RITU MITTAL,AGRA vs. INDIVIDUAL, AGRA

No arguments were advanced before me in respect to Ground Nos. 1, 2 and 3 raised by the assessee. Hence, the same are dismissed as not pressed.

Ground No. 5 is general in nature and does not require any specific adjudication.

Ground Nos. 4 to 4.2 raised by the assessee are challenging the addition made on account of cash deposit of Rs. 13,08,515 as unexplained money u/s 69A of the Act.

I have heard the rival submissions and perused the material available on record. The assessee filed a return of income for AY 2011-12 declaring taxable income of Rs. 2,22,440. The ld AO noted that assessee had made cash deposit of Rs. 13,08,515 in her bank account maintained with SBI during the year under consideration. This was added as unexplained cash deposit in the reassessment completed u/s 147 r.w.s. 144 of the Act on 03.12.2018.

Aggrieved by the said order, the assessee filed revision petition u/s 264 of the Act before the Jurisdictional Principal Commissioner of Income Tax (PCIT). The ld PCIT passed an order u/s 264 of the Act on 23.03.2021, wherein the revision application of the assessee was rejected. The assessee filed a writ petition before the Hon’ble Allahabad High Court. The Hon’ble Allahabad High Court quashed and set aside the revision order u/s 264 of the Act dated 23.03.2021. Further, in the second round, the ld PCIT passed an order u/s 264 of the Act dated 10.05.2024 and directed the ld AO to pass a fresh order de novo after providing due opportunity to the assessee. The details called for by the ld AO were furnished by the assessee to the extent available. The assessee categorically stated that the nature of goods purchased and sold are machinery parts and no books of account are maintained and accordingly no ledger for purchases or sales are available. The assessee submitted before the ld AO that the peak credit balance in the bank account was only Rs. 97,832 on 25.01.2011. The ld AO after consideration of the reply of the assessee concluded that assessee had not furnished any valid proof to justify the existence of carrying on business of machinery parts. Hence, he concluded that the deposits made in the bank account could not be construed as emanating from business activities of the assessee. Accordingly, he proceeded to add the cash deposit of Rs 13,08,515 as unexplained money u/s 69A of the Act de hors the business activities of the assessee. This action of the AO was upheld by the ld CIT(A).

It is pertinent to note that the return of income of Rs. 2,22,442/- filed by the assessee included business income of Rs. 1,20,000, which has been taxed by the ld AO, as is evident from the fact that the ld AO had started the determination of total income from the income returned by the assessee. This goes to prove that the business carried on by the assessee is accepted by the ld AO. Hence, making an independent addition on account of cash deposits without giving weightage to the business carried on by the assessee is held unsustainable in the eyes of law. In any event, even if the business carried on by the assessee is not accepted then the logical conclusion for the cash deposits issue would be to go by the peak credit theory. The peak credit theory is one of the recognized methods of arriving at the peak income of the assessee especially when there was frequent withdrawal and deposits in the bank account. In the instant case, the assessee had pleaded that there are regular withdrawals of cash from the bank account and had also enclosed the workings of peak credit before the lower authorities. The same are also enclosed in pages 87 to 89 of the paper book. Let this workings be examined by the ld AO and only the peak credit amount should be brought to tax instead of Rs. 13,08,515/-. This in my considered opinion would meet the ends of justice. Accordingly grounds by the assessee in this regard are partly allowed.

In the result, appeal of the assessee is partly allowed.