2012 (9) TMI 330 - AT - Income Tax

Unexplained investment - addition on account of peak credit available in the account - Held that - As CIT(A) has rightly permitted the assessee to place on record bank statement, copies of the DDs and copy of the invoices exhibiting purchase of medicines by M/s. Shiva Distributors. However, from the record no conclusive evidence could be found showing that assessee is having a proprietaryship concern which is running a medical store in the name of Shiva Distributors. The only evidence produced by the assessee is that DDs were issued from his account to the suppliers of medicines coupled with the sales bills raised by those suppliers upon Shiva Distributors, thus these documents are insufficient to say that assessee was running Shiva Distributors. Thus looking to the nature of bank account that amounts have been deposited and withdrawn systematically which suggest that there is circulation of the money. As only credit sides are not to be considered as unexplained investment the benefit of set off representing the withdrawals has also to be granted to the assessee, in such situation, the learned first appellate authority has rightly held that peak credits in the bank account is to be assessed as income of the assessee - against assessee.

Summary

Issues Involved:
Assessment of unexplained investment in a bank account under sec. 144 - Challenge to addition made by the Assessing Officer - Confirmation of peak credit available in the account by Learned CIT(Appeals) - Dispute over the assessment of income under sec. 44AF - Evidence presented by the assessee regarding business activities - Validity of notices served on the assessee - Consideration of bank statements, DDs, and invoices as evidence - Interpretation of systematic deposits and withdrawals in the bank account.

Analysis:

1. Assessment of Unexplained Investment:
The case involved a dispute over the addition of Rs.16,06,746 made by the Assessing Officer as unexplained investment in a bank account. The Learned CIT(Appeals) confirmed the peak credit available in the account at Rs.1,26,998. The revenue challenged this restriction, while the assessee cross-objected against the retention of the addition at Rs.1,26,998. The issues raised in the respective appeals were interconnected.

2. Evidence Presented by the Assessee:
The assessee contended that the assessment was passed without affording due opportunity of hearing. He provided evidence to support his claim of being a small-time trader in the business of medicines. The evidence included bank statements, drafts issued to suppliers, bills, and submission of income assessment under sec. 44AF at 5% of gross receipts. However, the Learned CIT(Appeals) rejected the explanation due to lack of conclusive evidence.

3. Validity of Notices and Evidence Consideration:
The tribunal noted that the Assessing Officer did not establish whether notices were duly served on the assessee or not, raising questions about the validity of the assessment process. The tribunal found that the evidence presented by the assessee, such as bank statements, DDs, and invoices, was not conclusive enough to prove the existence of the claimed business activity. However, systematic deposits and withdrawals in the bank account indicated a circulation of money, requiring consideration beyond just the credit side for assessing unexplained credits.

4. Judgment and Conclusion:
The tribunal concluded that the peak credits in the bank account should be assessed as the income of the assessee. It held that the Learned CIT(Appeals) rightly allowed the assessee to present evidence but found the presented documents insufficient to establish the business claimed by the assessee. The tribunal dismissed both the appeal and the cross-objection, upholding the decision of the Learned CIT(Appeals) regarding the assessment of peak credits as unexplained income.

In summary, the judgment addressed issues related to the assessment of unexplained investment, consideration of evidence presented by the assessee, validity of notices served, and interpretation of bank account transactions. The tribunal emphasized the need for conclusive evidence to support claims and highlighted the importance of a thorough assessment process in determining unexplained credits.