ACIT,CC-2, TRICHY V. SHRI THIRUVAMBALAM SUBRAMANIAN, ARANTHANGI

ITA 917/CHNY/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6243 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 08-11-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Peak credit; Set aside
• Section: 148; 133A; 143(1); 69A

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.917/Chny/2020 (िनधाBरण वषB / Assessment Year: 2010-11) ACIT, Central Circle-2, Trichy. बनाम / V s. Shri Thiruvambalam Subramaniyan No.36, TSP Illam, Veerammakalamman koil Street, Aranthangi – 614 616. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . BGW P S -0 9 1 3 -F (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Assessee by : Shri S. Sridhar (Advocate) – Ld. AR थ की ओरसे/Revenue by : Shri ARV Sreeenivasan (Addl. CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 02-08-2022 घोषणा की तारीख /Date of Pronouncement : 17-08-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2010-11 arises out of the order of Learned Commissioner of Income Tax (Appeals)-19, Chennai [CIT(A)] dated 28-08-2020 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 15-12-2017. The grounds taken by the Revenue are as under: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld CIT(A) has made the decision on the basis of orders of ITAT and hon'ble High Court. Issue of Unexplained cash credit is a question of facts and can’t be decided on the basis of the judicial precedences. ITA No.917/Chny/2020 - 2 - 3. The CIT(A) has erred in accepting the Peak Balance Theory put forth by the assessee. 4. The CIT(A) has directed the AO to delete the additions and give an opportunity to the assessee. This amounts to the setting aside of the Assessment Order. The CIT(A) doesn't have power to set aside the order. 5. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. As evident, the Revenue is aggrieved by relief granted by Ld. CIT(A) with respect to unexplained cash credit in the impugned order. The Ld. CIT(A) has partly allowed the appeal of the assessee, which has been accepted by the assessee. 2. The Ld. Sr. DR assailed the finding of the Ld. CIT(A) which has been controverted by Ld. AR. Having heard rival submissions and after perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident individual is stated to be belonging to a group of persons who mainly engaged in business of money lending on cash basis. It transpired that the assessee deposited cash into his various bank accounts. The original return of income was filed by the assessee at Rs.3.55 Lacs which was processed u/s. 143(1) of the Act. However, the case was reopened and notice u/s. 148 of the Act was issued to the assessee on 27-03-2017. The case was reopened since it was noted that the assessee deposited cash of Rs.387.65 Lacs in various bank account belonging to the assessee. These findings emanated during survey u/s. 133A on 25-03-2014 in the case of Avathan Chettiar Group. During survey, the bank accounts of the assessee were examined and the assessee could not substantiate ITA No.917/Chny/2020 - 3 - cash deposits with material evidence. The cash deposited by the assessee was quantified as under: Sl. No. Name of the Bank/Branch Account No. Cash deposited (Rs.) 1 ICICI Bank 611401512027 3649450 2. Axis Bank 1681010100253451 2546750 3. Axis Bank 909010032806387 5135500 4. Axis Bank 602010100001342 27434270 Total *Rs. 3,87,65,970/- The above amounts exclude cheque receipts, transfer receipts and cash deposits with persons names attached to it. 3.2 The assessee submitted that the cash deposits are repayments received from various persons to whom the assessee had lent money. It was also submitted that the amounts were already accounted for as they represent the amounts that are only getting recycled. The monies were received back from borrowers and the same was used to further lending to other persons. However, the assessee did not maintain any books and did not maintain any list of borrowers. 3.3 Considering the same, Ld. AO held that cash deposits remain unexplained u/s. 69A of the Act. The assessee submitted peak credit balance in the bank accounts wherein it netted off cash deposits with withdrawals made in the mode otherwise than by cash. However, this was held to be erroneous and not acceptable because peak credit working was to be applied in cases where there are cash deposits as well as cash withdrawals. Therefore, the theory of peak cash credit was held to be not acceptable and the amount of Rs.387.65 Lacs was added to the income of the assessee u/s. 69A of the Act. ITA No.917/Chny/2020 - 4 - Appellate Proceedings 4. During appellate proceedings, the assessee assailed the findings of the Ld. A.O and relied on various case laws in support of addition on the basis of peak credit. The assessee inter-alia submitted that it was engaged in money lending business which was evidenced by the financial statements and the sum of Rs.387.65 Lacs was sum total of all cash deposits made in various bank accounts throughout the year whereas Ld. AO has not taken into account the withdrawals from the same bank account in which the cash deposits were