If cash deposit fully explained no peak credit addition required as directed by ITAT

When cash deposit was fully explained no peak credit addition was required as directed by ITAT while remitting the matter back to Assessing Officer

ABCAUS Case Law Citation:
ABCAUS 3210 (2019) (12) ITAT

The single issue involved in the instant case was confirmation by the CIT(A)of the addition made by the Assessing Officer (AO) for unexplained deposits in the bank accounts.

The appellant assessee submitted that in the first round, the ITAT had set aside the issue to the Assessing Officer with a direction that the he shall recompute the peak credit in both the bank accounts by getting consolidated statement from the assessee.

However, the addition was made by the Assessing Officer as unexplained deposits in two bank accounts of the assessee.

It was pointed out that the assessee in the set aside proceedings filed consolidated cash book, showing deposits and withdrawals from two bank accounts and wherein there was no negative balance and, therefore, the entire amount stood explained.

It was submitted that the Assessing Officer instead of deleting the addition, made the addition of being the maximum balance available in the cash book of the assessee, which was wrong, as the maximum balance in the cash book stood very much explained from the regular cash in hand and the Assessing Officer mistook it as the peak credit in the bank account.

Therefore, it was prayed that the addition sustained by the CIT(A) be deleted.

The Tribunal observed that in the earlier round of litigation, the ITAT had set aside the issue to the Assessing Officer after recording the findings that as evident from the bank statements, there were not only entries relating to the cash deposits but there were entries in respect of withdrawal of cash. The ITAT had opined that in view of both cash deposit and withdrawals, the Assessing Officer instead of only considering the cash deposited and treating the same as unexplained, should have also considered the withdrawal made by the assessee. At the most, the peak deposit in each of the bank account could be assessed and that is also to be under section 69 of the Act, and not under section 68 of the Act.

With above observations, the ITAT had seta side the case to the AO with a direction to re-compute the peak credit.

The Tribunal observed that the above directions to the Assessing Officer clearly stated that the Assessing Officer was required recompute the peak credit in the bank accounts.

If cash deposit fully explained no peak credit addition required 

The Tribunal further observed that in set aside proceedings, the assessee had filed a consolidated statement of cash, wherein the opening balance and deposits in these bank accounts and withdrawals from these banks were incorporated. As per the consolidated cash statement, the balance appearing represented cash in hand and not peak credit in the bank accounts. The total amount deposited, as found recorded on the credit side of this statement stood fully explained by the total debit.

Therefore, the Tribunal opined that all the deposits in the bank account stood explained and, therefore, after considering the deposits and withdrawals in both the bank accounts, no addition was required to be made.

In view of the above, the Tribunal reversed the order of the CIT(A) and the appeal filed by the assessee was allowed.

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