2010 (7) TMI 1085 - AT - Income Tax

Summary

Issues Involved: Appeal against Commissioner of Income-tax (Appeals) order for Assessment Year 2004-05, regarding estimation of income based on net profit, source of cash deposits, and cheques deposits.

Estimation of Appellant's Income:
The Revenue appealed against the estimation of the appellant's income at 5% net profit on the addition of Rs. 26,55,618 by the Commissioner of Income-tax (Appeals) XXX, Kolkata. The Tribunal found that the entire deposits in the undisclosed bank account could not be considered as trading receipts without corroborative evidence. It was held that the net profit of 5% on the cash and cheques deposits was not justified. Instead, the peak amount deposited in the undisclosed bank account during the relevant Financial Year should be considered as undisclosed income.

Source of Cash Deposits:
The assessee, a manufacturer and trader of Aluminium utensils, had deposited Rs. 10,53,000 in a savings bank account with Standard Chartered Bank, Salt Lake Branch, Kolkata. The Assessing Officer treated this account as undisclosed and added the amount to the total income. Similarly, cheques deposits of Rs. 16,02,618 were observed but not reflected in the books. The Tribunal held that the entire amount deposited in the undisclosed bank account should not be considered as trading receipts without proper evidence. The peak amount of deposit in the undisclosed account was deemed as the undisclosed income.

Cheques Deposits:
The Assessing Officer added the cheques deposits of Rs. 16,02,618 to the total income of the assessee as they were not supported by proper documentation. The Tribunal agreed that the entire deposits in the undisclosed bank account could not be treated as trading receipts without substantiating evidence. It was decided that the peak amount deposited in the undisclosed account should be considered as undisclosed income, modifying the orders of the lower authorities.

Conclusion:
The Tribunal partially allowed the Revenue's appeal by directing the assessment of undisclosed income based on the peak amount deposited in the undisclosed bank account. The Cross objection filed by the assessee was dismissed. The decision was pronounced in open court on 02.07.2010.