TaxTMI 
TaxTMI 
2016 (12) TMI 746
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....ective. (3) On the facts and in the circumstances of the case, the ld. CIT(A) had factually and legally erred in enhancing the addition of Rs, 27,81,000/- made by the ld. AO on peak theory basis to Rs. 29,88,000/- denying the alleged benefit of the peak theory without any basis and also without appreciating the facts of the case in right perspective. (4) On the facts and in the circumstances of the case the ld. AO had factually and legally erred in initiating the penalty proceedings u/s 271(1)(c) of the Act. 2. The brief facts of the case are that the appellant had deposited cash of Rs. 17,90,000/- in his saving bank account with Central Bank of India, Sikar during the F.Y. 2008-09. It was explained by the appellant that in order to obtain licence for Bhang/Doda Posta shops from the Excise Department, he formed a group of his friends and assistants who contributed cash which was deposited by him in his bank account. Out of these deposits, demand drafts were prepared which were submitted alongwith the applications to the Excise Department. Assessee claimed to have received cash amounts from following persons. (1) Shri Anil Kumar - Rs. 3,50,000/- (2) Shri Rajendra Singh - ....
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....ures on the affidavits, discrepancies in their statements vis-a-vis explanation filed by the assessee etc. proved that the transactions were not genuine. The AO therefore held that the cash deposits in the bank accounts of the assessee remained unexplained and the same were added u/s 69 of the Act. The AO computed the peak credit in the bank account at Rs. 27,81,000/- and added to the returned income. 2.2 Being aggrieved, the appellant carried the matter in appeal before the ld CIT(A) and submitted that the assessee entered into an agreement with the aforesaid four persons for doing the business of bhang/doda posta. As per the agreement, a copy of which was filed in paper book all the said four persons were required to deposit their contributions in cash in the assessee's bank account for the purpose of applying for shop to Excise Department. If the shop is allotted all the persons will run the same with mutual co-operation. Profit and loss of the business will be in the ratio of their capital contribution. It was further stated by AR that since assessee was not aware of the income tax provisions, he wrongly allowed the other persons to make cash deposits in his bank account. The ....
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.... appellant. It is a settled position of law that the entire onus is on assessee to prove the identity & credit worthiness of the creditors and the genuineness of transaction. Mere proof of identity of creditors or mere filing their income tax numbers / return is not enough to prove the genuineness of credits. Sources of cash deposited in the bank account of the assessee has to be satisfactorily explained by him, otherwise the same can be treated as his unexplained income u/s 69 of the Act. Reliance is placed on the decisions in the case of CIT vs. K. Chinnatharmban (292 ITR 682)(SC) and Manoj Aggarwal vs. DCIT (113 ITD 377) (SB. Del.). In view of above discussion, it is held that the appellant has not been able to discharge his onus of proving the credit worthiness of the aforesaid four persons and the genuineness of transaction. Hence the aforesaid cash deposits in the bank accounts of the appellant are rightly added as his unexplained income u/s 69 of the IT Act. The AO has made an addition only on the peak credit of Rs. 27,81,000/-. During the appeal proceedings vide order sheet noting dated 11.10.2012 the Ld AR was asked to show cause why the benefit of peak credit should n....
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.... because all four persons were not having their bank account and were out of Sikar. Thus, out of total deposit of Rs. 29,88,000/- the deposits of Rs. 22,14,000/- was of these four persons and rest of Rs. 7,74,000/- belongs to the assessee from his past savings. The ld AR further submitted that the appellant has fully explained the sources of cash deposit in his bank accounts. In support, the assessee had filed the affidavits, income tax particulars of these persons and other details. These person duly accepted of giving money to the appellant for preparing the DD to apply for the licence of Bhang Doda Post shop in their name as appearing from the above documents. From these documents, it is not appearing that these are bogus. The AO merely proceeded on his own suspicion without making any enquiry or without giving sufficient opportunity of being explained to the assessee. The assessee had also filed the cash flow statements which has also not been denied. Only due to the fact that the assessee allow these persons to deposits their cash in his bank account who were not having bank account, addition cannot be made in the hands of the assessee. Where the AO was having any doubt about....
