SMT. GOPIBEN NAVINCHANDRA THAKKAR,,PATAN vs. THE INCOME TAX OFFICER, WARD-3,, PATAN

Date of hearing : 12-06-2019 Date of pronouncement : 27-06-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-

This assessee’s appeal for A.Y. 2008-09, arises from order of the CIT(A), Gandhinagar, Ahmedabad dated 16-08-2016, in proceedings under section 143(3) r.w.s 147 of the Income Tax Act, 1961; in short “the Act”.

of the assessee is against the decision of ld. CIT(A) in confirming the addition to the amount of Rs. 3,30,950/- Page No 2. Gopiben Navinchandra Thakkar vs. ITO consisted of Rs. 2,15,950/- on account of opening balance of cash and Rs. 1,15,000/- on account of sale of gold.

3. The fact in brief is that assessment u/s. 143(3) r.w.s. 147 of the act was finalized in the case of the assessee on 31st July, 2015. In the aforesaid completed assessment, an addition of Rs. 10,29,100/- was made on account of unexplained cash deposit made in the saving bank account of the assessee maintained with Harij Nagarik Sahakari Bank Ltd. The assessing officer has noticed that assessee has shown return of income of Rs. 1,51,913/- whereas he has deposited cash of Rs. 10,29,100/- on various dates. Since the assessee has failed to prove the source of cash deposit and also failed to substantiate his contention that the same amount which was withdrawn from the bank was again deposited in the same bank account, the amount of Rs. 10,29,100/- deposited by the assessee was treated as unexplained and added to the total income of the assessee by the assessing officer.

4. Aggrieved assessee has filed appeal before the ld. ld. CIT(A). The ld. CIT(A) has restricted the addition to the amount of Rs. 3,30,950/-. The relevant part of the decision of ld. CIT(A) is reproduced as under:- “4.2 I have considered the facts of the case, assessment order, submission made by the appellant and the case laws relied upon. The AO has made addition on the ground that the appellant has failed to prove source of cash deposit of Rs.10,29,100/- in the bank account. On the other hand the Appellant has argued to invoke peak credit principle. His case is that the relevant credit transactions have corresponding debit transactions and hence even if addition is made, the same shall be made by applying peak theory for which a working has been submitted. On careful consideration of facts, it is observed that total cash deposited in alleged bank account amounts to Rs.11,28,100/- against which withdrawal of Rs.12,17,400/- has been made. It is observed that withdrawal is more than the amount of cash deposited. Further, on perusal of dates on which cash is deposited and withdrawals made, it is observed that cash deposited is subsequent to withdrawals made from such account. Presently, the issues which requires consideration are as to whether peak theory can be applied in case of appellant and whether the fact that deposits are made after withdrawal of cash is sufficient proof for raising doubt on the genuineness of the transaction. The issue regarding application of peak credit is squarely covered Page No 3 Gopiben Navinchandra Thakkar vs. ITO

by the decision of Hon'ble Gujarat High Court in case of POT Vs. Shri Indrajeet Zandusing Tomar in Tax appeal No. 908 of 2015 wherein the Hon'ble court confirmed the findings of 1TAT of accepting peak credits in two undisclosed bank accounts, as undisclosed income. The relevant findings are as follows: "4. In our opinion, CIT (A) and Tribunal committed no error. There was nothing with the department to suggest that entire deposit of Rs.2.46 crores represents the income of the assessee. CIT (A) instead of adding 1% of Rs.2.46 crores adopted peak credit theory, which was also upheld by the Tribunal. No question of law arises. Tax Appeal is, therefore, dismissed." Following the above findings and in view of the fact that cash credit transactions have corresponding debit transactions, the applicability of peak theory in case of applicant cannot be denied. With respect to the issue regarding the fact that deposits in the account are made subsequent to withdrawal, reference is invited to the decision of Hon'ble Ahmedabad ITAT in case of Patel Prahladbhai Harjivanbhai in dated 15/03/2013 wherein it is stated that when it has not been proved that cash withdrawn has been utilized otherwise than the purpose mentioned by the appellant, no adverse view can be taken. The relevant findings are as follows : "5. We have heard the rival contentions and perused the material on record. The assessee has withdrawn cash from the Kalupur Commercial Cooperative Bank in the month of January and March, 2008, which was redeposited in the same bank account in the month of May 2008 at Rs.Rs.8,50,000/-. These were the cash withdrawal made by the appellant from his own account maintained with the same bank, namely, the Kalupur Commercial Co-operative Bank, which was kept at residence. Similarly withdrawal also made from the S.B.I, account and deposits were made in the Kalupur Commercial Co operative Bank on different date during the year The Id. A.O. has not brought on record any evidence that cash withdrawal in the month of January or March, had been used otherwise then other purposes mentioned by the appellant. Therefore, we have considered view that no addition can be made by following explanation of the assessee and two decisions of Hon'ble ITAT, Delhi. Accordingly, the assessee's appeal is allowed." Similarly in case of ACIT vs. Baldev Raj Charla [2009] 121 TTJ 366 (Delhi), wherein identical additions of cash deposited and it was held by the 'C Bench of ITAT, Delhi, as under: "Where there were sufficient cash withdrawals to cover cash deposits in question, merely because there was time gap between withdrawal of cash and cash deposits, explanation of assessee could not be rejected and addition on account of cash deposit could not be made [Block period 1-4-1996 to 24-9- 2002) [In favour of assessee]." In addition to above, Hon'ble Delhi Bench has further supported the view in case of Shri Bhupender Pal Singh Chawla in ITA 4080/Del/2010 dated 25/02/2011 that "When the gap between the withdrawal and deposit of amount have been explained by the assessee, then there is no infirmity in the order of CIT(A) vide which the impugned addition has been deleted on the ground that the assessee has been able to explain the source of said deposit which represents earlier withdrawal by the assessee." On overall consideration of facts and arguments it is observed that the case of the appellant is squarely covered by the above case laws and hence merely because withdrawal is made before deposit of cash explanation of the appellant cannot be rejected. Further, since debit in the account is represented by corresponding credit entry, credit by applying peak theory shall be granted to the appellant. However, on perusal of working of peak credit submitted by the appellant it is observed that there is opening balance of Rs.2,15,950/-. A further break up of such opening balance was obtained in order to verify the source of such balance. On perii^roT^OctrbTeaRlap^ it was Page No 4 Gopiben Navinchandra Thakkar vs. ITO observed that there was a further opening balance of Rs.2,81,4307- pertaining to A.Y. 200/-08, On Enquiry, the appellant has not furnished any details/evidences in order to substantiate the source of such opening balances. Another entry noticed in the peak credit working was for sale of gold amounting to Rs.1,15,000/-. In order to substantiate such sale, the appellant has filed confirmation of the party to whom such sale is made. However no other evidence has been furnished by the appellant. Also it is observed that such sale has not been reflected in the return of income filed by the appellant. Even confirmation is in loose paper and not justified actual sale and whether appellant is holding such ornaments are not proved. Considering the fact that such sale is made in cash and not substantiated by proper evidence, it raises doubt regarding its genuineness and hence credit of such amount cannot be granted. In view of above out of total deposit of Rs. 10,29,100/-, I hereby confirm Rs.3,30,950/- which consists of Rs.2,15,950/- on account of opening balance and Rs.l,15,000/- on account of sale of gold since the same have not been substantiated by proper evidences. The balance addition of Rs.6,98,150/- is directed to be deleted.”