S. PAZHANIRAJA,PUDUCHERRY vs. ITO, PUDUCHERRY

This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-

The assessee has raised several grounds in his appeal, however the crux of the issue is that the Ld.CIT(A) has erred in confirming the order of the Ld.AO, who had made addition on account of unexplained cash deposits made in UCO Bank for Rs.10,59,497/-.

The brief facts of the case are that the assessee is an individual earning “income from house property” and “income from other sources” filed his return of income electronically for the assessment year 2011-12 on 14.07.2012, admitting total income of Rs.2,34,280/-. Initially the return was process U/s.143(1) of the Act. Subsequently the case was selected for scrutiny and finally order U/s.143(3) of the Act was passed on 10.10.2013, wherein the Ld.AO made addition of Rs.10,59,497/- towards unexplained cash credits U/s.68 of the Act on the basis of peak credit.

During the course of assessment proceedings, it was observed by the Ld.AO that the assessee had made several cash deposits in UCO Bank, Pondicherry aggregating to Rs.27,61,200/- It was explained by the assessee that the source of the aggregate bank deposits of Rs.27,61,200/- was out of gift from his father, mother and sister of Rs.1,00,000/- each, Rs.1,83,500/- income earned during the year, Rs.1,73,000/- from the accumulated income of previous years, Rs.6,00,000/- from his father’s HUF etc., and withdrawals from bank. The Ld.AO rejected the contention of the assessee because there was no documentary evidence other than the confirmation letter from the relatives of the assessee for conferring such gifts and thereby added Rs.10,59,497/- to the income of the assessee by applying the peak credit method. On appeal, the Ld.CIT(A) confirmed the order of the Ld.AO by agreeing with his view.

Before us the Ld.AR reiterated his submission made before the Revenue authorities on earlier occasion and pleaded that the assessee had furnished the details for the source of bank deposit, however the Ld.AO as well as the Ld.CIT(A) had rejected the explanation offered by the assessee and without examining the relatives of the assessee added the bank deposit to the income of the assessee computed on peak credit method which is unjustifiable. It was therefore pleaded that the addition made in the hands of the assessee may be deleted. The Ld.DR on the other hand relied on the order of the Revenue authorities and requested for sustaining the same.

I have heard the rival submissions and carefully perused the materials available on record. From the facts of the case, it is apparent that the Ld.AO disregarding the confirmation letter furnished by the assessee’s relatives and without examining them made the addition of Rs.10,59,497/- to the income of the assessee made addition based on peek credit method and the Ld.CIT(A) has also confirmed the same. I do not find merit on the action of the Revenue authorities in this issue. The Ld.AO ought to have examined the relatives of the assessee before arriving at such conclusion. It is pertinent to mention that every individual will have some accumulated cash balance with them out of their savings. In the case of the assessee, he has claimed that approximately Rs.3 to 4 lakhs was received in aggregate from his relatives such as father, mother and sister and that cannot be disbelieved. Further, at least an amount of Rs.3 to 4 lakhs accumulated by his father’s HUF also cannot be disbelieved.

In the result, the appeal of the assessee is allowed.