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Facts
The assessee, a commission agent for forged steel, did not file an original ITR for AY 2011-12. Reassessment proceedings were initiated under Sections 147/148 due to significant bank deposits totaling Rs. 7.71 crores and multi-commodity exchange transactions. The assessee contended these deposits were circular transactions on behalf of A.V. Forgings Private Ltd, with only commission income earned, but the AO and CIT(A) made an addition of Rs. 99,40,506/- under Section 69 based on the peak credit method.
Held
The Tribunal noted that in a previous assessment year (AY 2010-11), for similar transactions, the CIT(A) had directed the application of a profit rate of 0.25% on total turnover, which remained unchallenged. Given that the assessee for the current year had already offered profit at 0.5% of the total turnover, the Tribunal directed the AO to apply this 0.5% profit rate instead of the peak credit method for the addition under Section 69, also mandating credit for already declared profit.
Key Issues
Whether the addition under Section 69 based on peak credit in bank accounts for alleged circular transactions is justified, or if a profit rate on turnover should be applied, considering past precedents in the assessee's own case.
Sections Cited
250, 143(3), 147, 69, 148, 131
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAILSHRI MAKARAND VASANT MAHADEOKAR
Date of Hearing – 22/12/2025 Date of Order - 30/12/2025
O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 30/06/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2011-12.
In this appeal, the assessee has raised the following grounds:
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1. the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)] erred in upholding the reassessment completed u/s 143(3) r.w.s.147.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 99,40,506/- as alleged unexplained income u/s 69 of the Act.
3. Addition under section 69 is unsustainable in the absence of corroborative evidence.
4. The learned CIT(A) erred in law and on facts in holding that "peak credit method" is justified in the present case.
5. The learned CIT(A) erred in not following the binding precedent in appellant's own case for earlier reassessment proceedings where the CIT(A) had restricted profit estimation to 0.25% of turnover.”
Ground No. 1, raised in assessee’s appeal, was not pressed during the hearing. Accordingly, the same is dismissed as not pressed.
Grounds No. 2-5, raised in assessee’s appeal, pertain to the addition made under section 69 of the Act.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and proprietor of M/s Kohinoor Enterprise. For the year under consideration, the assessee derived income from salary, capital gains and income from other sources. However, the assessee did not file his original return of income. Accordingly, notice under section 148 of the Act was issued to the assessee on 26/03/2018, as the assessee had transactions in the multi-commodity exchange of Rs. 33.45 lakhs and a cash deposit of Rs. 11.05 lakhs with ING Vysya Bank during the year under consideration, and proceedings under section 147 of the Act were initiated. In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 29/06/2018, declaring a total income of Rs.2,03,760. During the assessment proceedings, it was observed from the cash book submitted by the assessee that the assessee received a (A.Y. 2011-12) 3 total cash amount of Rs.12,12,500 during the year under consideration. Further, the perusal of the bank statement of the bank accounts of the assessee revealed the following deposits in his bank accounts: – Sl.no. Name of the bank A/c. No. Total receipts (Rs) 1. Kotak Mahindra Bank 06690120010721 6,56,002 2. ING Vysa Bank 533010038218 34,51,994 3. ING Vysa Bank (current a/c) 533011017091 6,90,34,390 4. ING Vysa Bank 5330110154449 6,00,042 5 ING Vysa Bank 5330110144455 27,89,437 6. Vijaya Bank 504401010012221 2,10,405 7. Dhanlaxmi Bank 017400100010750 3,81,475 Total: 7,71,23,745
Accordingly, the statement of the assessee was recorded under section 131 of the Act in respect of money deposited in his bank accounts, wherein the assessee submitted that he was engaged in the sale of forged steel material on commission basis on behalf of A.V. Forgings Private Ltd and the payment received on behalf of A.V. Forgings Private Ltd were transferred as per the instructions given by A.V. Forgings Private Ltd to various companies namely, Teknev India, Shriya Chemicals Pvt. Ltd., Prophyla Biological Pvt Ltd., etc.
After considering the details filed by the assessee and the statement recorded under section 131 of the Act, notice was issued to the assessee to show cause as to why the addition should not be made by considering the peak credit appearing in the bank statement. In response, the assessee submitted that in preceding years, i.e. assessment years 2007-08, 2008-09 and 2009-10, a similar issue came up for consideration, and the assessee submitted that he acts as an agent and gets only commission as income for (A.Y. 2011-12) 4 the transactions entered. The assessee further objected to the addition on the basis of the peak credit appearing in the bank account. The Assessing Officer (“AO”), vide order dated 24/12/2018 passed under section 143(3) read with section 147 of the Act, disagreed with the submissions of the assessee and held that the total deposits of Rs.7,71,23,745 in various banks, which include the cash deposits, which have been stated to be circular transactions, are without any purchases. The AO further held that the assessee had not been able to prove that these transactions were merely circular and that no sale/purchase was involved. As regards the commission income of Rs.1,00,700, the AO held that the onus lies on the assessee to prove that these transactions were circular transactions and were different from sale/purchase, and that the assessee was bound to accept 0.5% of the total transactions. Accordingly, the AO, by considering the peak credit appearing in various banks, amounting to Rs.99,40,506, made the addition under section 69 of the Act.
