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Facts
The assessee, a manufacturer of school and travelling bags, disclosed an income of Rs. 2,85,440 on a turnover of Rs. 9,85,000. During the assessment, the Assessing Officer (AO) treated huge cash deposits of approximately Rs. 1.25 crore in the assessee's bank accounts as income. The CIT(A) upheld the AO's decision.
Held
The Tribunal observed that there were cash deposits followed by immediate withdrawals in the assessee's bank accounts. The Tribunal held that treating the peak credit in the bank accounts as income would be a fair method, and in this case, it would be below the income already disclosed by the assessee.
Key Issues
Whether the entire bank deposits, due to their nature of cash deposits and withdrawals, can be treated as undisclosed income, or if the peak credit method is more appropriate.
Sections Cited
Section 68 of the Income Tax Act (implied, as the issue pertains to unexplained cash credits)
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN & SHRI RATNESH NANDAN SAHAY
(Assessment Year: 2015-16) Pawan Kumar Jaiprakash Gupta, I.T.O., Sri Nagar Road, Road No. 3, Harmu Ward-1(1), Ranchi, Vs. Road, Doranda, Ranchi-834002 AO Passing Assessment (Jharkhand) Order, ITO, Ward-3(2), PAN No. AJEPG 7529 D Kalyan. Appellant/ Assessee Respondent/ Revenue Assessee represented by Sri M.K. Choudhary, A.R. Department represented by Shri Khub Chand Pandya, Sr. DR Date of hearing 10/06/2025 Date of pronouncement 10/06/2025 O R D E R PER: BENCH 1. This is an appeal filed by the assessee against the order of the learned CIT(A), NFAC in appeal No. CIT(A), Thane-1/10503/2017-18 dated 30/11/2022 for the A.Y. 2015-16.
Shri M.K. Choudhary, ld. A.R. is represented on behalf of the assessee and Shri Khub Chand Pandya, ld. Sr.DR is represented on behalf of the revenue.
It was submitted by the ld. AR that the assessee is a small time manufacturer of school bags and travelling bags. It was submission that the turnover of the assessee was Rs. 9,85,000/-. It was a submission that the assessee had disclosed an income of Rs. 2,85,440/- in his return of income. It was a submission that in the course of assessment, it was noticed that the assessee had huge cash deposits aggregating to nearly Rs. 1.25 crore in his bank Pawan Kumar Jaiprakash Gupta Vs ITO accounts. The Assessing Officer on the ground that the assessee did not cooperative in the assessment proceedings, treated the entire deposits in the bank accounts as an income of the assessee. It was a submission that on appeal, the ld. CIT(A) without considering the submissions of the assessee, confirmed the assessment. It was a submission by the ld. AR that the assessee wanted to take a bank loan and bank had advised him to increase the number of transactions in his accounts. Consequently, the assessee had been deposting cash and withdrawing cash from the bank accounts of the assessee and this had resulted in the total credits in the accounts of assessee being at Rs. 1.25 crore. It was a submission that he had no objection if the bank credit of the bank accounts were considered as the income of assessee.
In reply, the ld. Sr.DR submitted that the turnover of the assessee being Rs. 9,85,000/- and the assessee had disclosed the income of Rs. 2,85,440/-, the N.P. rate has itself came to 33%. It was a prayer that at least N.P. rate may be applied.
We have considered the rival submissions. We have also perused the passbooks in respect of Bank of India, ICICI Bank and IDBI Bank maintained by the assessee. A perusal of the said bank accounts clearly shows that there are deposited of cash in the bank accounts and immediately thereafter there is cash withdrawals. Normally in such a situation, the best method to assess the income would be to treat the difference between the credits and debits as the income of the assessee. This would in any case in the present situation below the income disclosed by the assessee. This being so, in the interest of justice, we are of the view that the peak credit in the bank accounts of the assessee can be treated as