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Facts
The assessee, an individual, filed a return declaring an income of Rs. 6,38,270. The assessment was reopened under Section 148, and the Assessing Officer (AO) noted cash deposits in the minor children's bank accounts. The AO assessed the total income, including an addition under Section 68, but did not grant credit for self-assessment tax paid by the assessee.
Held
The Tribunal held that the Assessing Officer did not adopt the correct method of taxation, which should have been the peak credit method. The Tribunal also noted that the opening balance of a bank account should not be assessed in the current year and that credit for self-assessment tax paid by the assessee was not given.
Key Issues
Whether the Assessing Officer correctly assessed the income using the peak credit method and whether credit for self-assessment tax paid was appropriately granted.
Sections Cited
148, 250, 68
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Income Tax Appellate Tribunal, “D” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey
order
: February 24, 2026 ORDER
Per Pradip Kumar Choubey, Judicial Member:
This appeal filed by the assessee is directed against the order dated 14.08.2025 of the NFAC, Delhi passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2013–14.
Brief facts of the case of the assessee are that the assessee is an individual and filed his return of income declaring income of Rs.6,38,270/-. The assessment of the assessee was reopened u/s 148 and the assessee could not file return of income. The Assessing Officer noted that the assessee made cash deposits in two bank accounts of assessee’s minor children. The Assessing Officer assessed the total income of the assessee as under:
Being aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A) wherein the appeal of the assessee has been dismissed.
Aggrieved and dissatisfied, the present appeal has been preferred by the assessee. The ld. AR of the assessee challenges the impugned order by submitting that the Assessing Officer did not take correct method of taxation as in the present case, the correct method of taxation is the peak credit method. The ld. AR further submits that the explanation and evidences Sahanur Mondal submitted by the assessee in respect of source of cash deposits of Rs.1,24,02,080/- in the subject two bank accounts of minor son of assessee were in fact accepted partially by Assessing Officer and the addition out of said cash deposits, if at all to be made, should not have exceeded the combined peak balance of deposits and withdrawals from said two bank accounts in subject year less Rs.26,67,760/- declared and accepted as additional business profits under Income Declaration Scheme 2016 and other amounts accepted by Assessing Officer as because most of deposits and withdrawals in and from said two bank accounts were recycled from each other and all the deposits and withdrawals into said accounts were related to business of assessee. His submission is that there is no justification for addition of Rs.7900000/- made by the Assessing Officer. The ld. AR also submits that the Assessing Officer omitted to grant credit for self-assessment tax amounting to Rs.91,636/- paid by assessee without assigning any reason whatsoever though said payment is reflected in form 26AS. His prayer is that the appeal be remitted back to the file of the Assessing Officer for proper verification.
Contrary to that, the ld. DR supports the impugned order.
We have considered the submissions of both the parties and perused the records. We find that the assessee explained that the funds belonged to him and were routed for his business transactions through these accounts and there was continuous withdrawal and redeposits throughout the year and the deposits represented cash rotation and circulation of funds rather than fresh unexplained money. We also find that the Assessing Officer did not take correct method of taxation, in the present case the proper method of taxation is the peak credit ratio. It is pertinent to mention here that the assessee filed the following decisions before us: (a) CIT v. Kulwant Rai (2007) 291 ITR 36 (Del.) peak credit applicable where withdrawals and deposits are interlinked Sahanur Mondal (b) CIT v. S. Giridhar (2016) 385 ITR 372 (Mad.) cash rotation to be taxed on peak basis (c) CIT v. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom.) (d) ITO v. Shailesh Gandhi (ITAT Mumbai) (e) ITO v. Basant Lai Om Parkash (ITAT Amritsar) 6.1 We note that the peak balance of bank a/c ending 650273 includes an opening balance of Rs.15,55,472/-, which pertains to earlier year and cannot be assessed in this year and it is well settled that each assessment year is a self-contained unit and opening balance cannot be treated as income of the current year. We also note that the assessee paid tax of Rs.91,636/- which is evident from Form 26AS and credit of the same was not given. Keeping in view the above discussions, we find substance in the argument of the ld. AR that proper verification needs to be done in the case of the assessee. Accordingly, we remit the matter back to the file of the Assessing Officer for proper examination and to pass a fresh order after going over the documents filed by the assessee and keeping in mind the various judicial precedents.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Kolkata, the 24th February, 2026.