The learned CIT(A), vide impugned order, upheld the addition made by the AO under section 69 of the Act on the basis of peak credit appearing in bank accounts of the assessee. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee is an individual who claims to be carrying on business as a commission agent of trading in steel. Since, for the year under consideration, the assessee did not file his return of income, and there were transactions in the multi- (A.Y. 2011-12) 5 commodity exchange apart from cash deposits in a bank account during the year under consideration, notice under section 148 of the Act was issued, and proceedings under section 147 of the Act were initiated. From the details filed during the assessment proceedings, it was observed that apart from total cash receipts amounting to Rs.12,12,500, during the year under consideration, the assessee has credits totalling Rs. 7,71,23,745 in his bank accounts. As per the assessee, the said payment is nothing but the payment received on behalf of A.V. Forgings Private Ltd, as it was engaged in the sale of forged steel material on a commission basis on behalf of A.V. Forgings Private Ltd. The assessee further claimed that the said payment was transferred as per the instructions given by certain individuals of A.V. Forgings Private Ltd to various companies. Thus, according to the assessee, to conduct the transaction, it received a cash commission from A.V. Forgings Private Ltd.
During the hearing, the learned Authorised Representative (“learned AR”), reiterating the submissions made by the assessee before the lower authorities, submitted that on similar facts in respect of a transaction with A.V. Forgings Private Ltd, the learned CIT(A) for the assessment year 2010- 11 considered the profit rate of 0.25% on total turnover. From the perusal of the order passed by the learned CIT(A) in assessee’s own case for the assessment year 2010-11, forming part of the paper book from pages 20- 25, we find that the learned CIT(A) observed as follows: – “10. In this year beside the above facts of the case there is issue of not explaining properly the deposits in the bank accounts of the appellant. The only defence of appellant is that entire transactions are circulating transactions and no purchases, and/or sales have been effected. No details (A.Y. 2011-12) 6 in the form of confirmation of the relevant parties and justification for doing such circular transactions were not furnished. In view of the these facts and also relying on the decision of CIT(A)-33, Mumbai for AY 2008-09 the rejection of books of accounts by AO is upheld. In earlier years the disclosed profit is in the rage of 0.2% to 0.25% of the turnover. Accordingly AO is directed to apply profit rate of 0.25% on total turnover of Rs. 56,75,80,060/- and give credit of already declared profit of Rs. 5,23,525/-. Accordingly the ground of appeal is 'Partly Allowed.'”
11. Further from the submissions of the assessee made before the learned CIT(A), as recorded on Page-4 of the learned CIT(A)’s order for the assessment year 2010-11, it is evident that the assessee claimed that the amounts were received through the banking channel, inter-alia, on behalf of A.V.Forgings Private Ltd and immediately the same were transferred through banking channel to the same parties, as in the present case, at the instructions of A.V.Forgings Private Ltd. It is an undisputed fact that the order passed by the learned CIT(A) for the assessment year 2010-11 was not challenged by any party before a higher appellate forum, and the findings as rendered by the learned CIT(A) are unaltered. Therefore, we do not find any merit in the findings of the lower authorities in rejecting the approach adopted by the Revenue in preceding years and making the impugned addition by considering the peak credit in the assessee’s bank account.
12. It is pertinent to note that the learned CIT(A) in its order for the assessment year 2010-11, after noting the fact that the disclosed profit is in the range of 0.2% to 0.25% of the turnover, directed the AO to apply a profit rate of 0.25% on a total turnover. However, as noted in the foregoing paragraphs, in the year under consideration, the assessee offered the profit (A.Y. 2011-12) 7 at the rate of 0.5% of the total turnover. Accordingly, in view of the facts and circumstances of the present case as noted in the foregoing paragraphs, we deem it appropriate to direct the AO to apply the profit rate of 0.5% on the total turnover instead of considering the peak credit for making the addition under section 69 of the Act. Further, the AO is directed to give credit for already declared profit. As a result, Grounds no.2-5 raised in the assessee’s appeal are partly allowed.
In the result, the appeal by the assessee is partly allowed. Order pronounced in the open Court on 30/12/2025