DCIT,CENTRAL CIRCLE-3, COIMBATORE vs. SHRI S.KULAITHAIAN, CHENNAI
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY, HON’BLE & SHRI S. R. RAGHUNATHA, HON’BLE
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal instituted by the revenue is against the order of the Commissioner of Income Tax (Appeals)-19, Chennai for the assessment year 2016-17, vide order dated 28.02.2022 against the order of the ACIT, Trichy, dated 17.12.2018.
At the outset, we find that there is a delay of 04 days in appeal filed by the revenue, for which petition for condonation of delay along with reasons for delay has been filed. After
:-2-: ITA. No: 345/Chny/2022 considering the petition filed by the revenue and also hearing both the parties, we find that there is a reasonable cause for the revenue in not filing appeal on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeal and admit appeal filed by the revenue for adjudication.
The only ground raised by the revenue is, the ld. CIT(A) has erred in deleting the addition of Rs.12,37,88,540/- made u/s. 69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) towards unexplained cash deposits in bank account.
The brief facts of the case are that, the assessee is an individual, engaged in money lending business. The assessee filed his return of income on 15.10.2016, declaring total income of Rs.1,13,43,210/-. The case was selected for complete scrutiny by CASS. Accordingly, notices u/s. 143(2) and 142(1) of the Act was issued to the assessee, requiring him to produce evidences explaining source for cash deposits. In response to notices, the ld. AR of the assessee has submitted statement of computation, statement of affairs along with copy of bank accounts. However, not convinced with the evidences filed by
:-3-: ITA. No: 345/Chny/2022 the assessee, the ld. AO issued show cause notice on 07.12.2018, requiring the assessee to explain source for cash deposits with necessary evidences like details of books of accounts, list of persons to whom money has been sent etc. Consequently, the assessee made a submission that the cash deposits were made out of collections from the parties, to whom loans were given earlier, but no documentary evidences were filed. In absence of any evidences, the ld. AO has made addition of Rs.12,37,88,540/- u/s. 69A of the Act. Aggrieved by the impugned order of the ld. Assessing Officer, the assessee preferred an appeal before the ld. CIT(A).
Before the ld. CIT(A), the ld. AR pleaded that ld. CIT(A) in assessee’s own case for assessment years 2013-14, 2014-15 & 2015-16 has held that unexplained peak credit balance, if any, the same alone can be assessed to tax. In respect of the revenue appeal filed against the above order relevant to assessment year 2014-15, the ITAT in ITA No. 35/Chny/2018 has dismissed the revenue’s appeal. The ld. AR also relied on the decision of Jurisdictional High Court in TCA No. 216 & 217 of 2019 dated 04.03.2019 in the case of PCIT vs Sri. A. Anbukannan. The ld. CIT(A), after considering the submissions
:-4-: ITA. No: 345/Chny/2022 and case laws relied upon by the ld. AR, held that the action of Assessing Officer to add Rs.12,37,88,540/- is unjustified and allow the appeal by holding as under: “ 9.4 In this background, considering the earlier decision taken by this office in the appellant’s own case, as per the decision taken by the ITAT in the appellant’s case in a similar issue and by respectfully following the decision of the Hon’ble Jurisdictional High Court referred above, I am of the opinion that in the interest of justice, the Assessing Officer must have taken into account the relevant withdrawals while working out the cash deposits. While working out the withdrawals, naturally the peak credit method should be considered to determine any deficit in determining unexplained cash balance to consider the addition. Here, the appellant has worked out the peak credit and submitted proper explanation to the peak credit. In view of this, the addition made by the Assessing Officer amounting to Rs.12,37,88,540/- is not justifiable in the present facts and circumstances of the case. In this background, the ground raised by the appellant against the addition is allowed.”
The ld. DR, filed a written submission, which is held as under: “It is found that there are multiple transactions, which runs to Crores. Such huge transactions cannot be managed through one's memory alone. To manage such huge transactions, definitely some books of account should have been maintained by the assessee. However, despite of scrutiny assessments in the assessee's case for the A Ys 2013-14, 2014-15, 2015-16, the assessee failed to produce the book of accounts for the A Y 2016- 1 7 also, reflecting these huge transactions. This shows that the assessee is wilfully not disclosing the books of account which are
:-5-: ITA. No: 345/Chny/2022 maintained for four years consequently. This non-corporation on the part of the assessee had successfully prevented the department from making any further meaningful enquiry, as to how much the loan advanced and interest income earned thereon etc. Under these circumstances, the Ld.CIT(A) had erred in accepting the "working .. supplied by the assessee for adopting peak credit. The Ld.CIT(A) ought to have called for a "Remand Report" from the Assessing Officer before accepting the "working .. submitted by the assessee before the CIT(A) for the first time. This is in violation of Rule 46A. Grounds of Appeal point 7 raised by the Assessing officer is relied upon in this regard. The Ld. CIT(A) ought to have appreciated that adoption of peak credit in the absence of relevant books of account is not a scientific method to obtain the taxable income. It is further submitted that the bank accounts, apart from cash transactions, may also contain NEFT, RTGS & Cheque transactions. Adoption of Peak Credit can be considered only when there are cash transactions alone. If peak value of cash transactions are considered, the other modes of transactions that are reflected in the bank statement escape from the tax net. Also, if there are advances which are not returned back, the same will escape while adopting Peak Credit. Hence, adoption of Peak Credit is not correct method to assess the unaccounted income/ investment in the case of this assessee, to assess his real taxable income.(;;) The CIT(A) has relied on the jurisdictional High Court in Tax Case (Appeals) Nos.216 & 217 of 2019 and CMP No. 5601 of 2019 in the case of PCIT, Central-I, Chennai Vs. Shri. A Anbukannan dated 04.03.2019 in which the method of adopting peak credit was upheld. This decision relied by the CIT(A) is distinguishable.
