Principal Commissioner Of Income Tax vs A. Anbukkannan

Dr.Vineet Kothari,J

The Revenue has filed these Tax Case (Appeals) under Section 260-A of  the  Income  Tax  Act  by  raising  the  following  purported  substantial questions of law arising from the order passed by the Income Tax Appellate Tribunal on 5.4.2017 for the Assessment Year 2010-11 on the ground that the Appellate Authority was not justified in upholding the additions made in the hands of the Assessee on the basis of Peak Credit to the extent of Rs.18,12,888/-:-

"i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in directing to adopt 'peak credit' method to arrive at the income of the assessee for the assessment year under consideration?

ii) Whether the Tribunal is correct in law in applying peak credit method to arrive at the source of unexplained deposits, by ignoring the source of amount outstanding receivable at the end of the previous years?

iii) Whether the Tribunal is correct in law in applying peak credit method to arrive at the source of unexplained deposits, by ignoring the fact that most of the deposits are by cash, whereas the payments are in cheque and as such the payments by cheque are not available to the assessee for re-deposits?"

The Assessee was engaged in the business of money lending and could not explain certain credit entries in his bank account and therefore, the method of Peak Credit was adopted by the Appellate Authority giving partial relief to the Assessee.

The learned counsel for the Revenue relied upon the judgment in the following case Commissioner of Income Tax v. D.K.Garg ((2017) 84 Taxmann.com 257 (Delhi)) and S.Ahmed Khabeer Rowther v. Commissioner of Income-tax ((1977) 106 ITR 984 (Madras)).

The findings of the learned Tribunal upholding the order of the learned Commissioner of Income Tax (Appeal) in this regard are quoted below for ready reference:-

"9. We have considered the rival contentions and perused the orders of the authorities below. It is not disputed by the Revenue that assessee had both cash deposits as well as cash withdrawals in his bank account with Axis Bank accounts with Pudukkottai and T.Nagar Branch. Though learned Assessing Officer had listed out the major transactions at paragraph 4 of the assessment order, a date wise analysis of the bank accounts were not done. Assessee can always say that cash deposits in the bank account had come out of an earlier cash withdrawal as long as the time interval between the withdrawals and deposits are not so significantly substantial to disbelieve the source. Whether the assessee was carrying on any money lending business, has no relevance when an assessment is made considering the amounts deposited in the bank accounts. However, in our opinion, cash deposits alone cannot be the subject of an addition ignoring the cash withdrawals. Hence, finding of learned Commissioner of Income Tax (Appeals) that Peak Credit of Rs.18,12,888/- alone could have been considered for the addition cannot be faulted. In so far as transactions other than cash are concerned, it may be true that assessee was earning commission from money lending. However, the finding of the learned Commissioner of Income Tax (Appeals) that assessee was earning 1% commission of the deposits in the bank account was only a surmise. Even if there were some commission earnings it gets subsumed in the Peak Credit of Rs.18,12,888/-considered for addition. The further addition of Rs.3,67,758/- was not justified in the fact and circumstances of the case, such addition stands deleted.

In the result, appeal of the Revenue is dismissed whereas that of the assessee is partly allowed."

Having heard the learned counsel for the Revenue, we are satisfied that no substantial question of law arises in the present Appeals filed by the Revenue and we are of the considered opinion that only if the Assessee has failed to explain the entries in bank account, then the additions made by the Authorities under the Act on the basis of Peak Credit can be adopted to remove the cascading effect of the unexplained credit entries in the bank account. The assessee had both cash deposits and cash withdrawals in his bank account with the same bank. Therefore, the method of 'Peak Credit' was rightly adopted for addition of the alleged undisclosed income of the Assessee and this is a well settled and common principle so adopted. The finding of facts of the Authorities below cannot be said to be perverse or illegal in any manner.

The judgment relied upon by the learned counsel for the Revenue arose in different set of facts. As far as the decision of the Madras High Court is concerned, it concluded that the finding of facts does not give rise to any substantial question of law with which we are in respectful agreement. As far as the decision of the Delhi High Court, it was the case of Cash Credits (Bank Deposits) and the Assessee was a Chartered Accountant, who was found to be indulging in providing accommodation entries. Since the facts of both the cases are distinguishable, we do not find any support from that judgment as contended by the learned counsel for the Revenue.

Therefore, we are of the opinion that the Appeals filed by Revenue are devoid of merit and they are liable to be dismissed and accordingly, they are dismissed. The connected miscellaneous petition is also closed. No costs.