Peak credit addition does not include income after peak balance date. ITAT directed addition of further 8% profit after the date of peak value
ABCAUS Case Law Citation:
ABCAUS 2949 (2019) (05) ITAT
The assessee was a partner in a firm. On the basis of the Annual Information Report (AIR), he was found to have cash deposits in his saving bank accounts.
The assessee, on being questioned in its respect during assessment proceedings, submitted that the receipts in his saving bank accounts were in fact the trading receipts of the partnership firm, duly accounted for in its’ regular books of account.
The assessee, however, did not furnish any evidence in support of his claim, which was, accordingly, not accepted by the Assessing Officer (AO).
The AO regarded the cash deposits as business receipts and estimated the income at 10% of the gross receipts.
In appeal, the assessee furnished the copy of the said bank accounts, i.e., as stated to be appearing in the books of account of the firm. However, the books of the said firm were not produced before the CIT(A).
In view of the non-production of the firms’ regular books of account, the addition was accordingly confirmed in principle by the CIT(A), even as he directed for the adoption of the profit rate at 8%, i.e., as against 10% by the AO.
Aggrieved, the assessee was in second appeal before the Tribunal.
Even before the Tribunal, the assessee could not produce the books or substantiate his claim otherwise.
The Tribunal opined that the assessee’s explanation qua the deposits in his bank account was only a bald assertion without any basis in facts.
Against the contention of the assessee that the income be assessed on the basis of the peak credit in the said bank accounts during the relevant year, the Tribunal observed that a peak balance would, however, only include the income, i.e., by way of unexplained deposit, as well as the income, to whatever extent, included in the said receipts, up to the date of the peak balance and not for the period thereafter.
Accordingly the Tribunal held as under:
(a) the deposits/credits in the assessee’s saving bank accounts under reference be regarded as the business receipts of his business i.e., in which the firm deals in;
(b) the peak credit balance in the said two accounts during the relevant year be brought to tax u/s 69A as unexplained deposit;
(c) the profit of the business be assessed at 8% of the gross receipts, i.e., on that arising after the peak value date in bank accounts.