INCOME TAX OFFICER, WARD 1(1), KALYAN, KALYAN vs. SURAJ SOMARU VARMA, BHIWANDI

The Revenue has raised five grounds of appeal. Grounds No.1 to 3 relate to the deletion of the addition of Rs.8,33,66,925/- made by the Assessing Officer under section 69A read with section 115BBE of the Act, whereas Grounds No.4 and 5 relate to the grievance of the Revenue that the learned CIT(A) granted relief by accepting explanations, reconciliations and supporting documents at the appellate stage without calling for a remand report or otherwise obtaining verification from the Assessing Officer. Since Grounds No.1 to 3 arise from the same addition and involve a common issue, they are being considered together.

Briefly stated, the assessee filed his return of income for the assessment year 2020-21 declaring total income of Rs.6,60,250/-. The assessment was subsequently reopened under section 147 of the Act. During the course of reassessment proceedings, the Assessing Officer examined the bank accounts of the assessee and noticed cash deposits and credits in various bank accounts. The Assessing Officer noted cash deposits of Rs.1,05,65,300/- in the Axis Bank account, Rs.1,49,86,267/- in the IDFC Bank account and Rs.4,45,76,400/- in the Corporation Bank account. The Assessing Officer also noticed cash withdrawals of Rs.1,48,13,900/- from the Yes Bank account. The aggregate credits in the bank accounts were stated to be Rs.11,34,28,125/-.

During the assessment proceedings, the assessee explained that he was carrying on the business of a Business Correspondent Agent for various entities and that the bank accounts were used in the ordinary course of such business for receiving cash from customers and facilitating transfer/remittance of such funds to the respective principals. The assessee furnished, inter alia, agreements and certificates evidencing his agency arrangements with Vodafone M-Pesa Ltd., IDFC First Bank Ltd. and other entities. The assessee also explained that the receipts in the bank accounts did not represent his income but were funds collected from customers in the course of his agency business, for which he earned commission.

The Assessing Officer, however, proceeded to examine the commission received by the assessee of Rs.1,50,306/- from Vodafone M-Pesa Ltd. and, applying the rate of 0.5%, worked out the corresponding transaction value at Rs.3,00,61,200/-. After reducing the said amount from the aggregate bank credits of Rs.11,34,28,125/-, the Assessing Officer treated the balance amount of Rs.8,33,66,925/- as unexplained money under section 69A read with section 115BBE of the Act. The Assessing Officer accordingly made an addition of Rs.8,33,66,925/- to the income of the assessee.

Before the learned CIT(A), the assessee explained that he was acting as a Business Correspondent for several principals and that the commission income received from such principals was duly reflected in Form 26AS and disclosed in the return of income. The assessee pointed out that apart from commission of Rs.1,50,306/- from Vodafone M-Pesa Ltd., he had received commission of Rs.3,65,317/- from IDFC First Bank Ltd., Rs.6,84,990/- from Nearby Technologies Pvt. Ltd. and smaller amounts from Hermes I Tickets Pvt. Ltd., FINO Payments Bank Ltd., Nearby Insurance Broking Services Pvt. Ltd. and Ramdev Co-op Credit Society Ltd., aggregating to Rs.12,16,222/-.

It was further submitted before the learned CIT(A) that the Assessing Officer had erroneously considered the aggregate credits in the bank accounts without excluding inter-bank transfers and other transactions which did not represent income of the assessee. The assessee furnished a reconciliation whereby, after excluding certain transfers between his own bank accounts and taking into account the relevant transactions, the actual credits were stated to be Rs.8,88,80,859/-. It was also pointed out that the Assessing Officer had ignored cash withdrawals in arriving at the unexplained amount and had proceeded on the basis of the commission received from only one principal.

The learned CIT(A), after considering the submissions and material available on record, found that the assessee was engaged in the activity of providing Business Correspondent services to various banks and financial institutions. The learned CIT(A) observed that in such line of activity the Business Correspondent collects cash from customers, deposits the same into designated bank accounts and thereafter transfers the funds to the respective banks or payment platforms, earning commission for facilitating such transactions. The learned CIT(A) further noticed that the assessee had earned commission from several entities, which was reflected in Form 26AS and disclosed in the return of income.

