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2016 (8) TMI 358 - ITAT DELHI

2016 (8) TMI 358 - ITAT DELHI - TMI - Unexplained credit - peak credit theory - Held that:- When the assessee is engaged in parallel business activity, some closing stock may remain in hand and similarly some debtors may also be pending for recovery, thus in such circumstances peak of the bank account will not reflect the true income because on the date of peak credit some withdrawals and some sales are outside the peak credit. In our view, the Ld. Commissioner of Income-tax (Appeals) has rightl .....

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ORDER PER O.P. KANT, A. M. This appeal by the assessee is directed against order dated 18/11/2013 of Ld. Commissioner of Income-tax (Appeals),XXVI, New Delhi for assessment year 2009-10, raising following grounds: Assessee by : Shri Kapil Goel, Adv. 1. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in giving contradictory finding by holding at page 9 of his order that a. Assessee s transactions represent sale consideration of undisclosed business transacti .....

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n law the Ld. CIT(A) erred in holding at page 9 para 6.3 that cited precedents do not match assessee s facts where all the precedents cited are squarely applicable to appellant s case specially P & H high court order at 242 CTR 61 & Allahabad high court order at page 207 Taxman 332 and all precedents cited advances appellants case for taxation on profit/deemed profit rate as per presumptive scheme u/s 44AF of the Act. 3. That on the facts and in the circumstances of the case and in law t .....

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of Ld. CIT(A) u/s 250/251 of the Act which are preyed to the expunged. Relief Claimed i) To delete the addition sustained at ₹ 714,738/- from bank deposits of ₹ 21,25,620/- and to sustain the addition at ₹ 14,071/-; ii) To apply peak theory for maximum addition sustainable at ₹ 236,587/- iii) To expunge adverse directions without following audi altrem partem; iv) Any other relief as deemed fit and appropriate in facts and circumstances of the case That the appellant crave .....

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information of deposit of ₹ 21,25,620/- in bank account with IDBI bank, New Delhi was received from the Annual Information Return (AIR) and in the course of scrutiny proceedings, the assessee was asked to explain the source of the said deposits. The assessee explained that the deposits represent trading receipt of business of sale of automobiles parts and could not be declared the same by oversight, however on being asked by the Assessing Officer to produce sale/purchase bills in support o .....

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620/- as unexplained cash credit under section 68 of the Income-tax Act ,1961 (in short the Act ). On appeal, the Ld. Commissioner of Income-tax (Appeals), reduced the addition to ₹ 7,14,738/- following the asset expenditure basis. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds reproduced above. 3. At the outset, the Ld. Authorised Representative, submitted not to press grounds No. 1 and 2 of the appeal and therefore both the grounds are dismissed as infructuo .....

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ion, the Ld. AR relied on the decision of the Tribunal Delhi bench in the case of Rajeev Khurana in ITA No. 2906/Del/2013 pronounced on 27/03/2015 and judgement of the Hon ble High Court of Delhi in the case of Commissioner of income tax versus Inderpal Chawla in ITA 1424/2010 pronounced on 24/09/2010. 6. In reply to the above, the Ld. Senior Departmental Representative (SR DR) relying on the orders of the authorities below submitted that the peak theory was not applicable to the facts of the ca .....

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f accounts. 7. We have heard the rival submission and perused the material on record. In the ground raised the assessee has sought that the Ld. Commissioner of Income-tax (Appeals) should have adopted peak theory for sustaining the addition. The Ld. Commissioner of income tax appeals, in the impugned order has given detailed reasoning as why the theory of peak credit was not applicable to the facts of the assessee. The relevant para of the impugned order is reproduced as under: 6.2. I have perus .....

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issue in-depth. The addition of peak credit in the bank account can only be made when it is established that the outgoings are being brought in back to make re-deposit in the bank. Where the cycle of deposits and withdrawals are not questionable, only the peak credit in the bank account is assessable as income has been held in the above mentioned cases relied upon by the. Ld. Counsel. However, it is not a case here because no prudent business man will make withdrawals in cash in Delhi and send i .....

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00/-. Further, the AO has not brought any material on the record, which may substantiate his findings that the entire deposits are income. Thus, in view of above facts and the submission of the appellant, l am inclined to agree with the contention of the Ld. Counsel that the deposits and withdrawals in the IDBI bank account. are business transactions. Here, the deposits in the bank account appear sale consideration and the entire undisclosed business transactions are in cash. 8. We agree with th .....

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v Khurana (supra) cited by the Ld. AR, the withdrawals from bank account constituted the source of deposits therein and source of deposit was not from trading receipts, thus facts of the case are distinguishable. In the case of Inderpal Chawla (Supra) also the AO didn t make any adverse finding with regard to deposit in remand proceedings, the facts of the case distinguishable from that of the case in hand. The Ld. Commissioner of Income-tax (Appeals) has applied the asset expenditure theory for .....

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s business. Similarly, the appellant is bound to have stock in trade and debtors in respect of his undisclosed/unaccounted business. Taking the clue emerged from the above details of accounted business; I am of the considered view that the appellant is bound to have closing stock and debtors in respect of his unaccounted business whose admitted turnover is ₹ 21,25,620/-. As per the books of account, the ratio of closing stock plus debtors to the sales is 33.33% (closing stock of ₹ 3, .....

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there is no detail in respect of undisclosed assets in any form. 6.5 The income of the appellant has to be worked out on accrual basis or asset-expenditure .basis and higher of these two has to be assessed to avoid double taxation as the income on accrual/receipt basis, later on, gets appropriated / manifested / expended in assets and or expenditure. Presuming that the appellant has utilized his business establishment to run the undisclosed business also, then in such a situation, he is bound t .....

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