ITO, BANGALORE vs. SHRI. BASAVARAJ S KALLUR, VIJAYAPUR

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ITA 1230/BANG/2016Status: DisposedITAT Bangalore31 May 2017AY 2011-126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal agreed with the principle of using peak credit for additions but directed the AO to recompute it by excluding payments made to third parties from the total withdrawals.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 43,89,000/- on account of cash deposits in a bank account. The CIT(A) restricted the addition to the peak credit in the savings bank account, granting partial relief.

What were the issues?

Whether the CIT(A) correctly applied the principle of peak credit by considering all withdrawals, including payments to third parties, for the purpose of restricting the addition on cash deposits.

Which sections of the Income-tax Act were involved?

Section 144

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Income Tax Appellate Tribunal, “SMC-A” BENCH : BANGALORE

Before: SHRI VIJAY PAL RAO

For Appellant: Shri M.K. Biju, JCIT
For Respondent: Shri S. Ramasubramanian, CA
Hearing: 22.05.2017Pronounced: 31.05.2017

Per Vijay Pal Rao, Judicial Member

1.

This appeal by the revenue is directed against the order dated 22.03.2016 of CIT(A) for the assessment year 2011-12. The revenue has raised the following grounds.

2.

The AO while completing the assessment u/s. 144 vide order dated

28.11.2013 made an addition of cash deposit in Corporation Bank of Rs. 43,89,000/-. The assessee challenged the order of the AO before the CIT(A). The CIT(A) called for a remand report from the AO on the Page 3 of 6 submissions made by the assessee as well as the verification / examination of books of accounts and source of deposit made in the said bank account. The AO submitted his remand report dated 15.06.2015.

After considering the remand report the CIT(A) restricted the addition to the peak credit in the savings bank account instead of the entire deposit made by the AO.

3.

I have heard the ld. DR and ld. AR and considered the relevant material

on record. At the outset it is noted that the CIT(A) has granted part relief of Rs. 35,16,911/- and confirmed the addition to the extent of peak credits in para 8.1 as under:

4.

The ld. DR has submitted that even if the peak credit is taken into account the withdrawals made by the assessee himself can be considered for that purpose and not the payments made to the third party. Thus he has submitted that accepting the entire withdrawals including the payment to the third parties by the CIT(A) while determining the peak credit is not permissible. On the other hand, the ld. AR of the assessee has submitted that the principle of peak credit has been well settled by various decisions. In support of his claim he has relied upon the decision of Hon’ble Allahabad

Page 5 of 6 High Court in case of CIT Vs Saraf Trading Co. and another (376 ITR 534). Thus he has submitted that the CIT(A) has rightly given the benefit by considering the peak credit in the savings bank account instead of the entire deposits made on different dates.

5.

Having considered the rival submissions as well as relevant material on record it is noted that there are deposits as well as withdrawals in the savings bank account of the assessee as per the details attached to the impugned order of the CIT(A). The concept of peak credit is applied in a case where there are corresponding withdrawals, and therefore, subsequent deposits can be explained from the earlier withdrawal as a source. In this case except for six entries of withdrawal which appears to be the payment to the third parties all other withdrawals are either in cash or self withdrawal by the assessee. One withdrawal is made by the brother of the assessee Shri Basavaraj S. Kallur who is also representing the deceased assessee in the present appeal.

Therefore except those four withdrawals representing the payment to third parties all other entries are self withdrawals of the assessee and hence, has to be taken into account for the purpose of computing the peak credits.

Accordingly, on principle I concur with the view of the CIT(A) of taking only peak credit for the purpose of addition on account of deposits in the savings bank account however since some of the entries are payments to the third parties which are required to be excluded from the total withdrawals

Page 6 of 6 made during the year. Accordingly the AO is directed to recompute the peak credit by taking into account the entries of payment made to the third party.

6.

In the result the appeal of the revenue is partly allowed.

7.

Pronounced in the open court on this 31st day of May, 2017

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