ONE ASSESSEE IS MARBLE STONE DALALI FOR WHICH PARTIES DEPOSITS CASH IN HIS BANK A/C FROM OUTSIDE PLACES 300-500 KMS.THE SAME IS WITHDRAWN AND GIVEN TO THEM ON THEIR VISIT FOR PURCHASE OF STONE. HOWEVER THE ARE NOT PREPARED TO CONFIRM.ASSESSEE WANT BENEFITS OF PEAK CREDIT WHICH IS NEGLIGIBLE.WITHDRAWL IS 2-3 DAYS BEFORE NEXT CREDIT.A.O. MADE ADDITION FOR FULL. CIT A CONFIRMED AS THE PLACE OF DEPOSIT IS NOT SAME. PL. ADVICE


Admin’s Response:

According to the section, ‘Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of accounts if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year‘.

The section indicates that in order to be an income, there must be fulfilment of two conditions (since the word ’and’ has been used in the section). The investments made in the current year must not be recorded in the books of accounts ‘and’ the explanation is not offered or not satisfactorily offered. In addition to the same, it may be noted that this is a deeming provision which means that even though the assessee has no real income, it may be deemed to be his income. The provision which is deeming is always rebuttable. The use of the words ‘if any’ in the section indicates that it is not compulsory that the assessee must have maintained the books of accounts. He can prove the genuineness of the investments by some other evidence which proves investment out of disclosed source.
In such cases, peak credit should be taken the base of the assessing the income. However it depends if the case has been presented with full details. You may approach higher appellate authorities as well with proper calculations in your favour. Place of deposit should be no criteria once it is being considered unexplained income of the assessee.