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Facts
The assessee, a dealer, declared income under Section 44AD based on a turnover of Rs. 51.20 lakhs, but bank transactions revealed a much higher amount of Rs. 307.80 lakhs. The AO, at the assessee's request, applied the peak credit method for assessment, which was upheld by the CIT(A). The appeal to the Tribunal was delayed by 314 days due to a medical emergency, for which condonation was granted.
Held
The Tribunal noted that the AO was unduly liberal in applying the peak credit method instead of computing income on the higher actual turnover under Section 44AD. However, as the appeal was filed by the assessee and the AO's method was favorable to them, the Tribunal found no grounds to interfere and upheld the orders of the lower authorities.
Key Issues
Whether the AO correctly computed income based on peak credit method instead of applying presumptive tax rate on total bank transactions under Section 44AD, and if the Tribunal can interfere with a favorable assessment method at the assessee's appeal.
Sections Cited
Section 44AD, Section 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC BENCH”, RANCHI
Before: SHRI GEORGE MATHAN
(निर्धारण वर्ा / Assessment Year :2016-2017) Rajaram Agrawal, Vs. ITO, Ward-3(4), Chaibasa Ward No.7, Kali Mandir, Chakradharpur, West Singhbhum, Chakradharpur, Jharkhand स्थायी लेखा सं./PAN No. : AEJPA 5952 Q (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) निर्ाारिती की ओर से /Assessee by : Shri Ritesh Kumar Jha, Adv राजस्व की ओर से /Revenue by : Shri Khubchand T Pandya, Sr. DR सुनवाई की तारीख / Date of Hearing : 26/11/2025 घोषणा की तारीख/Date of Pronouncement : 26/11/2025 आदेश / O R D E R This is an appeal filed by the assessee against the order of the ld. Addl/JCIT(A)-2, Kolkata, dated 23.03.2024 for the assessment year 2016- 2017.
Shri Ritesh Kumar Jha, ld.AR represented on behalf of the assessee. Shri Khubchand T Pandya, Sr. DR appeared on behalf of the revenue.
It was submitted by ld. AR that the appeal of the assessee is time barred by 314 days. It was the prayer that the delay may be condoned and appeal of the assessee may be adjudicated.
I have perused the records. The affidavit filed by the assessee on for condonation of delay reads as follow:-
The appellate the order of the ld. CIT(A) was passed on 23.03.2024. The assessee has attached certain medical certificates. The reasons being given is that there is medical emergency and, therefore, I was there was reasonable cause for delay in filing the appeal. Accordingly, I condone the delay and the appeal of the assessee is admitted to be disposed off on merits.
On merits, it was submitted by the ld.AR AR that the assessee is a dealer in Sugar, atta, maida and suji rice etc. It was the submission that the return has been filed by applying the provisions of Section 44AD of the Act.
It was submitted that the transaction in the bank account were in respect of the business activity of the assessee. It was the prayer that the addition made by the AO is liable to be deleted.
In reply, the ld. Sr. DR submitted that the turnover shown by the assessee in his return is of Rs.51,20,100/-, whereas the transactions recorded in the bank account of the assessee was to the tune of Rs.3,07,80,940/-. It was submission that the assessee himself had requested the AO to complete the assessment as per the peak credit method to arrive at the true income. It was submission that in orders of the AO and CIT(A) are liable to be upheld.
I have considered the rival submissions. A perusal of assessment order clearly shows that the AO has recorded in para 3 of his order that the gross receipt shown by the assessee is only Rs.51,20,100/-. In para 4.1 of the Assessment Order, the AO has brought out the fact of cash deposited in the bank account and the total of the said cash deposited in the bank accounts is of Rs.3,07,80,940/-. The AO further proceeded to the mention in para 4.2 that the assessee himself has requested to complete the assessment as per the peak credit/telescoping method to arrive at his true income. After recording this, the AO in para 4.5 accepts that the transactions are relating to business activity of the assessee. Thereafter the AO has arrived at the peak credit at the request of the assessee. Here. I should pass a remark that on the gross receipts of Rs.51,20,100/- the assessee had shown u/s.44AD of the Act @8%. When the AO has found the bank transactions to be Rs.3,07,80,940/-, it is surprising that the AO When the assessee himself shown business income at 8%, I failed to understand as to why the same percentage may not be applied to the entire turnover of the assessee. Here, the AO was extremely liberal by taking the peak credit, which is not correct. However, as this is an appeal of the assessee, I am unable to interfere with the finding of the AO. This being so I am of the view that the order of the AO and order of the Ld.CIT(A) does not call for any interference and same stands upheld.
In the result, appeal of the assessee is dismissed. Order dictated and pronounced in the open court on 26/11/2025.