GITA DEVI GUPTA,CUTTACK vs. DEPUTY COMMISSIONER OF INCOME TAX, CUTTACK

Shri P.K.Mishra, P.K.Mishra, ld AR appeared for the assessee and Shri the assessee and Shri S.C.Mohanty, Sr. S.C.Mohanty, Sr. DR appeared for the revenue.

It was submitted by ld AR that three issues are involved in assessee’s appeal. The first issue was against the addition made of Rs.1,43,000/- representing the demonetized currency deposited in the assessee’s bank account. It was the submission that for the purpose of assisting the bank and public, the assessee used to collect demonetized currency of the poor people and exchange the same in the bank account of the assessee as an employee used to go bank daily. It was the submission that this is a part of the sales of the assessee, which was the exchange of demonetized currency of the poor people so that they did not go and stand in the queue in the bank. It was the submission that the addition made by the AO and confirmed by ld CIT(A) on this issue may be deleted.

In reply, ld Sr DR vehemently supported the order of the AO and ld CIT(A). It was the submission that the assessee was not a person authorized to collect the demonetized currency after declaration of demonetization. It was the submission that the assessee was not entrusted such philanthropic duties by the Government. It was the submission that the addition made by the AO and confirmed by ld CIT(A) be confirmed.

We have considered the rival submissions. A perusal of the present case clearly shows that the assessee has collected demonetized currency after the demonetization period and the assessee is not an authorised person to collect such notes. This being so, as the assessee has not been P a g e 2 | 7 able to prove the source of demonetized currency, the addition as made by the AO and confirmed by ld CIT(A) stands upheld.

The second issue was in regard to payment of bogus commission added by the Assessing Officer to an extent of Rs.20,37,437/-. It was the submission that the assessee had paid commission to seven persons whose names and address are also given to the Assessing Officer. It was the submission that the Assessing Officer had issued notice u/s.131 of the Act and all of them had responded and confirmed the receipt of commission against the work of purchase and sale for the assessee supported by copies of their income tax returns where they have disclosed the commission received, copy of their bank account, which showed that they have received commission through banking channel. It was the submission that while paying commission, the assessee had deducted TDS at the specified percentage though the ld CIT(A) says otherwise. It was the submission that no action under section 201(1) of the Act has been raised against the assessee on account of non-deduction of TDS. It was the submission that one of the person Shri R.K.Poddar had also appeared before the AO and his statement was recorded on 5.9.2019 wherein he has confirmed the business with the assessee and the receipt of commission. Ld AR further pointed out that the ld CIT(A) in page 13 at para 9.5 has also noted that in the case of Sh Chagan Lal Baheti, the net commission received was Rs.4,80,804/- as against gross commission received of Rs.12,04,544/- and P a g e 3 | 7 out of this Rs.12,04,544/-, the assessee had paid commission of Rs.3,22,100/-. It was the submission that all the recipients of commission have confirmed the receipt of commission, have provided proof of the same, had disclosed the income in their income tax returns and have also paid tax. It was the submission that the addition made is liable to deleted.

In reply, ld Sr DR submitted that the Assessing Officer has categorically recorded in the case of Shri Ramesh Kumar Poddar that his personal drawings during the year was Rs.1,44,000/- only whereas total cash withdrawals from bank was Rs.18,80,000/- as against the commission receipt of Rs.20,37,437/-, which clearly showed that monies had been re- routed to the payers of the commission. It was the submission that though there is no dispute to the paper work, the fact remains that the commission payment was bogus.

We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the assessee has also shown the sales and purchases in respect of various persons to whom the commission has been paid. The sales/purchases corresponding to the commission paid have not been disputed by the Assessing Officer. In fact, the commission has been paid for the earlier years and subsequent years and the details have been provided, which is as follows:

This coupled with the fact that the commission payments have also been reflected in their returns and the requisite TDSs have also been made and in fact one of the person in respect of whom the commission has been paid, a statement has been recorded and he has admitted that he has received commission, we are of the view that no disallowance on presumption is permissible in respect of commission payments. Consequently, the addition as made by the AO and confirmed by ld CIT(A) in respect of commission payment of Rs.20,37,437/- stands deleted.

The next issue was in regard to violation of provisions of Rule 40A(3) to an extent of Rs.1,80,000/-, which was the bonus paid to three of the employees in cash exceeding Rs.20,000/-. Admittedly, the assessee has not been able to prove any reasonable cause for violation of provisions of section 40A(3). Consequently, the addition as made by the AO and confirmed by ld CIT(A) stands confirmed.

In the result, appeal of the assessee stands partly allowed.