PERUMAL SEKAR,SALEM V. ITO, WARD 1(2). SALEM, SALEM

ITA 1830/CHNY/2025

AI Insights

The case involves Perumal Sekar, an individual engaged in the business of running a barber shop, who did not file his original return of income for the assessment year 2012-13. Following information about substantial cash deposits in his bank account, the Assessing Officer reopened the assessment by issuing a notice under section 148 of the Income Tax Act. The assessee later filed a return declaring a total income, but the Assessing Officer added Rs.48,59,573 as unexplained cash credit under section 68 of the Act. The CIT(A) confirmed this addition, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal acknowledged the assessee's failure to fully explain the source of the cash deposits but applied the peak credit theory to restrict the addition to Rs.13,33,525.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 825023 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-06-2025
• Other Referred Cases: CIT V.Mayawati, 338 ITR 653 (Del), Mehul V.Vyas v.ITO (2017)80 taxmann.com 311/164 ITD 296 (Mum.Trib), CIT v.Bhai Chand N.Gandhi (1983) 141 ITR 67 (Bombay), Smt.Manshi Mahendra Pitkar v.ITO, Thane (2016) 73 Taxmann.com 68, Smt.Madhu Raitani v.ACIT (2011) 10 taxmann.com 206, ITO, Barabanki v.Kamal Kumar Mishra (2013) 33 taxmann.com 610, Rameshbhai Somabhai Patel v.ITO (ITA No.1864(Ahd.) of 2014 19.4.2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTAMI MANIVASAGAM
• Assessee Lawyers: T.S. LAKSHMI VENKATARAMAN; F; FILING AN
• Keywords: Set aside; Reassessment proceedings; Unexplained cash credit; Peak credit; Onus to prove; Assessment record; Competent authority
• Section: 148; 143(3); 68; 133(6)

