Mayur Mohanbhai Magnani, Ahmedabad V. The ITO, Ward-3(2)(3), Ahmedabad

ITA 1084/AHD/2019

AI Insights

The case involves Mayur Mohanbhai Magnani, an individual engaged in textile trading, who appealed against the order of the Commissioner of Income Tax (Appeals)-13, Vadodara. The appeal arose from an assessment order under sections 147 and 144 of the Income Tax Act, 1961, for the Assessment Year 2011-12, which added Rs. 17,56,490 as undisclosed income due to unexplained cash deposits in the assessee's bank account. The Tribunal found that while the assessee failed to provide sufficient evidence of business activities, the application of the Peak Credit Theory was appropriate to account for the cash withdrawals against the deposits.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134549 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-12-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 25-06-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Peak credit; Additional evidence; Set aside
• Section: 147; 144; 142(1); 208; 22

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC” BENCH, AHMEDABAD SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1084/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2011-2012 Mayur Mohanbhai Magnani, 240, Mahasukhnagar, Saijpur Bogha, Ahmedabad. PAN: BCFPM6360P Vs. Income Tax Officer, Ward 3(2)(3), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Pritesh Shah, A.R Revenue by : Shri Purushottam Kumar, Sr. D.R सुनवाई कᳱ तारीख/Date of Hearing : 27/12/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 08/02/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-13, Vadodara, dated 26/04/2019 arising in the matter of assessment order passed under s. 147 r.w.s. 144 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12. 2. The assessee has raised the following grounds of appeal: 1. The Ld.CIT(A) erred in law and on facts in confirming addition of Rs.17,56,490/- being the amount of cash deposited in to Central Bank of India, Savings A/c considering the same as unexplained, such addition is requested to be deleted. ITA no.1084/AHD/2019 A.Y. 2011-12 2 3. The only effective issue raised by the assessee is that the Ld. CIT(A) erred in confirming the addition made by the AO for Rs. 17,56,490/- on account of cash deposit in the bank account. 4. Briefly stated facts are that the assessee in the present case is an individual and claimed to be engaged in the business of trading in textile. There was a deposit of cash of Rs. 17,56,490/- in Central Bank of India. On question by the AO, the assessee failed to justify the source of cash deposited in the bank by making any response to the notice issued u/s 142(1) of the Act. Thus, the AO treated the same as undisclosed income and added to the total income of the assessee. 5. Aggrieved, assessee preferred an appeal to the Ld. CIT(A). 6. The assessee before the Ld. CIT(A), submitted that he is engaged as a small trader in textile market. The assessee has made sales of small value to different parties based in different cities who in turn has deposited cash in his bank account which was withdrawn immediately for the purchase of the textiles and the business expense. The net income from the business was below the taxable limit, therefore, the return was not filed. The assessee in support of his contention has filed a copy of cash book, trading account, profit & loss account and handmade vouchers. However, the Ld.CIT(A), dis-believed the contention of the assessee on the reasoning that the sale was not based on any documentary evidence. Accordingly, the Ld. CIT(A), confirmed the order of the AO. 7. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. The Ld. AR before us filed a paper book running from pages 1 to 145 and reiterated the contention made before the Ld. CIT(A). The Ld. AR in support of his contention has also filed the additional evidence which are placed on pages 208 to 256 to justify that the assessee was engaged in the textile business. The Ld. AR further contended that the assessee failed to file the additional documents as they ITA no.1084/AHD/2019 A.Y. 2011-12 3 were lying with the accountant who was not co-operative and responding due to some dispute. The ld. AR to this effect has filed the affidavit of the assessee which is placed on record. 8. The Ld. AR alternatively contended that the entire amount of cash deposit cannot be taken as income of the assessee without considering the cash withdrawal. To this effect, the Ld. AR has also filed the cash book and offered peak balance as income of the assessee. 9. On the other hand the Ld. DR vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. It is the onus upon the assessee to justify the business carried out by him based on the documentary evidence. But from the submission of the assessee and details available on record, we find that the assessee has not brought any iota of evidence justifying that the assessee was carrying on any business activity. In the absence of the business activity, the question of putting any reliance on the profit and loss account and balance sheet filed by the assesse is ruled out. 10.1 However, we find force in the alternate contention raised by the Ld. AR to adopt the peak credit to tax the income. It is for the reason that there were continuous cash withdrawal from the bank account which can be verified from the pages 22 to 30 of the paper book. 10.2 Accordingly, we are of the view that the entire cash deposit cannot be treated as income of the assessee without considering the cash withdrawal. The revenue at the time of hearing has not brought anything on record suggesting that the cash withdrawal from the bank has been utilized for any expenses of personal nature or ITA no.1084/AHD/2019 A.Y. 2011-12 4 for the purpose of any investment. In the absence of such information, we assume that the amount withdrawn from the bank has been utilized for the deposit in the bank account. However, in the given case, the cash has been deposited in different cities thus, a doubt may arise how it is possible to hold that the cash withdrawn by the assessee has been utilized for the purpose of deposit in the bank account. Nevertheless, in the absence of any details available on record about the utilization of cash withdrawal from the bank or any investment made by the assessee, we want to give the benefit of doubt to the assessee. As such, we hold that the principle of Peak Credit Theory should be adopted for determining the income of the assesse for this limited purpose. Thus, we set aside the issue to the file of the AO for fresh adjudication in the light of the above discussion and as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes. 11. In the result, the appeal filed by the assessee is allowed for the statistical purposes. Order pronounced in the Court on 08/02/2023 at Ahmedabad. Sd/- Sd/-/- (SUCHITRA KAMBLE) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 08/02/2023 Manish