Cash Deposit in Undisclosed Bank A/c – ITAT deletes penalty as assessee declares Peak Cash as Income in Revised Return

The assessee’s sole substantive ground challenges correctness of section 271(1)(c) penalty of Rs. 5 lacs imposed by the Assessing Officer as affirmed in the lower appellate proceedings. He had filed return on 30-04-2007. The Assessing Officer noticed him to have disclosed bank account maintained with Pargati Sahkari Bank only. The Assessing Officer took up scrutiny based on AIR information that assessee’s bank account with Oriental Bank of  Commerce has seen cash deposits of Rs. 29,03,095/- as well as yet another sum of Rs. 3,85,122/- in a City bank account. He sought to add the same as unexplained cash credit. The assessee in turn filed his revised return on 26-11-2009 showing income of Rs. 17,16,540/- thereby offering peak cash deposits in the above stated account along with interest thereupon and initial cash deposits of Rs. 15,91,220/-, Rs. 7720/- and Rs. 25,500/- over and above that disclosed earlier. We find that the Assessing Officer disallowed miscellaneous expenditure of Rs. 1 lacs and accepted this revised income. He accordingly framed a regular assessment on 29-12-2009. The case file reveals that he initiated the impugned section 271(1)(c) penalty proceedings qua the above stated additional income of Rs. 16,24,440/-. Quantum proceedings attained finality at this stage itself.

The assessee submitted to have offered the above stated additional income by way of revised return in order to buy peace in bonafide belief. He accordingly sought for dropping the penalty notice. The Assessing Officer rejected the same inter alia by holding that the initial return did not contain particulars of the remaining two bank accounts which were disclosed only after being caught on the wrong foot in scrutiny proceedings. He held facts of the case as a clear cut instance of concealment for imposing the impugned penalty of Rs. 5 lacs. The same has been confirmed in the lower appellate proceedings.

ITAT have heard both the parties and perused the case file. There is no dispute about the factual position that the assessee had not disclosed two bank accounts maintained with the Oriental Bank of Commerce and City Bank in the enclosures filed with the original return. There is further no issue that he had deposited cash sums amounting to Rs. 29,03,095/- and Rs. 3,85,122/- respectively in these two accounts. He computed peak deposits of Rs. 16,24,440/- (supra) and declared the same as income with the revised return in scrutiny proceedings. Both the lower authorities treat it as a case of concealment of income within the meaning of section 271(1)(c) by holding that this additional income saw light of the day only after the necessary show cause in scrutiny proceedings. The assessee pleads bonafides in filing revised return. ITAT observed in these peculiar facts and circumstances that his revised return stands accepted during assessment itself. And also there is no denial of the fact that it is not all cash deposits which have been found to be unexplained but only a part thereof declared after computation of peak credits. ITAT are of the opinion in these facts and circumstances that the assessee has himself computed peak credits for declaring the same as additional income. ITAT accordingly hold that assessee act and conduct at the very initial stage in not declaring his two bank accounts comprising of the additional income does not amount to an act of concealment of income under the relevant statutory provision.