2013 (5) TMI 299 - AT - Income Tax

Addition on account of peak credit balance - Held that - As the dispute is with regard to three bank accounts, the transactions of which, according to the assessee, have been declared to the department, whereas it is the stand of the department that only those transactions which have not been disclosed by the assessee, have been considered for the purpose of working out the peak credit it is desirable to remit the matter back to the file of the AO for doing the assessment de novo after verifying the transactions in all the bank accounts maintained by the assessee.

Summary

Issues Involved:
Appeals against CIT (A) orders for assessment years 2003-04, 2008-09, and 2009-10; Addition of Rs.2,45,641 on account of peak credit balance.

Analysis:

1. Appeals against CIT (A) Orders:
The three appeals were filed against separate orders of CIT (A)-I, Hyderabad for different assessment years. The appeals were clubbed together since the assessee was common, and the issues were identical. Two appeals were withdrawn by the appellant, leaving only one appeal for consideration.

2. Addition of Peak Credit Balance:
The main issue in this appeal was the addition of Rs.2,45,641 on account of peak credit balance. The assessee, an individual, had filed returns for the relevant assessment year, but a search and seizure operation revealed undisclosed bank accounts with unexplained deposits. The Assessing Officer found discrepancies in the cash flow statements and determined a peak credit balance. The CIT (A) upheld the addition made by the Assessing Officer, considering peak credit as one method for estimating income.

3. CIT (A) Decision and Dispute:
The CIT (A) rejected the assessee's contentions regarding the consideration of deposits made by cheques and the exclusion of certain disclosed bank accounts. The CIT (A) reasoned that all deposits in undisclosed accounts are unexplained, and therefore, all deposits, including those made by cheques, should be considered for estimating income. The dispute centered around whether transactions in three disclosed bank accounts were double-counted for peak credit calculation.

4. Tribunal's Decision and Remand:
The Tribunal remitted the matter back to the Assessing Officer for a fresh assessment. It directed the officer to verify all bank account transactions to exclude any previously disclosed transactions while calculating the peak credit. The Tribunal emphasized providing the assessee with a fair opportunity to present their case during the reassessment process.

5. Conclusion:
The Tribunal allowed the appeal for statistical purposes, indicating a favorable outcome for the appellant. The decision highlighted the importance of accurate assessment procedures and the need to consider all relevant factors while determining peak credit balances in such cases.

In conclusion, the judgment addressed multiple issues related to appeals against CIT (A) orders and the addition of peak credit balance, providing detailed analysis and directions for a fair reassessment process.