AI Insights
The case involves Deekonda Venkateswara Rao (HUF), who appealed against the order of the Commissioner of Income-Tax (Appeals), which arose from an order passed by the Assessing Officer under Section 147 of the Income Tax Act, 1961. The Assessing Officer had treated cash deposits of Rs. 1,11,27,529 in the assessee's bank account as unexplained cash credits under Section 68 of the Act. The assessee contended that these deposits were from business transactions of trading in maize. However, both the Assessing Officer and the CIT(A) rejected this claim due to lack of supporting evidence. The Tribunal, while not accepting the source of the deposits as claimed by the assessee, directed that the addition be restricted to the peak credit in the bank account, citing precedents that support this method of assessment.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 709789 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-07-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Assessment Year
2016-2017
Judgement Text
"आयकर अपीलीय अधिकरण, विशाखापटणम पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL Visakhapatnam Bench श्री रिीश सूद, माननीय न्याययक सदस्य एिं श्री एस. बालक ृष्णन, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI BALAKRISHNAN. S, HON’BLE ACCOUNTANT MEMBER, आयकरअपीलसं./I.T.A.No.121/Viz/2025 (निर्धारण वर्ा/ Assessment Year: 2016-17) Deekonda Venkateswara Rao (HUF), R/o.Tadepalligudem. PAN : AAJHD3081K Vs. The Income Tax Officer, Ward – 1, Tadepalligudem. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri GVN Hari, Advocate. राजस्व का प्रतततितित्व/ Department Represented by : Dr. Aparna Villuri, Sr.DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 10.07.2025 घोर्णध की तधरीख/ Date of Pronouncement : 25.07.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee (HUF) is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 29.12.2024, which in turn arises from the order passed by the Assessing Officer (for Printed from counselvise.com 2 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) short “A.O.”) under Section 147 of the Income Tax Act, 1961 (for short “the Act”) dated 25.09.2021 for A.Y. 2016-17. The assessee HUF has assailed the impugned order on the following grounds of appeal before us: “1. The order of Learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) ought to have held that the addition of Rs.1,11,27,529 towards cash deposits in bank account cannot be made u/s 68 of the Act. 3. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.1,11,27,529 made by the assessing officer u/s 68 of the Act towards alleged unexplained cash deposits in bank account. 4. Any other ground that may be urged at the time of appeal hearing.” 2. Succinctly stated, the A.O., based on information that the assessee during the subject year had made substantial cash deposits of Rs. 1,11,27,529 with M/s. Citizen Cooperative Society Ltd., initiated proceedings under Section 147 of the Act. Notice under Section 148 of the Act, dated 23.01.2020 was issued to the assessee calling upon it to file its return of income for the subject year. In compliance, the assessee filed its return of income disclosing an income of Rs.6,75,060/-. Thereafter, the case of the assessee was selected for scrutiny assessment under Section 143(2) of the Act. Printed from counselvise.com 3 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) 3. During the course of the assessment proceedings, it was the claim of the assessee that it was carrying on the business of purchase/sale of maize on a retail basis. Elaborating on the reason for not having voluntarily filed its return of income for the subject year, the assessee had come forth with two fold reasons viz., (i). that it had remained under a bona fide belief that the income from purchase/sale of agricultural produce like maize, etc., did not fall within the purview of the Income Tax Act; and (ii). that as its income for the subject year was below the taxable limit, therefore, it had remained under the that no obligation was cast upon it to file the return of income. 4. Apropos the cash deposits/withdrawals in its savings bank account No. 40100531685 with Citizen Co-operative Society Ltd, it was the assessee's claim before the A.O that the same pertained to its business transactions of purchase/sale of maize. 5. The A.O. observed that the assessee in its return of income had disclosed income from the business of trading of maize under Section 44AD of the Act at Rs. 6,69,789/-, i.e., @ 8% of its total turnover of Rs. 83,72,355/-. The A.O., in order to verify the veracity of the assessee’s claim that it was engaged in the business of trading in maize, directed it to place on record the details of the farmers from whom maize was Printed from counselvise.com 4 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) purchased along with their addresses, bills, receipts, etc. However, the assessee despite specific directions failed to file the requisite information with the A.O. It was the assessee's claim that, as the subject purchases/sales pertained to the period 01.04.2015 to 31.12.2016, the same were not readily available with him. It was the assessee's claim that he would purchase maize from the nearby agriculturists and sell it on the same day after keeping