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Facts
The Assessing Officer (AO) received information about a cash deposit of Rs. 29,38,600/- in the assessee's bank account for the financial year 2009-10, relevant to AY 2010-11. The AO reopened the assessment and issued a notice under section 148. As the assessee did not file a return, the AO made an addition of the entire deposit as unexplained income under section 144 read with section 147.
Held
The Tribunal held that the AO made an addition of the entire credits but failed to provide set off for debit entries. While the assessee's explanation of being in the money lending business was not satisfactory, the AO should have computed the peak credit. Therefore, the AO is directed to restrict the addition to 12% of the total cash deposited, representing the notional interest earned on short-term loans.
Key Issues
Whether the addition of the entire bank deposit as unexplained income is justified without considering debit entries and computing peak credit; whether the AO should have restricted the addition to notional interest earned.
Sections Cited
148, 144, 147, 68
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Income Tax Appellate Tribunal, JABALPUR BENCH “SMC”, JABALPUR
Before: SHRI KUL BHARAT
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 21.05.2024, pertaining to the assessment year 2010-11. The assessee has raised the following grounds of appeal: -
1. The learned Commissioner of Income Tax (Appeal) NFAC was not Justified in upholding the Assessment order dated 07.12.2017 without appreciating that the appellant has filed return of income online for the F.Y. 2009-10.
The learned Commissioner of Income. Tax (Appeal) NFAC: was not justified in appreciating the facts that the AO made the addition only on the basis of AIR information „and no independent inquiry was done and thus, the notice issued under section 148 is bad in law and addition was made mechanically without any proper inquiry.
3. The learned Commissioner of „Income Tax (Appeal) NFAC was not justified in confirming the addition of Rs.29,38,600/- made by the AO under section 68 of the Act without considering the reply filed by the appellant and by ignoring the debit entries in the bank account.
Page 2 of 4 4. The learned Commissioner of Income Tax (Appeal) NFAC was not justified in confirming the addition of Rs.29,38,600/- made by the AO under section 68 of the Act without considering the alternate submission of the appellant that if at all addition have to be made it is to made only of peak credit.
5. The appellant craves for leave to amend, add to or omit any ground up to the time of hearing of the appeal.”
2. Briefly stated facts are that an information during the financial year 2009-10 relevant to A.Y. 2010-11 was received by the Assessing Officer that the assessee had deposited cash in his bank account to the tune of Rs.29,38,600/-. Therefore, the Assessing Officer, after recording the reasons that the income chargeable to tax was escaped taxation. He accordingly, re- opened the assessment and issued statutory notice u/s 148 of the Income Tax Act, 1961 (“Act”, for short) on 27.03.2017 and was duly served upon the assessee on 31.03.2017. In compliance to the notice issued u/s 148 of the Act, the assessee did not file any return of income. Since there was no response on behalf of the assessee, therefore, the Assessing Officer proceeded to frame assessment u/s 144 read with section 147 of the Act. Thereby, he made addition of the entire cash deposits in the bank account of the assessee amounting to Rs.29,38,600/- and assessed income at Rs.29,38,600/-. Aggrieved by this order, the assessee preferred appeal before the Ld. CIT(A) who also sustained the addition and dismissed the appeal of the assessee. Now the assessee is in appeal before this Tribunal.
Apropos to the grounds of appeal, the Ld. Counsel for the assessee contended that the Assessing Officer did not give the set off of the debit entries in the bank account. He contended that the assessee had also withdrawn amount from the bank and subsequently deposited it. Therefore, the Assessing Officer ought to have made addition to the peak credit. He further submitted Page 3 of 4 that the assessee had met with bike accident and had suffered 85% disability. Due to this disability, he could not comply with the notices. It is stated by the assessee money was withdrawn and deposited as he was advancing loan to various persons and on short term basis and use to deposit the amount received from them. He, therefore, submitted at the most the Assessing Officer should have restricted the addition to the extent of the interest received by the assessee.
On the other hand, the Ld. the Ld. Departmental Representative (DR) supported the orders of the lower authorities and submitted that it was incumbent upon the assessee to discharge onus of proving that the money was withdrawn for giving loan on short term and further the same amount was deposited in the bank account. In the absence of any credible evidence, the lower authorities have justified in treating the entire credit as unexplained.
I have heard the Ld. Representatives of the parties and perused the material available on record. There is no dispute with regard to the facts that the Assessing Officer has made addition of the entire credits made in the bank account of the assessee but failed to give set off of the debit entries. Thus, looking to the totality of the facts and the material placed before me, the Assessing Officer ought to have computed the peak credit if the explanation of the assessee that he was into the business of the money lending was not satisfactory, the Assessing Officer failed to do so. I, therefore, direct the Assessing Officer to restrict the addition to the extent of 12% of the total cash deposited in the bank account during the financial year which is the interest Page 4 of 4 normally is earned on such short term loans. Grounds of appeal of the assessee are partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on 17/09/2025.