2014 (11) TMI 1195

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....hether on the facts and in the circumstances of the case the Tribunal was justified in holding that the benefit of peak credit could not be automatically granted to the assessee?" 2"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that when the fiction provided in section 69 of the I.T. Act comes into play, all unexplained expenditure has to be added to the income of the assessee for such financial year?" 3. The counsel for the assessee does not press the question No.2 quoted above and thus this question is decided against the assessee. 4. Brief facts, with reference to question No.1, is that the assessee being a partnership firm carried on business of dealing in medicines on retail basis. ....

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....76/- u/s 69 of Income Tax. 6. Similarly, the Assessing Officer being not satisfied with the trading result also made a trading addition of Rs. 28,934/- by invoking provision of section 145 of Income Tax Act as the assessee did not maintain day to day stock register and accordingly ordered for addition of Rs. 28,934/- 7. Dissatisfied with the two additions of Rs. 28,934/- and Rs. 28,576/- the matter was carried in appeal before the CIT (A). While CIT(A) in so far as the trading addition is concerned sustained rejection of books of accounts and affirmed total addition of Rs. 5,000/- but in so far as the addition on account of cash purchases under section 69 is concerned did not agree with the contention of the assessee and approved finding ....

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.... has rotated and therefore, the addition of Rs. 28,576/- in the light of aforesaid judgments could not have been made and the Tribunal wrongly sustained the addition ignoring the peak credit theory propounded by the Hon'ble Apex Court and this Court. He has limited his argument that the question is squarely covered by the judgment of the Hon'ble Apex Court and judgment of this Court. 10. Per contra ld. counsel for the Revenue has contended that the Tribunal has rightly discarded this theory of the assessee and automatic benefit of peak credit cannot be given to the assessee and that too particularly in the present case when the assessee himself denied having investment outside the books of accounts and thus contended that this view....

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....vailable to the assessee as the book profits could be. In Lagadapati Subha Ramaiah v. CIT, [1956] 30ITR593, the Andhra Pradesh High Court adverted to this aspect of secret profits and their actual availability for application by the assessee. That view was affirmed by the Madras High Court in S. Kuppuswami Mudaliar v. CIT, [1964] 51 I.T.R. 757. There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as th....