TaxTMI 
TaxTMI 
2016 (11) TMI 596
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....3. Facts in brief as have been brought on record, assessee, an individual engaged in the business of iron and steel products. For the year under consideration, assessee filed its return of income declaring total income of Rs. 2,51,820/-on 28.09.2011. Thereafter the case was selected for scrutiny and accordingly, notice u/s. 143(2) of the Act was issued upon the assessee. During the course of assessment proceedings, the AO observed that Savings Bank a/c No. 00320100008466 with Bank of Baroda, M.G. Road Kolkata was not disclosed in the IT return. On scrutiny of the bank statement it was noted that for the year under consideration a sum of Rs. 1,09,50,000/- was deposited by way of cash in the said SB a/c on different dates as detailed below:- Transaction date Deposit (Rs. ) 07.03.2011 5,00,000/- 08.03.2011 9,00,000/- 10.03.2011 5,00,000/- 11.03.2011 9,00,000/- 12.03.2011 9,00,000/- 15.03.2011 9,00,000/- 16.03.2011 9,00,000/- 18.03.2011 7,00,000/- 21.03.2011 5,50,000/- 22.03.2011 9,00,000/- 23.03.2011 8,50,000/- 26.03.2011 9,00,000/- 29.03.2011 4,00,000/- 30.03.2011 9,50,000 Total 1,09,50,00....
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....ortunities to the appellant to explain the source of cash deposit in the undisclosed bank account. However, no compliance was made before him. The appellant had only stated before the AO that the cash was received by him from the parties but he neither disclosed the names and addresses of such parties nor explained the source of cash deposit. Thus, the appellant has failed to discharge the onus cash on him. The cash was found credited in the undisclosed bank account of the appellant and therefore the onus was on him to explain the source cash and if the same was received from the parties, even then the onus was him to disclose the identity of such parties and their creditworthiness. However, the appellant kept his silence and did not disclose and explain anything. Under the circumstances, I am of the opinion that the AO was justified in making addition u/s. 68 of the Act on account of unexplained cash credit. I am of the opinion that even the alternative claim of the appellant that the entire cash deposited in the undisclosed bank cannot be his income and that the AO ought to have applied peak credit theory in respect of the cash deposits; is not acceptable because in the ....
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....ified in making addition of Rs. 1,09,50,000/- u/s. 68 of the Act on account of unexplained cash credits in the undisclosed bank account and that, the peak credit theory is not applicable in the case of appellant. The addition made by the AO is confirmed. Te ground no. 1 and 2 are dismissed." Being aggrieved, by this order of Ld. CIT(A) assessee came in second appeal before us. 5. Before us Ld. AR submitted that the peak credit theory should be applied in the instant case, as assessee was engaged in providing the accommodation entries to various parties and cash deposited in the bank account of assessee do not belong to him. He again stated that assessee was acting just as a conduit in converting the unaccounted money into accounting form through various parties and income of assessee out of the transaction was in the form of commission which is of negligible value. On the other hand, Ld. DR submitted that assessee engaged in the trading business of iron and steel products and in the instant case cash was deposited and withdrawn by issuing cheques to various parties so the peak credit theory cannot be applied. Had there been cash deposit and cash withdrawal then only peak c....
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....ed the modus operandi of his business. The relevant statement reads as under: Binod Kumar Jha, AY 2009-10 Binod Kumar Jha, AY 2009-10 Binod Kumar Jha, AY 2009-10 Binod Kumar Jha, AY 2009-10 In view of the above statement the assessee claimed that he is engaged in the business of providing accommodation entries to various parties on commission basis and this commission has all along been disclosed by him as business income in the returns of income particularly for AYs 2008-09, 2009-10 and 2010-11. Now before us assessee's counsel argued that even peak credit cannot be added in the hands of the assessee only finance commission earned by him @ 0.25% to 0.50% at the best can be assessed. Ld. Counsel for the assessee drew our attention to paper book filed by assessee and particularly pages 1 to 41, wherein extract from bank statement of six undisclosed bank accounts of Axis Bank and calculation showing peak credit after consolidation is enclosed. There is no dispute about the cash deposited in these six bank accounts maintained with Axis Bank Ltd. We find from the above statement recorded by the AO of the assessee particularly Question nos. 14 and 15 that assessee is only a....
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....l Bank of India. It is observed that the assessee had rotated his own funds in Central Bank of India for providing accommodation entries to various parties. It is not disputed that the genuineness of the transaction could not be proved by the assessee by mentioning the names, addresses, PAN, confirmation of the parties to whom the payments were made and from payments were received by the assessee. Hence it is proved that transactions contained in the bank account are not genuine. Once the transactions in the bank account are proved ingenuine then it is an accepted practice of adopting the peak credit theory for the purpose of determination of undisclosed income of the assessee. Hence, reliance placed by the ld. DR in the decision of the Hon'ble Allahabad High Court reported in 276 ITR 38 which rejected the concept of peak credit theory is not applicable to the facts of the instant case. In the case before the Hon'ble Allahabad High Court, the assessee claimed that the credits in the bank account represented genuine loans borrowed and the character of the loan transactions were not disputed and hence their lordships of Allahabad High Court held that the peak credit theory wo....
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....cally result in deeming the value of investment to be the income of the assessee. That is still a matter within the discretion of the officer and, therefore, of the Tribunal. In other words, the discretion has been conferred on the Income tax Officer u/s 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. The Income Tax Officer is not obliged to treat the value of investment as income in every case where the explanation offered by the assessee is found to be unsatisfactory. 12. Hence it would be unreasonable to tax all the deposits in the bank account of the assessee. To this extent, we do not appreciate the action of the ld. AO in taxing the entire credits of Rs. 6,30,89,413/- as undisclosed income of the assessee for A.Y.2006-07. To put this ongoing dispute to rest, in the interest of justice and fair play, we direct the ld. AO to assess the peak credit in this case in respect of both cash as well as cheque transaction contained in the said bank account by verifying t....