PERUMAL SEKAR,SALEM vs. ITO, WARD 1(2). SALEM, SALEM

On the facts and circumstances of the case the assessee having furnished the confirmation letters from the above 6 persons in respect of loans totaling to Rs.23,00,000/- have discharged the onus cast upon him to prove the genuineness of the transactions by disclosing identity of the lenders. The AO within the powers vested with him u/s 133(6) of the Act nor the first appellate authority have enquired the above persons in assessing the above sum as unexplained cash credit. The above act of the lower authorities are bad in law in as much as no enquiries have been made.

On the facts and circumstances of the case the first appellate authority is not justified in sustaining the addition made by the AO u/s 68 of the Act even when the assessee has not maintained books of accounts. It has been judicially settled that the provisions of Section 68 can be invoked only in respect of an assessee who has maintained the books of accounts. In view of this invoking of the above provision in framing the assessment is void-ab-initio. 7. On the facts and circumstances of the case the first appellate authority is not justified in not adopting the "Peak Credit" concept. This ground is taken as an alternate plea and if this is accepted the maximum amount that could brought to assessment is sum of Rs. 13,33,525/-which is the peak credit position on 22.09.2011 in the bank account. The above figure is covered by the confirmation of credits to an extent of Rs.23,00,000/- and in view of this no addition to the returned income is warranted. 8. In view of the above grounds and other submissions to be made at the time of Appeal hearing, the order U/S 250 passed by Commissioner of Income Tax (Appeals), NFAC may be cancelled and justice rendered.

The brief facts of the case are that the assessee is an individual engaged in the business of hair cutting (Barber Shop) did not file his return of income for A.Y.2012-13. Information revealed that cash deposits of Rs.58,37,374/- in his bank account has been made during the impugned A.Y. and hence the case was reopened by issuing notice u/s.148 of the Act. In response assessee filed

Further, the ld.AR submitted that the assessee had furnished the identity of the lenders in respect of loans taken from parties to the tune of Rs.23.00 Lakhs by furnishing the confirmations from 6 persons with their Aadhar and PAN and discharged his onus to prove the genuineness of the transactions. He stated that the balance amount of deposit of Rs.20.23 lakhs is made out of the cash withdrawals from the bank account and ATM withdrawals. The ld.AR stated that the assessee had made these deposits to show more transactions in the bank account to avail loan from the bank for establishing his own shop.

In light of the above arguments the ld.AR prayed that the peak credit may please be adopted to arrive at the maximum to be added to the inco`me, which works out to Rs.13,33,525/-, held on 22.09.2011 in the bank account.

Per contra, the ld.DR submitted a written submission and stated that the assessee has neither proved the correlation between the deposits and withdrawals nor provided the genuineness of the loan transactions. Therefore, the ld.DR prayed for confirming the order of lower authorities.

We have heard both the parties perused materials available on record and gone through orders of the authorities below. The assessee is an individual engaged in the business of running a barber shop. The assessee did not file his original return of income for the assessment year 2012-13. Subsequently, based on information received regarding cash deposits amounting to Rs.58,37,374/- in his Axis Bank account during the relevant previous year, the :-5-: ITA. No:1830/Chny/2025 Assessing Officer reopened the assessment by issuing notice under section 148 of the Act. In response, the assessee filed his return of income on 20.12.2019 declaring total income of Rs.1,60,820/-. During the reassessment proceedings, the AO noticed substantial cash deposits in the bank account for which the assessee could not furnish satisfactory evidence explaining the source. Accordingly, after granting credit for income already disclosed, the Assessing Officer made an addition of Rs.48,59,573/- as unexplained cash credit u/s.68 of the Act. The same was confirmed by the ld.CIT(A) by passing an order on 16.06.2025.

Firstly, the assessee has raised grounds challenging the validity of notice issued u/s.148 and approval u/s.151 of the Act. However, no material evidence has been placed before us to demonstrate that the notice was issued beyond the prescribed time or without due approval of the competent authority. In the absence of such evidence, these grounds are dismissed.

It is an admitted fact that substantial cash deposits were made in the assessee’s bank account during the relevant year. The assessee’s explanation consists of two components: 1. Loans aggregating to ₹23,00,000/- from six persons 2. Balance deposits being redeposits of earlier withdrawals

The assessee has furnished confirmation letters in respect of the alleged loans, PAN, and Aadhaar details to discharge the onus cast upon the assessee under the Act. The Assessing Officer has neither conducted any enquiry u/s.133(6) of the Act nor brought any adverse material on record to disprove the identity of the lenders. Once the assessee discharges the primary onus, the burden shifts to the Assessing Officer. Failure to conduct enquiry cannot be a ground to sustain the addition.

However, we also note that the AO has treated the entire cash deposits as unexplained without considering the possibility of circulation of the same money. Where there are frequent withdrawals and deposits in the same bank

In our considered view, while the assessee has failed to fully explain the source of cash deposits, taxing the entire deposits would result in an excessive and unrealistic assessment. Therefore, in the interest of justice and fair play, the addition should be restricted to the peak unexplained credit.

Though the assessee has argued that section 68 of the Act cannot be invoked in the absence of books of account, the fact remains that the assessee has maintained a bank account through which unexplained cash transactions have been routed. Even if the strict application of section 68 is debatable, the unexplained peak balance is liable to be brought to tax as income from unexplained sources. Therefore, we set aside the order of the ld.CIT(A) and the addition of Rs.48,59,573/- made by the AO is restricted Rs.13,33,525/-, being the peak unexplained cash credit in the bank account and the balance addition is deleted

In the result the appeal filed by the assessee is partly allowed.