MANOJ KUMAR JAISWAL,KATIHAR vs. ITO, WARD -1(5), KATIHAR

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), Bhagalpur [hereinafter the ld. ‘CIT(A)’] dated 26/06/2019 passed under section 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’) and the solitary issue involved therein relates to the addition of Rs.14,14,579/- made by the Assessing Officer on account of peak credits appearing in the bank accounts of the assessee, since the deposits found to be made in the said bank accounts could not be fully explained by the assessee.

The assessee in the present case is an individual engaged in the business of sale of potatoes and also derives income from agriculture. After having noticed that the assessee has deposited huge amount of cash in his bank accounts and there was no return of income filed by him for the year under consideration, the assessment for the year under consideration was reopened by the Assessing Officer and the notice u/s 148 of the Act was issued by him to the assessee on 27/03/2018. In response to the said notice, the return of income for the year under consideration was filed by the assessee declaring total income of Rs.1,58,895/- and agricultural income of Rs.1,10,500/-. As noted by the Assessing Officer during the course of assessment proceedings total deposits (excluding interest) aggregating to Rs.56,27,776/- were made by the assessee in the following savings bank accounts”- Assessment Year: 2011-12 Manoj Kumar Jaiswal SI. No. Name of Bank & Account No. Amount credited except interest (Rs.) 1. UBKGB, Korha, Katihar 3,22,700/- A/c No. 1008241010002078 2. SBI, Purnia Bazar Branch 2,46,116/- A/c No. 31025904837 3. SBI, Purnia Bazar Branch 3,00,000/- A/c No. 31024934137 4. SBI, Purnia Branch 11,88,900/- A/c No. 10954150106 5. PNB, Raj gangeli, Purnia 10,65,300/- A/c No. 170000100035430 6. UCO Bank, Purnia 2,89,660/- A/c No. 0308010004595 Total 56,27,776/- As further noted by the Assessing Officer, sale of potatoes amounting to Rs.26,76,116/- was declared by the assessee in his return of income in addition to the agricultural income of Rs.1,10,500/-. Since the deposits found to be made in his bank account by the assessee were excess by Rs.28,41,160/-, than the sale proceeds of potatoes and agricultural income declared by the assessee, the assessee was called upon by him to explain the said excess deposits. In reply, it was submitted by the assessee that he had no source of income other than the trading of potatoes and agriculture. It was also submitted by the assessee that the addition on account of excess deposits found to be made in his bank accounts as pointed out by the Assessing Officer could at the most be restricted to the peak credits appearing in the said bank accounts. The Assessing Officer accordingly made addition of Rs.14,14,579/- to the total income of the assessee being the peak credits appearing in the savings bank accounts of the assessee in the assessment completed u/s 143(3)/147 of the Act, vide order dt. 23/08/2018. On appeal, the ld. CIT(A) upheld the action of the Assessing Officer on this issue but directed him to reduce the addition made on account of peak credits by the amount of credits from each of the bank accounts wherever such credits were by way of transfer of his own funds by the assessee from the other bank accounts. Still aggrieved, the assessee has preferred this appeal before the Tribunal.

I have heard both the sides on this issue and also perused the material available on record. The ld. Counsel for the assessee has invited my attention to the copies of the relevant bank accounts of the assessee placed on record to point out that all the Assessment Year: 2011-12 Manoj Kumar Jaiswal transactions reflected therein are related to the business of trading in potatoes of the assessee as well as his agricultural activities. He has contended that, since the assessee was not involved in carrying out any other activity, all the deposits found to be made in his bank accounts were related to the business of trading in potatoes as well as agricultural activity carried out by the assessee during the year under consideration. He has submitted that, the assessee is in a position to explain his case with the relevant details and urged that the matter may be sent back to the Assessing Officer for giving the assessee an opportunity to do so. He has urged that the Assessing Officer may be directed to verify the claim of the assessee and if the alleged unexplained deposits found to be made in the bank accounts of the assessee are satisfactorily established by the assessee as related to his business of trading in potato, the addition made by the Assessing Officer on account of peak credits in the said bank accounts may be directed to be restricted to the profit element involved in the sale proceeds of potatoes by adopting some reasonable net profit method.

Keeping in view all the above facts of the case, I am inclined to accept this request of the ld. Counsel for the assessee and since the ld. D/R also has not raised any objection in this regard, I set aside the impugned order passed by the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to decide the same afresh after verifying the claim of the assessee that the alleged unexplained deposits found to be made in his bank accounts represent the transactions of sale of potatoes. If the claim of the assessee is found to be correct by the Assessing Officer on such verification, he is directed to restrict the addition made on this issue to the extent of the profit element involved in the transactions of sale of potatoes by applying the reasonable rate of net profit after considering the trading results declared by the assessee in the year under consideration as well as in the earlier years.

In the result, this appeal of the assessee is treated as allowed for statistical purposes. Kolkata, the 9th day of September, 2021.