Case Law Details
Vakeel Ahmad Vs ITO (ITAT Lucknow)
Introduction: This article delves into the case of Vakeel Ahmad versus ITO, as adjudicated by ITAT Lucknow for Assessment Year 2010-11. The core issue revolves around the taxation of bank deposits, withdrawals, and the computation of peak credit. The assessee, engaged in the business of selling cloth as a local hawker, faces scrutiny regarding the source of funds in his bank account.
Detailed Analysis:
The assessee presented a copy of the bank account with Punjab National Bank, revealing an opening balance of Rs.5,737/- on 02.4.2009. Subsequently, deposits and withdrawals occurred, with the peak credit reaching Rs.79,668/- by 11.09.2009. The pattern suggests that withdrawals exceeded deposits, indicating the assessee utilized the funds for various purposes.
Before the ld. CIT(A), the assessee asserted that the deposits of Rs.15,82,190/- originated from the sale proceeds of cloth, advocating computation under Section 44AF of the Act. However, the ld. CIT(A) rejected this claim due to the absence of evidence establishing the assessee as a local hawker of cloth.
The ld. CIT(A) sustained the addition without considering the figures of deposits and withdrawals in the bank account. The crucial oversight is evident, as the entire deposits cannot be taxed; only the peak credit of Rs.79,668/- is taxable.
Ordinarily, the case should have been remanded to the Assessing Officer for verification, considering the initial order under section 144. However, given the unique circumstances, the article argues for the continuation of proceedings based on the available facts before the ld. CIT(A).
Conclusion: In conclusion, the ITAT Lucknow, recognizing the peculiar conditions of the assessee and the oversight in the ld. CIT(A)’s decision, directs the Assessing Officer to limit the addition to the peak credit of Rs.79,688/-. This article provides an in-depth analysis of the case, shedding light on the taxation intricacies related to bank deposits and peak credit for Vakeel Ahmad versus ITO.
find that the assessee has filed a copy of bank account with Punjab National Bank, wherein the opening balance as on 02.4.2009 is Rs.5,737/- and whereas deposits and withdrawals has been made in this account and the peak credit in this account in this account is Rs.79,668/- as on 11.09.2009. The pattern of deposits and withdrawals reflects that the assessee has been withdrawing the money from the above deposits and the total withdrawals are more than the deposits in the account. Before ld. CIT(A), the assessee had submitted that the entire deposits of Rs.15,82,190/- are on account of sale proceeds of cloth and therefore income should be computed as per the provisions of Section 44AF of the Act. However, the ld. CIT(A) did not accept the arguments of assessee as on his asking the assessee was not able to furnish any evidence to the fact that he was local hawker of cloth. While sustaining the addition, the ld. CIT(A) has overlooked the figures of deposits and withdrawal in the bank account. I find that the entire deposits in the bank cannot be taxed and only peak credit can be taxed in the present case of Rs.79,668/-.
Ordinarily, the appeal should have been set aside to Assessing Officer for his verification and reajudication on the basis of bank account as the Assessing Officer had passed the assessment order u/s. 144 of the Act. However, keeping in view the peculiar conditions of the assessee and in view of the facts and circumstances of the case and the fact that such submissions were made before ld. CIT(A), and finding the deposits and withdrawals in the bank account, I hold that the entire deposits cannot be taxed and only peak credit of Rs.79,688/- can be taxed.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
This appeal has been filed by the assessee against the order of the ld. CIT(A), Bareilly, dated 15.03.2019 for Assessment Year 2010-11. The grounds of appeal taken by the assessee are reproduced below:
“1. That the appellate order is bad in la\v as well as on the facts and circumstances of the case.
2. That the Ld, CIT (Appeals), Bareilly has erred in law that appellant could not prove that the money deposited in the bank account was from business activity and hence addition-made u/s 69A of Rs. 1582190/- is sustained. The contention of CIT(Appeals) is not true. Appellant is doing business of cloth as a local hawker (Pheri Wala) and deposit in the bank account was sale proceeds from the said business.
3. The Ld, Assessing Officer has treated deposit in saving bank account as income of the appellant. The Ld. Assessing Officer has failed to consider that the appellant deposit money in small fraction and peak credit in the said account is Rs. 79688/-. If any addition has to be made than peak credit amount of Rs. 79688/- should be added in the income of the appellant.
4. Any other ground as deem fit at the time of hearing of appeal.”
2. The ld. AR at the outset invited my attention to the fact that there is a delay in filing the appeal of fourty seven days. The reason for delay in filing the appeal has been explained by the assessee in its application 21.08.2021 supported by affidavit for condonation of delay, which is reproduced as under:
“1) That I received an Intimation for the assessment year 2010-11 under section 144(I)(a) of the income Tax Act 1962 on Date 18/10/2017.
