2015 (7) TMI 1441 - AT - Income Tax

Peak credit method upheld for unexplained cash credit addition despite no business activity shown

Income-tax Officer, Ward 5 (3), Surat Versus Smt. Meghna A. Modi, Prop. M/s Naghma Textiles

The ITAT Ahmedabad upheld the CIT(A)'s order adopting peak credit method for unexplained cash credit addition. The assessee had an undisclosed bank ... Addition of unexplained cash credit - CIT (A) has adopted peak credit - assessee’s source of income in the impugned assessment year was only from ‘’other’’ sources’ and also that there was no business activity at her behest - AO noticed in the course of scrutiny that the assessee had not disclosed her bank account maintained with the Prime Co-op. Bank, Katargam GIDC Branch, Surat - HELD THAT:- The Revenue seeks to restore the entire addition credited in the assessee’s undisclosed bank account. CIT (A) has adopted peak credit along with profits @ 5% of the sums in question totalling to Rs. 9,02,519/-. Revenue does not file any evidence on record disputing these figures of peak credit as the AO had himself arrived at the said figures (supra). Its sole argument is that once the assessee has not carried out any business activity, there is no evidence that the amount debited from her bank account was available for credit entries in question. We observe that the same forms all the more reason to infer that the amount debited was not utilised elsewhere else than the credit entries in question. The Revenue does not advance any other argument. We uphold the CIT(A)’ s order under challenge and reject the Revenue’ s sole substantive ground. Issues:1. Challenge to the CIT(A)'s order restricting the addition of unexplained investment.2. Determination of peak credit and unexplained investment in the undisclosed bank account.3. Consideration of profits made from transactions in the account.4. Dispute over the restoration of the entire addition credited in the undisclosed bank account.Analysis:The appeal pertains to the assessment year 2001-02 and concerns the addition of Rs. 56,66,052 as unexplained investment by the Assessing Officer based on undisclosed bank account transactions. The CIT(A) partially accepted the appellant's contentions and restricted the addition to Rs. 9,02,519, considering it as unexplained cash credit. The appellant argued that the Assessing Officer erred in calculating the peak amount, contending that the opening balance cannot be treated as the peak amount for the year. The appellant voluntarily offered Rs. 6,67,000 as unexplained cash credit to avoid further disputes. The CIT(A) analyzed the facts, noting that the undisclosed bank account was not disclosed in previous years, leading to the consideration of credits for determining unexplained investment. The peak credit was deemed to pertain to the preceding year and not treated as unexplained investment for the current year. The excess cash deposit was held as unexplained, resulting in an addition of Rs. 9,02,519 as unexplained investment and profits from transactions.The Revenue sought to restore the entire addition of Rs. 56,66,052, but the CIT(A)'s decision was upheld. The Revenue failed to provide evidence disputing the peak credit figures determined by the Assessing Officer. Despite the absence of business activity by the appellant, it was inferred that the debited amount was utilized for the credited entries. The Revenue's argument lacked substance, leading to the rejection of their appeal. The order pronounced on 31/7/2015 dismissed the Revenue's appeal, affirming the CIT(A)'s decision to restrict the unexplained investment addition to Rs. 9,02,519.