ORAL ORDER
(HONOURABLE MR. JUSTICE M.R SHAH)
[1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 27.09.2013 passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as “Tribunal”) in ITA No. 674.Ahd/2013 for Assessment Year 2009-10, the Revenue has preferred the present tax appeal for deciding the following proposed questions of law.
“2(1) Whether on the facts and circumstances of the case and in law, the ITAT was justified in upholding the self-contradictory order of the CIT(A), who while upholding the addition of unexplained cash deposits in the assessee's bank account, allowed the assessee relief on account of cash withdrawals thereby reducing the addition made by the Assessing Officer, even though the CIT(A) has himself held that the assessee has failed to explain the requirement of cash withdrawals satisfactorily?
(2) Whether on the facts and circumstances of the case and in law, the ITAT was justified in upholding the decision of the CIT(A) that only the peak of unexplained cash deposits is liable for tax without appreciating that the assessee had failed to discharge its onus to prove the requirement of the cash withdrawals and their subsequent redeposit in the same bank account and, therefore, the peak theory, which pre-supposes that the same money was rotated in deposit and withdrawal had not been parked elsewhere, could not have been applied mechanically to the assessee's case?”
[2.0] That the assessee filed the return of income for AY 2009-10, declaring total income of Rs. 6,09,518/-. The case was selected for scrutiny under CASS and notice under section 143(2) of the Income Tax Act, 1961 was issued by the Assessing Officer. During the assessment, it was found that the assessee deposited cash exceeding Rs. 10 lacs in his savings account with Axis Bank Account No. 55014. The assessee was, therefore, asked to furnish the copies of the bank statements along with the explanation on each of the credit entries and the assessee furnished the copies of the statements of the following bank accounts.
(i) Axis Bank account No. 55014
(ii) Axis Bank a/c No. 21231
(iii) BOB a/c No. 09959
(iv) Central Bank a/c No. 205898
(v) SBI a/c No. 910141
The assessee also furnished a cash book for the relevant period in support of his cash deposits in the bank accounts. The AO found that the assessee withdrew large sum of cash from his bank accounts which were redeposited in his other bank accounts and therefore, the AO doubted and after giving an opportunity directed to make the addition of unexplained cash deposits of Rs. 39,70,500/- and ultimately passed the assessment order and determined the total income of the assessee at Rs. 45,80,020/-.
[2.1] Feeling aggrieved and dissatisfied with the aforesaid addition of Rs. 39,70,500/-, the assessee preferred an appeal before the learned CIT(A) and the learned CIT(A) partly allowed the said appeal and restricted the addition to Rs. 7,95,160/- on account of unaccounted income being peak/maximum cash balance of Rs. 7,95,160/- on 26.08.2008 and consequently deleted the addition of the balance amount of Rs. 31,75,604/-.
[2.2] Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) restricting the addition to Rs. 7,95,160/-, the Revenue preferred appeal before the learned Tribunal and by impugned judgment and order the learned Tribunal has dismissed the said appeal confirming the order passed by the learned CIT(A) restricting the addition to Rs. 7,95,160/-.
[2.3] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal, the Revenue has preferred the present tax appeal with the aforesaid proposed substantial questions of law.
[3.0] Shri K.M Parikh, learned advocate appearing on behalf of the Revenue has vehemently submitted that as such the learned Tribunal has materially erred in restricting the addition to the peak of cash i.e Rs. 7,95,160/- i.e maximum cash balance as on 26.08.2008 on account of unaccounted income and deleting the addition of Rs. 31,75,604/-. It is submitted that the learned Tribunal has not properly appreciated the fact that even the learned CIT(A) himself held that the assessee has failed to explain the requirement of cash withdrawals satisfactorily. It is submitted that the learned Tribunal has materially erred in not properly appreciating the fact that while upholding the decision of learned CIT(A) that only the peak of the unexplained cash deposits is liable for tax without appreciating that the assessee has failed to discharge his onus to prove the requirement of the cash withdrawals and that subsequent redeposit in the said bank account and therefore, the peak theory which pre-opposes that the same money was rotated in deposit and withdrawal had not been part elsewhere, could not have been applied mechanically to the assessee's case.
Making above submissions, it is requested to admit/allow the present appeal.
[4.0] Heard Shri Parikh, learned advocate appearing on behalf of the Revenue at length and we have considered in detail the decision of the learned CIT(A) as well as the impugned judgment and order passed by the learned Tribunal.
