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Facts
The assessee, engaged in money lending, filed returns for AY 2015-16 and 2016-17. The Assessing Officer (AO) added entire cash deposits as unexplained money under section 69A of the Act. The assessee contended that only peak credit should be taxed.
Held
The Tribunal held that the addition of gross cash deposits is incorrect and only the unexplained peak credit can be added to the total income. The CIT(A)'s direction to verify and tax only the peak credit was upheld.
Key Issues
Whether entire cash deposits in a money lender's bank account can be added as unexplained income, or only the unexplained peak credit.
Sections Cited
69A, 143(2), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI JAGADISH
आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: These appeals filed by the Revenue are directed against the two orders of the Commissioner of Income Tax (Appeals), Chennai – 20, both dated 26.06.2025, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Years are 2015-16 & 2016-17.
& 2399/Chny/2025 :- 2 -: 2. Common issues are raised in these appeals. Hence, they were heard together and are disposed off by this consolidated order. Identical grounds are raised in both the appeals, which read as follows:- 1. The Order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts and in law. CIT (A), 2. The Ld. CIT(A) erred in deleting the addition made by the A0 of Rs. 6,76,88,320/ for AY 2015-16 & Rs.3,21,67,534/- for AY 2016-17 w/s 69A of the Act. 3 The Ld. CIT(A) erred in directing the AO to verify the deposits and work out the peak credit on the same and allow it for the purposes of computation of unexplained money by not appreciating that for getting the benefit of peak credit, the assessee has to admit that, borrowings made by the assessee from cash creditors are borrowings from non-genuine creditors, and the payments or outgo was only to himself in the form of 4. The Ld. CIT(A) erred in directing the AO to verify the deposits and work out the peak credit in the present case where the assessee claims that all the deposits are genuine, the benefit of peak will not be available. - Bhaiyalal Shyam Behari v. CIT [ 2005] 276 ITR 38 (AlL)] 5. For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld CIT(Appeals) may be set aside and that of the Assessing 0fficer may be restored. DCIT, Central Circle 3, Coimbatore.
Brief facts of the case are as follows:- The assessee an individual is engaged in the business of money lending. For the assessment years 2015-16 & 2016-17, return of income was filed on 29.10.2015 and 17.10.2016 declaring total income of Rs.34,33,840/- and Rs.95,90,420/- respectively. The assessments were selected for scrutiny and notices were issued u/s.143(2) of the Act. During the course of assessment & 2399/Chny/2025 :- 3 -: proceedings, the AO noted that assessee had made cash deposits in his bank accounts during the years under consideration. Assessee was directed to explain the source of cash deposits. The assessee submitted that only peak credit balance alone needs to be added because cash deposits made were immediately withdrawn and utilized for lending to other borrowers. The AO did not accept the submission of the assessee for the reason that he has not identified the persons to whom the money has been advanced and from whom the money was collected back, the date of such collection and the mode of collection, etc. Accordingly, the entire cash deposits were added as unexplained money u/s.69A of the Act and assessments were completed for assessment years 2015-16 & 2016-17.
Aggrieved by the assessments completed for assessment years 2015-16 and 2016-17, the assessee filed appeal before the CIT(A). During the course of appellate proceedings, it was submitted that assessee was carrying on the money lending business and amounts received were deposited and periodically withdrawn to make further advances. It was submitted that in such a scenario, only peak credit in the bank account alone can be brought to tax. Further, the assessee relied on the various orders of ITAT in assessee’s own case for assessment years 2011-12 & & 2399/Chny/2025 :- 4 -: 2014-15 and other family members. The CIT(A) after taking in to consideration various orders of ITAT, directed the AO to verify and bring to tax only the peak credit for which source is not explained by the assessee and allowed balance accordingly. Further, it was directed only the cash deposit and cash withdrawals alone to be considered for working out the peak credit. With these observations, the appeals filed by the assessee were partly- allowed.