The learned CIT(A) found that the Assessing Officer had wrongly considered only one principal for the purpose of reverse calculation while ignoring the commission income received from the other principals. The learned CIT(A) also found that the explanation of the assessee that the bank accounts were operational accounts used for collection and remittance of funds in the course of Business Correspondent operations was plausible. It was observed that the nature of such business inherently involved frequent deposits and withdrawals of funds collected from customers and that the mere existence of large bank credits could not, by itself, lead to the conclusion that the amounts represented unexplained income.

The learned CIT(A) further noted that a portion of the bank credits represented transfers between the assessee’s own accounts maintained with different banks and that such inter-bank transfers did not constitute income. The learned CIT(A) also considered the decisions of the appellate authorities in the assessee’s own case for earlier assessment years and observed that similar additions had been deleted after considering the nature of the assessee’s business as a Business Correspondent Agent. Following the principle of consistency, the learned CIT(A) held that there was no justification for taking a different view in the year under consideration in the absence of any material change in facts.

The learned CIT(A) specifically took note of the order of the Coordinate Bench of the Tribunal in the assessee’s own case for assessment year 2017-18 in ITA No.1776/Mum/2025 dated 15.09.2025, wherein the Tribunal accepted the assessee’s explanation regarding cash deposits made in the course of his Business Correspondent activity and deleted the addition under section 69A. The Tribunal had found that the assessee had duly explained the nature and source of the cash deposits by producing the agency agreement, relevant RBI circulars and the register containing particulars of customers and amounts collected.

The learned CIT(A) also considered the decision of the Coordinate Bench in the assessee’s own case for assessment year 2018-19 in ITA No.3782/Mum/2025 dated 05.09.2025. In that year also, the Assessing Officer had undertaken a reverse calculation based upon the commission received from Vodafone M-Pesa Ltd. and had treated the balance credits as unexplained. The Tribunal noticed that the difference arose mainly because the commission income earned by the assessee from the other parties had not been considered. The Tribunal found no merit in the Revenue’s challenge to the relief granted by the CIT(A) and dismissed the Revenue’s appeal.

On consideration of the matter, the learned CIT(A) ultimately held that the Assessing Officer was not justified in treating the bank credits of Rs.8,33,66,925/- as unexplained money under section 69A of the Act and directed deletion of the addition.

Before us, the learned Departmental Representative (ld.DR) relied upon the assessment order and submitted that the assessee had not furnished complete details before the Assessing Officer to substantiate the nature and source of the credits and, therefore, the learned CIT(A) was not justified in deleting the addition. It was further submitted that the learned CIT(A) had accepted explanations, reconciliations and supporting documents furnished at the appellate stage without affording the Assessing Officer an opportunity to examine and verify the same.

The learned Authorised Representative (ld.AR), on the other hand, supported the order of the learned CIT(A). It was submitted that the issue is squarely covered by the decisions of the Coordinate Bench in the assessee’s own case for assessment years 2017-18 and 2018-19. It was submitted that the assessee’s business model, the nature of the bank accounts, the receipt of customer funds in the course of Business Correspondent activities and the earning of commission from multiple principals remain substantially the same. It was accordingly submitted that there was no justification for interference with the order of the learned CIT(A).

We have considered the rival submissions and perused the material available on record. On the substantive issue raised in Grounds No.1 to 3, we find that the order of the learned CIT(A) is in consonance with the view already taken by the Coordinate Bench in the assessee’s own case for the earlier assessment years. The nature of the assessee’s business as a Business Correspondent Agent and the manner in which the bank accounts were utilised in the course of such business have already been considered by the Tribunal. In assessment year 2017-18, the Tribunal accepted the assessee’s explanation that the cash was collected from customers in the regular course of his money transfer business, deposited into the bank account and thereafter transferred to the Vodafone M-Pesa account, and accordingly held that the nature and source of the deposits stood explained. 6

More importantly, in assessment year 2018-19, the Coordinate Bench considered a situation materially similar to the present case, where the Assessing Officer had undertaken reverse calculation by taking into account the commission received from Vodafone M-Pesa Ltd. but had failed to consider the commission income earned by the assessee from other parties. The Tribunal found that the difference considered by the Assessing Officer arose mainly because the commission income earned from the other two parties had not been considered and, consequently, upheld the relief granted by the learned CIT(A) and dismissed the Revenue’s appeal.

