2022 (10) TMI 253 - AT - Income Tax

Addition u/s.69 towards cash deposits in the bank account - survey u/s.133A - determining the peak credit - As contended before the authorities below that the assessee was carrying on some business outside the books of account, whose proceeds were deposited in the bank account - HELD THAT - The existence or carrying on of any such business has not been established. When cash is deposited in a bank and thereafter withdrawn and again redeposited, the presumption is that the amount re-deposited came out of the amount withdrawn earlier, unless the AO shows the utilisation of cash elsewhere. In such circumstances, it is only the peak credit which can be charged to tax and not all the deposit entries in the bank account. As such, I set aside the impugned order and remit the matter to the file of the AO for determining the peak credit out of such transactions and make addition for the same in addition to the interest income credited by the bank separately as recorded in the bank statement. Addition towards purchase of plot - AR contended that the purchase of plot should be considered as sourced from the bank withdrawals for which separate addition was made by the AO - HELD THAT - While disposing of the first issue supra as directed that only the peak credit of the cash deposits and withdrawals should be included in the total income and not all the deposits. The contention of the assessee that Rs.31,990/- should be considered as coming out of the bank withdrawals, cannot be accepted because once the peak credit is taken, the presumption remains that all the amounts withdrawn from the bank were re-deposited. In such a situation, if the assessee makes a claim that a particular amount was utilised elsewhere, then the peak balance has to be adjusted accordingly by increasing it correspondingly. The net effect of the above discussion is that where the peak is added, the investment made by the assessee has to be added separately and it cannot be claimed that the cash re-deposited in the bank after withdrawal was used for purchase of any other asset. Thus we uphold the addition sustained in the first appeal.

Summary

Issues: Confirmation of addition of cash deposits in bank account under section 69 and confirmation of addition towards purchase of plot.

Analysis:

Issue 1: Addition of Cash Deposits in Bank Account
The appeal pertains to the confirmation of an addition of Rs.7,79,175 made by the Assessing Officer under section 69 towards cash deposits in the bank account. The Tribunal noted that during a survey under section 133A, documents related to properties/investments were found, leading to the issuance of a notice under section 148. The assessment finalized the total income at Rs.10,33,990, later rectified to Rs.10,63,990. The Tribunal previously directed the AO to provide Xerox copies of impounded documents and evidence before making the assessment. The AO, upon reviewing the bank account, observed cash deposits totaling Rs.7,79,175. The assessee claimed the deposits were from business activities, but the AO was not convinced, leading to the addition. The Tribunal held that only the peak credit should be charged to tax, not all deposit entries, and remitted the matter to the AO to determine the peak credit and make additions accordingly.

Issue 2: Addition towards Purchase of Plot
The second issue involved the confirmation of an addition of Rs.31,990 towards the purchase of a plot. The assessee bought a plot and spent Rs.31,990 without providing a source of investment, leading to the addition by the AO, which was upheld in the first appeal. The Tribunal considered the contention that the plot purchase should be sourced from bank withdrawals, but as only the peak credit was to be included in total income, the claim was not accepted. The Tribunal held that once the peak credit is considered, all withdrawn amounts were presumed to be re-deposited, and any claim of utilization elsewhere would adjust the peak balance accordingly. Consequently, the addition of Rs.31,990 was upheld.

In conclusion, the appeal was partly allowed, with the Tribunal setting aside the order on the first issue and remitting it to the AO for determining the peak credit and making additions accordingly. The addition towards the purchase of the plot was upheld, emphasizing the treatment of peak credit and investments separately.