SUBRAMANAI SAKTHIVEL,KANGAYAM vs. ITO, WARD-1(4), TIRUPUR

The Assessee raised the following grounds of appeal :

Briefly, the facts of the case are that the appellant is an Individual engaged in the trading of Agricultural Products. The appellant purchased agricultural products from farmers and sells them to traders. The appellant had not filed the Return of Income under the provisions of section 139 of the Act for the Assessment Year 2015-16. Based on the information that the appellant made cash deposits of Rs.51,00,600/- in the savings bank account maintained with the bank. The Assessing Officer formed an opinion that income got escaped assessment from tax, accordingly, Jurisdictional Assessing Officer issued a notice u/s.148 of the Act on 12.04.2022 for the Assessment year 2015- 16 calling upon the appellant to file the Return of Income after duly complying with the procedure laid down u/s.148A of the Act. The appellant filed Return of Income in response to notice u/s.148 of the Act on 14.05.2022 disclosing a total income of Rs.4,51,380/- for the Assessment Year 2015-16. Against the said Return of Income, the assessment was completed by the Faceless Assessment Unit of the Department vide order dated 14.03.2024 passed u/s.147 r.w.s 144B of the Act at a total income of Rs.55,51,980/-. While doing so, the Assessing Officer made addition of cash deposits of Rs.51,00,600/- as unexplained money in the savings bank account maintained with Lakshmi Vilas Bank and State Bank of India for the failure of the appellant to explain the source of the cash deposits.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A) contending that the cash deposits were made out of the business receipts of the appellant and therefore only profit element embedded in such gross receipts alone can be brought to tax. However, the Learned CIT(A) rejected the above contentions by holding that in the absence of any evidence of business activity carried on by the appellant, the claim cannot be entertained, accordingly confirmed the action of the Assessing Officer in making addition of Rs.51,00,600/-. The appellant also raised alternative contention that in the Return of Income filed in response to notice u/s.148 of the Act, the appellant declared the income @ 8% treating the cash deposit in the bank account as a business turnover of the appellant and estimating the income at 8% on such deposit. However, the Learned CIT(A) rejected the above contentions by holding that in the absence of any corroborative evidence, cash deposits cannot be treated as a business turnover of the appellant, accordingly rejected the contention of the appellant.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The Learned Counsel contends that the cash deposits in the bank account represents the business turnover of the appellant. Therefore, the entire credits in the bank account cannot be brought to tax, but only the profit element embedded in the gross receipts alone can be taxed. Without prejudice to the above, it is contended that the Lower Authorities ought to have granted the benefit of “peak credit theory’ as there were deposits as well as withdrawals from bank account.

The appellant filed petition for admission of additional ground of appeal.

On the other hand, the Learned Sr.DR vehemently opposed the above submissions and submitted that the appellant had failed to offer any plausible explanation as to the source of the cash deposits. The appellant had not discharged the onus of proving any business activity and nexus between the cash deposits and business carried on by the appellant. Therefore, the Assessing Officer had rightly made the addition of entire cash deposits as unexplained money of the appellant. The Learned CIT(A) also passed reasoned order confirming the action of the Assessing Officer. In the absence of any evidence of carrying on the business activity of trading in the agricultural products, the Learned CIT(A) rightly confirmed the addition.

We heard rival submissions and perused the material available on record. The solitary issue that arises for our consideration is whether the Learned CIT(A) was justified in confirming the addition of cash deposits in the bank accounts maintained with Lakshmi Vilas Bank and State Bank of India of Rs.51,00,600/-. On perusal of the assessment order, it would reveal that the appellant had not offered any explanation as to the source of the cash deposits. However, during the course of proceedings before the Learned CIT(A), the appellant took the plea that the cash deposits were made out of the business receipts and the appellant had offered income by estimating income at 8% on the gross receipts of the appellant. However, these contentions had been rejected by the Learned CIT(A) in the absence of any cogent evidence to show that the appellant had actually carried on business. Even before us, the appellant had not adduced any evidence to show that the appellant engaged in the business of trading in the agricultural products and establishing nexus between such business receipts and cash deposits made in the bank account. Therefore, we are of the considered opinion that the Learned CIT(A) had rightly rejected the contention of the appellant that the cash deposits in the bank accounts were made out of the business receipts of the appellant, accordingly this ground of appeal nos.2, 3, 4 and 5 stands rejected.

The appellant raised an additional ground of appeal before us for the first time seeking the benefit of ‘peak credit theory’. It is contended that from statement of account bank account the appellant made cash deposits as well as made cash withdrawals which are utilized for the subsequent deposits, therefore, what can be taxed is only the ‘peak credits’ not entire credits. In support of this, he also filed copies of bank statement which are enclosed at page no.4 to 11 of the paper book. We had carefully perused those bank statements and find that there were cash deposits as well as withdrawals from bank accounts. Therefore, the facts of the case justified the application of the Doctrine of peak credit, accordingly we direct the Assessing Officer to compute the ‘peak credits’ only amount of peak credit alone can be taxed as income. Accordingly, this ground no.7 stands partly allowed for statistical purpose.

The appellant raised the additional ground of appeal seeking correct computation of amount of the cash deposits in the bank accounts maintained with Lakshmi Vilas Bank and State Bank of India. It is contended before us that the appellant was not afforded reasonable opportunity before computing the correct amount of cash deposits. We find force in the submissions made on behalf of the appellant on this count for the reason that the assessment order was passed ex-parte and the assessment order does not give the working of computation of the total amount of cash deposits in the bank account maintained with Lakshmi Vilas Bank and State Bank of India. Therefore, this additional ground of appeal is also restored to the file of Assessing Officer to compute correct amount of cash deposits after affording an opportunity of being heard to the appellant.

In the result, appeal filed by the assessee partly allowed for statistical purpose. Order pronounced in the open Court on 10th September, 2026.