Additions u/s 69A upheld for maximum peak bank deposits instead of closing balances for the day

In a recent judgment, ITAT, Amritsar has ruled that CIT(A) was right in taking the the highest amount of cash deposits in the Bank Account at any point of time as maximum peak credit instead of considering the closing balances for the day instead for making addition u/s 69A

Case Details:
I.T.A No. 454(Asr)/2014 Assessment Year: 2005-06
ITO vs. Rajiv Kumar
Date of Order/Judgment: 23/03/2018

Brief Facts of the Case:
The assessee had not disclosed in his return of income the transactions in IDBI Bank and case of the assessee was reopened u/s 148 to verify the cash deposits. The assessee submitted that he was earning commission on sales of cloths and he had been collecting amount from buyers on behalf of seller of goods and he used to deposit the same in his bank account and remit the same to the suppliers through account payee cheques.  The assessee also furnished a list of 86 parties of suppliers and furnished of 84 parties to whom payments through cheques were remitted from the bank however, he did not file detail of purchasing parties and had submitted that he had no details of purchase parties because parties had stopped their business and left Amritsar. It was also submitted that out of 80-90 purchasing units only 15-20 were in existence and remaining processing unit had closed down. However, the Assessing officer was not satisfied with the explanation of the assessee and therefore, he made the addition of cash deposits in the bank u/s 69A of the Act.

CIT(A) rejected the theory of the assessee and held that the assessee was engaged in unrecorded trading activities and has been buying and selling of cloth but he held that entire amount of cash deposits cannot be taxed and he therefore, took a peak amount as on 21.5.2004 and restricted the addition to the peak amount of Rs.14,25,850/-.

Before ITAT, the assessee contended that CIT(A), while arriving at the figure of peak credit, wrongly took the figure of Rs.14,24,850/- as on 21.05.2004. Whereas the closing balance on 21.5.2014 was Rs.11,20,916/- .

Excerpt from ITAT Judgment:

……. The learned AR, has argued that the figure should have been Rs.11,73,562/- which is a closing figure as on 21.5.2004. However, we are not in agreement with the argument of the learned AR as learned CIT(A) has taken the maximum peak in the Bank Account which happens to be Rs.14,24,850/- on 21.5.2004 and which has been rightly taken by the learned CIT(A). This is highest amount in the Bank Account at any point of time and which has been rightly taken by learned CIT(A) as maximum peak credit. In view of the above, the ground No. 1 of Cross Objections is dismissed.