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Rejesh Dahyabhai Prajapati Versus Income Tax Officer

2016 (8) TMI 957 - GUJARAT HIGH COURT

Addition of unexplained cash credit u/s. 68 - Held that:- The materials on record would suggest that admittedly, the assessee had maintained two bank accounts, not disclosed to the Revenue authorities. In such bank accounts, multiple cash deposits were made by the assessee from different places. The assessee initially explained that such deposits were made by his friends and he, in turn, would withdraw the amounts at Ankleshwar and handover the cash to the friends for a small commission. He, how .....

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r a small commission, the question of applicability of peak credit would not arise. When the assessee failed in his first attempt, he came up with the novel theory of the amounts being for the purpose of his chemical business. This theory probably was pressed in service to enable the assessee to seek the benefit of principle of peak credit. Before the Revenue authorities, this contention was not even raised. No material was produced regarding the same. - Considering such circumstances, we do .....

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Appellant : Mr. Hardik V Vora, Advocate For the Opponent : Mr KM Parikh, Advocate ORDER ( Mr. Justice Akil Kureshi ) 1. The assessee has filed this appeal challenging judgement of the Income Tax Appellate Tribunal dated 03.03.2016. Following questions are presented for our consideration: 1. Whether on facts and in law, the Tribunal is right in confirming order of CIT(A) which confirms addition of ₹ 13,22,400/- as unexplained cash credit u/s. 68 of the Act? 2. Whether on facts and in law, t .....

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essee to tax peak credit of the bank accounts? 2. Though multiple questions are framed, the issue is only one viz. of the additions of ₹ 13.22 lacs and 12.55 lacs made by the Assessing Officer and confirmed by the CIT[Appeals] and the Tribunal under Section 68 of the Income Tax Act, 1961 ['the Act' for short]. The assessee had filed the return of income on 31.07.2010 for the assessment year 2010-11 disclosing income of ₹ 1.77 lacs. During the course of the assessment, the Ass .....

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d the assessee to explain the source of cash deposits in such bank accounts. The assessee explained that his friends used to deposit cash in his account. He would, in turn, withdrew the same from Ankleshwar and give it to them. He was receiving a small commission of ₹ 500/- or ₹ 1000/- for such purpose. He, however, refused to give names and addresses of such friends. In view of this, the Assessing Officer made above additions making following observations: 4.3 First of all, it is pe .....

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ssee simply said that the cash was deposited in his account by his friends. However, he refused to divulge the identity of such so called friends. The statement of the assessee cannot be taken on face value because on verification of the bank statement, it is revealed that cash has been deposited from various cities across the country right from Silliguri in West Bengal to Madurai in Tamil Nadu. It is unbelievable that the assessee had such a large network of friends. The assessee could be a par .....

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confirmed the additions making following observations: 5. We have heard viral contentions. Case file perused. Both parties reiterate their respective stands in support and against the twin substantive grounds raised in the instant appeal. We have already narrated the relevant facts in preceding paragraphs. The sole issue in the instant appeal is as to whether both the lower authorities have rightly added cash deposits/cheques credited in assessee's two bank accounts is unexplained or not. Th .....

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upportive evidence as well by way of relevant books and accounts maintained with his so called friends/customers engaged in chemicals business. We reiterate that it is open for an assessee to tender an explanation along with cogent evidence in support thereof is such kind of proceedings. However, the only limitation is that the same must have element of genuineness and creditworthiness to further buttressed by identity of the parties concerned. No such course of action has been adopted in the in .....

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e entirely a misconceived plea. We revert back to his explanation that his friends throughout the country have made the impugned deposits/credits without specifying their identity. This is his case from the beginning that he had been involved in transferring in and out the very sum of money. We are of the opinion in this backdrop of fact that this third party indulgence in making the impugned credits and deposits falsifies his entire explanation. It goes against the basic tenet of the peak credi .....

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ted. The CIT(A)'s order stands affirmed. 4. It is this judgement of the Tribunal which the assessee has challenged in this appeal. 5. Learned counsel Mr. Vora for the assessee submitted that the Revenue authorities and the Tribunal failed to apply the peak credit principle and taxed the entire cash credit. He submitted that under identical circumstances, the Tribunal in case of Income Tax Officer, Ward 9(2), Surat vs. Shri Indrajeet Zandusing Tomar, had given the benefit of peak credit which .....

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