PAVAN MALHOTRA,JAMMU vs. THE INCOME TAX OFFICER, JAMMU

ITA 651/ASR/2016Status: DisposedITAT Amritsar11 April 2018AY 2006-074 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO wrongly applied the peak credit theory by considering both debit and credit entries. The Tribunal found that the cash deposits were explainable and routed through the cash book, and that some deposits pertained to the subsequent year. The addition was therefore unsustainable.

What were the facts?

The Assessing Officer (AO) added Rs. 16,70,206 to the assessee's income, representing the difference between total cash deposits in a bank account and the declared turnover, applying the peak credit method. The assessee contended that the AO considered only gross deposits and neglected withdrawals, and that the deposits were reflected in the books.

What were the issues?

Whether the addition made by the AO on account of unexplained cash deposits, using the peak credit method, is justified when the deposits are reflected in the assessee's books and cash book.

Which sections of the Income-tax Act were involved?

Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR

Before: SH. SANJAY ARORA & SH. N.K.CHOUDHRY

For Respondent: Smt. Balwinder Kaur (Ld. DR)

Hearing: 30.01.2018Pronounced: 11.04.2018

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA No.651(Asr)/2016 Assessment Year:2006-07

Sh. Pawan Malhotra Vs. Income tax officer 6-D/C, Gandhi Nagar Ward-1(2), Jammu Jammu, J&K PAN:ADLMP9523E (Appellant) (Respondent) Appellant by: Sh. P. N. Arora (Ld. Adv.) Respondent by: Sh. Smt. Balwinder Kaur (Ld. DR) Date of hearing: 30.01.2018 Date of pronouncement: 11.04.2018 ORDER PER N.K.CHOUDHRY, JM: The instant appeal has been preferred by the Assessee/Appellant, on feeling aggrieved against the order dated 08.09.2016 passed by the Ld. CIT(A)-1, Amritsar Camp at Jammu (J&K) u/s 250(6) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’). 2. The following grounds of appeal raised by the assessee. “1. That the authorities below have wrongly made the addition of Rs.16,70,206/- which is against the facts of this case, the Bank Account to which the Assessing Officer is referring is duty reflected in the books of the assessee. 2. That the addition of Rs.16,70,206/- made and confirmed by authorities below is against the facts of this case since the Assessing Officer took into account only the gross total of all

ITA No.651/Asr/2016 (A.Y.2006-07) 2 Sh. Pavan Malhotra, Jammu vs. ITO

deposits made during whole of the year and have grossly neglected in not giving the credit of withdrawals made in during the year.” 3. The brief facts of the case are that the assessee is a Doctor and also running a Diagnostics Center in the name and style of M/s Himal Diagnositics and had filed his return of income on 29th June, 2006 by declaring the income of Rs.1,41,120/-. The Assessing Officer while examining the copy of Bank Account No.1231SB1089 (J&K Bank), ASCOME, Batra, noticed that the assessee has made cash deposits to the extent of Rs.30,13,800 in his account from 1st April, 2005 to 31st March, 2006 as per details annexure “A”. The Assessing Officer applied the peak credit method and added Rs.16,70,206/- as difference in the cash deposits of Rs.30,13,800/- and declared gross turn over Rs.13,43,594/- The Assessing Officer also made two other additions.

The Assessee, on feeling aggrieved, challenged the assessment order before the Ld. CIT(A), who while deciding the appeal of the assessee by observed that that the Ld. AO has rightly assessed income of the assessee after taking into account the peak credit in absence of any documentary evidence and clarification in respect of various cash deposits amounting to Rs.30,13,800/- in the Bank Account of the assessee and finally dismissed the appeal of the assessee , while allowing partly reliefs. 5. Feeling aggrieved against the order impugned herein passed by the Ld. CIT(A), the assessee has challenged the

ITA No.651/Asr/2016 (A.Y.2006-07) 3 Sh. Pavan Malhotra, Jammu vs. ITO

addition of Rs.16,70,206/- which was sustained by the Ld. CIT(A) on the basis of peak credit theory.

We have heard the rival parties and perused the relevant material placed on record, as in the instant case, the assessee has declared gross turn over of Rs.13,43,594/- in his income and expenditure accounts, however, it was observed by the Assessing officer that on examination of copy of Bank Account No. stated above, it was noticed that the assessee has made cash deposits to the extent of Rs.30,13,800/- in his account for the period of 1st April, 2005 to 31st March, 2006. On query the assessee failed to clarify the same and in that eventuality the difference of the aforesaid amounts i.e., 16,70,206/-was added to the income of the assessee on account of undisclosed sales by applying peak credit theory, which was affirmed by the Ld. CIT(A). Our attention was drawn to the bank Statement as well as account ledger where the amount of Rs.30,13,800/- as depicts pertains to period from 1st April, 2005 to 31st March, 2006 and even the amount of Rs.3,23,000/- out of Rs.30,13,800/- deposited on dated 28th April, 2006, undisputedly pertains to the subsequent year. It is not out to place herein below that all the details of cash deposits to the tune of Rs.30,13,800/- is available and co-relates with the ledger account and fully explainable because the same have been routed through cash book maintained by the assessee. It seems that the Assessing Officer has taking into consideration the debit as well as credit entries for applying peak credit theory which is

ITA No.651/Asr/2016 (A.Y.2006-07) 4 Sh. Pavan Malhotra, Jammu vs. ITO

not sustainable, therefore, the observation of the Ld. CIT(A) to the extent that, in the absence of documentary evidences and clarification in respect of various cash deposits amounting to Rs.30,13,800/- in the Bank Account of the assessee culminated into rightly assessed income of the assessee after taking into account is peak credit, is contrary to the facts and documents on record and hence can not be sustained . Even otherwise, the gross turn over o the Asseeee has also been accepted by the department in subsequent assessment year without deduction. Even otherwise, the Ld. DR has not refuted the claim of the assessee by placing on record any contrary material and/or pointing out any defect in the ledger account and the bank statement of the assessee. In the cumulative effect the addition of Rs.16,70,206/- as sustained by the Ld. CIT(A) is liable to be deleted and, hence, the addition stands deleted.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 11.04.2018.

Sd/- Sd/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:11.04.2018 /PK/ Ps. Copy of the order forwarded to: (1) Sh. Pavan Malhotra, Gandhi Nagar, Jammu, (J&K) (2) The ITO, Ward-1(2)- Jammu (3) The CIT(A)-1, Amritsar Camp at Jammu (J&K) (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order

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