RAHUL NEMGONDA PATIL,KOLHAPUR V. INCOME TAX OFFICER, ICHALKARANJI

ITA 2522/PUN/2024

AI Insights

The case involves Rahul Nemgonda Patil, a dealer in petrol and diesel, who did not file his income tax return for the assessment year 2013-14. The AO discovered cash deposits totaling Rs. 41,07,000 in Patil's bank account and treated these as unexplained cash credits under section 68 of the Income Tax Act, 1961, due to lack of satisfactory explanation and documentary evidence from Patil. The CIT(A) upheld this addition, leading Patil to appeal to the ITAT. The ITAT found merit in Patil's argument that the addition should be restricted to the peak credit amount, acknowledging the need for verification of the submitted details and directed the AO to re-assess the matter accordingly.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633597 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Other Referred Cases: Bhaichand H. Gandhi vs. CIT, Shashi Garg vs. PCIT, Gloria Eugenia Rynjah Benerji vs. ITO, CIT vs. Nova Promoters & Finlease Pvt. Ltd., N.R. Portfolio Pvt. Ltd. vs. CIT, V. Kamlaben Sureshchandra Bhatti vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MADHAN THIRMANPALLI
• Assessee Lawyers: PRAMOD S SHINGTE
• Keywords: Set aside; Opportunity of being heard; Question of law; Unexplained cash credit; Peak credit; Gift
• Section: 147; 148; 144; 142(1); 68; 69

Judgement Text

" आयकर अपीलीय अधिकरण “एक सदस्य मामला” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.2522/PUN/2024 निर्धारण वर्ा / Assessment Year : 2013-14 Rahul Nemgonda Patil, N D Patil Petroleum, Gat No. 536, AT Post-Nandani, Tal-Shirol, Dist.-Kolhapur – 416102 PAN : ANMPP3340H Vs. Income Tax Officer, Ward – 1, Ichalkaranji अपीलधर्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Pramod S Shingte Department by : Shri Madhan Thirmanpalli Date of hearing : 14-05-2025 Date of Pronouncement : 11-06-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 30.09.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2013-14. 2. The assessee has raised the following grounds of appeal : “1. On the facts and circumstances of the case and in law the CITIA), NFAC erred in confirming the addition made by the AO, NaFAC, erred of cash deposits in saving bank account of Rs.41,07,000 u/s 68, not accepting any of the following submissions of the appellant : a. The bank account not being the books of account of the appellant, amount credited in such account cannot be added under section 68 of the Income Tax Act, 1961. b. The entire deposits being out of explained sources no addition in called for in this respect. c. The addition, if any, ought to have been restricted to the peak credit since the addition of gross deposits amounts to double taxation of the same amount. The appellant prays that the AO be directed to delete the addition. The appellant craves leave to add to, amend, alter, delete or modify all or any of the above ground of appeal or raise a new ground of appeal before or at the time of hearing.” 2 ITA No.2522/PUN/2024, A.Y. 2013-14 3. Briefly stated, the facts of the case are that the assessee is an individual and a dealer in petrol, diesel etc. He did not file is return of income for AY 2013-14 under consideration. On perusal of AST data, the Ld. Assessing Officer (“AO”) found that during the relevant AY, the assessee made cash deposit of Rs.41,07,000/- in the bank account held with Bank of Baroda Branch, Nandani. Accordingly, the Ld. AO issued letter to the assessee requesting him to file the return of income but the assessee failed to do on account of which source of investment remained unexplained. As no return of income was filed, the case was reopened and notice u/s 148 of the Income Tax Act, 1961 (the “Act”) was issued with the prior approval of PCIT, Kolhapur. No return was filed in response to the notice u/s 148 of the Act. Thereafter, notice u/s 142(1) of the Act was issued calling for certain documents pertaining to cash deposit of Rs.41,07,000/- during the relevant AY. In response thereto, the assessee submitted that the sources of cash deposit is out of gift received from blood relation and receipts of agricultural income. However, these submissions were not supported by filing any documentary evidence in respect thereof. The show cause letter issued by the Ld.AO also remained un-complied