Income Tax Appellate Tribunal - Kolkata
Sri Swarup Chand Mondal, Hooghly vs Department Of Income Tax on 28 September, 2016
I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5
Assessment year: 2011-2012
Page 1 of 7
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'C(SMC)' BENCH, KOLKATA
Before Shri P.M. Jagtap, Accountant Member
I.T .A. No. 1295 /KOL/ 2015
Assessment Year: 2011-2012
Income Tax Officer,.......................................................................Appellant
Ward-23(4 ), Hooghly,
Aayakar Bhavan,
Khadina More, Hooghly-712 101
-Vs.-
Shri Swarup Chand Mondal,.......................................................Respondent
B.K. Roy Super Mark et,
P.O. Arambagh,
Dist. Hooghly-712 601
[PAN: AEDPM 4362 C ]
Appearances by:
Shri Rajendra Prasad, JCIT, D.R., for the Department
Shri Sunil Surana, FC A, for the assessee
Date of concluding th e hearing : Ju ly 28, 2016
Date of pronouncing the order : September 28, 2016
O R D E R
This appeal is preferred by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-6, Kolkata dated 26.08.2015 for the assessment year 2011-12 and the grounds raised by the Revenue therein read as under:-
"(1) Whether the CIT(Appeals) erred in law by violating Rule 46A in not giving any opportunity to the AO while accepting the computation of peak credit which according to him should have been considered for addition.
(2) Whether the CIT(A) erred in fact as well as in law in accepting the method of computation of peak credit by the assessee who had evidently not established that the debit entries in the bank account had indeed been routed back as some of the credit entries to reduce the total income of Rs.41,94,000/- to only Rs.9,79,326/-.
I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5 Assessment year: 2011-2012 Page 2 of 7 (3) Whether the CIT(A) erred in fact in not reproducing or not enclosing the said computation of peak credit with or in the appellate order.
2. The assessee in the present case is an individual, who is engaged in the business of wholesale rice trading. The return of income for the year under consideration was filed by him on 30.09.2011 declaring total income of Rs.6,20,250/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has maintained two Bank accounts with Bank of India, Bulchandrapur Branch and Axis Bank, Burdwan Branch, which were not reflected in the financial statements of the assessee. He also noticed that there was substantial deposit made by the assessee in the said two Bank accounts during the year under consideration. In this regard, the explanation offered by the assessee before the Assessing Officer, inter alia, was that the cash withdrawals made from the said Bank accounts were available and utilized for making deposits on the subsequent dates. It was also submitted by the assessee that the opening balance in the said accounts amounting to Rs.5,79,326/- as well as the gift of Rs.4,00,000/- received by him from his mother-in- law in cash was available for him to explain the cash deposits found to be made in the said two Bank accounts. The explanation of the assessee was not found acceptable by the Assessing Officer and he proceeded to add the entire deposit of Rs.42,00,416/- found to be made in the two Bank accounts of the assessee to its total income in the assessment completed under section 143(3) vide an order dated 26.03.2014.
3. Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) disputing the addition of Rs.42,00,416/- made by the Assessing Officer on account of deposits found to be made in his two Bank accounts and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) restricted the said addition to Rs.6,416/- only thereby giving relief of I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5 Assessment year: 2011-2012 Page 3 of 7 Rs.41,94,000/- for the following reasons given in paragraph no. 5 of his impugned order:-
"I have carefully co nsidered the facts o f the case and th e appellant's submissio ns. As regards the cl aim of the appell ant that a gift in cash of Rs.4 ,00,000/- were received by the appellant, the appellant has proved the identit y of the donor. The donor i.e. the mother-in-l aw of the appell ant confirmed in her st atement recorded by the AO during her personal attendance that she had made the gift . She gave details of her sources of inco me wh ich have not been rebutted by the AO. Th e only reaso n given by the AO for the rejection of the gift as genuine is that it was stated by the dono r t hat the gift had been made as per the needs of the appellant . Th e reason given by the AO for rejection of the confirmatio n of the donor d uring her personal attendance is not sufficient to disbelieve the genuineness of th e transaction and the do nor's capacit y to pay. Hence, th e gift of Rs.4.00,000/- claimed to have been deposit ed in the bank account of the appellant with Axis Bank on 22.04.2010 is held t o be genuine and t he second ground of appeal is allowed. Th e total of cash deposits of Rs. 41,37,606/- (including interest of Rs. 5,606/-) in the said bank account has been held by the AO to be unexpl ained and was added back as undisclosed income. The appell ant's case is that the deposits in the said amount are expl ained either by t he opening balance o f Rs.5 ,79,326/.