2014 (5) TMI 1101 - AT - Income Tax

Addition on account of assessee s saving bank account - peak amount of entries - Held that - We find that the fact that SB account of the assessee with SNCB was not disclosed in the account book of the assessee nor it was disclosed to the department could not be controverted on behalf of the assessee. However the action of the Department in adding the entire aggregate of the credit entries in the said bank account is not in accordance with the settled position of law. In such a case only the peak amount of entries could be added as income in the hands of the assessee. Since the account of the assessee was undisclosed to the department and the peak amount is addable as income in the hands of the assessee the plea of the Revenue that the assessee should prove the co-relation between the credit and debit entries in the said bank account is not sustainable. In the facts and circumstances of the case and in accordance with the settled law we direct the AO to determine the peak amount in the said SB Account No.1001926 with SNCB and restrict the addition to the peak amount only and this part of the ground of the appeal of the assessee is partly allowed. With regard to the other addition of 40, 000/- on account of inflation in opening stock no argument was addressed on behalf of the assessee before us and accordingly the ground of the appeal of the assessee with regard to the issue of this addition of 40, 000/- on account of inflation in opening stock figure is dismissed. - Decided partly in favour of assessee.

Summary

Issues:
1. Addition of Rs. 34,28,000 made by AO.
2. Discrepancy in the figure of opening stock.

Analysis:

Issue 1: Addition of Rs. 34,28,000 made by AO
The assessee appealed against the addition of Rs. 34,28,000 by the Assessing Officer (AO). The primary contention was regarding two additions: Rs. 33,88,000 related to the assessee's undisclosed saving bank account with Surat National Cooperative Bank (SNCB) and Rs. 40,000 due to a discrepancy in the opening stock figure. The counsel for the assessee argued that only the peak amount of credit entries should be added as income, not the entire aggregate. The Department contended that the assessee failed to prove that the credit entries were from withdrawals made in the undisclosed bank account. The Tribunal noted that the SNCB account was not disclosed in the assessee's records or to the department. It held that only the peak amount should be added as income, directing the AO to determine the peak amount and restrict the addition accordingly. The Tribunal partly allowed this ground of appeal.

Issue 2: Discrepancy in the figure of opening stock
No arguments were presented by the assessee regarding the addition of Rs. 40,000 due to inflation in the opening stock figure. Consequently, the Tribunal dismissed this part of the appeal related to the opening stock discrepancy.

In conclusion, the appeal by the assessee was partly allowed, with the Tribunal directing the AO to consider only the peak amount from the undisclosed bank account for addition as income. The issue of inflation in the opening stock figure was not pursued by the assessee and was thus dismissed.