made. There was no evidence that the cash withdrawals were used for making some other investments and no unaccounted investment whatsoever has been unearthed thereby establishing the claim of the assessee that the deposits are nothing but recycling of the withdrawals already made from the various bank accounts. There were regular deposits / withdrawals by cash as well as by cheques and therefore, all the transactions ought to be considered together and could not be treated as an independent item of undisclosed income and added severally and hence, to ignore withdrawals from the same account, whether by cash or by cheques shall lead to absurd conclusions. The assessee was liable to explain only the peak balance in the bank accounts for which the assessee relied on various decisions. 5. The Ld. CIT(A) noted that the A.O has sought to assess the gross deposits while the assessee’s plea was that only the peak credit was liable to be added as money advanced in money lending business would be circulated frequently meaning thereby that the amount advanced is received back and is again advanced in relatively shorter duration of cycle in the said business. Therefore, the peak credit theory ITA No.917/Chny/2020 - 5 - would apply to the assessee. On identical situation, in the case of assessee’s group concern e.g. Anbukannan vide order ITA No.238/16- 17 dated 16.10.2017, the first appellate authority had considered this issue and held that taxation of gross depots was incorrect. This decision was upheld by Tribunal and finally, the revenue’s appeal against the same was not admitted by Hon’ble High Court of Madras in TCA No.216 & 217 of 2019 dated 04.03.2019. The Hon’ble Court held that if the assessee has failed to explain the entries in the bank accounts, then the addition could be made on the basis of peak credit to remove the cascading effect of the unexplained credit entries in the bank account. The assessee had both cash deposits and cash withdrawals in his bank account with the same bank. Therefore, the method of peak credit was rightly adopted for addition of the alleged undisclosed income of the assessee. 6. The assessee furnished the peak credit in the bank account as on 01.07.2009 and arrived at peak credit of Rs.23.25 Lacs (para 7.5 of the impugned order). Considering the same, Ld. CIT(A) held as under: - 7.6 I have given thoughtful consideration to the facts of the case of the appellant and have noticed that the Hon’ble ITAT and the jurisdictional High Court in the case as highlighted supra have held that there is no case for assessing gross deposits and that only peak credit only is liable to be assessed. In the present appeal as well, identical facts exists and in view of the cannon of judicial discipline and doctrine of judicial precedence, I hold that the action of AO in treating the gross deposit is untenable. The peak credit as mentioned in para 7.5 is explained by the peak cash balance available. I hold that no further addition is exigible and hence, the AO is directed to delete the addition after verifying the arithmetic correctness of the working and affording opportunity to the appellant. Accordingly, the appellant’s ground on this score is disposed of accordingly. Aggrieved aforesaid the revenue is in further appeal before us. ITA No.917/Chny/2020 - 6 - Our findings and Adjudication 7. Upon careful consideration of factual matrix, we find that this similar issue has already been decided by Tribunal in assessee’s group case i.e. Shri A. Anbukannan (ITA N0.1871/Mds/2014 and 1731/Mds.2014 dated 05.04.2017). The bench upheld the application of theory of peak credit on cash receipts and cash withdrawals. Subsequently, the revenue’s appeal against this decision has not been admitted by Hon’ble High Court of Madras. We find that similar facts exist in the present case and Ld. CIT(A) has rightly applied this case law to adjudicate the issue. Therefore, no infirmity could be found in the impugned order to that extent. 8. Having said so, we are of the considered opinion that the peak credit has to be worked out properly by considering only cash receipts and cash withdrawals and the same is required to be verified by Ld. AO. The same is the plea of Ld. Sr. DR who has submitted that peak credit was not made available to Ld. AO and therefore, modification in directions is required. We find that the assessee has made deposited cash and withdrawn the same throughout the year. Accepting the plea of Ld. Sr. DR, the working of the peak credit shall be furnished by the assessee to Ld. AO who is directed to consider the same and restrict the addition to the extent of peak credit of cash receipts and cash withdrawals. The cheque entries shall be separately examined and re- adjudicated. The directions given in the impugned order stand modified to that extent. ITA No.917/Chny/2020 - 7 - 9. The appeal stands partly allowed in terms of our above order. Order pronounced on 17 th August, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे+ई / Chennai; िदनांक / Dated : 17-08-2022 EDN/- आदेश की Xितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF