Assessment year: 2011-2012 Page 1 of 7 IN INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA Before Shri P.M. Jagtap, Accountant Member I.T .A. No. 1295 /KOL/ 2015 Assessment Year: 2011-2012 Income Tax Officer, Appellant Ward-23(4 ), Hooghly, Aayakar Bhavan, Khadina More, Hooghly-712 101 -Vs.- Shri Swarup Chand Mondal,. Respondent B.K. Roy Super Mark et, P.O. Arambagh, Dist. Hooghly-712 601 [PAN: AEDPM 4362 C ] Appearances by: Shri Rajendra Prasad, JCIT, D.R., for Department Shri Sunil Surana, FC A, for assessee Date of concluding th e hearing : Ju ly 28, 2016 Date of pronouncing order : September 28, 2016 O R D E R This appeal is preferred by Revenue against order of ld. Commissioner of Income Tax (Appeals)-6, Kolkata dated 26.08.2015 for assessment year 2011-12 and grounds raised by Revenue therein read as under:- (1) Whether CIT(Appeals) erred in law by violating Rule 46A in not giving any opportunity to AO while accepting computation of peak credit which according to him should have been considered for addition. (2) Whether CIT(A) erred in fact as well as in law in accepting method of computation of peak credit by assessee who had evidently not established that debit entries in bank account had indeed been routed back as some of credit entries to reduce total income of Rs.41,94,000/- to only Rs.9,79,326/-. Assessment year: 2011-2012 Page 2 of 7 (3) Whether CIT(A) erred in fact in not reproducing or not enclosing said computation of peak credit with or in appellate order. 2. assessee in present case is individual, who is engaged in business of wholesale rice trading. return of income for year under consideration was filed by him on 30.09.2011 declaring total income of Rs.6,20,250/-. During course of assessment proceedings, it was noticed by Assessing Officer that assessee has maintained two Bank accounts with Bank of India, Bulchandrapur Branch and Axis Bank, Burdwan Branch, which were not reflected in financial statements of assessee. He also noticed that there was substantial deposit made by assessee in said two Bank accounts during year under consideration. In this regard, explanation offered by assessee before Assessing Officer, inter alia, was that cash withdrawals made from said Bank accounts were available and utilized for making deposits on subsequent dates. It was also submitted by assessee that opening balance in said accounts amounting to Rs.5,79,326/- as well as gift of Rs.4,00,000/- received by him from his mother-in- law in cash was available for him to explain cash deposits found to be made in said two Bank accounts. explanation of assessee was not found acceptable by Assessing Officer and he proceeded to add entire deposit of Rs.42,00,416/- found to be made in two Bank accounts of assessee to its total income in assessment completed under section 143(3) vide order dated 26.03.2014. 3. Against order passed by Assessing Officer under section 143(3), appeal was preferred by assessee before ld. CIT(Appeals) disputing addition of Rs.42,00,416/- made by Assessing Officer on account of deposits found to be made in his two Bank accounts and after considering submissions made by assessee as well as material available on record, ld. CIT(Appeals) restricted said addition to Rs.6,416/- only thereby giving relief of Assessment year: 2011-2012 Page 3 of 7 Rs.41,94,000/- for following reasons given in paragraph no. 5 of his impugned order:- I have carefully co nsidered facts o f case and th e appellant's submissio ns. As regards cl aim of appell ant that gift in cash of Rs.4 ,00,000/- were received by appellant, appellant has proved identit y of donor. donor i.e. mother-in-l aw of appell ant confirmed in her st atement recorded by AO during her personal attendance that she had made gift . She gave details of her sources of inco me wh ich have not been rebutted by AO. Th e only reaso n given by AO for rejection of gift as genuine is that it was stated by dono r t hat gift had been made as per needs of appellant . Th e reason given by AO for rejection of confirmatio n of donor d uring her personal attendance is not sufficient to disbelieve genuineness of th e transaction and do nor's capacit y to pay. Hence, th e gift of Rs.4.00,000/- claimed to have been deposit ed in bank account of appellant with Axis Bank on 22.04.2010 is held t o be genuine and t he second ground of appeal is allowed. Th e total of cash deposits of Rs. 41,37,606/- (including interest of Rs. 5,606/-) in said bank account has been held by AO to be unexpl ained and was added back as undisclosed income. appell ant's case is that deposits in said amount are expl ained either by t he opening balance o f Rs.5 ,79,326/.