2016 (1) TMI 1397 - AT - Income Tax

Addition made u/s 69A - undisclosed bank account - addition only to the net profit of the excess of deposits over withdrawals instead of peak credit addition - Held that - We find that no material has been brought on record by the Learned AR to controvert this finding. The action of the CIT(A) in deciding this issue cannot be faulted with. The arguments of the AR that only the net profit of the undisclosed bank account should be brought to tax does not hold any water as in the instant case, there is no material brought on record that the sources for deposits and withdrawals emanate out of the business transactions of the assessee. We find from the case relied upon by the Learned AR on the decision of Hon ble Calcutta High Court, there was a clear cut finding recorded by the tribunal that the credits in the undisclosed bank represents undisclosed business receipts and withdrawals made thereon represent undisclosed business expenditure. In these circumstances, the Hon ble Calcutta High Court affirmed the view of the tribunal to adopt the net profit thereon for the purpose of taxation. The facts in the instant case are squarely distinguishable from facts before the Hon ble Calcutta High Court. Accordingly, the grounds raised by the assessee as well as the revenue are dismissed.

Summary

Issues:
1. Non-issuance of notice u/s 143(2) of the Income Tax Act.
2. Addition made u/s 69A of the Act in respect of an undisclosed bank account.
3. Dispute regarding the methodology for calculating the addition to the undisclosed bank account.
4. Appeal outcomes for both the assessee and the revenue.

Issue 1:
The first issue pertains to the non-issuance of notice u/s 143(2) of the Income Tax Act. The appellant raised this ground but later withdrew it during the hearing. Consequently, the ground was dismissed as not pressed.

Issue 2:
The second issue involves the addition made u/s 69A of the Act in relation to an undisclosed bank account. The assessee had a savings bank account where a significant deposit was made. The Assessing Officer (AO) added this amount as undisclosed income. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the addition, considering the withdrawals and deposits in the account. The dispute revolved around the peak credit addition. The appellant argued for taxing only the net profit of the excess deposits over withdrawals, citing a relevant court decision. However, the tribunal upheld the CIT(A)'s approach of peak credit addition, emphasizing the lack of evidence linking the transactions to business activities.

Issue 3:
The dispute over the methodology for calculating the addition to the undisclosed bank account was thoroughly analyzed. The tribunal found that the CIT(A) correctly applied the peak credit theory, disregarding withdrawals for personal expenses. The appellant's argument to tax only the net profit was rejected due to the absence of evidence linking the transactions to business activities. A court decision cited by the appellant was deemed inapplicable to the current case. Consequently, the grounds raised by both the assessee and the revenue were dismissed.

Issue 4:
Regarding the appeal outcomes, the tribunal dismissed the appeal of the assessee and the revenue, upholding the decisions made by the CIT(A) in reducing the addition to the undisclosed bank account. The order was pronounced in open court on a specified date.

In conclusion, the judgment addressed issues related to the non-issuance of a notice under the Income Tax Act, the addition to an undisclosed bank account, the methodology for calculating the addition, and the final appeal outcomes for both parties involved. The tribunal's decision emphasized the application of the peak credit theory and the lack of evidence linking the transactions to business activities, leading to the dismissal of the grounds raised by the assessee and the revenue.