2021 (3) TMI 360 - AT - Income Tax

Unexplained cash deposits in the bank account - as pointed by assessee that there are withdrawals and deposits in the cash book and the source of deposits can be explained by the Assessee with supporting evidence. It was submitted that it is an accepted rule that a withdrawal from the cash book would be a source for deposit of cash in the bank account at a later date.HELD THAT - We are of the view that when there are deposits and withdrawals from the cash book and the source of cash deposits in the cash account is explained, the earlier withdrawal of cash can be explained as source for the subsequent deposit of cash, provided there are no evidence or circumstances to show that the earlier withdrawals could not be available to the Assessee as a source for subsequent deposit. In such circumstance one has to see the peak credit balance in the cash account and add only peak credit. The peak credit alone would have to be treated as unexplained. The peak credit theory has to take into consideration before treating the cash deposit as unexplained cash credits. Since the statement showing the withdrawals and deposits of cash in the cash account in the statement is now filed as additional evidence has not been examined by the AO, we deem it fit and proper to remand the issue to the AO for consideration afresh after affording Assessee opportunity of being heard. The Assessee will have to explain the source of cash deposit in the cash account with supporting evidence to enable the AO to accept the source of cash deposit in the cash account. Appeal of assessee is allowed for statistical purposes.

Issues:
1. Justification of sustaining the addition of cash deposits by CIT(A).
2. Consideration of agricultural income in cash deposits.
3. Admission of additional evidence for proper adjudication.
4. Application of peak credit theory in determining unexplained cash deposits.

Issue 1: Justification of sustaining the addition of cash deposits by CIT(A)

The appeal concerns the assessment year 2016-17, focusing on whether the CIT(A) was right in upholding the addition of ?33,49,844 as unexplained cash deposits, compared to the initial addition of ?35,34,844 by the AO. The assessee, an individual engaged in various businesses, explained the cash deposits from ticket sales, agricultural income, and bank withdrawals. However, the AO and CIT(A) were not convinced due to lack of evidence and details. The CIT(A) granted a minor relief of ?1,85,000 considering agricultural income. The Tribunal noted the discrepancy and admitted additional evidence for further review.

Issue 2: Consideration of agricultural income in cash deposits

The appellant argued that the agricultural income of ?1,85,000 was not adequately considered by the authorities. The CIT(A) partially agreed, allowing relief for this amount. The Tribunal acknowledged the merit in this contention, emphasizing the need to include and justify agricultural income in the cash deposits to avoid inaccuracies in the assessment.

Issue 3: Admission of additional evidence for proper adjudication

The Tribunal admitted additional evidence submitted by the assessee, highlighting the importance of these documents in clarifying the source of cash deposits. The failure to present these details earlier was deemed non-deliberate, and the Tribunal considered the evidence essential for a fair assessment, leading to a remand of the issue to the AO for a fresh review.

Issue 4: Application of peak credit theory in determining unexplained cash deposits

The appellant proposed the peak credit theory, suggesting that only the highest credit amount should be considered unexplained cash. The Tribunal agreed, stressing the significance of analyzing the peak credit balance to avoid overestimating unexplained cash deposits. The case was remanded to the AO for a thorough examination based on the provided evidence and explanations.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for a detailed reassessment considering all relevant factors and evidence presented by the assessee.

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