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During Income tax Assessment proceedings, asking source of cash deposits in the bank accounts and correlating it to the income declared is an area which has always caught the fancy of Income Tax Officers. In most of the cases, Income Tax Assessing Officers unless treated as income, consider the total cash deposited in the bank account as unexplained cash credit under section 68 or unexplained investment u/s 69 etc. and complete the assessment as such to be followed by a penalty notice.

More than often, cash deposits are made out of cash in hand or cash withdrawn from the bank at an earlier date. It has been held in number of ITAT judgments that unless the Assessing Officer bringS any material on record to show that the cash withdrawn was utilized/used for other purposes it could not be said that such withdrawals might not have been redeposited in the bank account.

Accordingly such additions had generally not survived beyond the first appellate authority CIT (Appeals) or on further appeal, before ITAT.

Few order/judgments of Income tax Appellate Tribunal (ITAT) on the subject are provided hereunder for a ready reference.

ITAT Ahmedabad 20-08-2015 Addition made u/s 68 reduced to Net of Cash Deposits and Withdrawals from bank Account	ITA-531/2012 M/s Murlidhar Ice Cream & Sweet Parlour vs ITO Read Order Click Here >>
ITAT Lucknow 22-06-2015 Only Gross Profit Additions justified in view of regular cash deposit and withdrawals in bank account	ITA-634/LKW/2014 Shri Vishanl Lal vs ITO ITA-634/2014 Read Order Click Here >>
ITAT Chennai 15-05-2015 CIT(A) was justified in holding that cash withdrawn from bank would be available for subsequent deposits and correctly directed the Assessing Officer to take only peak credit not the entire deposit in bank account	ITA-1232/Mds/2014 B. Jenson Thanaraj vs ACIT Read Order Click Here >>
ITAT Hyderabad 27-03-2015 Cash recently withdrawn can reasonably be treated as available with the assessee for cash deposit in bank account especially when there is nothing to show that the amount withdrawn was utilized by the assessee for some other purpose	ITA-469/Hyd/2014 C. Vamsi Mohan vs ITO Read Order Click Here >>
ITAT Delhi 05-09-2014 Merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount can not be treated as income from undisclosed sources u/s 69	ITA-5660/Del/2012 ITO Vs. Mrs. Deepali Sehgal Read Order Click Here >>
ITAT Agra 14-02-2014 The entire amount of deposit made in the bank account cannot be said to be unexplained because after deposit of the cash amounts, there are withdrawals.	ITA-273/Agra/2013 ITO v/s Rajeev Kumar Gupta Read Order Click Here >>
ITAT Chandigarh 20-08-2013 Peak theory needs to be applied to both in respect of the opening introduction of cash in hand and various transactions of cash deposits and withdrawals	ITA-713/Chd/2012 Satya Bhama Bindal vs ITO Read Order Click Here >>
ITAT Kolkata 18-06-2013 Additions made u/s 69 reduced from total cash deposits to only peak balance in the undisclosed bank account	ITA-263/Kol/2012 ITO vs Deb Kumar Jana Read Order Click Here >>
ITAT Mumbai 31-05-2010 Additions made for unexplained cash deposits reduced to only net cash deposits in bank after set off of opening balance of cash in hand	ITA-1475/Mum/2009 Jagdish N. Thakkar vs ITO Read Order Click Here >>

Peak Credit Theory Additions u/s 68, 69 for Cash Deposit in Bank ignoring cash withdrawals-Recent ITAT Judgments on Peak Credit Theory | 21-08-2015 |