1993 (3) TMI 148 - AT - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 3,11,380 represented an advance made by the assessee or a deposit received by him.
2. The correct computation of peak credit for the deposits in the names of the assessee, his wife, and children.
3. The validity of the addition of Rs. 50,000 on an ad hoc basis by the CIT(A).

Summary:

Issue 1: Nature of Rs. 3,11,380 (Advance or Deposit)
The controversy centered on whether Rs. 3,11,380 was an advance made by the assessee or a deposit received by him. The assessee initially stated that the amount was received from Rasheed but later corrected it to Ramesh Kumar. The ITO concluded it was an advance due to the lack of confirmation from Ramesh Kumar. However, the CIT(A) gave the benefit of doubt to the assessee, holding that the amount represented a deposit rather than an advance, as the Department did not provide clinching evidence to prove otherwise. The Tribunal concurred with the CIT(A)'s findings, thus deleting the addition of Rs. 3,11,380 as an advance.

Issue 2: Computation of Peak Credit
The ITO individually computed the peak credit for each account in the names of the assessee, his wife, and children, arriving at Rs. 1,54,400. The CIT(A) held that a comprehensive review of all transactions should be conducted, resulting in a peak credit of Rs. 1,06,000. The Tribunal agreed with the CIT(A) that the correct method was to consider all accounts together and upheld the peak credit computation of Rs. 1,06,000.

Issue 3: Addition of Rs. 50,000 on Ad Hoc Basis
The CIT(A) added Rs. 50,000 on an ad hoc basis to the declared income of Rs. 3,25,000, considering the possibility of unaccounted expenses. The Tribunal found that once the CIT(A) determined that Rs. 3,25,000 was sufficient to cover all unaccounted expenses, there was no justification for an additional ad hoc amount. Therefore, the Tribunal deleted the Rs. 50,000 addition.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, thereby confirming that Rs. 3,11,380 was a deposit, upholding the peak credit of Rs. 1,06,000, and deleting the ad hoc addition of Rs. 50,000.