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2022 (7) TMI 1265 - AT - Income TaxUndisclosed income - diary found during the course of search and statement recorded from the assessee - HELD THAT:- In this case, AO has admitted that what was recorded in the seized document towards debit side is expenditure outside regular books of account, although nature of said expenditure is not known to the assessee as well as the Assessing Officer. Therefore, we are of the considered view that when the AO has taken credit entries as income of the assessee earned from undisclosed source of income, he ought to have considered debit side of entries as expenditure incurred for earning said income. If you consider same analogy, then the AO should have considered income as well as expenditure. If you consider debit entry as expenditure, then only net income from said document needs to be taxed. Since, we have already stated in earlier part of this order, credit entry does not depict any income and debit entry does not show any light on expenditure, then the only possible method to determine undisclosed income for the above period is adoption of peak credit theory and in this case, particularly peak credit theory is best method to determine undisclosed income of the assessee. The assessee has filed working of peak credit, which is available in paper book filed for relevant period. The assessee has copied entries contained in seized documents relied upon by the AO and recorded date-wise receipts and payments. For the financial year 2015-16 as on 23.03.2015, peak credit works out to Rs.36.25 lakhs, which is net of debit and credit entries recorded in seized document. Therefore, addition is required to be made to the extent of Rs.36.25 lakhs for the assessment year 2015- 16. Hence, we direct the Assessing Officer to sustain additions to the extent of Rs.36.25 lakhs for the assessment year 2015- 16 towards undisclosed income. The assessee has worked out peak credit of Rs.73.13 lakhs as on 25.03.2016 which is relevant to the assessment year 2016-17, on the basis of net of debit and credit entries from so called diary found during the course of search. Therefore, we direct the Assessing Officer to restrict addition to the extent of Rs.73.13 lakhs for the assessment year 2016-17 - Therefore, addition is required to be made to the extent of Rs.422.00 lakhs for the assessment year 2017-18 and thus, we direct the Assessing Officer to sustain addition to Rs.422 lakhs for the assessment year 2017-18. Unaccounted cash receipts - Except entry in the name of M/s. Natesh Agencies amounting to Rs.50,40,000/-, the assessee could not explain other entries in the name of P.Palaniswamy for Rs.61,00,000/- M/s.Pearl Transport for Rs.10,00,000/- Mr.TNJ Nadarajan for Rs.49,90,000/- and M/s. M.S.Wines for Rs.45,00,000/- totaling to Rs.1,65,90,000/-, except stating that those entries does not belong to him and persons from whose premises said document is found needs to be explained contents of the document. We do not find any merits in the arguments of the assessee for the simple reason that document pertains to business activities of the assessee and further, persons specified in the document are all associates of the assessee and hence, it is for the assessee to explain contents recorded in the document. Since, the assessee could not explain contents; we are of the considered view that the Assessing Officer has rightly made additions towards entries as unaccounted income in the hands of the assessee. Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the assessee.
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