The same fundamental error is found in the assessment year under consideration. The Assessing Officer himself noticed that the assessee had received commission from IDFC Bank and Nearby Technologies Pvt. Ltd., in addition to the commission received from Vodafone M-Pesa Ltd. However, for the purpose of reverse calculation, the Assessing Officer considered only the commission received from Vodafone M-Pesa Ltd. and treated the remaining credits as unexplained. The assessment order thus proceeds by considering only one segment of the assessee’s agency business while disregarding the other principals whose commission income was admittedly reflected in Form 26AS.

We also find that the learned CIT(A) has recorded a categorical finding that the assessee was carrying on Business Correspondent activities for multiple principals and that the bank accounts were operational accounts used for collection and remittance of funds in the course of such activities. The learned CIT(A) further recorded that inter- bank transfers between the assessee’s own accounts did not constitute income and that the nature of the business itself explained the frequent deposits and withdrawals. These findings have not been shown to be factually incorrect by the Revenue.

In the absence of any material brought before us demonstrating a change in the facts or business model of the assessee in the year under consideration, we see no reason to depart from the view consistently taken by the Coordinate Bench in the assessee’s own case. The principle of consistency assumes particular significance where the nature of the business and the basis on which the impugned bank transactions arise remain substantially the same. The Revenue has also not brought any distinguishing material on record which would warrant a different conclusion in the present assessment year.

In view of the aforesaid discussion, and respectfully following the decisions of the Coordinate Bench in the assessee’s own case for assessment years 2017-18 and 2018-19, we uphold the order of the learned CIT(A) deleting the addition of Rs.8,33,66,925/- made under section 69A read with section 115BBE of the Act. Grounds No.1 to 3 raised by the Revenue are accordingly dismissed.

We now turn to Grounds No.4 and 5, wherein the Revenue has challenged the action of the learned CIT(A) in accepting the explanations, reconciliations and supporting documents furnished at the appellate stage without calling for a remand report or otherwise obtaining verification from the Assessing Officer and has contended that the matter ought to have been restored to the file of the Assessing Officer for verification instead of deleting the entire addition.

We find that this grievance of the Revenue also came up for consideration before the Coordinate Bench in the assessee’s own case for assessment year 2018-19. The Revenue had challenged the relief granted by the learned CIT(A), including the manner in which the material relating to the assessee’s agency business and commission income was considered at the appellate stage. The Tribunal examined the matter and, after considering the material placed before it, found no merit in the Revenue’s challenge to the relief granted by the learned CIT(A). The Tribunal specifically held that there was no merit in the claim of the Revenue that the CIT(A) had exceeded his jurisdiction while granting relief to the assessee and accordingly dismissed the Revenue’s appeal.

The facts of the present year, insofar as the nature of the material relied upon by the assessee and the basis of the relief granted by the learned CIT(A) are concerned, are substantially similar. The learned CIT(A) has considered the assessee’s agency agreements, commission income reflected in Form 26AS, the nature of the operational bank accounts and the reconciliation of the bank credits. The learned CIT(A) has also independently recorded findings on the substantive issue. Therefore, merely because certain material was furnished or elaborated upon during the appellate proceedings, it would not, in the facts of the present case, furnish a sufficient ground to set aside the relief which is otherwise supported by the material on record and by the decisions of the Coordinate Bench in the assessee’s own case.

Further, once the very basis adopted by the Assessing Officer for making the addition is found to be unsustainable, namely, the selective consideration of the commission received from only one principal while ignoring the commission received from other principals, there is no justification for restoring the matter merely for the purpose of undertaking the same exercise afresh. The learned CIT(A) has examined the relevant material and has recorded findings which are consistent with the findings already rendered by the Coordinate Bench in the assessee’s own case for the earlier years. The Revenue has not demonstrated any specific factual discrepancy requiring verification which could alter the conclusion on the substantive issue.

In these circumstances, respectfully following the decision of the Coordinate Bench in the assessee’s own case for assessment year 2018- 19, we find no merit in Grounds No.4 and 5 raised by the Revenue. The same are accordingly dismissed.

In the result, the appeal filed by the Revenue is dismissed.