Umesh Babu Vs ITO (ITAT Bangalore)
Entire Bank Deposits Cannot Be Taxed – Tribunal Limits Addition to Peak Credit- Cash Withdrawals & Re-Deposits – Tribunal Rules Only Peak Credit Taxable- Bang Trib
In this case, Assessee was a non-filer, but the department found cash deposits of ₹57.10 lakhs in his savings account with a Co-operative Bank. Based on this information, a notice u/s 148 was issued & the case was reopened u/s 147. In response, Assessee filed return declaring income of ₹7.88 lakhs.
AO, however, noticed that total credits were ₹92.32 lakhs including cash deposits of ₹57.10 lakhs & withdrawals of ₹66.48 lakhs. The explanation that deposits were out of earlier withdrawals was not accepted, as no clear nexus was shown. AO therefore treated the entire cash deposits as unexplained money u/s 69A, taxed under section 115BBE. CIT(A) upheld this view.
Before Tribunal, the Counsel argued that Assessee had already prepared a cash flow statement & computed peak credit of ₹12.25 lakhs, which he was willing to accept as addition. It was submitted that there is no bar on withdrawing & redepositing cash from one’s own bank account & only peak credit should be taxed.
Tribunal noted that the Delhi High Court’s ruling in CIT Vs D.K. Garg [2017] 84 taxmann.com 257 was distinguishable since that case dealt with entry operators & third-party deposits, whereas here the Assessee himself admitted redeposit of own withdrawals. Accordingly, peak credit theory was held applicable. The Tribunal restricted the addition to ₹12.25 lakhs u/s 69A, instead of ₹57.10 lakhs, & partly allowed the appeal.
