SHAKTI SINGH,UTTAR PRADESH vs. WARD 3(3)(5), SAHARANPUR

The Learned CITA identified certain discrepancies in the peak credit workings submitted by the assessee and proceeded to ignore the same. Some of the discrepancies pointed out by the Learned CITA in the peak credit workings are that the assessee had claimed certain payments made to certain individuals by cheques as cash withdrawals. This was stated to be bearer cheques issued to the parties who had withdrawn cash from the bank on behalf of the assessee and given the cash to the assessee. However, this explanation was found to be not accepted by the Learned CITA. Further, the Learned CITA observed that there were certain credit entries in the bank account other than cash which remained unexplained. Since the assessee had not considered those credit entries in the bank account in the peak credit workings, the peak credit workings deserve to be rejected. With these observations, the Learned CITA ignored the peak credit workings submitted by the assessee.

Before us, the Learned AR submitted that assessee had issued bearer cheques to certain parties who had withdrawn cash from the bank and given to the assessee. Hence, the same should be construed as cash withdrawals. Further, in support of this, the Learned AR also filed a bank certificate confirming the fact that those transactions represent only cash withdrawals made by those certain individuals from the bank. The Learned AR also submitted the date wise details of credits made in the bank account other than cash to represent maturity proceeds of fixed deposits. The Learned AR also gave the details of fixed deposit receipt numbers, the date of investment together with the date of maturity there on. It was pleaded by the Learned AR that the interest income on fixed deposits was less than the maximum amount not chargeable to tax and hence there was no obligation on the part of the assessee to file the return of income. The Learned AR also sought to explain that the Learned CITA erroneously referred to the credit amount of Rs. 12 lakhs on 31-3-2016 while factually no such credit entry of Rs. 12 lakhs existed neither in the Pratama UP Gramin Bank nor in the loan account maintained with Punjab National Bank as on 31-3- 2016. Further, the Learned AR also submitted that there were certain transactions of amounts received and paid from / to Mr. Jatinder Kumar (son of the assessee) who is regularly assessed to tax and in support of which the copy of income tax return of the son together with his bank statements were placed on record. Hence those sums could not be included in the peak credit workings. Similar was the transactions made with Mrs. Anguri Devi, mother of the assessee. Further, the assessee had raised a loan of Rs. 5 lakhs from Punjab National Bank on 6-4-2015 which amount also stood credited in the Pratama UP Gramin Bank account of the assessee. This was sought to be not considered by the assessee in the peak credit workings. Further, a sum of Rs. 72,500/- was received from Bharat Traders (Proprietor Jagdish Lal Chawla) who is regularly assessed to income tax. This sum was received through regular banking channels and the same does not represent any element of income there on. Accordingly, it was not considered in the peak credit workings of the assessee.

Per Contra, the Learned DR vehemently pleaded that it is very unusual that 13 persons were engaged by the assessee to make cash withdrawals from the bank account. Hence the bearer cheques theory quoted by the Learned AR together with the bank certificate thereon cannot be believed. He argued that having decided to adopt peak credit for determination of income of the assessee, it is bounden duty of the assessee to consider all the transactions in the bank account and cannot do cherry picking thereon.

We find that the assessee was able to satisfactorily explain the credits in the bank account other than cash transactions with proper evidences in the maturity proceeds of fixed deposits, amounts received from son, mother, Bharat Traders and loan from Punjab National Bank. It is to be noted that the assessee’s only source of income is from agriculture which fact has also been accepted by the revenue by accepting agricultural income of Rs 20,21,800/-. However, there were certain cash deposits made in the bank accounts together with the cash withdrawals. The agricultural income transactions as claimed by the assessee have been duly accepted by the revenue already. Hence the other cash transactions of cash (i.e both cash withdrawals including bearer cheque transactions and cash deposits) are to be worked out separately to consider the peak negative cash balance , if any, to arrive at the income of the assessee. For this purpose, the only method is to consider the peak negative balance of cash by adopting the peak credit theory, which is a recognized method of determination of negative cash balance in view of rotation of funds happening in the bank accounts. The assessee had duly given those workings which were not examined by the revenue. Hence in the interest of justice and fair play, we deem it fit and appropriate, to restore this issue to the file of the Learned AO to verify the peak credit workings given by the assessee by considering only cash transactions and bearer cheque transactions. The peak negative cash balance should be set off with the agricultural income of Rs 20,21,800/- and remaining sum , if any, is to be brought to tax as unexplained money under section 69A of the Act in the hands of the assessee. With these directions, the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.