JOYDEB MISTRY,KOLKATA vs. ITO, WD-26(3), KOLKATA, KOLKATA

The Assessee is an individual. He carries on the business of trading in broom stick. For A.Y. 2008-09 the assessee filed return of income declaring a total income of Rs.1,48,760/-. In A.Y.2009-10 the assesse filed return of income declaring total income of Rs.1,60,000/-. In the course of assessment proceedings for A.Y.2009-10 the AO noticed that there was AIR (Annual Information Report) received by the AO that the assessee was maintaining a savings bank account with Axis bank, Baruipur branch bearing A/c No.259010100059195. In this account the assessee had deposited cash of more than Rs.68,00,000/- during the previous year relevant to A.Y.2009-10. This was the reason why the assessee’s return of income for A.Y. 2009-10 was taken up for compulsory scrutiny.

In the course of assessment proceedings for A.Y.2009-10 the AO noticed that the existence of this bank account was not disclosed by the assessee in the return of income nor were the transactions in the bank account reflected in the books of accounts of the assesse. In A.Y.2008-09 the assessment was reopened u/s 148 of the Act consequent to the information about undisclosed bank account which transpired from the AIR information in A.Y.2009-10. Even in A.Y.2008-09 the existence of this bank account with Axis bank and the transactions in this bank account were not reflected in the books of accounts of the assessee. Even in A.Y.2008-09, these were cash deposits in this Bank Account. In both the assessment years the assessee did not participate in the assessment proceedings and therefore the AO proceeded to complete the assessment to the best of his judgment u/s 144 r.w.s. 145(3) of the Act. The amount of cash deposited made in A.Y.2009-10 was more than Rs.68,00,000/- and in A.Y.2008-09 cash deposits in the undisclosed bank account was a sum of Rs.35,01,167/-.

In the absence of any explanation with regard to the source of funds out of which cash deposits in the bank account was made, the AO had no other option but to make an addition of the peak credit in the aforesaid bank account. The AO resorted to making an addition of peak credit because he found that there were deposits and withdrawals from the very same bank account and the deposits succeeding earllier withdrawal, to some extent would explain the source of subsequent deposit in the bank account. Hence the AO resorted to making an addition of peak credit. The AO worked out peak credit in A.Y.2008-09 and 2009-10 in the following manner A.Y.2008-09 On going through the bank statement of savings bank accounts maintained with Axis Bank Ltd. Baruipur Branch vide no.259010100059195 the peak credit was calculated Rs.1236167/- on 31/03/2008 in the following manner :- Joydeb Mistry PAN : AKKPM7238E A.Y.2008-09 a/s no.259010100059195 date debit credit net credit Joydeb Mistry A.Y.2008-09 & 2009-10 23-Feb 100000 100000 29/02 300000 400000 14-Mar 200000 600000 24-Mar 335000 935000 24-Mar 230973 PO issued of Rs.230,973/- not considered because they never available for reinvestment. 31-Mar 300000 1235000 31-Mar 1167 1236167 (Peak)

Aggrieved by the order of AO the assessee preferred appeal before CIT(A). Before CIT(A) the assessee submitted that the cash deposits in the bank account Joydeb Mistry A.Y.2008-09 & 2009-10 represented turn over of the business of the assessee and therefore the only income at 8% of the total deposits which represented the turn over should be made and not the addition of peak credit in the said bank account. This plea of the assessee was rejected by CIT(A).The CIT(A) held that the assessee failed to explain that the deposits in the bank represented turn over of the assessee’s business. The CIT(A) held that the assessee will not get the benefit of estimation of income on the basis of the turn over because it was the incumbent on the part of the assessee to show the nature and source of the turn over and also the evidence of purchase and sale since the assessee failed to demonstrate that the cash deposits in the bank account represented the turn over of business of the assessee which was not disclosed, the CIT (A) was of the view that the addition of peak credit made by the AO was proper and does not call for any interference. The CIT(A) also noticed that the AO had made an addition u/s 69A of the Act but appropriate section under which the addition ought to have been made was section 69 of the Act. The CIT(A) rectified this mistake in the order of AO also. The addition of peak credit for both the assessment years by the AO was upheld by CIT(A).

Aggrieved by the orders of CIT(A) the assessee has preferred the present appeals before the Tribunal.

The ld. Counsel for the assessee submitted before us that the cash deposits in the bank account represented turn over of business not disclosed in the books of accounts. He pointed out that apart from trading in broom stick the assessee started a new line of business of wholesale dealing in betelnuts and excavation of ponds in coastal areas in South Bengal. The turn over achieved in such new areas of business were deposited at Axis bank, Baruipur branch. It was submitted by him that from the mode of deposits and withdrawals in the bank account a presumption could be drawn that deposits were in fact turn over of the business and not any investment of assessee’s own money. The ld. Counsel reiterated the submissions made before CIT(A) that 8% of the cash deposit in the bank account should be estimated as profits of undisclosed business instead of addition of peak credit as made by the revenue authorities. The ld. DR relied on the order of the AO. ITA Nos.1512&1513/Kol/2015 Joydeb Mistry A.Y.2008-09 & 2009-10

We have given a very careful consideration to the rival submissions. We are of the view that the submissions made by the ld. Counsel for the assessee are not backed up by any evidence whatsoever. As rightly observed by CIT(A, the source of deposits in the bank account as attributable to the turn over of a new business carried on by the assessee has not been substantiated by the assessee by producing any evidence. By estimating a percentage of the deposits in the bank account treating it as a turn over of the business, the assessee would get the benefit of deduction from such turn over the cost of sales namely cost of purchase and other expenses to carry on the undisclosed business. The assessee could not produce any evidence to substantiate its claim that the deposits in the bank account emanated from any business carried on by the assessee. In these circumstances, the AO taking note of the fact that there were deposits as well as withdrawals from the bank account, made the addition only of the peak credit over the previous year in the bank account. This approach of the AO was in accordance with law and was rightly confirmed by CIT(A). We find no justifiable reasons to interfere with the order of CIT(A). The order of CIT(A) is therefore upheld. Thus both the appeals by the assessee are dismissed.

In the result the appeals by the assessee are dismissed. Order pronounced in the open Court on 13.12.2017. Sd/- Sd/- [Dr.Arjun Lal Saini] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 13.12.2017. [RG Sr.PS] Copy of the order forwarded to: 1.Joydeb Mistry, Vill Slika, P.O.Alida, Dist. 24-Parganas, 743355. 2.I.T.O., Ward-26(3), Kolkata.. 3. CIT(A)-7, Kolkata. 4. CIT-9, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,