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TMI Blog2013 (11) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... of the source of funds being unaccounted or unexplained. In the present case, the assessee's explanation is vague and unsubstantiated - The peak credit theory is based on recycling of funds, implying systematic activity, while neither the nature of the deposits nor their utilization, stands explained, so that the plea is not maintainable at the threshold. Scrutiny (of the bank account statement) reveals it to be inconsistent with not only the explanation of the amounts being possibly used for charitable purposes, but also with the fact of the same being, apart from withdrawn in cash, also by cheques for ostensibly personal purposes, on a regular basis and in no insignificant sums - Further, the pattern of withdrawal reveals the account to be employed for transfer of funds in the main, i.e., deposit of cash at one place and its withdrawal at other; the funds being withdrawal almost in toto, and soon after their deposit. The assessee has been wholly unable to discharge the onus of a satisfactory explanation qua cash deposits, including the quantum of funds involved – Appeal disallowed – Decided against the Assessee. - IT Appeal No. 6846 (Mum.) of 2011 - - - Dated:- 17-4-2013 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s father was actively involved. It was further stated that in view of the close proximity between the cash deposit and withdrawal, the subsequent deposits may be treated as sourced from the said withdrawals, in which case the amount of unexplained cash deposits would stand reduced to Rs. 5,32,017/-. The assessee's explanation was considered to be only a make-believe story, being not supported by any corroborative evidence. The explanation furnished was based only on surmises, conjectures and presumptions, and the assessee had in substance not explained the source of the impugned deposits in any manner. The assessee's contention of only the peak amount as being liable to be taxed was also considered as without merit. This is as, even assuming that the said sums represented donations collected for charitable purposes, so as to help the needy people for marriage, ill-health, etc., the amount spent on charity would no longer be available for redeposit in the bank account. The entire amount of cash deposit was, accordingly, treated as unexplained cash deposits/credits, and deemed as the assessee's income for the relevant year. The assessee carried the matter in appeal, contending for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, both the existence of the funds, as well as their subsequent utilization, are essentially matters of fact, to be reasonably established by the assessee, or the inference as to which would flow on an overall consideration of the facts and circumstances of the case. The unaccounted profits of the past, may well have been expended or dissipated on a host of avenues, so that the fact that it was not so, and the same were indeed available, and drawn upon during the relevant year, liquidating the corresponding investment or any other form in which the same were held, would be required to be reasonably shown. This aspect, in fact, stands clarified by the apex court in its afore-referred judgment in the case of Anantharam Veerasinghaiah Co. (supra), to quote from which would be relevant inasmuch as it brings into focus the law in the matter: "The secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on record to substantiate the same. In fact, even so, inasmuch as the explanation furnished ascribes the source of the entire funds to donations, it would only mean that his father was engaged in charitable works by way of financial assistance to the poor and needy, without contributing anything of his own. Rather, if and to the extent the contributions are from the account-holder himself, there is an implicit admission of the source of funds being unaccounted or unexplained. Further, it is understandable that he being a man of charity and integrity, people had faith in him and trusted him with their monies. However, that would again imply of him working in an organised manner; the explanation itself stating that the monies were collected with the help of volunteers and well-wishers, so that the receipts or acceptances would be the first thing that would be issued to the donors. Further, the assessee's father working in this line, the monies withdrawn would again only be utilised in an open, transparent manner, so that there would be definite evidence to show the amounts withdrawn as being utilised for charitable purposes. Examining the bank account from this stand point, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarify which aspect only we have stated the pattern and nature of the withdrawals in some detail. 5.3 The nature of the withdrawals impels us to examine their pattern; the assessee's case in fact resting only on the argument of the addition being excessive inasmuch as the funds have been recycled, the benefit of which has though not been allowed, further. The account shows a balance of Rs.286.40 (as on 01.04.2007) and at Rs.1384.43 (as on 31.03.2008), even as the account bears credits to an aggregate of Rs. 29,41,716/- for the year, of which Rs. 29,16,408/- is stated to be by way of cash. In fact, there appears to be a mistake in working the figure of the cash deposits inasmuch as that the non cash credits total only up to Rs. 307/-. The cash deposits are mostly in the range of Rs. 50,000/-, even as there are deposits in higher denominations, viz. at Rs.75,000/- (on four occasions), and in the range of Rs. 81,000/- to Rs. 1,10,000/- (on ten occasions), as well as for lower amounts, which are as low as Rs. 200/- to Rs. 500/-. The quantum of deposit thus does not agree with the explanation of collection in small amounts from friends and well wishers. Interestingly, the cash withdr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts; the assessee referring to the decisions by them, also seek to emphasize, even as in the facts of the case they may have approved the tribunal's decision in having allowed set off, being based as these were on the satisfaction by it (the tribunal) with regard thereto. As an example to what is being said, we may refer to one such decision being relied upon by the assessee, i.e., Addl. CIT v. Mohan Engg. Co. [1995] 151 ITR 571(Patna). Clarifying the law, it is stated with the tribunal had, without considering any of the facts, proceeded as if the decision in the case of S. Kuppuswami Mudaliar v. CIT [1964] 51 ITR 757 (Mad.) laid down a universal proposition of law that whenever the assessee failed to explain the credits found in his books, it was open to him to claim a set off of those credits against the additions made to his income in the assessments for the previous years. It stands explained that no such proposition has been laid down by the court, which only extends to state that the intangible additions constitute a real source of income, which could be available for being used by the assessee for any of its purposes, so that the same could be explained as a possible source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal fails. The decision by the apex court, it must be borne in mind, is rendered in the context of a penalty provision, which is first to be strictly applied and, besides, its trite that a plausible explanation saves penalty. This would explain the use of the words 'reasonably attributable' or 'reasonably explained' by it. It is also to be noted, and cannot be overlooked, that this is not a case of telescoping in its true sense, but one of application of peak credit, to determine the quantum of the same, single income, while the telescoping is normally of the use of funds attributable to one income, against 'income' wherein it finds reflection in some other form. For example, as where there is a suppression of the sales and, correspondingly, certain unrecorded trade debtors are also found, and so on. Further, while there may be no direct evidence with regard to concealed income, so that a reasonable view - under the facts and circumstances of the case which, in any case have to be kept focus - has to be adopted, the peak credit would arise only in the case of recycling of funds, which would, therefore, be applicable only in the case of the regular and systematic activity. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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