ITAT upholds peak credit method for calculating undisclosed income under section 69A, dismissing Revenue's challenge

ITAT Chennai dismissed Revenue's appeal challenging CIT(A)'s application of peak credit method for determining undisclosed income under section 69A. CIT(A) calculated peak credit considering opening balances in bank accounts, cash, advances, and income from money lending business less drawings. The method was upheld based on precedents from Madras HC and ITAT Chennai involving assessee's relatives. ITAT found no infirmity in CIT(A)'s approach and confirmed the peak credit method as appropriate for determining unexplained amounts.

---

---

Issues:
- Justification of sustaining the addition of Rs. 16,08,071/- out of the total addition of Rs. 5,82,38,126/- by the ld. CIT(A) based on the peak credit method.

Analysis:
1. The Revenue filed an appeal against the order passed by the ld. Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The assessee did not appear, and the appeal proceeded exparte. The main issue was whether the ld. CIT(A) was correct in upholding the addition of Rs. 16,08,071/- out of the total addition of Rs. 5,82,38,126/-.

2. The case involved scrutiny of cash deposits in the assessee's bank accounts. The Assessing Officer made an addition treating the cash deposits as unexplained money under section 69A of the Income Tax Act. The ld. CIT(A) restricted the addition to Rs. 16,08,071/- using the peak credit method. The Revenue challenged this decision, arguing that the ld. CIT(A) did not consider the case properly and the details provided were incomplete.

3. The ld. CIT(A) considered the nature of the business and the submissions made by the assessee. He relied on the peak credit method to determine the unexplained amount. The decision was supported by the case of S. Kulanthaian and the judgment of the Hon'ble Jurisdictional High Court in the case of PCIT v. S. Anbukannan. The ld. CIT(A) found the peak credit to be Rs. 44,00,557/- and the unexplained amount to be Rs. 16,08,071/-.

4. The ld. CIT(A) referred to the decision of the Hon'ble High Court and followed the same principles in this case. He concluded that the addition should be limited to Rs. 16,08,071/- as the unexplained money. The Tribunal upheld the ld. CIT(A)'s decision, stating that there was no error in adopting the peak credit method based on legal precedents.

5. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decision of the ld. CIT(A) to sustain the addition of Rs. 16,08,071/- using the peak credit method. The judgment was pronounced on 28th August, 2024 in Chennai.

---