At the outset it is required to be noted that the AO directed to make the addition of Rs. 39,70,500/- as unexplained cash on the ground that the assessee had withdrawn the same from his own bank account and again redeposited the same in his bank accounts. The AO also made the aforesaid addition by observing that the assessee withdrew the cash instead of sufficient cash balance available with him. However, the aforesaid addition has been restricted by the learned CIT(A) to Rs. 7,95,160/- being the peak balance available in the bank account of the assessee as on 26.08.2008 It is required to be noted that as such the assessee did explain the cash deposit in his bank account by submitting that he has taken the same as unsecured loan from other persons whose names were also given by the assessee. Thus, as such the assessee did explained his deposit of the aforesaid amount in his bank account. Thereafter, it was immaterial whether the assessee had withdrawn the said amount and applied subsequently for his own use by redepositing the same in his bank account. As rightly observed by the learned CIT(A), once the source of deposit is explained, subsequent withdrawal is not required to be explained. In the facts and circumstances of the case, learned CIT(A) has not committed any error in restricting the addition to the extent of Rs. 7,95,160/- on account of unaccounted income. In para 4, the learned CIT(A) while restricting the addition to Rs. 7,95,160/-, has observed as under:
“4. I have considered the facts of the case, finding of the AO and written submission made by the appellant.
The undisputed facts are that the appellant has withdrawn and deposited cash. It is also a fact that the appellant has withdrawn cash inspite of sufficient cash balance available with him. As far as cash book is concerned there is no negative cash balance observed. The appellant is also furnished explanation with regard to the requirement of cash in his line of business.
The AO's case rests on the issue that though sufficient cash balance was available with the appellant but he kept on withdrawing money from the bank accounts and during the course of proceedings he did not explain satisfactorily the requirement of such withdrawals. Therefore, considering the surrounding circumstances and applying the test of human probabilities, the AO concluded that the explanation offered by the assessee is not genuine. To that, assessee's contention is that there is no requirement under the law with regard to the limit of cash carried from day to day and also there is no requirement with regard to the reasons for carrying such cash balance. According to him once the source of deposit is explain subsequent withdrawal is not required to be explained. There can be an addition on account of source there could not be addition of withdrawals from explained sources.
No doubt there is no limit of cash balance prescribed in the Act or Rules and secondly the AO cannot dictate to the appellant as to how to conduct business. However, the question is not with regard to the rights of the appellant but it is concerning the fairness and truthfulness of the accounts maintained as well as how fairly the business is being conducted. The AO is not off the mark when he enquires about the intention of withdrawing money when sufficient cash is available. And if the plausible and satisfactory explanation is not forthcoming then the financial transaction appears suspicious. The only explanation available for withdrawing cash in spite of cash balance is available is that
i) the cash has been invested in unaccounted activities, income which is not offered. OR
ii) there is really no cash balance available with the assessee as shown in the cash book.
These arguments have not been demolished by the appellant therefore, question still remains unanswered. No reply to the above querries will lead to only one conclusion and that is the affairs of the appellant are opaque and suspicious. On the other hand, AO's action of making addition on accounts of all deposits made in the bank accounts of the appellant is without any justification and bordering to the point of high pitch assessment.
During the course of assessment proceedings as well as before the undersigned the appellant has produced cash book showing daily cash balances. From this statement it is observed that appellant was having maximum cash balance of Rs. 7,95,165/- on 26/08/2008. Considering that whatever income the appellant earned is being ploughed back into his business and he could have at the most earned income to the extent of the maximum cash balance as per his cash book, accordingly maximum addition is restricted to the peak of cash balance during the year.
Under the circumstances, addition of Rs. 7,95,160/- on account of unaccounted income is being confirmed and the assessee gets relief Rs. 31,75,604/-. This ground of appeal is partly allowed.”
The aforesaid is confirmed by the learned Tribunal by impugned judgment and order by observing in para 4 as under:
“4. Now the Revenue is before us. Ld. Sr. D.R vehemently argued that the appellant used whatever cash withdrawal from the bank for other purposes, he had not established direct linkage between cash withdrawn and cash deposit. Therefore, A.O was right to make the addition of Rs. 39,70,500/-. No one appears from the assessee side. Therefore, we decide this case on the basis of facts available in file. During the course of assessment proceedings, the assessee had produced cash book and copy of the bank account. The appellant submitted before the A.O that cash withdrawal from the bank was re-deposited in the bank account. The A.O did not find any discrepancy between cash withdrawal from the bank and cash available in the cash book on a particular date. The appellant had not claimed any expenditure on account of interest payment. The appellant had filed the confirmation of the persons from whom loans were given. The appellant neither paid interest nor earned any income on account of interest on advance. This aspect has not been doubted by the A.O There is no limit in cash withdrawing the re-depositing in the bank account. The assessee has offered a plausible and satisfactory explanation before the A.O for each financial transaction. He had not brought on record any evidence which proves that cash withdrawal had been invested somewhere else and cash balance in the cash book is artificial. Thus, we confirm the order of the CIT(A).”
[5.0] In the facts and circumstances of the case, we are in complete agreement with the view taken by the learned Tribunal as well as the learned CIT(A) restricting the addition to the extent of Rs. 7,95,160/-. Under the circumstances, as there arise no substantial question of law, present tax appeal deserves to be dismissed and is, accordingly, dismissed.