High Court rules on undisclosed income assessment, upholding peak balance as income over total deposits.

The case involved the assessment of undisclosed income from two bank accounts. The Tribunal upheld adding only the peak balance in the accounts as income, not the total deposits. The High Court agreed, stating the department lacked evidence to consider the entire deposit as income. The second issue questioned the Tribunal's disregard of a prior Gujarat High Court decision. The High Court affirmed the peak credit approach, finding no error in the Tribunal's decision. The Tax Appeal was dismissed as no legal question arose.

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Issues:
1. Whether the ITAT was justified in accepting the peak credit in undisclosed bank accounts as undisclosed incomeRs.
2. Whether the ITAT was justified in ignoring a previous decision of the Gujarat High CourtRs.

Issue 1:
The case involved the assessment of undisclosed income based on two undisclosed bank accounts held by the assessee in AXIS Bank and ICICI Bank. The Assessing Officer contended that the entire amount deposited in these accounts during the relevant year should be added to the assessee's income. The assessee argued that only 1% commission on the total turnover should be considered as income. The CIT (A) did not accept either the Assessing Officer's addition of the entire amount or the assessee's plea of 1% income. Instead, the CIT (A) added 1% of the total deposit based on the peak credit in the two accounts. The Tribunal upheld this approach, stating that only the peak amount in such cases could be added as income, not the total credit side of the account. The peak balance in the two undisclosed bank accounts was calculated at Rs. 22,58,223, which was confirmed as income. The High Court agreed with this reasoning, concluding that the department had no evidence to suggest that the entire deposit represented the assessee's income.

Issue 2:
The second issue raised was whether the ITAT was justified in ignoring a previous decision of the Gujarat High Court. The Tribunal, in its decision, did not consider a judgment of the Gujarat High Court in a similar case. However, the High Court found that the CIT (A) had correctly applied the peak credit theory, which was consistent with established legal principles. The High Court affirmed the Tribunal's decision, stating that no error was committed by the CIT (A) or the Tribunal. Consequently, the Tax Appeal was dismissed, as no question of law arose from the case.

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