- or t he cash withdrawals made befo re th e impugned cash deposits. I find that the peak balance in the said account was Rs.9,79 ,326/- as on 22.04.2010 which is explained by the o pening bal ance of Rs.5,79,326 /- followed by cash withdrawal of Rs.5,00 ,000/- on 03.04.2010 and subse quent cash deposit of the same t otal amount of Rs.5 ,00,000/-(Rs.2,00 ,000/- on, 17.04.2010 and Rs.3,00,000/- on 1 9.04.2010) and cash deposit of Rs.4,00,0 00/- on 22.04.2010 held above to be expl ained by the cash gift from the appellant's mother-in-l aw. The subsequent cash deposits in the bank account are less th an the aggregat e of the cash withdrawals on prio r dat es. Further, the cash deposit s of Rs.12 ,000/- on 12.11 .2010 and Rs.50 ,000/- on 31.12.2010 in the appellant's bank account with Bank of India are less th an the proximate cash withdrawals of Rs. 1,30,000/- on 29.10.2010 and Rs.3,50,000/ - on 06.1 2.2010 from the bank account with Axis Bank. Th e appellant has noted various judicial decisions to state th at combined peak cash balance in his bank account s after considering the prior cash withdrawals onl y can be considered fo r addit ion, if any. It is quite logical to infer that deposits made out of with drawal s made prior to the said deposits would h ave come out of the preceding with drawal s unless there is evidence to suggest that the withdrawals h ave been made fo r a specific purpo se and not found their way back into the bank account as deposits. The Assessing Officer h as not brought any material on reco rd to pro ve that the cash withdrawn by the appellant would not have found it s way back into the same bank account. It has been h eld time' and again in vario us judicial prono uncement s that wh ere I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5 Assessment year: 2011-2012 Page 4 of 7 in respect of a bank account, th ere are inst ances of cash deposits as well as cash withdrawals, o nly thy 'peak credit of such a bank account can be considered to be the undisclosed income of the assessee and the cash withdrawals preceding cash deposits have to be considered as source of the said subsequent cash deposits. The appellant h as rel ied on various case laws. It was also held by the ITAT , Kolkat a, 'A' Bench in the case of Tanmo y Chatterjee Vs ITO, ITA No.1434/ K/2009 vide it s order dated 30/07/2010 as follows:
"We are of th e considered view th at the assessee h as made cash deposit and also cash withdrawal fro m time to time from the said bank account. The assessee has also not been able to explain t he source of deposit in the said bank account. Further, the Department has also not brought any evidence o n record that the said cash withdrawal has been spent by the assessee. Therefore, we find substance in the submissio n of the assessee that the assessee made withdrawal from the said bank account and again deposited the same as the assessee could not utilize the withdrawal amount for the purpose fo r which it was with drawn. No doubt the assessee h as not stated any where the purpose for which the amount was withdrawn from time to time, The assessee has also placed the bank st at ement at page 7 of the paper book. Considering t he said bank statement , the extract of which has been given by the Ld. CIT(A) at page 3 of the impugned o rder, which has al ready been reproduced h ereinabo ve, we are of the considered view th at the peak of th e balance in the said bank account should be considered as unexplained investment u/ s. 69 of the 1. T . Act. "
Also, the Hon'ble ITAT, Kolkat a 'C' Bench in its order dated 30,04.2010 in the case of Asit Baran Utt asanee Vs ITO in ITA No. 1327/K/2008 held as follows:
"8. We have carefully considered the submissions of the learned Representatives of the parties and the orders of the authorities below. There is no dispute to the fact that th e assessee has not been able to expl ain th e negative cash balance as observed by the Assessing Officer and the details of which are give n on pages 3and 4 of t he assessment o rder. However, we are of the considered view that the addition of the amount of negative bal ance made by the Assessing Officer aggregating Rs.11,80 ,150.52 u/s.6 8 of the Act is not just ified. Considering the facts, we are of th e considered view that it will be just ifiable to take the peak of the negative balance as unexplained cash credit."
I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5 Assessment year: 2011-2012 Page 5 of 7 Further, the Hon'ble ITAT, Kolkata 'C' Bench held in the case of ACIT vs. Loknath Prasad G upt a in IT (SS) A No. 185 & 190/Kol/2003 as under.-
"We h ave carefully perused the respective bank account s and observed that there were various credits as well as, withdrawals in the said bank acco unt beginning on and from 01-01-1990 to 20-03-2002, leaving a closing balance of Rs.8 ,461/-. There is no doubt that the deposit in the bank account is an unexplained investment by the assessee. H owever, it is seen th at every deposit is followed by a withdrawal subsequently. The amount invested at one point of time has been with drawn subsequently and there was furth er deposit in the bank account. Therefo re, th e peak credit of Rs.7,50,975/- covers the total deposits and withdrawal made by the assesese in th e said bank account . Making the addit ion of aggregat e deposit s in the bank account without giving the benefit of withdrawals made by the assessee from t ime to time is not justified The Ld C IT(A) h as rightl y t reated the peak balance of Rs.7 ,50,97 5/- as an unexplained invest ment made by the assessee in the nat ure of credits in the said bank account and, therefo re, th e addition of Rs 7,50,975/- is onl y call ed for. The o rder of th e Ld. CIT (A) is therefo re, upheld.
