2017 (4) TMI 241 - AT - Income Tax

Tribunal confirms unexplained deposits in bank account, rejects peak credit theory.

The Tribunal upheld the additions of Rs. 46,010 and Rs. 19,37,590 as unexplained deposits and cash credit, respectively, in the bank account. The decision ... Addition on account of deposits made in the bank account - unexplained deposits in the bank account - Held that:- Regarding the deposits of ₹ 46010/ found in the a/c no. 624401086077 with ICICI Bank the assessee failed to substantiate his claim that these were the loan amount received as no supporting concrete evidences were furnished. We have noticed that the total cash deposit of ₹ 19,37,590/-was consisted of ₹ 1,95,290/- in the bank a/c 624401086077 and ₹ 17,42,300/- in the bank a/c no. 058401500739 with ICICI respectively. Out of these cash deposit, the assessee has tried to explain the cash deposit of ₹ 12,64000/- by claiming that he along with other members have created an AOP called AYUSHI investment and two of the members of this AOP, Shri Sandipbhai H. Dobariya and Shri Virjibhai C. Gajera have brought capital of ₹ 4,10,000 and ₹ 8,54,000/- respectively. In this connection we have noticed that Shri Sandip H. Dobariya and Shri Virjibhai C. Gajera have produced only the copies of 7/12 of agricultural land before the assessing officer and failed to furnish any concrete evidences of earning agricultural income and also failed to prove that cash was deposited by them in the above mentioned bank account of the assessee. We have also perused the copies of statement recorded u/s 131 of these two persons in which they have revealed their ignorance about nature of business of the AOP and purpose for which the cash was given by them to the assessee. As perused the copy of deed of the AOP the agreement of AOP was made on the hundred rupees non- judicial stamp paper and nowhere date of stamp paper was indicated, the signing parties also had nowhere mentioned the date of signatures on this deed. We have further noticed that in the copy of the AOP deed it was mentioned that it was cratered on 31st of March 2008 and at serial number 3 of this deed it was stated that bank account number 058015739 in the ICICI bank will be used for its business purposes. In this connection we have gone through the copy of bank statement filed in the paper book submitted by the assessee and noticed that bank account number 058015739 with the ICICI bank was opened on 12th of May 2008 whereas the date of creation of the trust deed was stated to be 31.03.2008.These facts indicate that the creation of the trust deed as AOP was the afterthought steps taken by the assessee. We further find that the assessee failed to establish the genuineness of his claim about depositing of cash in the bank account through the above stated two persons. We have also considered the contention of the Ld. Counsel that benefit of peak balance to be provided to the assessee. In this connection we observed that the peak credit theory is based on recycling of funds implying systematic activity. In the case of the assessee, neither of the deposits nor their utilisation stands explained, therefore, we considered that this contention of the assessee is not maintainable. - Decided against assessee. Issues Involved:1. Addition of Rs. 46,010 as unexplained deposits in the bank account.2. Addition of Rs. 19,37,590 as unexplained cash credit.Detailed Analysis:1. Addition of Rs. 46,010 as Unexplained Deposits in the Bank Account:The assessee contested the addition of Rs. 46,010 made by the Assessing Officer (AO) as unexplained deposits in the bank account. The assessee failed to provide proper evidence regarding the deposits during both the assessment and appellate proceedings. The CIT(A) upheld the addition, stating that the appellant admitted to not having evidence to prove the source of the deposits. The Tribunal also found that the assessee could not substantiate the claim that these were loan amounts received, as no supporting concrete evidence was furnished. Consequently, the addition of Rs. 46,010 was confirmed.2. Addition of Rs. 19,37,590 as Unexplained Cash Credit:The AO noticed cash deposits totaling Rs. 19,37,590 in two ICICI bank accounts of the assessee. The assessee claimed that Rs. 12,64,000 of this amount came from two members of an AOP (AYUSHI Investment), who brought capital from agricultural income. However, the AO found that the two individuals failed to provide sufficient evidence to prove their agricultural income, such as purchase bills for seeds, fertilizers, or sale receipts of agricultural produce. The AO added the entire amount as unexplained cash credit.The CIT(A) upheld this addition, stating that mere filing of affidavits and landholding documents does not prove the capacity to make such huge cash contributions. The CIT(A) noted several inconsistencies, including the backdating of the AOP deed and the lack of evidence for the agricultural income claimed. The affidavits were not considered reliable without corroborative evidence.The Tribunal reviewed the case and noted that the assessee failed to substantiate the claim regarding the cash deposits. The Tribunal also rejected the assessee's contention for applying the peak credit theory, as neither the deposits nor their utilization were explained. Consequently, the addition of Rs. 19,37,590 was confirmed.Conclusion:The Tribunal dismissed the appeal of the assessee, confirming the additions of Rs. 46,010 and Rs. 19,37,590 as unexplained deposits and cash credit, respectively. The decision was based on the assessee's failure to provide concrete evidence and the inconsistencies in the explanations provided. The order was pronounced in the open court on 27-03-2017.