2015 (10) TMI 1622 - AT - Income Tax

Addition u/s. 69A - peak credit in bank account No.2041 with Bank of Baroda - Held that - Assessing Officer was not justified in rejecting the explanation of the assessee who had presented the books of accounts showing the receipts of undisclosed bank account from sale of foodgrain merely on the ground that it being an afterthought. It was incumbent upon the Assessing Officer to examine the books of accounts with the related evidences and documents and thereafter should have arrived at a decision. Without verification of books of accounts produced before him and bringing any material on record, the Assessing Officer was not justified in rejecting the books of accounts of the assessee as an afterthought and the CIT (A) was not justified in confirming the same. We therefore set aside the orders of the lower authorities and remand the matter back to the file of the Assessing Officer and direct him to decide the issue afresh after examining the books of accounts and related documents as per law. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against order of CIT (A)-IV, Surat for Assessment Year 2007-08 regarding addition under section 69A of the Act for peak credit in bank account.

Detailed Analysis:

Issue 1: Addition under Section 69A of the Act
The assessee failed to explain the source of credit in the Bank account, leading to a show cause notice for treating the credit of Rs. 17,45,468/- as unexplained money under section 69A. The assessee claimed the transactions were related to trading activities, offering 3% of turnover as income. However, the Assessing Officer (A.O.) rejected this explanation, considering it an afterthought due to the sudden appearance of books showing sales and purchases. The A.O. held the peak credit of Rs. 9,62,184/- as unexplained income under section 69A, along with an additional profit amount. On appeal, the CIT (A) upheld the addition of peak credit as unexplained income but deleted the profit estimate addition due to lack of accepted business existence by the A.O.

Issue 2: Hearing and Decision
During the appeal hearing, the assessee sought an adjournment due to the absence of their representative, which was rejected. The Departmental Representative argued that the undisclosed bank account and claimed business receipts were afterthoughts, justifying the A.O.'s addition of the peak deposits to the assessee's income. The Tribunal found the A.O.'s decision unjustified, as the explanation provided by the assessee, supported by presented books of accounts, should have been examined thoroughly before rejection. The Tribunal set aside the lower authorities' orders, remanding the matter to the A.O. for a fresh decision after proper examination of the books of accounts and related documents.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of a thorough examination of evidence before making additions under section 69A. The decision highlighted the necessity for the A.O. to provide a fair opportunity for the assessee to present their case and for proper verification of documents before reaching conclusions. The judgment focused on ensuring a just and lawful process in determining unexplained income, emphasizing the need for due diligence and fairness in tax assessments.