with. The Ld.AO, therefore, completed the assessment as best judgment assessment u/s 147 r.w.s. 144 read with section 144B of the Act vide his order dated 26.09.2021 treating the cash deposit of Rs.41,07,000/- as unexplained cash credit u/s 68 of the Act. 4. On appeal before the Ld. CIT(A), the assessee contended that the bank account not being the books of account of the assessee, the amount credited in such account cannot be added u/s the provisions of section 68 of the Act. The assessee contended that the entire cash deposits are out of explained sources and hence no addition is called for. He also raised an alternate contention that the addition, if any, should be restricted to the peak credit since the addition of gross deposits amounts to taxation of the same amount again and again. The contentions/submissions of the assessee were not found to be acceptable by the Ld. CIT(A) and he dismissed the appeal of the assessee by observing as under : “5.3 The appellant has primarily raised the appeal against this addition. His main contention is that as per Hon'ble Mumbai High Court in the case of Bhaichand H.Gandhi (50 CCH 092) no u/s 68 of the I.T. Act can be made for the amount entered in the bank passbook of the assessee as the bank statement is not considered as part of books of accounts of the assessee. His next contention is that entire source of the cash deposits are explained. He further prays that addition, if any, should be restricted to peak credit only. 3 ITA No.2522/PUN/2024, A.Y. 2013-14 5.4 It is noted that the decision of High Court of Mumbai in the case of Bhaichand.H. Gandhi (11 Taxman 59) was delivered in 1982 related to AY 1962-63. This case can be distinguished on the facts of the instant appeal. The word \"books of account\" is not defined during the relevant assessment year in which this order by the Hon'ble High Court was delivered. Later, Section 2 (12A) was introduced in the Act defining books or books of account by the Finance Act, 2001 with effect from 01.06.2001 and the same reads as follows: “(12A) \"books or books of account\" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device,” The above definition is inclusive definition and it includes not only ledgers, day-books, cash books, account-books and other books, but also the print- outs of data stored in a floppy disc, tape or any other form of electro- magnetic data storage device. 5.5 In another case on the facts similar to the instant case of this pending appeal, Delhi High Court affirmed the order of the Tribunal. (Related Assessment year 2011-12) in the case of Shashi Garg vs. PCIT [2020] 269 Taxman 27: 113 taxmann.com 92 (Delhi). It was held that the assessee had withdrawn huge amount of cash from his bank account on different dates in order to purchase an immovable property. Assessee failed to explain source of those cash deposits. Assessing Officer added same to assessee's taxable income. Tribunal confirmed the addition. It is noted that Hon'ble High Court of Delhi in the case of Shashi Garg (Supra) has justified the addition made where the appellant has failed to explain the source of cash deposit in the bank account. In this case, the Hon'ble Supreme Court has dismissed the SLP of the assessee. 5.6 is worthwhile at the purpose of statue is to bring into the fold of taxation any income the source of which is not explained. And the facts of this case are that the appellant has not explained the source of cash deposits in his bank account. The explanation of gifts and agricultural income is not supported by the documentary evidences Merely because the cash credits have been taxed by the AD us 68 of the IT. Act, 1961 the fact that the source of cash deposit in the bark account of the assessee appellant does not change. The relevant provisions can be section 69 in the case of term deposits with the banks and section 60A in case of other deposits into bank accounts. Where the Assessing Officer has, mistakenly, treated unexplained deposits in bank as income u/s 68, the Commissioner (Appeals) can direct the Assessing Officer to charge the relevant sums u/s 69/69A instead of s 08 on the basis of general principles. 