SHRI NITIN PAREKH, HUF,,VADODARA vs. THE INCOME TAX OFFICER, WARD-1(2)(4),, VADODARA

PER AMARJIT SINGH - AM:

“I have carefully considered the facts and circumstances of the case, the observations of the Assessing Officer, the submissions of the assessee, material available on record and the judicial pronouncements on the subject. The assessee had deposited Rs. 49,00,000/- in cash in its bank account. The assessee had claimed that it had opening cash balance of Rs. 17,77,683/- as on 01.04.2011, which was utilized to deposit cash in its bank account. However, the assessee has failed to establish this fact by adducing relevant evidence, as also noted by the Assessing Officer in para (b.1), page 4 of the assessment order. Therefore, assessee's plea regarding existence of opening cash balance of Rs. 17,77,683/- is not accepted. Further, the assessee had utilized the withdrawal of Rs. 5,00,000/- on 05.11.2011 for personal expenses and the same was not available to the assessee for redeposit in cash in bank account. The assessee has argued that the Assessing Officer hasignored the withdrawals made by the it and has made additions on account of all the credit entries, which is not as per law. I tend to agree with assessee's this plea. Once the Assessing Officer has decided to consider the credit entries in a bank account, he is bound to consider and account for all the withdrawals also. Availability of cash on account of withdrawals by the assessee cannot be disputed, as the same are withdrawn from the bank. Hon'ble ITAT, Ahmedabad in SoriNandakumarSodhan Vs. JTO in 1TA No. 2075/Ahd/2012, held that the entries in the bank should not be doubted. Those entries in the banks were in the nature of deposits and withdrawals, which were incorporated in the cash flow statements. The Tribunal held that if the revenue department has not established that the cash available with the assessee was not utilized elsewhere, then on the basis of preponderance of probabilities, it can be assumed that the very cash available with the assessee was re-deposited in the bank. Hon'ble ITAT, Ahmedabad, in the case of ITO vsMurlidhar Ice-cream &SweetParlour, has held that “where there are deposit and withdrawal entries into the bank account, it would be presumed that the amount withdrawn was available with the assessee for depositing the same. Therefore, it cannot be concluded that the entire deposits were fromunexplained source.”In view of this, it is clear that the cash withdrawals from the bank account cannot be ignored, while assessing unexplained cash deposits in the bank account. The evidence of withdrawal from the bank account has to accepted as genuine and once the' withdrawal is accepted, in view of the decision of Hon'ble Gujarat High Court in the case of CIT vsShaileshRasiklalMehta [2009] 176 TAXMAN 270 (GUJ), there was no question of deposit to the extent of withdrawal of cash, as unexplained. Hon'ble ITAT, Ahmedabad has, in the case of ShivjiManjiAmbavs DCIT [1995] 51 TTJ 61 (AHD.), held that while considering 2 unexplained investment, availability of money from bank withdrawals cannot and should not be ignored. After considering the withdrawals and the deposits in all the accounts, the peak negative cash balance in this case comes to Rs.5,62,000/-. Hon'ble Ahmedabad bench of ITAT in SoriNandakumarSodhan Vs. ITO in IT A No. 2075/Ahd/2012, hasheld that the entries in the bank should not be doubted. The court held that if the revenue department has not established that the cash available with the assessee was not utilized elsewhere, then on the basis of preponderance of probabilities, it can be assumed that the very cash available with the assessee was re- deposited in the bank. Hon'ble Ahmedabad bench of ITAT in ACIT vsJayesh Finance [2014] 41 taxmann.com 323 (Ahmedabad-Trib.) has held that in case of recycling of cash in business, addition should be made on basis of peak credit as appearing in cash flow statement. Hon'ble Rajkot bench of ITAT has, in ITO vsMaheshkumarJayantilaiVora [2004] 3 SOT 96 (Rajkot) held that for making additions on account of unexplained cash deposits, only peak credit should be taken, as by aggregating deposits, they tend to be taxed twice. Hon'ble Rajkot bench of ITAT has, in ITO vs.MaheshkumarJayantilaiVora [2004] 3 SOT 96 (Rajkot) held that for making additions on account of unexplained cash deposits, only peak credit should be taken, as by aggregating deposits, they tend to be taxed twice. It is noted that the assessee has worked out the peak credit of Rs. 20,00,000/-, after ignoring the opening cash balance of the assessee as on 01.04.2011. However, it is noted that the assessee had taken in to account the withdrawal of Rs. 5,00,000/- on 05.11.2011, which was accepted as having been utilized for personal purposes by the assessee and as such noted by the Assessing Officer in the assessment order. Therefore, this amount was not available to the assessee for redeposit in its bank account and after taking this in to account the peak credit works out to Rs. 25,00,000/-. In view of the above, addition of Rs. 25,00,000/-, on account of peak credit, is upheld and the balance addition of Rs. 24,00,000/- is deleted. The assessee partly succeeds on this ground of appeal.”