TaxTMI 
TaxTMI 
2026 (9) TMI 1071
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....(A) had partly allowed the appeal against the Assessment Order, dated 18/03/2025, passed under Section 147 read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as 'the Act']. 2. The Revenue has raised the following grounds in ITA No.1485/AHD/2026: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that the addition of Rs. 1,56,21,790/- made by the Assessing Officer under section 69A read with section 115BBE of the Income-tax Act, 1961 was excessive and unsustainable. 2. The learned CIT(A) has erred in accepting the assessee's explanation that the cash deposits represented agricultural receipts/recycled cash without appreciating ....
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....o the relevant assessment year. 4. The relevant facts in brief are that the Assessee is an individual and a farmer carrying out agricultural activities in his village. For the Assessment Year 2017-18 relevant to Financial Year 2016-17, the Assessee did not file return of income. Specific information was flagged under the Non-Filer Monitoring System (NMS) on the Insight Portal which indicated that the Assessee had made aggregate cash deposits amounting to INR.1,56,21,790/- in his savings bank account maintained with Corporation Bank. Based on the said information, proceedings under Section 147 of the Act were initiated, and notice under Section 148 of the Act was issued on 01/03/2024. In response, the Assessee filed his Return of Income o....
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....4/2016 to 31/03/2017) and Corporation Bank statement of the Assessee. The Learned CIT(A) observed that there were frequent contra entries ('To/By Corporation Bank') reflecting continuous rotation of funds, where total bank credits aggregated to INR.1,68,05,672/- and total debits aggregated to INR.1,68,04,746/-. In view of the aforesaid, the Learned CIT(A) conclude that taxing gross cash deposits leads to double taxation of circulating funds and directed the Assessing Officer to apply Peak credit theory and restrict the addition to the maximum unexplained peak cash balance after due verification. 6. Being aggrieved by the order passed by the Learned CIT(A), both the Revenue and the Assessee have preferred these cross-appeals befor....
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....and debits (INR.1,68,04,746/-) demonstrate near-equal rotation of the same funds. Thus, the explanation of fund recycling stood corroborated. In the facts of present case, taxing the aggregate gross deposits would result in arbitrary taxation of the same circulating cash. 10. We have given thoughtful consideration to the rival submissions on this issue. There is no dispute regarding the entries in the bank account and cash book. On perusal of the Corporation Bank statement and Cash Book for the relevant period, it is evident that cash deposits were followed by 'SELF' cash withdrawals of similar amounts, which were again redeposited into the account. The total debits and credits in the bank statement broadly match, confirming cont....
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....eeds. 14. We have considered the submissions. We have, hereinabove, upheld the order of the CIT(A) directing the Assessing Officer to compute the addition based on peak credit theory. We note that the Learned CIT(A) has directed the Assessing Officer to compute the final addition on the basis of peak credit after eliminating explained agricultural receipts and verifying cash book reconciliation. We do not find any infirmity with the aforesaid directions issued by the Assessing Officer regarding computation of peak credit. However, after taking into consideration the rival submission and totality of facts and circumstances of the present case, we deem it appropriate to issue following further directions/clarification to the Assessing Offi....