a margin of Rs. 50/- per bag. Elaborating further on the nature of the business, it was submitted by the assessee that the sale receipts were deposited in its savings bank account maintained with Citizen Co-operative Society Bank, and the same was thereafter withdrawn for making purchases from the agriculturists. Once again, the assessee, on being called upon to produce the details of purchases and sales, expressed its inability to furnish the requisite information on the ground that the same was not readily available with him. 6. The A.O., after verifying the submissions of the assessee, was not persuaded to subscribe to the same for the reason that it had failed to corroborate it with supporting documentary evidence. Rather, the A.O. observed that the verification of the majority of the withdrawals revealed that the cash withdrawals were made by one “Mr. Sagar” and Rs. Printed from counselvise.com 5 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) 10,10,000/- was paid to one “Mr. D. Sivnarayan” in two instances. Accordingly, the A.O. held a firm conviction that the assessee was not dealing with various persons for purchase and sale of maize, as was so claimed by him, and had come with a concocted story to avoid legitimate payment of tax on his unexplained money that was deposited in its bank account during the year under consideration. 7. Further, the A.O. observed that on verification, it was gathered that the assessee had neither filed its return of income either for the immediately preceding or succeeding years and had filed the return of income only for the year in question only after initiation of proceedings under Section 147 of the Act. The A.O., finding no substance in the assessee's claim that the cash deposits/withdrawals in its bank account pertained to the transactions of purchase/sales of maize, rejected the same. Accordingly, the A.O. held the entire amount of cash deposits of Rs.1,11,27,529/- as an unexplained cash credit under Section 68 of the Act. 8. Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without success. 9. Ostensibly, the assessee had come up with two-fold contentions before the CIT(A), viz. (i). that the A.O. had grossly erred in law and on Printed from counselvise.com 6 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) facts of the case in making the impugned addition of the cash deposits in its bank account as an unexplained cash credit under Section 68 of the Act; and (ii). that the A.O. had grossly erred in rejecting the assessee's claim that the cash deposits/withdrawals in its bank account pertaining to its business transactions of trading of maize during the year under consideration. However, the CIT(A) did not find favour with either of the contentions advanced by the assessee and dismissed the appeal. For the sake of clarity, the observations of the CIT(A) are culled out as under: Printed from counselvise.com 7 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) Printed from counselvise.com 8 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) 10. The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us. 11. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. Printed from counselvise.com 9 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) 12. Shri G.V.N. Hari, Advocate, the learned Authorized Representative (for short “Ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the authorities below had grossly erred in law and on facts of the case in rejecting the assessee's claim that the cash deposits/withdrawals in its Savings Bank account No. 40100531685 with Citizen Co-operative Society Ltd. pertained to its business transactions of purchase/sale of maize which it was carrying out during the year under consideration. Elaborating further on his contention, the Ld. AR submitted that now when the A.O. while framing the assessment had accepted the business income of Rs. 6,69,789/- that the assessee had disclosed in its return of income on a presumptive basis u/s 44AD of the Act i.e @ 8% of its gross turnover of Rs.83,72,355/-, thereafter, he could not have rejected its claim that the subject cash deposits in its bank account were sourced out of the sale proceeds generated in the normal course of the said business. Alternatively, the Ld. AR submitted that even if the explanation of the assessee was not to be accepted, the addition in its case could only have been made to the extent of the peak credit of the transactions in the subject bank account during the year. The Ld. AR had drawn our attention to a “Chart” revealing the computation of the peak credit, which as pointed out by him on 11.09.2015 worked out at Rs. Printed from counselvise.com 10 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) 11,45,629/-. The Ld. AR, to buttress his claim that in case there are a chain of cash deposits/withdrawals in a bank account of an assessee over a year, then, the addition is liable to be restricted only to the extent of the peak credit in the bank account, had relied upon the order of the Tribunal in the case of ITO, Ward-2(1), Rajahmundry Vs. Smt. Laveti Lalitha, ITA No. 171/Vizag/2016, dated 25.04.2018 and ITO, Ward- 2(1), Visakhapatnam Vs. Shri S. Siva Rama Reddy, ITA Nos.250 & 252/Vizag/2015, dated 30.12.2016. The Ld. AR submitted