Shri Gaddam Santosh Reddy, , Khammam vs Department Of Income Tax

This is a Revenue's appeal against the order of the Commissioner of Income Tax (Appeals), Vijayawada dated 14-12-2012. Issue involved in this appeal is with reference to bringing to tax the peak deposit in the bank accounts of assessee.

2. Briefly stated, assessee an individual, engaged in granite business filed return of income admitting total income of Rs. 1,71,200/-. In the course of assessment, it was noticed that assessee had two bank accounts in Axis Bank and ICICI Bank which were not reflected in the Books of Accounts maintained. Assessing Officer (AO) after issuing show cause notice and considering the explanation of the assessee however, was not satisfied by the explanation. Since the two accounts were not reflected in the Books of Accounts, he rejected the Books of Accounts as ITA No. 225/Hyd/2013 :- 2 -: Sri Gaddam Santosh Reddy

correctness and completion of account could not be verified. However, in spite of rejecting the Books of Accounts, he accepted the returned income and did not estimate any income from the business u/s. 145(3) of the Income Tax Act [Act]. With reference to the deposits in the bank account, AO noticed that total credits in Axis Bank are Rs. 22,44,980/- and ICICI Bank are Rs. 20,63,933/-. Since assessee's explanation was not accepted, AO deemed it fit to assess assessee's investment in un- accounted transactions by taking peak credits from both the banks. Doing so, the peak credit in Axis Bank was determined at Rs. 13,34,841/- and ICICI Bank at Rs. 13,62,416/-. The total of the peak was arrived at Rs. 26,97,257/- and accordingly, the same amount was brought to tax.

3. Before the Ld.CIT(A), assessee contended that peak credits in two bank accounts cannot be considered and these bank accounts pertain to HUF status. In the alternate, it was submitted that peak credit in one of the banks can be accepted and not in both the banks. Ld.CIT(A) without examining whether there are any cross transactions between the banks, accepted assessee's alternate contention and confirmed the highest amount among the two at Rs. 13,62,416/- as against the amount of Rs. 26,97,257/- assessed by the AO. Revenue is aggrieved.

4. Ld. DR contended that CIT(A) was not correct in deleting the amount on the alternate contention that peak credit in one of the banks can only be brought to tax without examining the facts or without giving an opportunity to AO.

5. Ld. Counsel while submitting that assessee has accepted the CIT(A)'s order, however, relied on the CIT(A)'s order. At our instance, he has filed a combined statement of Axis Bank and ICICI Bank wherein the ITA No. 225/Hyd/2013 :- 3 -: Sri Gaddam Santosh Reddy

peak of the credits in the accounts came to Rs. 19,97,825/- on 24-01- 2009. By excluding the opening balance of Rs. 99,520/-, the peak amount comes to Rs. 18,98,305/-.

6. We have considered the rival contentions and perused the record. We are unable to understand on what basis the AO arrived at peak credit in different banks. While completing the assessment, he neither examined the individual deposits nor examined the withdrawals nor analysed nature of transactions. Even though he rejected the Books of Accounts, there is no estimation of income on the business transactions. Ld.CIT(A) also equally erred in deleting one of the amounts while confirming the other without examining the combined peak credit in both the banks. Since the assessment was completed only on the basis of the peak credits, we have no option than to consider the issue only on that issue. Since the peak amount reworked out was determined at Rs. 18,98,305/-, we hold that the above amount can be brought to tax by modifying the order of the CIT(A). Even though Ld. DR requested for setting aside the issue for re-examination, we do not find it necessary as the assessment itself was taken on peak credit basis and a combined statement placed on record indicate the peak credit amount. Accordingly, the peak credit amount to be brought to tax was determined at Rs. 18,98,305/-. AO is directed to modify the order accordingly.

7. In the result, Revenue's appeal is partly allowed.

Order pronounced in the open Court on 30th June, 2015.

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 30th June, 2015 TNMM ITA No. 225/Hyd/2013 :- 4 -: Sri Gaddam Santosh Reddy

Copy to :

1. The Income Tax Officer, Ward-2, Aayakar Bhavan, Behind Kinnerasani Theatre, Rajiv Gunj, Khammam.

2. Sri Gaddam Santosh Reddy, 8-1-8, Behind NSP Guest House, Prasanti Nagar, Khammam.

3. CIT(Appeals), Vijayawada.

4. CIT, Vijayawada.

5. D.R. ITAT, Hyderabad.

6. Guard File.