INCOME TAX ACT, 1961

Section 68 Section 69

Income from undisclosed sources - Addition under section 68 - Unaccounted sales vis-a-vis undisclosed bank account -

During the course of assessment proceedings, AO while examining the unaccounted sales transaction accepted by the assessee which were carried out through the undisclosed bank account held with ICICI Bank. AO also examined the peak balance in the bank account and found that on 1-3-2014 there is a peak balance of Rs. 1,25,53,136. In reply to the show cause notice, it was submitted that no addition was called for on account of peak credit since assessee had sufficient cash and stock-in-hand on various dates around the year which were valuing more than the peak balance available in the bank account and thus required set off before calculating the peak credit. AO found no justification in this submission and made the addition for peak credit of Rs. 1,25,53,136 which was subsequently deleted by Commissioner(Appeals) accepting the assessee's contentions and judicial precedence referred before him. Held: It was noteworthy that assessee was carrying out of books sales transactions in the past also and till the date of peak bank balance on 28-2-2014 the profits earned on unrecorded sales have been offered to tax and they were from part of the peak bank balance. So, in nutshell against peak balance found in the bank account not disclosed in the regular books in the instant case, three things have to be considered, firstly, stock-in-hand available with the assessee, secondly cash in hand available in regular books and thirdly the undisclosed profit earned on the unaccounted sales till the date of peak balance which had been offered to tax. Taking these factors together, in the instant case the peak balance in the undisclosed ICICI Bank Account was much less than the total of stock-in-hand, cash in hand and unaccounted profits offered to tax. In the given facts and circumstances of the case and considering judicial precedence there was therefore, no inconsistency in the finding of CIT(A) deleting the peak credit addition.

Applied:Asstt. CIT v. Kashmir Trading Company (2012) 20 Taxmann.com 337 (Jod-Trib) : 2011 TaxPub(DT) 1624 (JP-Trib) and CIT v. Tirupati Construction Co. (2015) 55 Taxmann.com 308 (Guj-HC) : 2015 TaxPub(DT) 2848 (Guj-HC).

REFERRED : CIT (Central) v. Fertilizer Traders (2015) 42 Taxmann.com 476 (Allahabad) : 2014 TaxPub(DT) 0717 (All-HC)

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 145(3)

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