2020 (5) TMI 552

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....AO with aid of section 69 of Income Tax Act, 1961. 3. Brief facts of the case are that the assessee is an individual and was doing trading in commodity market at the relevant time. He filed his return of income on 27.7.2010 declaring total income at Rs. 4,18,060/-. The case was selected for scrutiny assessment. On the basis of AIR information, the AO got information that the assessee has two bank accounts with ICICI Bank bearing no.029401512701 and 625901505193. In the first account, a sum of Rs. 22,38,220/- was found to be deposited in cash on various dates. Similarly, in the second account an amount of Rs. 1,49,179/- was found to be deposited in cash. The ld.AO has directed the assessee to explain source of such investment in the....

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....at on the basis of these details, the assessee has prepared a cash flow which is available on page no.23 and 24 of the paper book. He pointed out that there is negative cash balance on the bank account as on 5.9.2009 which was Rs. 3,51,801/-. At the most, if peak credit theory is being applied, then this addition can be retained. His line of the argument is that these amounts were being used by the assessee for commodity trading. Some of the cheques came from M/s.SMC Comtrade were deposited in this very account, and some cheques were issued from this very account. He drew our attention towards a cheque bearing no.432603 dated 4th June of SMC Trading of Rs. 50,000/-. It has been credited in this account. Therefore, Shri Divetia's emphasis....

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....l that the stand of the assessee from the very beginning was that he has discounted the cheques, in a way, he has issued a cheque to a person and in discounting, he took back the amount. This was alleged by him in his submissions, which has not been specifically dealt with. It is also discernable from the bank statement that these bank accounts have been used by the assessee for trading activity; a withdrawal in systematical manner at Rs. 49,000/- per transaction is being made. If an assessee has to make payment on account of other reasons, then he would not have made payment every time at a fixed amount of Rs. 49,000/-. The AO in the assessment order, though noticed the details of alleged cheque payments, and in some of payments, amounts w....

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....ese amounts must have been used by the assessee for trading activities, and therefore, only the peak positive or negative balance occurred in these accounts deserves to be considered as unexplained income of the assessee, because deposits and withdrawals from the same account, though through cross-bearer cheques also. But according to the assessee, he has availed benefit of cheque discounting and re-circulated this money for commodity trading. Possibility of truth in this allegation cannot be ruled out. It can only be ruled out, had the AO called one of the persons to whom cheques was issued, and inquired who has collected cash from the bank. Had this exercise was done, with regard to one Shri Janardhan who has withdrawn Rs. 2.50 lakhs o....