Aggrieved by the orders of the CIT(A) for assessment years 2015-16 and 2016-17, the Department has filed the present appeals before the Tribunal. The Ld.DR strongly relied on the grounds raised.
The Ld.AR on the other hand submitted that in assessee’s own case for the assessment years 2011-12, 2013-14 and 2014- 15, the Tribunal on identical facts had held that only unexplained peak balance alone to be taxed and not the entire cash deposits. It was further submitted that in one of the family member’s case, namely, PCIT vs. A. Anbukkannan in Tax case (Appeal) Nos.216 & 217 of 2019, the Hon’ble Madras High Court had upheld the order of the Tribunal, wherein the peak credit was adopted instead of addition of the entire cash deposits. The Ld.AR has filed a paper- & 2399/Chny/2025 :- 5 -: book enclosing therein the judgment of the Hon’ble Madras High Court and the orders of the Tribunal in assessee’s own case and other family members, wherein decision was taken to make addition only the unexplained peak balance as taxable and not the entire cash deposits.
We have heard rival submissions and perused the material on record. The CIT(A) by following the order of the Tribunal in assessee’s own case for assessment years 2011-12 and 2014-15 in and 166/CHNY/2018 (order dated 13.03.2019) had directed the assessee to submit the working of peak cash credit to the AO and explain the source for the same. The specific directions of the CIT(A) reads as follows:- “6.6. Thus, it can be seen that this 0ssue has been decided by the Hon'ble ITAT, Chennai in various cases of the appellant's family members and including the appellant's own case by upholding the CIT(A)'s decision that the appellant is liable to explain only the peak credit balance and only the unexplained peak cash credit is liable to be brought to tax and added to the returned income of the appellant for this assessment year. Further, in the case of Shri A. Anbukkannan (supra), the Hon'ble High Court of Madras has also held that the method of 'Peak Credit' is the correct method in such cases. Therefore, respectfully following the above decision of the Hon'ble High Court of Madras and Hon'ble ITAT. Chennai, I am of the opinion that addition of gross cash deposits in the bank account of the appellant is incorrect and only the unexplained peak credit can be added to the appellant's total income. The appellant is directed to submit the working of peak cash credit to the AO and also explain the source of the same. The AO is directed to verify the same and bring to tad only the peak credit for which the source is not explained by the appellant and allow the & 2399/Chny/2025 :- 6 -: balance accordingly. Needless to say, only cash deposits and cash withdrawals alone to be considered for working out the peak cash credit. With these directions, the grounds raised by the appellant are partly allowed.
The above directions of the CIT(A) is in consonance with the dictum laid down in assessee’s own case for assessment years 2011-12 & 2014-15, (supra). In one of the family member’s case namely Shri A. Anbukkannan, the Hon’ble Madras High Court in TCA No.216 & 217 of 2019 (order dated 04.03.2019) had upheld the Tribunal order wherein addition was directed to be made on the basis of peak credit in order to remove the cascading effect of unexplained entries in the bank account. The relevant finding of the Hon’ble Madras High Court reads as follows:- “5. Having heard the learned counsel for the Revenue, we are satisfied that no substantial question of law arises in the present Appeals filed by the Revenue and we are of the considered opinion that only if the Assessee has failed to explain the entries in bank account, then the additions made by the Authorities under the Act on the basis of Peak Credit can be adopted to remove the cascading effect of the unexplained credit entries in the bank account. The assessee had both cash deposits ad cash withdrawals in his bank account with the same bank. Therefore, the method of ‘Peak Credit’ was rightly adopted for addition of the alleged undisclosed income of the Assessee and this is a well settled and common principle so adopted. The finding of facts of the Authorities below cannot be said to be perverse or illegal in any manner.”
The Ld.DR has not been able to point out any error in the aforesaid directions of the CIT(A). Hence, we upheld the orders & 2399/Chny/2025 :- 7 -: of the CIT(A) are correct and in accordance with law. It is ordered accordingly.
In the result, both the appeals filed by the Revenue are dismissed.