TaxTMI 
TaxTMI 
TaxTMI 
2013 (11) TMI 469
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....cling of funds, so that it is only the peak amount that ought to be subject to tax, working out the same at Rs. 5,32,017/-. This would sum up the controversy at large, and which needs to be resolved. The respective cases 3. The primary facts are not in dispute. The assessee filed its return of income for the year on 29.07.2008, disclosing income by way of salary, profit from the partnership firm, and from other sources, at a total of Rs. 1,92,228/-. The said return was selected for being subject to the verification procedure by the issue of notice u/s.143(2) on 04.08.2009. Subsequently, on the basis of the information received under CASS, the assessee was vide notice dated 25.10.2010 questioned in respect of the cash deposited (in the aggregate of Rs. 29.16 lakhs) in his bank account with Axis Bank Ltd., requiring him to furnish an explanation with supporting evidence with regard to the source of the same, i.e., the cash deposited in bank. It was explained by his son that the assessee, his father, had expired in September, 2009, and that the said account was handled exclusively by him, expressing his inability to adduce any evidence in the matter. The said sum in fact comprises c....
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....withdrawal and its deposit, and/or utilization, while in the instant case, the redeposit is in the same year, i.e., after a time lag varying from as low as immediately after the withdrawal, to a maximum of a few months later and, as such, the assessee's prayer for being allowed credit for the recycling of its funds merits acceptance. The ld. DR, on the other hand, would rely on the orders by the authorities below, claiming them to be in accordance with the law, i.e., as applied to the facts and circumstances of the case. Findings 5. We have heard the parties, and perused the material on record. 5.1 The first thing that needs to be clarified is that the matter arising for our consideration and adjudication in the instant case is a matter of fact and not of law. That the undisclosed profits earned during an earlier year, could constitute a source of either unaccounted expenditure or investment, i.e., suffered or made by him subsequently, as the case may be, is a well-settled proposition, toward which we find decisions, as in the case of CIT v. Ram Sanehi Gian Chand [1972] 86 ITR 724 (Punj. & Har.), even prior to the pronouncement of the same by the apex court in the case of Anant....
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....revenue to rely on all the circumstances pointing to that conclusion. They must be such as can lead to the firm conclusion that the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars. The burden remains on the revenue of proving the existence of material leading to that conclusion." As would be apparent there-from, cash credit has to be 'reasonably attributed' to a pre-existing fund of concealed profit, so as to be considered as reasonably explained with reference to the said income. In each case, therefore, it has to be individually determined whether it is a fit case for application of the peak credit theory, which essentially signifies or gives credence to the recycling of funds. 5.2 We may now examine the facts of the case. The assessee, Shri Sushil M. Raney, who is assessed in the capacity of the legal representative of his late father, explains the impugned cash deposits to be cash donations/contributions collected from various donors outside Mumbai in small amounts with the help of the others, to be used for charitable purposes, in which his father was engaged, viz., helping poor people for marriage purposes, ill healt....
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....the same being trust funds. It also disproves the case of the same being liable to be re-deposited or recycled. We may once again clarify that all these payments being by cheque are not available for being reused, while the assessee has not excluded all of them in working out the peak credit, so that the said argument is both misconceived on principle and factually incorrect. In fact, how we wonder could such payments be not known to, or his son be not aware of the same, as bills from such suppliers or service providers would have continued to flow for some time after his father's expiry, and which would have only been settled or paid or by him. Continuing further, in fact even if there were no such payments during the year, i.e., by cheque or on personal account, the amounts withdrawn toward charitable purposes would not be available for being recycled. In other words, the assessee's argument of recycling is inconsistent and in contradiction to the explanation furnished with regard to the source of the funds and the purposes for which the same were deposited and withdrawn. Needless to add that no evidence has been led to show that the monies were in fact trust monies, to clarify ....
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....increasing the balance to Rs.36,638/- (there being a debit toward locker rent and DP bill, at Rs.3,647). Again, the entire of it (Rs.36,500/-) is withdrawn in cash on 25.05.2007, bringing the balance to Rs.138/-. Does that not show, clearly, the withdrawal of the bank balance, rather than the redeposit in part of Rs.3 lakhs withdrawn on 25.04.2007, as being canvassed by the assessee? The pattern continues over the entire year, with the assessee withdrawing the entire amount in cash as accumulated over the preceding few days, extending up to week or so. There is no basis whatsoever, thus, for claiming any credit on account of recycling of funds. The claim for the same, in our view, has been rightly declined by the Revenue. 5.4 Though, we have sought to explain at the outset that the matter is essentially one of fact, this is precisely what the hon'ble courts of law have been at pains to explain, and for which we may refer to some of the decisions cited by the assessee itself, even though, as explained earlier, the legal position stands amplified in the case of Anantharam Veerasinghaiah & Co. (supra). In fact, this is also the sum and substance of what the hon'ble high courts; the a....
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....her, being limited to the working of the quantum of the unexplained funds involved, contending recycling, so as to impact the addition to income exigible on account of the unexplained nature and source of the investment. The peak credit theory is based on recycling of funds, implying systematic activity, while neither the nature of the deposits nor their utilization, stands explained, so that the plea is not maintainable at the threshold. Scrutiny (of the bank account statement) reveals it to be inconsistent with not only the explanation of the amounts being possibly used for charitable purposes, but also with the fact of the same being, apart from withdrawn in cash, also by cheques for ostensibly personal purposes, on a regular basis and in no insignificant sums. Further, the pattern of withdrawal reveals the account to be employed for transfer of funds in the main, i.e., deposit of cash at one place and its withdrawal at other; the funds being withdrawal almost in toto, and soon after their deposit. The assessee has been wholly unable to discharge the onus of a satisfactory explanation qua cash deposits, including the quantum of funds involved and, accordingly, its appeal fails. ....