5.7 The findings regarding sources for making bank deposits by the assessee are factual findings only and do not give rise to substantial question of law (V. Kamlaben Sureshchandra Bhatti [2014] 44 taxmann.com 459 (Gu.). The appellant in this instant appeal before me, has not submitted any documentary evidence to explain the source of cash deposits in the bank account. For the gifts, the appellant should have submitted the PAN details, confirmation of accounts from the donor, documents to prove the creditworthiness and genuineness of the transaction. For the agricultural income, the evidence of land holding and crop production details need to be submitted by the appellant. Mere statement that in order to obtain the dealership in petrol diesel, he was negotiating with the company officials and was required to show the bank balance/availability of funds to the company officials cannot be relied upon. There is no documentary evidence to prove that there was any such compulsion from the company. The assessee appellant has not able to submit any cash flow statement to justify the source of cash for the deposit in the bank account. It is also noted from the bank account statement that there are cash deposits throughout the period of six months from April to October. There are withdrawals by self- cheque and also RTGS transfer to different accounts after the cash deposits. 4 ITA No.2522/PUN/2024, A.Y. 2013-14 The reasons for the same are not explained neither before the Assessing Officer nor during the appeal proceedings. 5.8 The Income Tax Appellate Tribunal (ITAT) Delhi recently delivered a judgement in the case of Gloria Eugenia Rynjah Benerji vs. ITO, (ITA no 3510/Del/2019) where it upheld the addition made by the Assessing officer (AO) under section 68 of the Income Tax Act, 1961, despite the fact that the AO had mentioned the wrong section in his order. The ITAT held that the addition could not be deleted merely on a technical ground and that the peculiar facts of the case did not warrant any relief to the assessee. The Delhi High Court in the case of CIT vs. Nova Promoters & Finlease Pvt. Ltd. and in the case of N.R. Portfolio Pvt. Ltd. has held that mere mention of wrong provision does not invalidate the assessment order if it can be justified under the provisions. 5.9 No benefit of peak credit is possible as no purpose of the withdrawals as against the cash deposits has been explained by the assessee. No working of the cash flow has been provided. It is for the appellant assessee to give the complete details and supporting documentary evidences for its claim. 5.10 Thus, in my considered opinion, the grounds of appeal taken by the appellant before me are not acceptable. The ground No. 1 of the appeal is therefore, dismissed. 6. The ground of appeal No. 2 is general in nature and needs no adjudication.” 5. Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto. 6. At the outset, the Ld. AR submitted that the assessee is not challenging the addition in respect of cash deposit of Rs.41,07,000/- made by the assessee in his Bank of Baroda account under section 68 of the Act as unexplained cash credit. He, however, contended that the addition should be restricted only to peak credit to the extent of Rs.15,27,000/-. He argued that bringing to tax the gross amount of cash deposits would result in double taxation of the same income as the amounts withdrawn would be always available against the deposit. In support thereof, he relied on the decision of the Chennai ITAT in the case of B. Jenson Thanaraj, 83 taxmann.com 243, Maheshkumar Jayantilal Vora, 3 SOT 96 and Venkat Reddy, 76 taxmann.com 128, copies of which are placed on record. He submitted a chart disclosing the working of peak credit of Rs.15,27,000/- which is reproduced below : “1. Bank of Baroda having account no. 11560100003684: This is the main account in which the cash deposit and withdrawal transactions have taken place, we attach herewith the summary of cash deposit and withdrawal for your reference as annexure no.1, we have also attached the relevant bank statement for which please refer page no. 21,23 of paper book. 2. Kolhapur District Co-op Bank Ltd. having account no. 35/2021: 5 ITA No.2522/PUN/2024, A.Y. 2013-14 There are no cash transaction in this bank account, we have also attached the relevant bank statement for which please refer page no. 24,25 of paper book. 3. Kolhapur District Central Co-op Bank Ltd. having account no. 0501110020000796: There are no cash transaction in this bank account, we have also attached the relevant bank statement for which please refer page no. 26 of paper book. 4. Finacle having account no. 11560100003684 page no. 27 & 28 are for different period. 