2021 (2) TMI 897 - AT - Income Tax

Unexplained cash deposits - peak credit theory - HELD THAT - We find no force in assessee s explanation in entirety. The fact remains neither he has submitted all details of his family members business(es) nor has he denied the fact that the above bank account is maintained in his sole name only. Coming to the point that these deposits are in business nature only, the assessee has failed to prove even a single business receipt in the corresponding span of time in the relevant previous year. We thus find no reason to reverse the impugned addition. As argued that even if impugned addition is to be confirmed in principle, the same must be restricted to peak amount only going by the assessee s bank statements - This clinching fact has gone unrebutted from the Revenue s side since assessee s paper book has also seen multiple number of withdrawals which sufficiently highlight the fact that the impugned deposits are an admixture of credit as well as debit entries. We therefore direct the Assessing Officer to restrict the addition amount to peak amount as per assessee s bank accounts. Amount was part of closing balance as on 31.3.2011 and opening balance as on 01.04.2012 shall also be excluded from impugned addition - As per hon ble Bombay high court s judgement in Ivan Singh vs. ACIT 2020 (2) TMI 850 - BOMBAY HIGH COURT holds that the statutory expression previous year incorporated in Sec.68 of the Act has to be taken as the relevant previous year in issue only. We thus direct the Assessing Officer to finalise the consequential computation in foregoing terms. Assessee s appeal is partly allowed for statistical purposes in above terms.

Summary

Issues Involved:
Challenge to the treatment of cash deposits as unexplained in assessment for A.Y. 2013-14.

Detailed Analysis:

1. The appellant, a trader in sarees, filed the return of income electronically for A.Y. 2013-14 admitting total income of ?2,10,850. The assessment was completed u/s 143(3) by estimating the total income at ?66,34,750. The appellant raised grievances challenging the additions made by the assessing officer, including cash deposits of ?63,48,900 and a claim under Chapter VIA of ?75,000. The assessing officer alleged that the cash deposits were unexplained and the claim was not substantiated with proper evidence.

2. The appellant explained the sources of all deposits during the assessment proceedings. However, the assessing officer added the amounts as unexplained or unsubstantiated. The appellant's submissions during the appeal included details of the turnover and profits from business activities of family members. The assessing officer, in response, highlighted the lack of documentary evidence supporting the appellant's claims. Despite the appellant's contentions, the assessing officer added the cash deposits and the claim amount back to the income.

3. The appellant contended that the lower authorities erred in making the addition of bank deposits as unexplained, as he had utilized the sums in business activities with family members who also declared their incomes as business income. The appellant provided bank statements showing corresponding withdrawals to support the business nature of the deposits. However, the assessing officer and the CIT(A) supported the addition.

4. On careful consideration, the tribunal found no merit in the appellant's explanation. The appellant failed to provide sufficient details of family members' businesses or prove that the bank account was jointly held. While the appellant argued that the deposits were business receipts, no corresponding business receipts were demonstrated. The tribunal upheld the addition of the deposits as unexplained.

5. The appellant further argued that if the addition is confirmed, it should be restricted to the peak amount shown in the bank statements. The tribunal agreed and directed the Assessing Officer to limit the addition to the peak amount reflected in the bank accounts. Additionally, the tribunal directed the exclusion of the amount part of the closing balance as on 31.3.2011 and opening balance as on 01.04.2012, in line with a Bombay High Court judgment.

6. Consequently, the tribunal partially allowed the appellant's appeal for statistical purposes, restricting the addition to the peak amount shown in the bank accounts and following the relevant previous year for computation, as per the Bombay High Court's judgment.

This detailed analysis covers the issues raised in the legal judgment regarding the treatment of cash deposits as unexplained in the assessment for A.Y. 2013-14.