2020 (7) TMI 220 - ITAT KOLKATA - Income Tax

Head Note / Extract:
Addition u/s 68 - peak credit addition - GP estimation - HELD THAT:- As combined peak credit of both bank accounts need to be taken to work out the element of undisclosed investments made by the assessee for the undisclosed transactions. From the opening balances in both the banks, it is understood that this is not the initial year, wherein, the assessee has made the undisclosed transaction. Since, this is the assessment year in which the fact of undisclosed bank accounts were discovered, the undisclosed investment needs to be taxed separately. Combined peak credit in respect of both the banks need to be taken to find out the undisclosed investments made by the assessee for the undisclosed transaction in both banks which is ₹ 2,06,690/-, which needs to be added in the hands of the assessee. Since the AO failed to bring on record any material to show that the assessee was doing any other business other than the grocery business, the inference that can be drawn is that the assessee was doing undisclosed transaction in respect of grocery from grey market without any bills etc.. Therefore, assessee was engaged in the business of grocery through these undisclosed bank accounts. Next, coming to the trade profit, which the assessee could have made from the undisclosed transaction, I note that the assessee had disclosed Gross Profit oft 8.81% and Net Profit of 4.65% of the turnover from the regular grocery business. Therefore, trade profit of the regular business i.e. G.P rate of 8.81% would be justified. In the light of the aforesaid discussion, the entire addition made by AO/Ld. CIT(A) of the total amount deposited in the two undisclosed bank accounts to the tune of ₹ 21,92,100/- is erroneous. Direct the AO to restrict the addition to two items (i) combined peak credit of two bank accounts, which would take care of the undisclosed investment of the assessee, which is ₹ 2,06,690/- and (ii) trading profit from the undisclosed transaction needs to be added in the hands of the assessee.