| The Tax Publishers2020 TaxPub(DT) 2785 (Kol-Trib) INCOME TAX ACT, 1961
Section 68
Where withdrawals from undisclosed bank accounts were neither spent for any other purpose than the regular business of grocery nor invested in any immovable/movable property, the entire deposits made in the said bank accounts should not have been added and only the combined peak credit of such bank accounts were needed to be added to work out the element of undisclosed investments made by assessee along with the trade profit, which the assessee could have made from the undisclosed transactions.
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Income from undisclosed sources - Addition under section 68 - Assessee failed to explain cash transactions in undisclosed bank accounts - Treatment as unexplained cash credit
AO found that assessee had two undisclosed bank accounts in which she deposited certain cash during year under consideration. According to the AO, despite giving several opportunities, the assessee failed to explain the cash transactions in the undisclosed bank accounts and did not file any supporting evidence. Therefore, the AO made the addition on account of unexplained cash credit under section 68. Assessee submitted that she was into the business of running a grocery shop and in those two bank accounts she used to deposit the sale consideration and used to withdraw the amounts for purchases. Therefore, those two bank accounts were used for the very same trading business and, hence, the entire deposits should not have been added and only the GP/NP or peak credit from the two bank accounts could be made. Held: It was found that there were cross-deposits and withdrawals between the two undisclosed bank accounts. Since the withdrawals from those bank accounts were neither spent for any other purpose than the regular business of grocery nor invested in any immovable/movable property, thus, combined peak credit of both bank accounts were needed to be taken to work out the element of undisclosed investments made by the assessee. Further, coming to the trade profit, which the assessee could have made from the undisclosed transactions, it was noted that the assessee disclosed GP rate of 8.81% and NP rate of 4.65% from the regular grocery business. Therefore, trade profit of the regular business, i.e., GP rate of 8.81% would be justified. Accordingly, the AO was directed to restrict the addition to two items (i) combined peak credit of two bank accounts, which would take care of the undisclosed investments of the assessee and (ii) trading profit from the undisclosed transactions and for that, the GP rate @ 8.81% would be applied.
REFERRED :
FAVOUR : Partly in favour of assessee
A.Y. : 2016-17
IN THE ITAT, KOLKATA BENCH
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