Peak of both debit and credit entries of seized papers only can be added as undisclosed income, no justification for adding only receipt side of seized papers
ABCAUS Case Law Citation:
ABCAUS 2651 (2018) (11) ITAT
Important Case Laws Cited/relied upon:
Tirupati Construction Company 55 taxmann.com 308 (2015
The instant appeal was filed by the assessee against the orders of the Commissioner of Income Tax (Appeals) in confirming the addition of peak credit of unexplained credit entries recorded in the impounded papers.
The assessee was a partnership firm engaged in the business of food grain and commission agent. A survey u/s 133A of the Act was conducted and various documents were impounded for lack of proper explanation. Subsequently assessee filed his return of income.
Notice u/s 143(2) and 142(1) of the Act were served upon the assessee. During the course of assessment proceedings learned Assessing Officer confronted the assessee with the impounded documents which contains the name of persons along with amount shown as credit receipt
It was pleaded by the assessee that the farmers gave advance in the start of the day and if no transactions are taken up during the day these amounts are refunded back. Some parts of the details appearing in the impounded documents were entered into the books of accounts.
However, the AO was not convinced and unmatched credit entries were added to the income of the assessee.
Aggrieved, the assessee preferred appeal before CIT(A) and partly succeeded.
The assessee pleaded that the assessee being commission agent and in this type of business there is a regular practice that farmers give token money in anticipation of the possible business transaction during the year.
The assessee further contended that the lower authorities should have noted the fact that in the impounded documents along with the credit entries there were debit entries also and set off of the same should have been given and at the most addition for the peak credit should have been made.
The Tribunal observed that in the impounded documents there were credits and debit entries. However the AO had merely made the addition if the unexplained credit entries without giving any set off of unexplained debit entries appearing in these documents.
The Tribunal noted that Hon’ble High Court had upheld the decision of the Tribunal that only peak of debit and credit entries of the seized papers/diary could be assessed as undisclosed income in the hands of the assessee. The Tribunal had opined that there was no justification for adding the entire receipt side of the seized papers.
Therefore, following the judgment of the Hon’ble High Court the Tribunal opined that both the lower authorities erred in confirming the addition of total of unexplained credit amount appearing in the impounded documents and set off of debit entries appearing in the very same documents should have been given to the assessee.
Thus the Tribunal partly allowed the ground of the assessee by confirming the addition of peak credit after set off.