2) That as per the said intimation I found that my returned income has been enhanced by Rs. 15,82,190 and a consequential demand has been made against me.
3) That I was advised by my legal consultant that the said intimation is factually incorrect and an application for rectification.
4) That I was advised by the legal consultant to file an appeal before the Hon’ble ITAT for relief but the appeal has already become barred by time limitation, Nevertheless the appeal was filed before this Hon’ble ITAT accompanied by an application for condonation of delay as provided under section.
5) That in this way there is a delay of 47 days for which an application
has been filed alongwith Letter of Condonation of Delay.
6) That delay in filing the appeal is because of a genuine belief of the applicability of a particular provision of the Income Tax 1962 which was not accepted by the Original Authority.
7) That I had no intention to jeopardize the interest of the revenue by delaying the filing of the appeal.”
3. The ld. DR of the Revenue had no objection to condonation of delay. Findings the reasons for delay in filing of appeal being reasonable the delay in filing the appeal was condoned and the ld. AR was directed to proceed with his arguments.
4. The ld. AR at the outset submitted that the assessee is a small hawker dealing in business of cloth who sold cloth in cash and deposited the amount in his bank account and from where the withdrawals were made to meet out the cost of purchases and in this respect, my attention was invited to copy of bank statement of the assessee where such deposits and withdrawals were mentioned. The ld. AR submitted that assessee is a very poor fellow and invited my attention to the assessee, who was present in the court and who also joined the submissions and stated that now he has lost even this work also and is working as a factory labourer as he had incurred huge liabilities which he could not repay. As regards, the additions in the bank account he stated that he was a small cloth hawker who use to purchase cloth from Ludhiana and sell it to people and after collecting the sales used to deposit the same in bank account and from there the withdrawals were made to pay for the purchases. The ld. AR submitted that peak credit should have been accepted as the income of the assessee which he has not done and the authorities has added back the entire deposits instead of considering the withdrawal also. Therefore, in view of above facts and circumstances, it was prayed that the additions sustained by ld. CIT(A) be deleted.
5. The ld. DR, on the other hand submitted that before Assessing Officer nobody appeared and therefore Assessing Officer has passed the order u/s. 144 of the Act. It was submitted that since assessee did not appear therefore it was prayed that the case may be set aside to Assessing Officer for readjudication. The ld. AR in his rejoinder submitted that the assessee is a very poor fellow and he cannot afford to go back again and placed his case whereas entire facts are before this Tribunal and Tribunal can adjudicate the issue keeping in view the copy of bank account placed before this Tribunal and therefore it was prayed that the issue may be decided here itself.
6. I have heard the rival parties and have perused the material available on record. I find that the assessee has filed a copy of bank account with Punjab National Bank, wherein the opening balance as on 02.4.2009 is Rs.5,737/- and whereas deposits and withdrawals has been made in this account and the peak credit in this account in this account is Rs.79,668/- as on 11.09.2009. The pattern of deposits and withdrawals reflects that the assessee has been withdrawing the money from the above deposits and the total withdrawals are more than the deposits in the account. Before ld. CIT(A), the assessee had submitted that the entire deposits of Rs.15,82,190/- are on account of sale proceeds of cloth and therefore income should be computed as per the provisions of Section 44AF of the Act. However, the ld. CIT(A) did not accept the arguments of assessee as on his asking the assessee was not able to furnish any evidence to the fact that he was local hawker of cloth. While sustaining the addition, the ld. CIT(A) has overlooked the figures of deposits and withdrawal in the bank account. I find that the entire deposits in the bank cannot be taxed and only peak credit can be taxed in the present case of Rs.79,668/-.
7. Ordinarily, the appeal should have been set aside to Assessing Officer for his verification and reajudication on the basis of bank account as the Assessing Officer had passed the assessment order u/s. 144 of the Act. However, keeping in view the peculiar conditions of the assessee and in view of the facts and circumstances of the case and the fact that such submissions were made before ld. CIT(A), and finding the deposits and withdrawals in the bank account, I hold that the entire deposits cannot be taxed and only peak credit of Rs.79,688/- can be taxed. In view of above facts and circumstances, I direct the Assessing Officer to restrict the addition to Rs.79,688/- being the peak credit in his bank account.
8. In the result, appeal filed by the assessee is allowed.
(Order pronounced in the open court on 07/06/2022)