Judgement Text

" आयकर अपील य अ धकरण, ‘बी’ \u000eयायपीठ, चे\u000eनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI \u0015ी मनु क ुमार ग\u0019र, \u000eया\u001aयक सद य एवं \u0015ी एस. आर. रघुनाथा, लेखा सद य क े सम$ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:1830/Chny/2025 \u001aनधा%रण वष% / Assessment Year: 2012-13 Perumal Sekar, 514, B, Arputhavasal, Anna Nagar 1st Street, Near Class Factory, Attur, Salem – 636 102. vs. ITO, Ward -1(2), Salem. [PAN: CRPPS-0022-J] (अपीलाथ'/Appellant) (()यथ'/Respondent) अपीलाथ' क* ओर से/Appellant by : Shri. T. S. Lakshmi Venkataraman, F.C.A. ()यथ' क* ओर से/Respondent by : Shri. Goutami Manivasagam, JCIT सुनवाई क* तार ख/Date of Hearing : 25.11.2025 घोषणा क* तार ख/Date of Pronouncement : 29.12.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2012-13, vide order dated 16.06.2025. 2. The assessee has raised the following grounds of appeal: 1. On the facts and circumstances of the case the order of first appellate authority dated 16.06.2025 in dismissing the appeal of the appellant is bad in law and is not legally justified. Printed from counselvise.com :-2-: ITA. No:1830/Chny/2025 2. On the facts and circumstances of the case the notice u/s.148 has been served on the assessee on 02.04.2019 and for proper initiation the notice should have left the hands of the department on or before 31.03.2019 which fact has to be verified from the assessment records. 3. On the facts and circumstances of the case the lower authorities are not justified in not providing the copy of satisfaction note given by the competent authority in terms of section 151 of the Act. 4. On the facts and circumstances of the case the first appellate authority is not justified in sustaining the addition made by the AO to an extent of Rs.48,59,573/- as unexplained cash credit u/s 68 of the Act being cash deposits made in Axis Bank. Out of the above cash deposits of Rs.48,59,573/-, a sum of Rs.23,00,000/- represents unsecured loans borrowed by the assessee from 6 parties and balance deposits were out of withdrawals through cash and ATM which were re-deposited in the above bank account. 5. On the facts and circumstances of the case the assessee having furnished the confirmation letters from the above 6 persons in respect of loans totaling to Rs.23,00,000/- have discharged the onus cast upon him to prove the genuineness of the transactions by disclosing identity of the lenders. The AO within the powers vested with him u/s 133(6) of the Act nor the first appellate authority have enquired the above persons in assessing the above sum as unexplained cash credit. The above act of the lower authorities are bad in law in as much as no enquiries have been made. 6. On the facts and circumstances of the case the first appellate authority is not justified in sustaining the addition made by the AO u/s 68 of the Act even when the assessee has not maintained books of accounts. It has been judicially settled that the provisions of Section 68 can be invoked only in respect of an assessee who has maintained the books of accounts. In view of this invoking of the above provision in framing the assessment is void-ab-initio. 7. On the facts and circumstances of the case the first appellate authority is not justified in not adopting the \"Peak Credit\" concept. This ground is taken as an alternate plea and if this is accepted the maximum amount that could brought to assessment is sum of Rs. 13,33,525/-which is the peak credit position on 22.09.2011 in the bank account. The above figure is covered by the confirmation of credits to an extent of Rs.23,00,000/- and in view of this no addition to the returned income is warranted. 8. In view of the above grounds and other submissions to be made at the time of Appeal hearing, the order U/S 250 passed by Commissioner of Income Tax (Appeals), NFAC may be cancelled and justice rendered. 3. The brief facts of the case are that the assessee is an individual engaged in the business of hair cutting (Barber Shop) did not file his return of income for A.Y.2012-13. Information revealed that cash deposits of Rs.58,37,374/- in his bank account has been made during the impugned A.Y. and hence the case was reopened by issuing notice u/s.148 of the Act. In response assessee filed Printed from counselvise.com :-3-: ITA. No:1830/Chny/2025 his return of income on 20.12.2019 declaring a total income of Rs.1,60,820/-. During the assessment proceedings, the Assessing Officer noted that cash deposit was not supported by any evidence and hence made a addition of Rs.48,59,573/- ( Rs.51,47,573/- Minus Rs.2,88,000/- declared in the return) as unexplained cash credit u/s.68 of the Act by passing an order u/s.147 r.w.s. 143(3) of the Act dated 21.09.2021. 4. Aggrieved by the order of the Assessing Officer the assessee preferred an appeal before the ld.CIT(A), who dismissed the appeal after consideration of the submissions and confirmed the order of the Assessing Officer by passing an order dated 16.06.2025. 5. The order of the ld.CIT(A) is challenged by the assessee by filing an appeal before us. 6. Before us the ld.AR for the assessee submitted that the ld.CIT(A) has erred in confirming the order of the Assessing Officer. The Assessing Officer has not considered details of the assessee and his business and arbitrarily added the entire bank credits as the income of the assessee. Further, the ld.AR submitted that the assessee has not maintained proper books of accounts. In this connection the ld.AR filed a copy of page 5 of ITR, acknowledgement of ITR, Income computation sheet, Income and expenditure Account and Balance Sheet for the year ended 31.03.2012. He drew our attention to the page No.5 of the ITR form, wherein the assessee has offered income under the head “no accounts case” and filed ITR-4. When the assessee has not maintained proper books of accounts, invoking provisions of section 68 of the Act for deposits is not legally sustainable. The ld.AR relied on the following judicial precedents in support of his argument. - CIT V.Mayawati, 338 ITR 653 (Del) – Hon’ble Delhi High Court - Mehul V.Vyas v.ITO (2017)80 taxmann.com 311/164 