that the Tribunal in both the aforementioned orders had observed that in case the explanation of the assessee regarding the source of the cash deposits is not to be accepted, then, the A.O., in all fairness, should consider both the cash deposits as well as cash withdrawals for determining the peak addition, which alone could be brought to tax in his hands. The Ld. AR submitted that in case the claim of the present assessee that the cash deposits/withdrawals in its bank account during the year under consideration pertained to its business of trading of maize was not to be accepted, then the addition in its case, in all fairness, was liable to be restricted to Rs.11,45,629/- i.e., the amount of the peak credit in the bank account. Printed from counselvise.com 11 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) 13. Per contra, Dr. Aparna Villuri, the learned Senior Departmental Representative (for short “Ld. DR”) relied upon the orders of lower authorities. The Ld. D.R submitted that the assessee had failed to come forth with any material which would irrefutably substantiate that the cash deposits/withdrawals in its bank account during the subject year pertained to the transactions of trading of maize carried out by him during the year, therefore, the A.O. had rightly rejected its explanation. It was further stated by her that as the assessee had failed to provide any plausible explanation regarding the nature and source of the deposits of Rs. 1.11 crores (approx.) in its bank account, therefore, the same had rightly been assessed as unexplained cash credit under Section 68 of the Act. The Ld. DR submitted that as the order passed by the CIT(A) does not suffer from any infirmity, therefore, the appeal filed by the assessee being devoid and bereft of any substance was liable to be dismissed. 14. We have thoughtfully considered the contentions advanced by the Learned Authorized Representatives for both parties in the backdrop of the orders of lower authorities. 15. We are of the view that now when the A.O. while framing the assessment had accepted the business income of Rs. 6,69,789/- that Printed from counselvise.com 12 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) the assessee had disclosed in its “return of income” on a presumptive basis u/s 44AD of the Act i.e @ 8% of its gross turnover of Rs. 83,72,355/- from its business of trading in maize, thereafter, he could not have summarily rejected its claim that the subject cash deposits or any part thereof in its Bank account No. 40100531685 with Citizen Co- operative Society Ltd. were sourced out of the sale proceeds generated in the normal course of the said business. We, say so, for the reason that it is neither the observation of the A.O that the business sale proceeds of Rs. 83.72 lacs (approx.) were found to have been deposited by the assessee in some other bank account or was lying available with him as cash in hand. Accordingly, the probability of the part of the sale proceeds of the assessee’s business of trading in maize, having been routed as cash deposits in the assessee’s bank account no. 40100531685 (supra) during the subject year cannot be ruled out. However, we remain conscious of the fact that the assessee despite specific directions of the A.O, had failed to lead any evidence that could substantiate its claim that the cash deposits/withdrawals made in its bank account during the subject year pertained to the transactions of purchase/sale of agricultural produce. Accordingly, as the assessee had failed to discharge the onus that was cast upon it to substantiate its explanation regarding the source of the cash deposits in its bank Printed from counselvise.com 13 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) account, therefore, we refrain from dislodging the rejection of the same by the authorities below. 16. However, we find substance in the Ld. AR's claim that as the subject cash deposits in the assessee’s Saving Bank account No. 401000531685 with the Citizens Co-operative Society Ltd, Tadepalligudem were preceded by cash withdrawals, therefore, in all fairness, even if its explanation that the subject cash deposits were sourced from its business receipts was not to be accepted, the addition in its case was liable to be restricted only to the extent of the “peak credit” in the said bank account during the subject year. We, say so, specifically for the reason that neither it is the claim of the Department; nor a fact discernible from the record that the cash withdrawals made over the year, i.e. during the period 01.04.2015 to 31.03.2016 from the bank account had either been shown to have been invested or utilized by the assessee, and thus, were no more available with it for re- depositing the same by way of subsequent deposits in the said account. Our aforesaid view that for deducing the true and correct income of an assessee, the A.O., in all fairness, should consider both the cash deposits as well as cash withdrawals made by the assessee from his bank account is supported by the order passed by the Tribunal in the Printed from counselvise.com 14 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) case of ITO, Ward-2(1), Rajahmundry Vs. Smt. Laveti Lalitha, ITA No.171/Vizag/2016, dated 25.04.2018, wherein the