:-6-: ITA. No: 345/Chny/2022 However in this regard it is submitted that, in the case of Bhaiyalal Shyam Behari Vs. CIT 276 /TR 38 (All) (2005), the Hon 'hie Allahabad High Court, it was held that benefit of Peak Credit can be given only when the assessee owns up all the cash credits in the books of accounts. In this regard, the attention of the Hon'ble Bench is drawn to the ITAT's order, passed in the assessee's own case, for the earlier A Y i.e., 2013-14 (in ITA No. 944/CHNY/2017 dated 12.10.2023). In this ITAT order, in a similar situation to quantify the taxable income related to huge cash deposits made in the bank account, the Hon'ble ITAT vide its Para 9 has observed as under: "The plea of ld Counsel for the assessee that peak credit should be accepted for the purpose of explanation of cash deposits are made out of cash withdrawals, we direct the AO to accept the theory of peak credit but the cheque entries cannot be included for the purpose of peak credit unless he could explain how the cheque amounts has gone and how he received back. If he can explain the cash deposits out of the same, the AO will accept. In term of the above, we set aside the order of the Assessing Order and that of the Id CIT(A) and remand the issue back to the file of Assessing Officer for fresh adjudication. " In the above decision of the Hon'ble ITAT in this assesse's own case, it has been held that the cheque entries in the bank account can be excluded for the purpose of "peak credit computation" only if : a) The assessee is able to explain how the cheque amounts were given earlier and how the assessee received back the same cheque amounts subsequently. b) If only the assessee can explain the source for the cash deposits by linking the same to the loans given earlier, and receipts thereon, to that extent source for the cash deposits can be treated by AO as fully explained. In the absence of such
:-7-: ITA. No: 345/Chny/2022 clarification, it is correct for the AO to assess the same cash deposits as unexplained cash deposits and bring them to tax.”
Per contra, the ld. AR reiterated the arguments made before the ld. CIT(A). The ld. AR also stated that the details of bank statements and other information had already been furnished during the assessment proceedings itself, and no fresh evidences have been brought before the ld. CIT(A) as alleged by the ld. DR. The ld.AR stated that, the assessee has provided the working statement of the bank deposits to arrive at the peak credit, based on the bank statements which are already existing in the records of the ld.AO furnished during the assessment proceedings. Therefore, there is no violation of Rule 46A of I.T. Rules, 1962 as stated by the ld. DR and pleaded to uphold the order of the ld.CIT(A).
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts stated above are not repeated for the sake of brevity. The Assessing Officer made addition of Rs.12,37,88,540/- as unexplained cash deposits. On appeal, the ld.CIT(A) has deleted it by relying on Tribunal order in
:-8-: ITA. No: 345/Chny/2022 assessee’s own case for earlier year. However, the ld.DR pointed out that no such exercise as directed by the Tribunal has been conducted by the ld.CIT(A), while allowing the appeal and also ld.CIT(A) erred in accepting the assessee’s version of peak credit, without confronting the Assessing Officer, which action of the ld.CIT(A) is fragile for violation of Rule 46A of I.T. Rules, 1962. We find force in the submissions of ld.DR, as held by Tribunal in assessee’s own case for assessment year 2013- 14, on identical issue we set aside the impugned order of ld.CIT(A) and restore it back to the file of the Assessing Officer for fresh adjudication. For easy reference, the decision of the Tribunal is as under: “9. The plea of ld. Counsel for the assessee that peak credit should be accepted for the purpose of explanation of cash deposits are made out of cash withdrawals, we direct the AO to accept the theory of peak credit but the cheque entries cannot be included for the purpose of peak credit unless he could explain how the cheque amounts has gone and how he received back. If he can explain the cash deposits out of the same, the AO will accept. In term of the above, we set aside the order of the Assessing Order and that of the ld. CIT(A) and remand the issue back to the file of the Assessing Officer for fresh adjudication. Accordingly, this issue raised by the Revenue is allowed for statistical purpose.”
:-9-: ITA. No: 345/Chny/2022 We are inclined to set aside the order of ld.CIT(A) and remit the issue to the file of the Assessing Officer for a limited purpose to verify the working made by the assessee and appeal is allowed for statistical purposes.
In the result, appeal filed by the revenue is allowed for statistical purposes. Order pronounced in the open court on 31st May, 2024 at Chennai. Sd/- Sd/- (एस. आर. रघुनाथा) (एबी टी वक� ) (S. R. RAGHUNATHA) (ABY T VARKEY) लेखासद�/Accountant Member �ाियक सद�/Judicial Member चे�ई/Chennai, �दनांक/Dated, the 31st May, 2024 JPV आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3.आयकर आयु�/CIT– Chennai/Coimbatore/Madurai/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF