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....the District Excise Officer Sikar, the total demand draft (DD) of Rs. 28,38,732/- has been made and deposited in the District Excise Office, Sikar. Out of Rs. 28,38,732/-, the DD of Rs. 20,62,000/- was in the name of Shri Dayal Singh in whose name the license has been allotted and Rs. 4,00,000/- was of assessee and remaining of Rs. 3,76,732/- was of other persons. All the DDs have been made between 11.02.2009 to 19.03.2009. DD's of Rs. 8,05,332/- has been made from the bank of Baroda A/c and DD's of Rs. 20,33,400/- has been made from the Central Bank of India. It was submitted that out of the DD's of Rs. 28,38,732/-, the following DD's were cancelled. The DD's of Rs. 8,09,452/- has been cancelled and has come back in the A/c of Central Bank of India as under: 23.02.2009 2,99,000/- 04.03.2009 3,99,888/- 16,03,2009 32,388/- 16.03.2009 32,388/- 02.04.2009 44,900/- Total 8,09,452/- The DD's of Rs. 6,30,000/- has been cancelled and has came back in the a/c of Bank of Baroda as under: 04.03.2009 5,00,000/- 16.03.2009 32,500/- 08.04.2009 32,500/- 08.04.2009 32,500/- 08.04.2009 32,500/- Total 6,30,000/- Thus out of Rs. 28,38,732/-, the DD's of Rs.....
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....persons and has made the addition only and only on the basis of suspicion. They have not brought any single evidence on record in support of them except assumption, presumption and suspicion and we have already stated no addition can be made on the basis of suspicion or doubt. Further the persons have explained the source of money given to the assessee. Hence it is wrong that the persons not having much income but they can take borrow from other persons to start any business. The duty of the assessee was only to the extent to prove the sources here. The assessee has provided the sources of source as the person had stated in their statement. As per settled legal position the assessee is only required to prove the sources not sources of sources of sources. If the AO was having any doubt he could have taken the action in the hands of persons. Further the assessee in support has filed the affidavits of the persons, their ITR, their statements has been recorded in which they have explained with source and purpose of giving cash deposits in the bank account of the assesee. When all these evidences are on record when they have not been rebutted with the help of evidence no addition can b....
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....ve persons. The appellant has thus tried to establish a linkage in terms of initial cash deposit, subsequent issuance of demand drafts and refund of the money to the respective persons. The ld AR has submitted that out of total demand Drafts valuing at Rs. 28,38,732 issued out of cash deposits, the DDs valuing at Rs. 13,99,280 were retained by excise department in respect of licence issued to Sh Dayal Singh and balance DDs valuing at Rs. 14,39,452 have been returned and subsequently cancelled. Thus, in terms of amount repayable to these persons, it comes to Rs. 814,720 (Rs 2214000 less Rs. 13,99,280) and the assessee has repaid Rs. 750,000 to respective persons as evident from its bank statements and the balance Rs. 64,720 relates to DDs preparation/cancellation charges, etc. 2.6 The above factual matrix explains the utilisation of money once the money has been deposits in the bank accounts maintained by the assessee. Mere application to the District Excise officer in name of these persons along with the demand draft doesnot establish that the money originally belong to those persons. In the context of section 69 of the Act, the primary question that arises for consideration befor....
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....end lacs of rupees to the appellant." "It is a settled position of law that the entire onus is on assessee to prove the identity & credit worthiness of the creditors and the genuineness of transaction. Mere proof of identity of creditors or mere filing their income tax numbers / return is not enough to prove the genuineness of credits. Sources of cash deposited in the bank account of the assessee has to be satisfactorily explained by him, otherwise the same can be treated as his unexplained income u/s 69 of the Act. Reliance is placed on the decisions in the case of CIT vs. K. Chinnatharmban (292 ITR 682)(SC) and Manoj Aggarwal vs. DCIT (113 ITD 377) (SB. Del.). In view of above discussion, it is held that the appellant has not been able to discharge his onus of proving the credit worthiness of the aforesaid four persons and the genuineness of transaction." 2.7 The necessary corollary of the above finding is that all the money, which has been found deposited in his two banks, belongs to the appellant. Section 69 provides that where in the financial year, the assessee has made investments which are not recorded in the books of accounts, if any maintained by him for any source of....