2022 (8) TMI 948 - AT - Income Tax

Determination of income - applying the G.P. rate of 8% on the entire deposit made by the assessee - whether peak credit is not applicable where deposits remain unexplained under section 68 of the Act? - HELD THAT - As there is a clear cut findings given by the CIT(A) that the assessee during the course of assessment proceedings as well as appellate proceedings inspite of repeated request he did not produce bills/vouchers relating to sales and purchase, purchase and sales ledger etc. and accordingly, the AO has no other option but to assessed the income of assessee by adopting gross profit of 8% on total deposits and estimated the business income of assessee accordingly. As the appellant has completely failed to give any satisfactory reply about the proof of the nature of his business, therefore, AO had no other option but made an addition and the same was confirmed by the ld. CIT(A) also. In the light of the above facts and circumstances, we note that conclusion arrived by the ld. CIT(A) does not require any interference therefore, we confirmed the orders of ld. CIT(A) and accordingly dismiss the grounds raised by the appellant.

Summary

Issues:
Appeals against orders u/s 250(6) of the Income-tax Act, 1961 for A.Y. 2012-13 & 2013-14 - Determination of income based on GP rate of 8% on deposits - Failure to explain sources of deposits - Peak credit theory application - Non-appearance of assessee - Failure to produce necessary details.

Analysis:
1. Non-Appearance of Assessee:
- The appellant did not appear despite multiple opportunities, leading the Tribunal to adjudicate the appeals with the assistance of the ld. DR and available records.

2. Assessment and Addition of Income:
- The Assessing Officer (AO) found that the appellant, an individual, did not file returns for A.Y. 2012-13 and 2013-14. Notices were issued regarding significant deposits, and the AO added amounts to the income for non-compliance with producing satisfactory evidence.

3. Peak Credit Theory Application:
- The ld. CIT(A) dismissed the appeals, citing the failure of the appellant to explain the sources of deposits and corresponding payments without squaring them off. The appellant's reliance on the peak credit theory was deemed impermissible in law.
- Legal precedents were cited, emphasizing that the appellant must explain all pertinent facts regarding credit entries in accounts to avail the benefit of peak credit. The appellant's inability to provide supporting documents led to income estimation based on a GP rate of 8% on total deposits.

4. Confirmation of Orders:
- The Tribunal upheld the orders of the ld. CIT(A) due to the appellant's failure to provide necessary details, such as bills/vouchers related to transactions, despite repeated requests. The AO's income estimation based on GP rate and subsequent additions were deemed justified in the absence of satisfactory explanations.

5. Conclusion:
- The Tribunal confirmed the orders of the ld. CIT(A) and dismissed the appeals, as the appellant's lack of cooperation and failure to substantiate the nature of business activities led to income additions based on GP rate. The non-compliance with producing essential details resulted in the dismissal of the appeals.

This detailed analysis highlights the key issues of non-appearance, failure to explain sources of deposits, application of peak credit theory, and the consequences of inadequate documentation in the legal judgment delivered by the ITAT Kolkata.