SURAJ SOMARU VARMA,BHIWANDI vs. ITBA, KALYAN

The assessee thereafter carried the matter in appeal before the ld. CIT(A) who has sustained the said findings and against the findings of the CIT(A), the assessee is in appeal before us.

During the course of hearing, the ld. AR submitted that assessee works as a business correspondence agent, as per RBI guidelines, with Vodafone M-Pesa Limited whereby he deposits cash received from his customers in his bank account and thereafter transfer the same to the respective M- Pesa accounts and earns commission income on such transfers. In this regard, reference was drawn to the RBI circular dated 28.09.2010 and circular dated 02.09.2013 as well as the agency agreement entered into the Vodafone M- Pesa Limited whereby the assessee was authorized to act as a business correspondence agent vide agreement dated 06.09.2016. It was further submitted that as per the RBI circular dated 08.11.2016, the assessee, being a business correspondence agent, was authorized to exchange specified bank notes during the period of demonetization and in pursuance of such authority, the assessee accepted cash from the customers and deposited the same into his account on the following date and it was accordingly submitted that such activity of accepting the cash and thereafter remitting the money to the respective bank accounts was strictly within the authorization granted to the assessee in terms of the agency agreement entered into with Vodafone M-Pesa Limited as well as the RBI circulars issued from time to time and it was in the Suraj Somaru Varma normal course of his business that such money was deposited into the assessee’s bank account and therefore the deposit so made cannot be regarded as unexplained so as to attract addition u/s. 69A of the Act. It was submitted that the cash deposits were fully accounted for in the books of accounts maintained by the assessee such as register for transactions entered into by the customers and same was duly submitted before the AO for necessary verification and in this regard, our reference was drawn to the finding of the AO at para 4.1 of the assessment order wherein the AO has noted the fact that the assessee has filed copies of register maintained for customers in the business of money transfer for the year under consideration. It was submitted that basis such review of the said register only, the AO has worked out a figure of Rs. 9,16,000/- which were deposited in the old currency. It was submitted that the said amount was collected from the customers on 10.11.2016 and deposited in the assessee’s bank account on 11.11.2016 and thereafter transfer to the Vodafone M-Pesa on 11th November and from there, to respective customers account on 11th, 12th and 13th November 2016. It was submitted that similar transaction were undertaken by the assessee even prior to the demonetization and as such all these transactions were in regular course of business of the assessee and are duly accounted for in the books of accounts. Further, reliance was placed on the decision in case of Salem Sree Ramavilas Chit Company (P) Ltd. Vs. Deputy Commissioner of Income Tax [2020] 114 Suraj Somaru Varma taxmann.com 492 (Madras) as well as in case of Abhishek Nair Vs. Income Tax Officer [2023] 152 taxmann.com 500 (Surat- Trib.), wherein the cash deposited were treated as normal transactions in due course of business and the additions made by the AO were deleted.

It was further submitted that the AO has made disproportionate addition vis-à-vis the actual earnings of commission income which was just limited to 0.5% of the transfer value. It was submitted that the assessee has received an income at Rs. 3,38,740 on such money transfer business which has been duly declared in the return of income and no adverse finding has been recorded by the AO. It was accordingly submitted that there is no basis for making the addition over and above the returned income by the AO and the addition so made by the AO and sustained by the ld CIT(A) be directed to be deleted.

The ld. DR has been heard who has relied on the order passed by the AO as well as that of the ld. CIT(A). It was submitted that there were total cash deposit to the tune of Rs. 50,11,900/- made by the assessee during the relevant financial year and out of that, the AO has made an addition of only an amount of Rs. 9,16,000/- being deposit in old currency and in respect of which the assessee has failed to explain nature and source of such deposits. It was accordingly submitted that there is no infirmity in the order so passed by the AO and which has been rightly confirmed by the ld. CIT(A).

We have heard the rival contentions and purused the material available on record. The limited issue under consideration relates to nature and source of cash deposits amounting to Rs 9,16,000/- made by the assessee in his bank account during the period of demonetization. The assessee has explained that he has been authorized to act as a business correspondence agent for Vodafone M-Pesa limited and is authorized to collect and transfer funds on behalf of its customers. It has been further explained that he has been authorized to collect and exchange specified bank notes during the period of demonetization as per the RBI circular dated 08.11.2016. It has been further explained that in pursuance of such authorisation, he has accepted cash from his customers and deposited the same into his account on the following date. To corroborate the said explanation, the assessee has submitted copy of agency agreement entered into the Vodafone M-Pesa Limited dated 06.09.2016 and copies of RBI circulars dated 28.09.2010, 02.09.2013 and 08.11.2016. In addition, the assessee has submitted a register which has been maintained by him containing particulars of the customers from whom the cash was received and has submitted that cash so received from the respective customers on 10.11.2016 were deposited in the bank account on 11.11.2016 and thereafter transferred to the Vodafone M-Pesa account on 11th November 2016 and from there to respective customers account on 11th, 12th and 13th November 2016. We therefore find that the assessee has put forward the requisite Suraj Somaru Varma explanation that the money so received has been received from his customers in regular course of his money transfer business and is part of total cash collection and deposits of Rs 50,11,900, the particulars of the customers and the money so collected has been duly documented and submitted for necessary verification, that the money has been deposited on the very next date of collection and thereafter, on the next date, the money has been transferred to Vodafone M-Pesa account. Considering the explanation and documentation so placed on record, we see no reason but to accept the explanation so submitted by the assessee whereby he has duly explained the nature and source of such cash deposits. In light of the same, the addition so made by the AO and sustained by the ld CIT(A) is hereby set-aside and the AO is directed to grant the necessary relief to the assessee.

In the result, the appeal so filed by the assessee is allowed.