Brief Facts of the case:
The assessee is a widowed housewife. Her husband Shri Sugan Chand Rangwani was also assessed to income tax with ITO Ward 1(2), Jaipur. He expired in August, 2012 after prolonged suffering from Malignant Brain Tumor and a spell of being bed ridden for couple of years. The assessee filed return of income declaring interest income. In this year a house property was constructed by her at 2-Ga-24, Jawahar Nagar, Jaipur.AO inquired about the cost of construction and sources thereof, in reply assessee filed a registered valuer report showing valuation Rs. 37,80,196/-, which was for correcting some measurement mistakes was revised to Rs. 35,28,917/-.AO after inquiry of source of the investment concluded that the assessee could explain the sources to the extent of Rs. 18,33,300/- and the balance amount of Rs. 20,73,876/- was held to be unexplained and added to her income.
Her husband used to avail OD facilities on an Axis Bank joint a/c No. operated mainly by him. The withdrawals were mainly used for construction of the house in question.AO made an addition of Rs. 1,19,73,500 on account of the un-explained bank transactions(deposit entries in Joint OD A/c).Thus, AO made an aggregate addition amounting to Rs. 1,40,47,376.Aggrieved by the order of AO , assessee preferred an appeal before CIT(A).
CIT(A) deleted the addition of Rs.20,73,876/- on account of the alleged un-explained investment in the construction of residential house and restricted the addition on account of the alleged un-explained bank transactions to Rs. 8,01,050 as originally added as Rs. 1,19,73,500 by the AO , by adopting ‘Peak Theory’. Both the parties filed cross appeals before the ITAT.
Contention of the Assessee:
The learned counsel for the assessee contended that no credit for the withdrawals of Rs.6,36,000/- made in the names of family members had been given despite of the fact that affidavits of the family members were submitted certifying therein the fact that such withdrawals were made by them for the appellant only to be invested in the construction works of the residential house.
Further, the cash withdrawn by the husband from the other bank a/c Rs/ 14,50,000 and Opening cash of Rs. 2,75,000 were not considered overlooking the explanation furnished by the appellant on the point with the help of a chart showing immediate sources of such deposits and withdrawals. If these amounts taken together Rs. 23,61,000 is taken into consideration , then the addition made by AO on the account of alleged unexplained investment Rs. 20,73,876 would not sustain.
As regards the addition on account of alleged unexplained entries in the bank statement , the learned counsel for the assessee contended that the CITA) has erred in adopting the Peak credit theory because he failed to consider the credit entry of Rs.25,00,000/- which would nullify the peak deficit. Therefore, the addition made by the CIT(A) is not justified.
Contention of the Revenue:
The learned counsel for the department contended that cash flow statement prepared by the AO show that cash funds available with the assessee were to the extent of Rs.16,58,300/- only. Further the opening cash available with the assessee was at Rs.1,75,000/- only. The investment of Rs.1,32,176/- in the purchase of material for construction was incorrect and it was in the nature of interest charged by the bank or insurance premium paid by the assessee. In the light of above facts, the AO was right in concluding that the assessee had cash funds to the extent of Rs.18,33,300/- (Rs.16,58,300/- plus Rs.175,000/-) available with her whereas she had claimed to have invested an amount of Rs.39,07,176/- in the construction of said house. Therefore, the balance amount of Rs.20,73,876/- was treated as undisclosed investment in the said house property.
Further the addition of Rs.1,19,73,500/- on account of entire credit entries through cheques in the hands of the appellant is also justified as the same was not reasonably explained to the satisfaction of the AO.
Decision of the ITAT:
The ITAT after considering the rival submissions observed that there is no reason to interfere with CIT(A) order who has co-terminus powers with AO and can do what AO failed to do. The CIT(A) has been right in allowing the credit of Opening balances & withdrawals by the assessee’s husband in explaining the investment in the construction of the house property.
As regards, second issue CIT(A) has rightly adopted the peak credit theory by considering the fact that that there was only rotation of overdraft funds whereby the funds advanced on earlier dates were received back subsequently and there were no fresh deposits. Thus, instead of aggregate of credit entries only the peak credit balance could be added as the some entries remain ‘unexplained. However, the share of said addition to the assessee’s account as a joint holder comes to Rs. 4,00,550 only.(being ½ of 8,01,050)