Recalculation of Peak Credit and Commission Income Exclusion

The Tribunal concluded that the peak credit should be recalculated, excluding the opening balance and the brother's bank account. Once the peak credit is determined, no separate addition for commission income should be made. The final addition will be based solely on the recalculated peak credit. The appeal by the assessee was thus partly allowed, directing the AO to work out the peak credit accordingly.

---

---

Issues Involved:
1. Legitimacy of the cash deposits in various undisclosed bank accounts.
2. Calculation of peak credit for determining unaccounted income.
3. Inclusion of commission income in addition to peak credit.

Detailed Analysis:

1. Legitimacy of Cash Deposits:
The primary issue revolves around the legitimacy of the cash deposits made by the assessee in various undisclosed bank accounts. The assessee, engaged in the money transfer business under the trade name "Raj Quick Services," claimed that the cash deposits were from customers, mainly laborers in Mumbai, who intended to send money to their families in Uttar Pradesh. The assessing officer (AO) noted discrepancies, including the failure to disclose certain bank accounts and the inability to provide names and addresses of the persons involved in the transactions. Consequently, the AO treated the entire sums deposited in these accounts as undisclosed income under Section 68 of the Income Tax Act.

2. Calculation of Peak Credit:
The CIT(A) agreed that the entire cash deposits could not be treated as unexplained income due to regular cash withdrawals and deposits in the same accounts. Therefore, the CIT(A) directed the calculation of the peak credit, which represents the highest balance at any point in time after considering both debits and credits. The peak credit was determined to be Rs. 29,69,518. However, the CIT(A) also included the credits in the bank account of the assessee's brother in Azamgarh, which the Tribunal later corrected, stating that the brother's account should not be included in the peak credit calculation.

3. Inclusion of Commission Income:
The CIT(A) added a commission income of Rs. 3,87,562, calculated at 3% of the total credits deposited in the bank accounts, to the peak credit. The assessee contended that if the peak credit is considered, then the commission income should not be added separately. The Tribunal upheld this view, stating that the unexplained peak credit itself accounts for the income element, and adding commission income separately would be redundant.

Conclusion:
The Tribunal concluded that the peak credit should be recalculated, excluding the opening balance and the brother's bank account. Once the peak credit is determined, no separate addition for commission income should be made. The final addition will be based solely on the recalculated peak credit. The appeal by the assessee was thus partly allowed, directing the AO to work out the peak credit accordingly.

---