2010 (7) TMI 1025 - AT - Income Tax

Additions u/s 69A - Undisclosed income - HELD THAT - We find that the Ld. CIT(A) while partly allowing the assessee s appeal held that the addition made by the AO on account of deposits in undisclosed bank accounts is directed to be restricted to the combined peak credit of 22, 80, 206.63. In this view of the matter and in the absence of any controverting material brought on record by the revenue at the time of hearing before us we do not find any infirmity in the order of the Ld. CIT(A) and the same is hereby upheld. Therefore the appeal of the revenue is dismised.

Summary

Issues:
1. Telescoping peak credit benefit allowed by Ld. CIT(A)
2. Determination of undisclosed income from bank account deposits
3. Peak credit method application for undisclosed income assessment

Issue 1: Telescoping peak credit benefit allowed by Ld. CIT(A):
The appeal before the Appellate Tribunal ITAT Kolkata was against the order of the Ld. CIT(A) allowing the assessee the benefit of telescoping peak credit. The revenue contended that the peak credit should be considered separately for the two undisclosed bank accounts instead of amalgamating them. The Ld. CIT(A) had restricted the addition made by the Assessing Officer (AO) on account of deposits in undisclosed bank accounts to the combined peak credit of a specific amount. The revenue sought to set aside this order and restore that of the AO.

Issue 2: Determination of undisclosed income from bank account deposits:
The case involved the assessee not disclosing two bank accounts during assessment proceedings. The AO added the entire deposits in the bank accounts as income from undisclosed sources due to the lack of explanation from the assessee. Later, the Ld. CIT(A) restricted the addition to a specific peak credit amount after considering various legal pronouncements and the ratio laid down by the Hon'ble ITAT Kolkata. The revenue challenged this decision before the ITAT.

Issue 3: Peak credit method application for undisclosed income assessment:
The ITAT analyzed the submissions and material on record. It noted that the AO had suggested determining peak credits for both bank accounts separately, while the Ld. CIT(A) had amalgamated them. The ITAT upheld the Ld. CIT(A)'s decision, emphasizing that the peak credit method should consider the combined peak credit of all undisclosed bank accounts. Citing legal precedents, the ITAT highlighted the importance of allowing withdrawals made from time to time against deposits to determine undisclosed income accurately. The ITAT found no infirmity in the Ld. CIT(A)'s order and dismissed the revenue's appeal.

In conclusion, the ITAT upheld the decision of the Ld. CIT(A) to restrict the addition of undisclosed income from bank account deposits to the combined peak credit amount, emphasizing the correct application of the peak credit method for assessing undisclosed income.