UMESH BAHU,DAVANGERE V. INCOME TAX OFFICER, WARD-1, DAVANGERE

ITA 573/BANG/2025

AI Insights

The case involves Shri Umesh Babu, a non-filer of income tax returns, who was assessed by the Income Tax Officer (ITO) for unexplained cash deposits totaling Rs.57,10,000 in his bank account. The ITO issued a notice under section 148 of the Income Tax Act, leading to the filing of a return by the assessee declaring an income of Rs.7,88,790. The assessee contended that the cash deposits were from withdrawals and provided bank statements and other documents to support his claim. However, the ITO and the Commissioner of Income Tax (Appeals) (CIT(A)) did not accept the explanation, leading to an appeal before the ITAT. The ITAT, considering the peak credit theory and the arguments presented, reduced the addition to Rs.12,25,000.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773542 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 19-03-2025
• Other Referred Cases: CIT Vs. D. K. Garg [2017] 84 taxmann.com 257 (Delhi)
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Peak credit
• Section: 147; 148

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER ITA No.573/Bang/2025 Assessment Year : 2016-17 Shri. Umesh Babu, S O Thippeswamy Onkareshwara Badavane, Jagalur Town, Jagalur, Davangere – 577 528. PAN : AANPU 1988 Q Vs. ITO, Ward – 1, Davangere. APPELLANT RESPONDENT Assessee by : Shri. V. Srinivasan, Advocate Revenue by : Shri. Subramanian S,JCIT(DR)(ITAT), Bangalore. Date of hearing : 10.09.2025 Date of Pronouncement : 25.09.2025 O R D E R Per Laxmi Prasad Sahu, Accountant Member : This appeal is filed by the assessee against the Order passed bythe CIT(A) vide DIN and Order No.ITBA/N FAC/S/250/2024-25/1072842205(1) dated 03.02.2025 on the following grounds of appeal : Printed from counselvise.com ITA No.573/Bang/2025 Page 2 of 7 2. Briefly stated, the facts of the case are that assessee is a non-filer. As per the information available with the income tax department, assessee did not file return of income inspite of having transactions of Rs.57,10,000/- in the Printed from counselvise.com ITA No.573/Bang/2025 Page 3 of 7 savings bank account No.69000932144 in Davangere District Central Co- operative Bank Ltd. Accordingly, a notice under section 148 of the Act was issued after following due procedure and the case of the assessee was selected under section 147 of the Act. In pursuance of notice issued under section 148 of the Act dated 28.03.2023, assessee filed his return on 13.04.2023 declaring total income of Rs.7,88,790/-. Subsequently, other statutory notices were issued to the assessee. In response to the notice, assessee submitted his reply stating that cash deposited of Rs.57,10,000/- in the District Central Co- operative Bank Ltd., was out of withdrawals and it can be verified from the bank statement and filed copy of the bank statement. He furnished copy of the ITR, bank statements, ledger accounts of the parties from which it had received contractual income, etc., in support of his contention. Reply submitted by the assessee was examined. On perusal of the bank statement, it was noticed that there is a total credit entry of Rs.92,32,541/- out of which total cash deposit was Rs.57,10,000/- and total cash withdrawal of R.66,48,000/-. The submission of the assessee was not accepted and the AO observed as under: Printed from counselvise.com ITA No.573/Bang/2025 Page 4 of 7 Printed from counselvise.com ITA No.573/Bang/2025 Page 5 of 7 3. The AO as per the above findings was not satisfied from the explanation submitted by the assessee and added the entire cash deposits under section 69A of the Act and applied section 115BBE of the Act. 4. Aggrieved from the above Order, assessee filed appeal before the learned CIT(A) and learned CIT(A) dismissed appeal of the assessee. 5. Aggrieved from the above Order, assessee filed appeal before the Tribunal. The learned Counsel reiterated the submissions made before the lower authorities and before the learned CIT(A) assessee submitted cash flow statements and he calculated peak credit of Rs.12,25,000/-. Assessee agreed for addition of Rs.12,25,000/- as peak credit, the learned Counsel submitted that assessee did not have any source of income except the work carried out by him during the year and there is no bar to withdraw and deposit cash into bank account and assessee can hold the cash and if it is required then he may deposit again the said amount. 6. On the other hand, learned DR relied on the Order of the lower authorities and submitted that the Order of lower authorities are correct. It should not be disturbed. He further submitted that assessee was unable to explain the source of deposit of cash with credible evidence and there is no correlation with the cash withdrawal and again deposit. Printed from counselvise.com ITA No.573/Bang/2025 Page 6 of 7 7. Considering the rival submissions and perusing the entire material available on record and Orders of authorities below, we noted that assessee is a non-filer of income tax return. Accordingly notice was issued to the assessee on the basis of information available with the income tax department that the assessee has cash deposited of Rs.57,10,000/- in District Central Co-operative Bank Ltd. The source of deposit of cash was not accepted by the AO as well as CIT(A) and assessee before us while arguing the case was agreed for making addition of Rs.12,25,000/- as worked out during the course of first appellate proceedings as peak credit. In this regard, it was noticed that there is judgment of the Hon’ble Delhi High Court in the case of CIT Vs. D. K. Garg reported in [2017] 84 taxmann.com 257 (Delhi) and the assessee filed before Hon’ble Apex Court against the judgment of Hon’ble Delhi High Court and the Hon’ble Apex Court has granted leave on the appeal filed by the assessee. It was brought into notice of both the parties regarding applicability of the judgment. Therefore, during the course of clarification, the learned Counsel tried to distinguish the judgment of the Hon’ble Delhi High Court and strongly supported that the facts of that case are not applicable to the present facts of the case of the assessee and submitted that in the case of D. K. Garg noted supra, is related to the entry operator and as per para 18 of the judgment, in that case, there was deposit in the name of different persons during the previous year but here in this case, assessee is accepting that he has withdrawn himself and withdrawal amount has been deposited. For the sake of convenience, we are reproducing para No.18 of the above judgment: Printed from counselvise.com ITA No.573/Bang/2025 Page 7 of 7 8. Considering the above para of the judgment, we also hold that this judgment is not applicable to the present facts of the case. Considering the totality of the facts and circumstances of the case, we accept arguments of the learned Counsel that peak credit theory will apply in this case. Accordingly, as accepted by the learned Counsel during the course of hearing that a sum of Rs.12,25,000/- may be considered as unexplained, we are restricting the addition under section 69A of the Act to the extent of Rs.12,25,000/-. 9. In the result, appeal filed by the assessee is partly allowed. Pronounced in the open court on the date mentioned on the caption page. Sd/ Sd/- Sd/- (SOUNDARARAJAN K) (LAXMI PRASAD SAHU) Judicial Member Accountant Member- Bangalore. Dated: 25.09.2025. /NS/* Copy to: 1. Appellants 2. Respondent 3. DRP 4. CIT 5. CIT(A) 6. DR,ITAT, Bangalore. 7. Guard file By order Assistant Registrar, ITAT, Bangalore. Printed from counselvise.com "