I.T.O., WARD - 30(4)/KOLKATA, KOLKATA vs. SMT. RITA SINGH, KOLKATA

The captioned appeal filed by the Revenue , pertaining to Assessment Year 2009-10, is directed against an order passed by the Commissioner of Income Tax(Appeals)-XIV, Kolkata which in turn arises out of an order passed by the Assessing Officer u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 30.12.2011.

We have heard both the parties and perused the material available on record. The brief facts qua the issue are that the assessee is a proprietor of M.K.S. Aromatics which is engaged in the business of trading in chemical, Essential oils, Aromatics and Menthol crystals. The assessee has contended that a sum of Rs. 31,28,125/- was the opening cash balance in its hand and a sum of Rs. 90,00,000/- was received from-various agriculturists on a number of dates. It was contended that the appellant had furnished the names and addresses of the parties. It was further contended that the A.O. failed to verify the facts and the addition was made. The assessee further submitted that even if the contention of the A.O. is accepted, then also the principle of peak credit needs to be applied in its case and hence the addition should be restricted only to the amount of peak credit of all the transactions in its books. It was contended that the cash book was produced before the assessing officer and the Bank statements were also submitted by the appellant before the A.O. It was further contended that all the bank statements appearing in the balance sheet of its proprietorship firm as well as in its individual balance sheet were produced before the A.O. along with cash book. The learned A/R of the appellant emphasized the fact that the opening cash in hand of Rs. 31,28,125/- could not legally be added in the current assessment year as it pertains to earlier year. It was further contended that the sum -of Rs. 90,00,000/- was received by the appellant in cash from 10 (ten) persons whose names and addresses were fully submitted to the A.O. and their identities were also proved. Besides, it was submitted that debit entry of Rs. 3,00,000/- being withdrawals from Banks was satisfactorily explained as the same was out of the money deposited in the bank accounts of the appellant. However, the Assessing Officer rejected the contention of the assessee and held that the opening cash in hand as claimed by the assessee Page | 2 Smt. Rita Singh Assessment Year:2009-10 at Rs. 31,28,125/- and cash received from the parties at Rs. 93,90,000/- as well as debit entry of Rs. 3,00,000/- claiming to be withdrawal from banks to sanctify the cash deposit in bank account is not proper and justified and its was fabricated and an afterthought event, therefore Assessing Officer considered all of these as unexplained income and made addition of Rs. 1,28,18,175/- (Rs. 31,28,125 + Rs. 93,90,000 + Rs. 3,00,000).

Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer and confirm the peak balance of the bank account as an addition observing the following: “5.1. Having considered the appellant’s alternate ground in ground no.3 of the appeal, it is seen that the appellant has maintained books of accounts in its proprietorship firm, M.K.S Aromatics and it had also submitted an individual balance sheet before the A.O. in the course of assessment proceedings. In such individual balance sheet, the other bank accounts of the appellant were duly disclosed and on perusal of the said balance sheet, it is seen that the appellant had shown a number of transactions which have neither been disputed by the A.O. in the assessment proceedings nor the books of accounts have been rejected in this regard by the Assessing Officer. It has been contended by the ld. A/R of the appellant that all the entries in the individual balance sheet are arising out from the said cash book and the bank statements disclosed on the basis of which the addition has been made by the Assessing Officer. Having considered the cash book submitted by the appellant and the individual balance sheet, it is seen that the cash book duly reflects all cash which have been withdrawn from various banks, maintained by the appellant. For example, it was seen that on the following dates, the sums were withdrawn from the bank and deposited in the said cash book-

We have gone through the order of ld. CIT(A) and noted that ld. CIT(A) has reached on a logical conclusion and made addition based on peak credit theory. We note that by aggregating all deposits tend to get taxed twice which is against the principle of natural justice. Therefore, only peak credit should be considered. Page | 4

In the result, the appeal of the revenue is dismissed.