Reassessment on cash deposits upheld, but unexplained bank transactions were taxed only at peak balance.

Tangible information from the Investigation Wing regarding substantial cash deposits provided a valid basis for reopening, so the challenge to reassessment under sections 147 and 148 failed. However, where the assessee could not prove the source or identity behind the deposits and the bank account showed immediate withdrawals after deposits, taxing the entire cash inflow was considered excessive. The addition was therefore restricted to the peak balance of the account, reflecting rotation of funds rather than a one-time unexplained accretion. The reopening was upheld, but the substantive addition was confined to the peak credit approach, granting partial relief.

---

---

Issues: (i) Whether reassessment under sections 147 and 148 was valid on the basis of information regarding cash deposits in the assessee's bank account; (ii) whether the entire cash deposits could be assessed under section 69 or only the peak balance could be taxed.

Issue (i): Whether reassessment under sections 147 and 148 was valid on the basis of information regarding cash deposits in the assessee's bank account.

Analysis: The reassessment was founded on information from the Investigation Wing showing substantial cash deposits in the assessee's bank account. Such information constituted tangible material giving the Assessing Officer reason to believe that income had escaped assessment. On that basis, the reopening satisfied the statutory requirement for initiating reassessment proceedings.

Conclusion: The challenge to the reopening failed and the reassessment was upheld.

Issue (ii): Whether the entire cash deposits could be assessed under section 69 or only the peak balance could be taxed.

Analysis: The assessee failed to produce documentary evidence establishing the identity of depositors, the beneficiaries, or the source of the cash. The bank statement, however, showed immediate withdrawals following deposits, indicating a routing mechanism rather than a one-time accretion. In these circumstances, taxing the full deposits was considered excessive, while some addition remained justified because the nature and source of the transactions were not satisfactorily explained.

Conclusion: The addition was not sustained in full and the Assessing Officer was directed to tax the peak balance of the bank account.

Final Conclusion: The reopening was sustained, but the addition was restricted by adopting the peak balance approach, resulting in partial relief to the assessee.

Ratio Decidendi: Where cash deposits in a bank account are supported by tangible material for reopening but the assessee fails to explain the source of deposits, the addition under section 69 may be restricted to the peak balance when the account evidences immediate rotation of funds.

---