Tribunal, while emphasizing on the fact that the income of the assessee in the case before them, in all fairness, was required to be determined based on the peak credit method, had observed as under : “6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. disbelieved the submission of the assessee that the cash deposits do not belong to Mr. V. Venkateswara Rao and held that the entire cash deposits made in the bank account related to the assessee. Mr. V. Venkateswara Rao sources does not support the probable income earnings from the agricultural land possessed by him. Similarly, since Mr. V. Venkateswara Rao is suffering from ill health, he does not have capacity to take the lands on lease and earn the income. Therefore, the A.O. believed that the entire cash deposits are related to assessee but not belonging to Mr. V. Venkateswara Rao as stated by her. Having come to conclusion that the cash deposits were made by the assessee in the savings bank account, it is fair on the part of the A.O. to consider both the cash deposits as well as cash withdrawals for determining true and correct income. The Ld. CIT(A) considering the facts of the case directed the A.O. to re-determine the income by peak credit method. Since there was cash withdrawals and deposits, we hold that the CIT(A) rightly directed the A.O. to determine the income on peak credit method. Accordingly, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the revenue.” (emphasis supplied by us) Also, a similar view had been taken by the Tribunal in the case of Income Tax Officer, Ward – 1(2), Visakhapatnam Vs. Shri S. Siva Rama Reddy, ITA Nos.250 & 252/Vizag/2015 dated 30.12.2016. For the sake of clarity, the observations of the Tribunal are culled out as under: Printed from counselvise.com 15 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) “It is the claim of the assessee that the assessee has withdrawn money in various places for the purpose of business and the same has been re-deposited in the bank account, therefore, if at all, any addition is warranted, only additions can be made for peak credit found in the bank account. We find that the assessee has withdrawn cash on various dates. Unless the A.O. proves that cash withdrawals has been utilized for personal expenditure or deployed for acquisition of assets, the sources available in the form of cash withdrawals cannot be ignored while considering credits in the bank account. Therefore, we are of the view that the A.O. was erred in making additions towards total credits found in the bank account. Hence, we direct the A.O. to work out peak credits found in the bank account and make additions to the peak credit instead of total credits found in the bank account.” (emphasis supplied by us) 17. We, thus, in the absence of any material having been placed on record by the assessee which would irrefutably substantiate its claim that the subject cash deposits in its bank account were sourced out of the sale proceeds of its business of trading in maize, are not inclined to dislodge the view taken by the authorities below which have rejected the same. However, considering the facts of the present case in the backdrop of the view taken in the aforementioned cases by the Tribunal, we direct the A.O. to restrict the addition in the hands of the assessee to the extent of the “peak credit” appearing in its bank account during the year under consideration. At this stage, we may herein observe that though the Ld. AR has filed before us a “Chart” revealing the computation of peak credit for the subject year at Rs. 11,45,629/- (supra), but as it cannot be summarily accepted, therefore, we direct Printed from counselvise.com 16 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) the A.O. to verify the same while giving effect to our aforesaid observations. 18. We thus, in terms of our aforesaid observations, set aside the CIT(A) order and restrict the addition in the hands of the assessee to the extent of the “peak credit” appearing in its bank account during the subject year. The Ground of Appeal No. 3 is partly allowed in terms of our aforesaid observations. 19. As the Ld. AR has not placed any contention qua the Ground of Appeal No. 2, therefore, the same is dismissed as not pressed. 20. The Grounds of Appeal Nos. 1 and 4 being general in nature are dismissed as not pressed. 21. Resultantly, the appeal filed by the assessee is partly allowed in terms of our aforesaid observations. Order pronounced in the Open Court on 25th July, 2025. Sd/- (एस. बालक ृष्णन) (S. BALAKRISHNAN) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (रिीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 25.07.2025. TYNM/sps Printed from counselvise.com 17 ITA No.121/Viz/2025 Deekonda Venkateswara Rao (HUF) आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Deekonda Venkateswara Rao (HUF), D.No.7-24-1, Pathuru, Kode Vari Veedhi, Tadepalligudem, West Godavari District. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward – 1, Tadepalligudem. 3. The Principal Commissioner of Income Tax, Visakhapatnam. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, / DR, ITAT, Visakhapatnam. 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam Printed from counselvise.com "
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