ITD 296 (Mum.Trib) Printed from counselvise.com :-4-: ITA. No:1830/Chny/2025 7. Further, the ld.AR submitted that the bank passbook alone does not constitute books of account of the assessee which has been upheld by the following judicial precedents. - CIT v.Bhai Chand N.Gandhi (1983) 141 ITR 67 (Bombay) - Smt.Manshi Mahendra Pitkar v.ITO, Thane (2016) 73 Taxmann.com 68 - Smt.Madhu Raitani v.ACIT (2011) 10 taxmann.com 206 - ITO, Barabanki v.Kamal Kumar Mishra (2013) 33 taxmann.com 610 - Rameshbhai Somabhai Patel v.ITO (ITA No.1864(Ahd.) of 2014– 19.4.2018 8. Further, the ld.AR submitted that the assessee had furnished the identity of the lenders in respect of loans taken from parties to the tune of Rs.23.00 Lakhs by furnishing the confirmations from 6 persons with their Aadhar and PAN and discharged his onus to prove the genuineness of the transactions. He stated that the balance amount of deposit of Rs.20.23 lakhs is made out of the cash withdrawals from the bank account and ATM withdrawals. The ld.AR stated that the assessee had made these deposits to show more transactions in the bank account to avail loan from the bank for establishing his own shop. 9. In light of the above arguments the ld.AR prayed that the peak credit may please be adopted to arrive at the maximum to be added to the inco`me, which works out to Rs.13,33,525/-, held on 22.09.2011 in the bank account. 10. Per contra, the ld.DR submitted a written submission and stated that the assessee has neither proved the correlation between the deposits and withdrawals nor provided the genuineness of the loan transactions. Therefore, the ld.DR prayed for confirming the order of lower authorities. 11. We have heard both the parties perused materials available on record and gone through orders of the authorities below. The assessee is an individual engaged in the business of running a barber shop. The assessee did not file his original return of income for the assessment year 2012-13. Subsequently, based on information received regarding cash deposits amounting to Rs.58,37,374/- in his Axis Bank account during the relevant previous year, the Printed from counselvise.com :-5-: ITA. No:1830/Chny/2025 Assessing Officer reopened the assessment by issuing notice under section 148 of the Act. In response, the assessee filed his return of income on 20.12.2019 declaring total income of Rs.1,60,820/-. During the reassessment proceedings, the AO noticed substantial cash deposits in the bank account for which the assessee could not furnish satisfactory evidence explaining the source. Accordingly, after granting credit for income already disclosed, the Assessing Officer made an addition of Rs.48,59,573/- as unexplained cash credit u/s.68 of the Act. The same was confirmed by the ld.CIT(A) by passing an order on 16.06.2025. 12. Firstly, the assessee has raised grounds challenging the validity of notice issued u/s.148 and approval u/s.151 of the Act. However, no material evidence has been placed before us to demonstrate that the notice was issued beyond the prescribed time or without due approval of the competent authority. In the absence of such evidence, these grounds are dismissed. 13. It is an admitted fact that substantial cash deposits were made in the assessee’s bank account during the relevant year. The assessee’s explanation consists of two components: 1. Loans aggregating to ₹23,00,000/- from six persons 2. Balance deposits being redeposits of earlier withdrawals 14. The assessee has furnished confirmation letters in respect of the alleged loans, PAN, and Aadhaar details to discharge the onus cast upon the assessee under the Act. The Assessing Officer has neither conducted any enquiry u/s.133(6) of the Act nor brought any adverse material on record to disprove the identity of the lenders. Once the assessee discharges the primary onus, the burden shifts to the Assessing Officer. Failure to conduct enquiry cannot be a ground to sustain the addition. 15. However, we also note that the AO has treated the entire cash deposits as unexplained without considering the possibility of circulation of the same money. Where there are frequent withdrawals and deposits in the same bank Printed from counselvise.com :-6-: ITA. No:1830/Chny/2025 account, judicial discipline requires adoption of the peak credit theory to avoid double taxation of the same funds. The assessee has furnished a working of peak credit, according to which the highest unexplained balance in the bank account during the year was Rs.13,33,525/- as on 22.09.2011. The Revenue has not disputed the arithmetical correctness of this working. 16. In our considered view, while the assessee has failed to fully explain the source of cash deposits, taxing the entire deposits would result in an excessive and unrealistic assessment. Therefore, in the interest of justice and fair play, the addition should be restricted to the peak unexplained credit. 17. Though the assessee has argued that section 68 of the Act cannot be invoked in the absence of books of account, the fact remains that the assessee has maintained a bank account through which unexplained cash transactions have been routed. Even if the strict application of section 68 is debatable, the unexplained peak balance is liable to be brought to tax as income from unexplained sources. Therefore, we set aside the order of the ld.CIT(A) and the addition of Rs.48,59,573/- made by the AO is restricted Rs.13,33,525/-, being the peak unexplained cash credit in the bank account and the balance addition is deleted 18. In the result the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 29th December, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार ग\u0019र) (MANU KUMAR GIRI) \u000eया\u001aयक सद य/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद य/Accountant Member चे\u000eनई/Chennai, /दनांक/Dated, the 29th December, 2025 SP Printed from counselvise.com :-7-: ITA. No:1830/Chny/2025 आदेश क* (\u001aत1ल2प अ3े2षत/Copy to: 1. अपीलाथ'/Appellant 2. ()यथ'/Respondent 3.आयकर आयु4त/CIT– Chennai/Coimbatore/Madurai/Salem 4. 2वभागीय (\u001aत\u001aन ध/DR 5. गाड% फाईल/GF Printed from counselvise.com "