- or t he cash withdrawals made befo re th e impugned cash deposits. I find that peak balance in said account was Rs.9,79 ,326/- as on 22.04.2010 which is explained by o pening bal ance of Rs.5,79,326 /- followed by cash withdrawal of Rs.5,00 ,000/- on 03.04.2010 and subse quent cash deposit of same t otal amount of Rs.5 ,00,000/-(Rs.2,00 ,000/- on, 17.04.2010 and Rs.3,00,000/- on 1 9.04.2010) and cash deposit of Rs.4,00,0 00/- on 22.04.2010 held above to be expl ained by cash gift from appellant's mother-in-l aw. subsequent cash deposits in bank account are less th the aggregat e of cash withdrawals on prio r dat es. Further, cash deposit s of Rs.12 ,000/- on 12.11 .2010 and Rs.50 ,000/- on 31.12.2010 in appellant's bank account with Bank of India are less th the proximate cash withdrawals of Rs. 1,30,000/- on 29.10.2010 and Rs.3,50,000/ - on 06.1 2.2010 from bank account with Axis Bank. Th e appellant has noted various judicial decisions to state th at combined peak cash balance in his bank account s after considering prior cash withdrawals onl y can be considered fo r addit ion, if any. It is quite logical to infer that deposits made out of with drawal s made prior to said deposits would h ave come out of preceding with drawal s unless there is evidence to suggest that withdrawals h ave been made fo r specific purpo se and not found their way back into bank account as deposits. Assessing Officer h as not brought any material on reco rd to pro ve that cash withdrawn by appellant would not have found it s way back into same bank account. It has been h eld time' and again in vario us judicial prono uncement s that wh ere Assessment year: 2011-2012 Page 4 of 7 in respect of bank account, th ere are inst ances of cash deposits as well as cash withdrawals, o nly thy 'peak credit of such bank account can be considered to be undisclosed income of assessee and cash withdrawals preceding cash deposits have to be considered as source of said subsequent cash deposits. appellant h as rel ied on various case laws. It was also held by ITAT , Kolkat a, 'A' Bench in case of Tanmo y Chatterjee Vs ITO, ITA No.1434/ K/2009 vide it s order dated 30/07/2010 as follows: "We are of th e considered view th at assessee h as made cash deposit and also cash withdrawal fro m time to time from said bank account. assessee has also not been able to explain t he source of deposit in said bank account. Further, Department has also not brought any evidence o n record that said cash withdrawal has been spent by assessee. Therefore, we find substance in submissio n of assessee that assessee made withdrawal from said bank account and again deposited same as assessee could not utilize withdrawal amount for purpose fo r which it was with drawn. No doubt assessee h as not stated any where purpose for which amount was withdrawn from time to time, assessee has also placed bank st at ement at page 7 of paper book. Considering t he said bank statement , extract of which has been given by Ld. CIT(A) at page 3 of impugned o rder, which has al ready been reproduced h ereinabo ve, we are of considered view th at peak of th e balance in said bank account should be considered as unexplained investment u/ s. 69 of 1. T . Act. " Also, Hon'ble ITAT, Kolkat 'C' Bench in its order dated 30,04.2010 in case of Asit Baran Utt asanee Vs ITO in ITA No. 1327/K/2008 held as follows: "8. We have carefully considered submissions of learned Representatives of parties and orders of authorities below. There is no dispute to fact that th e assessee has not been able to expl ain th e negative cash balance as observed by Assessing Officer and details of which are give n on pages 3and 4 of t he assessment o rder. However, we are of considered view that addition of amount of negative bal ance made by Assessing Officer aggregating Rs.11,80 ,150.52 u/s.6 8 of Act is not just ified. Considering facts, we are of th e considered view that it will be just ifiable to take peak of negative balance as unexplained cash credit." Assessment year: 2011-2012 Page 5 of 7 Further, Hon'ble ITAT, Kolkata 'C' Bench held in case of ACIT vs. Loknath Prasad G upt in IT (SS) No. 185 & 190/Kol/2003 as under.- "We h ave carefully perused respective bank account s and observed that there were various credits as well as, withdrawals in said bank acco unt beginning on and from 01-01-1990 to 20-03-2002, leaving closing balance of Rs.8 ,461/-. There is no doubt that deposit in bank account is unexplained investment by assessee. H owever, it is seen th at every deposit is followed by withdrawal subsequently. amount invested at one point of time has been with drawn subsequently and there was furth er deposit in bank account. Therefo re, th e peak credit of Rs.7,50,975/- covers total deposits and withdrawal made by assesese in th e said bank account . Making addit ion of aggregat e deposit s in bank account without giving benefit of withdrawals made by assessee from t ime to time is not justified Ld C IT(A) h as rightl y t reated