5. Jaikisan Gramin Bigar Sheti patsanstha: There are no cash transaction in this bank account, we have also attached the relevant bank statement for which please refer page no. 29 of paper book. 6. Following Bank account statements are enclosed in the paper book however they pertain to other members of appellant family and are not relevant for working out peak credit. 6 ITA No.2522/PUN/2024, A.Y. 2013-14 6.1 In view of the above submissions, he requested the Bench that the addition may be restricted to the extent of peak credit of Rs.15,27,000/-. 7. The Ld. DR supported the order of the Ld. CIT(A) and referring to the issue of peak credit dealt by the Ld. CIT(A) in para 5.9 of his appellate order, he submitted that the assessee has failed to substantiate the said claim by filing the requisite details and supporting documents before the lower authorities. 7 ITA No.2522/PUN/2024, A.Y. 2013-14 8. We have heard the Ld. Representatives of the parties and perused the material on record, the paper book filed by the Ld. AR on behalf of the assessee as well the judicial precedents relied upon by the Ld. AR. The facts of the case are not in dispute. The Ld. AO has passed an ex-parte order on account of absence of the requisite supporting documentary evidence in respect of source of alleged cash deposits made by the assessee during the relevant AY. The Ld. CIT(A) has dismissed the appeal of the assessee for the reasons reproduced in the preceding paragraphs. As regards the alternate claim of the assessee that the addition be restricted to the peak credit, the Ld. CIT(A) in para 5.9 of his appellate order has observed that no benefit of peak credit is possible as no purpose of the withdrawals as against the cash deposits has been explained by the assessee. No working of the cash flow has been provided. The assessee has not given the complete details and supporting documentary evidences for its claim. Before us, the Ld. Counsel for the assessee has not presented any strong argument in respect of the addition made under section 68 of the Act in respect of impugned cash deposits but his grievance is that the addition should be restricted to the peak credit to the extent of Rs.15,27,000/- instead of the entire amount of cash deposits of Rs. 41,07,000/-. We find force in this argument of the Ld. AR. In support of the said claim, the Ld AR has filed the details/ submission along with a chart demonstrating the working of such peak credit (reproduced above). Perusal thereof, reveals that the same requires verification as these have not been examined by the Ld. AO/CIT(A). In this view of the matter, we deem it fit and proper, to restore the impugned issue to the file of the Ld. AO with a direction to restrict the addition to the peak credit taking into consideration the claim made by the assessee after due verification thereof, as per facts and law. Needless to say, the assessee shall be granted reasonable opportunity of being heard by the Ld. AO to present and substantiate his claim by submitting the relevant documents/evidence as may be required/called upon during the fresh proceedings before the Ld. AO. The order of the Ld. CIT(A) is hereby set aside and the matter is restored back to the file of Ld. AO for de-novo adjudication in terms of our directions above. We direct and order accordingly. Consequently, ground No. 1(a) & 1(b) raised by the assessee are dismissed as infructuos and ground No. 1(c) is allowed for statistical purposes. 8 ITA No.2522/PUN/2024, A.Y. 2013-14 9. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 11th June, 2025. Sd/- Sd/- (Manish Borad) (Astha Chandra) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ददन ांक / Dated : 11th June, 2025. रदि आदेश की प्रनिनलनप अग्रेनर्ि / Copy of the Order forwarded to : 1. अपील थी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The Pr. CIT concerned. 4. धिभागीय प्रधिधिधि, आयकर अपीलीय अधिकरण, “एक सदस्य मामला” बेंच, पुणे / DR, ITAT, “SMC” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपत प्रदत// True Copy// आदेश नुस र / BY ORDER, िररष्ठ दनजी सदिि / Sr. Private Secretary आयकर अपीलीय अदधकरण ,पुणे / ITAT, Pune "