Thus the Hon'ble Tribunal has consist entl y held that only the peak bal ance can be treated as unexplained investment. Respectfully following this common ratio of various decisions o f the jurisdictional tribunal , it is held th at only the combined peak credit in the appellant's bank accounts wit h Axis B ank and Bank of India can be bro ught to tax , if it cannot be expl ained satisfacto rily. As discussed above, the peak cash b alance of Rs.9 ,79,326/- on 22.04.2010 in the appellant's bank account with Axis Bank (which is also the consolidated peak fo r both his account s) is explained by the o pening cash balance of Rs.5 ,79,326/- brough t forward from the preceding ye ar which cannot be considered the undisclosed income of the assessment year under appeal and the cash gift of Rs.4 ,00,000/- received from the appellant's mother-in-law. Thus, the combined peak cash bal ance h as been explained satisfact orily by the appellant. The subsequent cash deposits (other than interest credited to the account with Axis bank) are explained by the prior cash withdrawals. Hence, only th e total int erest of Rs. 5 ,606/- credit ed to the amount with Axis Bank, tot al intere st of Rs.387/ - credit ed to the bank account with Bank of India(A/c. No .7445) and interest of Rs. 423/- on dormant account no 1484 with Bank of India can be bro ught to tax. Hence, addition of Rs.6,416/-(i.e. Rs. 5,606/- + Rs.387/- + Rs. 423/-) is co nfirmed and th e bal ance addit ion of Rs. 41,9 4,000/- is deleted. The third and fourt h grounds of appeal are decided acco rdingly" .
I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5 Assessment year: 2011-2012 Page 6 of 7 Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
4. I have heard the arguments of both the sides and also perused the relevant material available on record. The main contention raised by the ld. D.R. is that the case made out by the assessee on the basis of peak credit theory was accepted by the ld. CIT(A) without giving any opportunity to the Assessing Officer to verify the same. He also contended that the said theory was put in to service by the assessee for the first time before the ld. CIT(Appeals) and the action of the ld. CIT(Appeals) in giving relief to the assessee by relying on the same without giving any opportunity to the Assessing Officer to verify the peak credit working of the assessee is in clear violation of Rule 46A of the Income Tax Rules. However, as pointed out by the ld. counsel for the assessee from the relevant portion of the assessee's submission made before the Assessing Officer, which has been duly reproduced by the Assessing Officer in the assessment order, the Peak Credit Theory was put into service by the assessee even before the Assessing Officer by pointing out that the cash withdrawals made from the same Bank accounts were available and utilized for making deposits on the subsequent dates. It is thus clear that the argument based on Peak Credit Theory was raised by the assessee even before the Assessing Officer and the other submissions regarding availability of funds in the form of opening balance as well as gift claimed to be received from his mother-in-law in cash were also specifically made by the assessee before the Assessing Officer. It is thus clear that there was no new case made out by the assessee before the ld. CIT(Appeals) for the first time and there is no violation of Rule 46A on the part of the ld. CIT(Appeals) while giving relief to the assessee on the issue under consideration as alleged by the ld. D.R. Even on merit, a perusal of the copy of relevant Bank statement placed on record by the assessee clearly shows that all the withdrawals and deposits from the said Bank accounts were mainly made in cash and, therefore, only peak credit appearing in the said Bank account was required to be considered I . T. A . N o. 1 2 9 5 / KO L . / 2 0 1 5 Assessment year: 2011-2012 Page 7 of 7 for making addition to the total income of the assessee. Such peak credit in the said Bank account was Rs.9,79,326/- and since the same was substantially explained by the assessee by way of opening balance available in the relevant Bank account as well as the gift of Rs.4,00,000/- received in cash from his mother-in-law, I find no infirmity in the impugned order of the ld. CIT(Appeals) giving substantial relief to the assessee on this issue. I, therefore, uphold the same and dismiss this appeal filed by the Revenue.
5. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on September 28, 2016.
Sd/-
(P.M. Jagtap)
Accountant Member
Kolkata, the 28 t h day of September, 2016
Copies to : (1) Income Tax Officer,
Ward-23(4 ), Hooghly,
Aayakar Bhavan,
Khadina More, Hooghly-712 101
(2 ) Shri Swarup Chand Mondal,
B.K. Roy Super Mark et,
P.O. Arambagh,
Dist. Hooghly-712 601
(3) Commissioner of Income Tax (Appeals)-6, Kolkata;
(4) Commissio ner of Income Tax- ,
(5) The Depart ment al Represent ative
(6) Guard File
By order
Assistant Registrar,
Income Tax Appellate Tribunal,
Kolkata Benches, Kolkata
Laha/Sr. P.S.