peak balance of Rs.7 ,50,97 5/- as unexplained invest ment made by assessee in nat ure of credits in said bank account and, therefo re, th e addition of Rs 7,50,975/- is onl y call ed for. o rder of th e Ld. CIT (A) is therefo re, upheld. Thus Hon'ble Tribunal has consist entl y held that only peak bal ance can be treated as unexplained investment. Respectfully following this common ratio of various decisions o f jurisdictional tribunal , it is held th at only combined peak credit in appellant's bank accounts wit h Axis B ank and Bank of India can be bro ught to tax , if it cannot be expl ained satisfacto rily. As discussed above, peak cash b alance of Rs.9 ,79,326/- on 22.04.2010 in appellant's bank account with Axis Bank (which is also consolidated peak fo r both his account s) is explained by o pening cash balance of Rs.5 ,79,326/- brough t forward from preceding ye ar which cannot be considered undisclosed income of assessment year under appeal and cash gift of Rs.4 ,00,000/- received from appellant's mother-in-law. Thus, combined peak cash bal ance h as been explained satisfact orily by appellant. subsequent cash deposits (other than interest credited to account with Axis bank) are explained by prior cash withdrawals. Hence, only th e total int erest of Rs. 5 ,606/- credit ed to amount with Axis Bank, tot al intere st of Rs.387/ - credit ed to bank account with Bank of India(A/c. No .7445) and interest of Rs. 423/- on dormant account no 1484 with Bank of India can be bro ught to tax. Hence, addition of Rs.6,416/-(i.e. Rs. 5,606/- + Rs.387/- + Rs. 423/-) is co nfirmed and th e bal ance addit ion of Rs. 41,9 4,000/- is deleted. third and fourt h grounds of appeal are decided acco rdingly . Assessment year: 2011-2012 Page 6 of 7 Aggrieved by order of ld. CIT(Appeals), Revenue has preferred this appeal before Tribunal. 4. I have heard arguments of both sides and also perused relevant material available on record. main contention raised by ld. D.R. is that case made out by assessee on basis of peak credit theory was accepted by ld. CIT(A) without giving any opportunity to Assessing Officer to verify same. He also contended that said theory was put in to service by assessee for first time before ld. CIT(Appeals) and action of ld. CIT(Appeals) in giving relief to assessee by relying on same without giving any opportunity to Assessing Officer to verify peak credit working of assessee is in clear violation of Rule 46A of Income Tax Rules. However, as pointed out by ld. counsel for assessee from relevant portion of assessee s submission made before Assessing Officer, which has been duly reproduced by Assessing Officer in assessment order, Peak Credit Theory was put into service by assessee even before Assessing Officer by pointing out that cash withdrawals made from same Bank accounts were available and utilized for making deposits on subsequent dates. It is thus clear that argument based on Peak Credit Theory was raised by assessee even before Assessing Officer and other submissions regarding availability of funds in form of opening balance as well as gift claimed to be received from his mother-in-law in cash were also specifically made by assessee before Assessing Officer. It is thus clear that there was no new case made out by assessee before ld. CIT(Appeals) for first time and there is no violation of Rule 46A on part of ld. CIT(Appeals) while giving relief to assessee on issue under consideration as alleged by ld. D.R. Even on merit, perusal of copy of relevant Bank statement placed on record by assessee clearly shows that all withdrawals and deposits from said Bank accounts were mainly made in cash and, therefore, only peak credit appearing in said Bank account was required to be considered Assessment year: 2011-2012 Page 7 of 7 for making addition to total income of assessee. Such peak credit in said Bank account was Rs.9,79,326/- and since same was substantially explained by assessee by way of opening balance available in relevant Bank account as well as gift of Rs.4,00,000/- received in cash from his mother-in-law, I find no infirmity in impugned order of ld. CIT(Appeals) giving substantial relief to assessee on this issue. I, therefore, uphold same and dismiss this appeal filed by Revenue. 5. In result, appeal of Revenue is dismissed. Order pronounced in open Court on September 28, 2016. Sd/- (P.M. Jagtap) Accountant Member Kolkata, 28 t h day of September, 2016 Copies to : (1) Income Tax Officer, Ward-23(4 ), Hooghly, Aayakar Bhavan, Khadina More, Hooghly-712 101 (2 ) Shri Swarup Chand Mondal, B.K. Roy Super Mark et, P.O. Arambagh, Dist. Hooghly-712 601 (3) Commissioner of Income Tax (Appeals)-6, Kolkata; (4) Commissio ner of Income Tax- , (5) Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. Income-tax Officer, Ward-23(4), Hooghly v. Swarup Chand Mondal