VAIBHAV DWARKANATH WAREKAR,NAVI MUMBAI vs. INCOME TAX OFFICE, NAVI MUMBAI

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.

Addition under section 69 is unsustainable in the absence of corroborative evidence.

The learned CIT(A) erred in law and on facts in holding that "peak credit method" is justified in the present case.

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 3

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 4

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- 5

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 6

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.

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 7

In the result, the appeal by the assessee is partly allowed.