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Facts
The assessee, a non-filer, had deposited Rs. 57,10,000 in his savings bank account. The Assessing Officer treated these cash deposits as unexplained money under Section 69A and made an addition. The assessee argued that the deposits were from earlier withdrawals.
Held
The Tribunal noted that the assessee's claim of deposits being from earlier withdrawals was not substantiated and that the sequence of transactions was contrary to the assessee's submission. However, accepting the principle of peak credit, the Tribunal restricted the addition.
Key Issues
Whether the cash deposits in the bank account were unexplained money and if the peak credit theory is applicable for determining the addition.
Sections Cited
69A, 115BBE, 139, 234A, 234B, 147, 148, 68
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This appeal is filed by the assessee against the Order passed bythe CIT(A) vide DIN and Order No.ITBA/N FAC/S/250/2024-25/1072842205(1) dated 03.02.2025 on the following grounds of appeal :
Briefly stated, the facts of the case are that assessee is a non-filer. As per the information available with the income tax department, assessee did not file return of income inspite of having transactions of Rs.57,10,000/- in the Page 3 of 7 savings bank account No.69000932144 in Davangere District Central Co- operative Bank Ltd. Accordingly, a notice under section 148 of the Act was issued after following due procedure and the case of the assessee was selected under section 147 of the Act. In pursuance of notice issued under section 148 of the Act dated 28.03.2023, assessee filed his return on 13.04.2023 declaring total income of Rs.7,88,790/-. Subsequently, other statutory notices were issued to the assessee. In response to the notice, assessee submitted his reply stating that cash deposited of Rs.57,10,000/- in the District Central Co- operative Bank Ltd., was out of withdrawals and it can be verified from the bank statement and filed copy of the bank statement. He furnished copy of the ITR, bank statements, ledger accounts of the parties from which it had received contractual income, etc., in support of his contention. Reply submitted by the assessee was examined. On perusal of the bank statement, it was noticed that there is a total credit entry of Rs.92,32,541/- out of which total cash deposit was Rs.57,10,000/- and total cash withdrawal of R.66,48,000/-. The submission of the assessee was not accepted and the AO observed as under:
The AO as per the above findings was not satisfied from the explanation submitted by the assessee and added the entire cash deposits under section 69A of the Act and applied section 115BBE of the Act.
Aggrieved from the above Order, assessee filed appeal before the learned CIT(A) and learned CIT(A) dismissed appeal of the assessee.
Aggrieved from the above Order, assessee filed appeal before the Tribunal. The learned Counsel reiterated the submissions made before the lower authorities and before the learned CIT(A) assessee submitted cash flow statements and he calculated peak credit of Rs.12,25,000/-. Assessee agreed for addition of Rs.12,25,000/- as peak credit, the learned Counsel submitted that assessee did not have any source of income except the work carried out by him during the year and there is no bar to withdraw and deposit cash into bank account and assessee can hold the cash and if it is required then he may deposit again the said amount.
On the other hand, learned DR relied on the Order of the lower authorities and submitted that the Order of lower authorities are correct. It should not be disturbed. He further submitted that assessee was unable to explain the source of deposit of cash with credible evidence and there is no correlation with the cash withdrawal and again deposit.
Page 6 of 7 7. Considering the rival submissions and perusing the entire material available on record and Orders of authorities below, we noted that assessee is a non-filer of income tax return. Accordingly notice was issued to the assessee on the basis of information available with the income tax department that the assessee has cash deposited of Rs.57,10,000/- in District Central Co-operative Bank Ltd. The source of deposit of cash was not accepted by the AO as well as CIT(A) and assessee before us while arguing the case was agreed for making addition of Rs.12,25,000/- as worked out during the course of first appellate proceedings as peak credit. In this regard, it was noticed that there is judgment of the Hon’ble Delhi High Court in the case of CIT Vs. D. K. Garg reported in [2017] 84 taxmann.com 257 (Delhi) and the assessee filed before Hon’ble Apex Court against the judgment of Hon’ble Delhi High Court and the Hon’ble Apex Court has granted leave on the appeal filed by the assessee. It was brought into notice of both the parties regarding applicability of the judgment. Therefore, during the course of clarification, the learned Counsel tried to distinguish the judgment of the Hon’ble Delhi High Court and strongly supported that the facts of that case are not applicable to the present facts of the case of the assessee and submitted that in the case of D. K. Garg noted supra, is related to the entry operator and as per para 18 of the judgment, in that case, there was deposit in the name of different persons during the previous year but here in this case, assessee is accepting that he has withdrawn himself and withdrawal amount has been deposited. For the sake of convenience, we are reproducing para No.18 of the above judgment:
Page 7 of 7 8. Considering the above para of the judgment, we also hold that this judgment is not applicable to the present facts of the case. Considering the totality of the facts and circumstances of the case, we accept arguments of the learned Counsel that peak credit theory will apply in this case. Accordingly, as accepted by the learned Counsel during the course of hearing that a sum of Rs.12,25,000/- may be considered as unexplained, we are restricting the addition under section 69A of the Act to the extent of Rs.12,25,000/-.
In the result, appeal filed by the assessee is partly allowed.