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S. Venkat Reddy, Versus Income Tax Officer, Ward 8 (2)

Addition u/s 68 - peak credit theory - Held that:- It is not in dispute that the assessee’s income either in the earlier year or in subsequent years has never crossed the threshold of ₹ 2 lakhs in which event the Assessing Officer could have kept the same in mind while making the addition. Even while computing the assessment to the best of his judgment, under section 144 of the Act, it is the duty of the Assessing Officer to make an addition on the basis of the available material and circu .....

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ssessee, the expected profit in each year, based on the earlier year’s income declared and accepted in order to estimate the income of the current year; while holding that there was some undisclosed income assessable to tax under section 68 of the Act. The assessee having furnished the bank statement Assessing Officer could have verified and noticed that there were credits and corresponding debits which would give an indication that some amount has been recycled and it is a settled principle tha .....

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This appeal by the assessee is directed against the order passed by CIT(A)-II, Hyderabad and it pertains to the A.Y. 2009-2010. The following grounds were urged before us. 1. The Appellate Commissioner ought not to have dismissed the appeal on the ground that the assessee was not interested in prosecuting the appeal. 2. The Appellate Commissioner ought not to have confirmed the addition made by the Assessing Officer of an amount of ₹ 18,98,800/- being cash deposits in bank accounts. 3. The .....

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ed Counsel for the assessee submitted that there are sufficient reasons for non-appearance on the dates fixed for hearing, it could not be substantiated before us and therefore, ground No.1 is rejected. Thus, the only ground survives for our consideration is with regard to the addition of ₹ 18,98,800 referable to the cash deposits in bank account. 2.1. As could be noticed from the assessment order, the assessee is engaged in the business of purchase and sale of general goods and also deale .....

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cating that in the absence of any reply the assessment would be completed under section 144 of the Act and an addition of ₹ 18,98,800 would be made since there were cash deposits with ICICI Bank, Santoshnagar Branch which was not explained. On 08.12.2011 the assessee appeared in response to the above show cause notice and requested time till 12.12.2011 but on the said date it did not appear and therefore, on the basis of the material available on record, assessment was completed wherein to .....

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ncial year the assessee deposited cash of ₹ 18,98,800 on different dates in the savings bank account and the said deposits were made out of earlier withdrawal from the same bank account. In otherwords, the same cash was recycled round the year and it was explained to the Assessing Officer at the time of submitting bank statement. But the Assessing Officer failed to appreciate the same and sought to add all the deposits as unexplained deposits. 4. Even before the CIT(A) the assessee did not .....

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g Officer. 5. Further aggrieved, assessee is in appeal before us. Learned Counsel for the assessee submitted that even if an assessee has not appeared before the Assessing Officer and the CIT(A), the tax authorities should not take the benefit out of it and it is their duty to bring to tax the correct income assessable under the Act. Learned Counsel for the assessee sought to bring out the principle laid down by the Hon ble Madras High Court in the case of Indian Express 140 ITR 705 at 722 to su .....

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the Assessing Officer, which was hovering around ₹ 2 lakhs, which clearly proves that the assessee could not have earned income from the said business over and above ₹ 2 lakhs in which event, merely because there are certain deposits, Assessing Officer cannot make any addition on the ground that assessee has not furnished proof with regard to source of cash more particularly when the deposits were stated to be recycled - in which event only the peak cash credit is assessable to tax .....

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n fact, this fact was brought to the notice of the Ld. CIT(A) also in the form of statement of facts but the appeal was dismissed merely on the ground that none appeared for the assessee, overlooking the fact that in the earlier year as well as subsequent years the income offered by the assessee, hovering around ₹ 2 lakhs, was accepted by the Revenue. 6. On the other hand, Ld. D.R. strongly submitted that justice is only meant for people who are vigilant and not those who are indolent. Des .....

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ssee to explain the source of cash deposits but merely because it could not be explained the amount cannot automatically be added since the expression May used in Section 68 of the Act imposes an obligation on the Assessing Officer to verify as to whether assessee could have earned such huge income in one year. In the instant case, it is not in dispute that the assessee s income either in the earlier year or in subsequent years has never crossed the threshold of ₹ 2 lakhs in which event th .....

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