M/S RAJ HARDWARE,BURDWAN vs. I.T.O.,WARD-2(4), BURDWAN

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ITA 2389/KOL/2019Status: DisposedITAT Kolkata04 March 2020AY 2010-112 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the peak credit method, which deducts gross withdrawals from gross deposits, is the correct approach for determining undisclosed sales. The AO was directed to consider the net amount as undisclosed sales.

What were the facts?

The Assessing Officer treated all cash deposits in the assessee's bank account as undisclosed sales. The assessee argued that cash withdrawals should be deducted from deposits to arrive at the net undisclosed sales.

What were the issues?

Whether cash deposits in a bank account should be treated entirely as undisclosed sales, or if withdrawals should be netted off to determine the actual undisclosed sales.

Which sections of the Income-tax Act were involved?

Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA

Before: Shri J. Sudhakar Reddy]

order

: March 4th, 2020 ORDER

Per J. Sudhakar Reddy, AM:

1.

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals), Burdwan [‘CIT(A)’ for short] dated 23.08.2019 u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short) for AY 2010-11.

2.

After hearing rival contentions, I find that the only grievance of the assessee is the quantification of the undisclosed sales. The AO considered all the cash deposits in the bank account held by the assessee with Central Bank of India, B.C. Road, Burdwan as undisclosed sales/gross receipts from business. 3. In other words, the total credits/gross deposits in this bank account were held as undisclosed sales and a percentage of the undisclosed sales has been brought to tax as profit. The contention of the assessee is that, the cash withdrawals from this bank account amounting to ₹16,47,092/- should be reduced by the gross deposits of ₹50,32,783/- and only the net figure should be taken as the undisclosed sale figure, as otherwise it would give a distorted figure. He wanted the peak deposit to be taken as the undisclosed sales.

Assessment Year: 2010-11 M/s. Raj Hardware.

4. I do not find any infirmity in the claim of the assessee. It is well settled that the peak credit should be taken as the undisclosed credit figure and such peak credit should be arrived at by deducting the gross cash withdrawal from the gross cash deposits. Thus, I direct the AO to consider the net amount of ₹33,85,692/- as the undisclosed sales in place of ₹50,32,738/-.

4.

In the result, the appeal of the assessee is allowed in part. Kolkata, the 4th March, 2020.

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