2022 (7) TMI 841 - AT - Income Tax

Unexplained Cash Credit u/s. 68 - addition of the peak credit - assessee submitted that details contains in seized paper include cash deposited as well as cash withdrawal and therefore, redeposit should be considered as being made out of such withdrawal and only peak credit should be considered as unexplained - HELD THAT - In the seized paper, the first payment of Rs.3,20,000/- has been shown and thereafter there is a receipt of Rs.30,000/- on 30.07.2007 and receipt of Rs.10,00,000/- on 14.08.2007. Further on 12.09.2007 Rs.5,00,000/- has been shown to be paid and on 30.09.2007 again Rs.5,00,000/- has been shown as receipt. The details of payments and receipts are recorded on one page and in chronological order. In such circumstances, the peak credit amount as worked out in table reproduced in earlier paragraph only remains as unexplained in the hands of the assessee. The finding of CIT(A) that there is no continuous deposit is without appreciation of the facts properly. The contention of the assessee of adopting peak credit is justified. Accordingly, we restrict the addition in the case to Rs.3,20,000/-. Appeal of assessee partly allowed.

Summary

Issues:
1. Addition of unexplained cash credit under section 68 of the Income Tax Act.
2. Consideration of peak credit amount for restriction of addition.

Issue 1: Addition of unexplained cash credit under section 68 of the Income Tax Act:
The case involved an appeal by the assessee against an order confirming the addition of Rs.8,20,000 as unexplained cash credit under section 68 of the Income Tax Act for the assessment year 2008-09. The Assessing Officer added the amount based on information received during search proceedings in another case. The assessee argued that the seized documents showed cash deposits and withdrawals, and only the peak credit should be considered unexplained. However, the Ld. CIT(A) upheld the addition of the entire amount, stating that the appellant failed to explain the source of the cash and that the peak credit method was not applicable due to lack of continuous deposits and withdrawals. The Tribunal, after considering the submissions, restricted the addition to Rs.3,20,000, as the details of payments and receipts were recorded on one page and in chronological order, supporting the peak credit theory.

Issue 2: Consideration of peak credit amount for restriction of addition:
The Tribunal analyzed the seized paper detailing payments and receipts, noting the chronological order of transactions. The Ld. CIT(A)'s observation that there were no continuous deposits was deemed incorrect. The Tribunal agreed with the assessee's argument that only the peak credit of Rs.3,20,000 should be considered unexplained, given the clear recording of transactions on a single page. Consequently, the Tribunal partially allowed the appeal, restricting the addition to Rs.3,20,000, while dismissing the second ground of appeal that sought an alternate plea for further reduction.

In conclusion, the Tribunal partially allowed the appeal, restricting the addition of unexplained cash credit to Rs.3,20,000 based on the peak credit method. The decision highlighted the importance of analyzing transaction details and considering the peak credit amount in cases involving unexplained cash credits under section 68 of the Income Tax Act.