SUBRATA SAHA,KOLKATA vs. ITO, WD-41(2), KOLKATA, KOLKATA

This appeal by the assessee against the order of Commissioner of Income Tax (Appeals)-XXX, Kolkata dated 15.10.2014. Assessment was framed by ITO Ward-41(2), Kolkata u/s 1444 r.w.s 147/264 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 05.10.2010 for assessment year 2005-06. Shri Miraj D Shah Ld. Authorized Representative appeared on behalf of assessee and Shri Provash Roy, Ld. Departmental Representative appeared on behalf of Revenue.

First issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the addition of ₹ 10.70 lakh u/s 69A of the Act on account of unexplained money.

Briefly, the facts are that assessee in the present case is an individual and declared his income from business and Short Term Capital Gains and income from other sources. The assessee has been maintaining a joint bank account with his wife in Standard Chartered Bank bearing A/c No.33410043062, Shyambazar Branch, Kolkata where a cash deposit of ₹ 10.70 lacs was made. The said bank account was not disclosed by assessee in his IT return. The assessee claimed that said sum belonged to his wife. Accordingly, AO summoned assessee’s wife, Eti Saha by issuing notice u/s. 131(1) of the Act and examined her on oath. The relevant extract is reproduced below:- “Q3- How many bank A/c did you maintain in the FY 04-05 [i.e. 1.4.04 to 31.3.05]? A: Silence Q4. What are the names of banks where you opened you’re a/c or ran you’re a/c in the last 4 years with names of branches? A: Silence”

Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that cash was deposited by his wife which was disclosed A.Y. 2005-06 Subrata Saha Vs ITO Wd-41(2) Kol. Page 3 in her balance-sheet. However, Ld. CIT(A) observed that assessee failed to explain the source of cash but merely challenged the addition on technical ground. Therefore, Ld. CIT(A) disregarded the claim of assessee by observing as under:- “From the Assessment Order it becomes clear that the Appellant’s wife was not aware of the Bank Account in which the deposit of Rs.10,70,000/- was made. Similarly, she does not seem to have signed the cheques or the deposits slips. It appears that the Bank Account has been fully utilized by the Appellant himself. The AR’s claim that the deposit has been disclosed in the Balance Sheet is also dubious as these deposits were made in November, 2004 and January, 2005 and therefore there is no reason why these amounts should appear in the Balance Sheet, which should show the assets and liabilities as on the last day of the relevant FINANCIAL YEAR. Clearly thus the alleged Balance Sheet is a fabricated financial statement inserting the deposits details which should not normally appear in the Balance Sheet. The Appellant or the AR is silent about the immediate source of the deposit in the Joint Bank Account. Thus the Appellant has failed to explain satisfactorily the source of cash deposits either in the Assessment stage or in the Appeal stage. I therefore have no reasons to alter the decision of the AO in making the addition of Rs.10,70,000/-. The Appellant has no basis to claim that the money was deposited by Eti Saha in the said Account or that the deposit was disclosed in the Balance Sheet of Eti Saha. In the facts and circumstances of the deposit and operating of the Bank Account and ignorance of Eti Saha about the said Bank Account, it is apparent that the money has been utilized by the Appellant who was also the actual owner of the money involved. As the source of the said money has not been explained satisfactorily, the addition is upheld and the ground is not allowed.”

Before us Ld. AR for the assessee has filed paper book which is running pages from 1 to 35 and reiterated same submissions as made before Ld. CIT(A). Ld. AR drew our attention on page 19 of the paper book where the balance-sheet of assessee’s wife was placed showing the amount of ₹10.70 in her account. The ld. AR further submitted that the cash flow statement along with balance-sheet of assessee which is placed on page 21-23 of paper book. Ld. AR further stated that wife of assessee remained silent when she was called upon under oath u/s. 131(1) of the Act but does not mean that money belongs to assessee. The ld. AR in support of that assessee claimed relied on the orders of ITAT Kolkata Benches in the case of ITO Wd-35(4) Kolkata vs. Madan Chand Surana (HUF) in dated 24.12.2013 and ITA No.1075/Kol/2015 A.Y. 2005-06 Subrata Saha Vs ITO Wd-41(2) Kol. Page 4 ITAT Hyderabad Bench in the case of ITO Ward-12(5) Hyderabad vs. Smt. Guthula Nagamany in ITA No.1281/Hyd/2015 dated 29-06-2016. The ld. AR alternatively argued that in case addition is sustained in the hands of assessee then the peak theory should be applied. The ld. AR further submitted that the cash was deposited in the bank but the same cash was also withdrawn and further deposited. Therefore the same amount of cash was routed many times. Therefore the peak balance should be added in the total income of assessee. On the other hand, Ld. DR for the Revenue submitted that neither the assessee nor his wife has proved the source of cash. The onus lies upon the assessee to justify the source of cash deposited in bank account. He vehemently relied on the order of Authorities Below.

We have heard the rival contentions and perused the materials available on record. From the foregoing discussion, we find that the addition was made by AO for the cash deposited in their bank account on the ground that the source was not duly explained. The ld. CIT(A) subsequently confirmed the order of AO. On perusal the materials before us, we find that it is the duty of the assessee to justify the source of cash. In the instant case the assessee just trying to discharge his burden by stating that cash belonged to his wife but in actuality wife also failed to explain the entries reflecting in bank statement. In the absence any specific explanation from the side of the assessee, we find no infirmity in the order of Authorities Below. However, the argument placed by Ld. AR for the assessee that the peak credit theory should be applied in the case on hand has force. It is because the cash was deposited by assessee and the same amount was withdrawn and subsequently the same amount was deposited. But on perusal of the facts of the case we find that the issue of peak credit theory was not raised before the lower authorities. In view of the above, it will be injustice with the assessee if entire cash deposited is added to the total income of assessee. Therefore we are of the considered view that peak cash should be added to the total income of assessee. We also find that A.Y. 2005-06 Subrata Saha Vs ITO Wd-41(2) Kol. Page 5 the cases relied by Ld. AR for the assessee is distinguishable from the facts in the case of hand. In those cases the source was duly explained but in the instant case the assessee failed to explain the source of cash deposit. Accordingly, in the interest of justice and fair play we are inclined to restore this issue back to the file of AO for fresh adjudication as per law and in the light of above stated discussion. Hence, this ground of assessee’s appeal is allowed for statistical purpose.