RAJAGOPAL SELVARAJ,CHENNAI vs. ITO, NON CORP. CIRCLE-4(1), CHENNAI

The Assessee raised the following grounds of appeal : “1. The Learned CIT(A) and the Learned Assessing Officer have failed to understand the facts of the case and have passed an arbitrary order which is prejudicial, illegal, and against the principles of natural justice.

The Learned CIT(A) and the Learned Assessing Officer have wrongly passed an order which is contrary to the facts of the case and the evidence on record.

The Learned CIT(A) and the Learned Assessing Officer have unfairly overlooked the fact that this not the only year where the transactions with M/s. Kela & Company has taken place, Appellant has been an agent for the company since 2015 and has been undertaking such transactions for the company since then.

The Learned CIT(A) and the Learned Assessing Officer have unfairly overlooked the explanations, books of account, bank statements, and documentary evidences furnished by the Appellant during the course of assessment and appellate proceedings.

The Learned Assessing Officer and the Learned CIT(A) have failed to properly appreciate that the Appellant functioned solely as an agent/commission agent for M/s. Kela & Company, and had no right, title or beneficial ownership over the proceeds collected on behalf of the principal. The cash deposits in the Appellant's bank account represented sale proceeds received in a fiduciary capacity for the principal, and therefore did not constitute income in the hands of the Appellant.

The Learned CIT(A) erred in upholding the addition made by the Learned Assessing Officer in treating the trade-related receipts routed through the Appellant's bank account as unexplained income, despite the fact that the commission income earned therefrom had already been duly disclosed and offered to tax by the Appellant.

The Learned CIT(A) erred in upholding the addition made by the Learned Assessing Officer, which effectively results in double taxation of the same transactions, once by taxing the commission income and again by treating the gross receipts as unexplained, which is contrary to the undertaken business transaction and settled principles of taxation.

The Learned CIT(A) erred in upholding the addition made by the Learned Assessing Officer, having failed to understand and appreciate the modus operandi of the Appellant's business. During the impugned period, the Appellant sold lungis to traders near the Myanmar border but did not physically take part in the trades. During the time of demonetisation, the traders deposited the money payable to the Appellant directly into the bank account of the Appellant without intimating him about the same.

The Learned CIT(A) erred in upholding the addition made by the Learned Assessing Officer, who, based only on suspicion and surmise, disallowed the evidence and the claim of the Appellant.

Briefly, the facts of the case are that the appellant is an Individual engaged in the business of dealing in Lungis. The Return of Income for the Assessment Year 2017-18 was filed on 04.10.2017 disclosing total income of Rs.52,32,690/-. Against the said return of income, assessment was completed by the ACIT, Non Corp, Circle-6(10), Chennai (hereinafter called ‘AO’) vide order dated 23.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 at a total income of Rs.74,30,857/-. While doing so, the Assessing Officer made addition of Rs.21,98,167/- being the cash deposits in the Specified Bank Notes(SBN) during the Demonetization Period in the bank account rejecting the explanation of the appellant by holding that the appellant could not explain to the satisfaction of the Assessing Officer as to the source of the said cash deposits. Accordingly, the Assessing Officer made addition of Rs.21,98,167/- as unexplained money of the appellant.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A), who vide impugned order dismissed the appeal of the appellant by rejecting the explanation of the appellant that the cash deposits were directly made by customers in SBN at places like Manipur District.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The ld.Counsel submits that the ld.CIT(A)

We heard rival submissions and perused the material available on record. The solitary issue that arises for our consideration is that whether the ld.CIT(A) was justified in sustaining addition of Rs.21,98,167/- or not! The Assessing Officer made addition of Rs.21,98,167/- for the failure of the appellant to furnish cogent evidence in support of the sources of the cash deposits. However, during the course of proceedings before the ld.CIT(A), the appellant took the plea that the appellant was acting as a commission agent on behalf of Kela and Company and earning commission income. The money collected from the customers on behalf of the Kela and Company was directly deposited in the bank account of the Company in the places like Manipur. The commission income so earned was offered to tax. Therefore, since the account does not belong to the appellant, same cannot be taxed in the hands of the appellant. However, we find from the impugned order that the ld.CIT(A) had failed to deal with the submission of the appellant. The submissions made on behalf of the appellant requires verification of evidence and therefore, we are of the considered opinion that in order to meet the ends of justice, matter needs remand back to the file of Assessing Officer for denovo assessment in accordance with law after affording an opportunity of being heard to the appellant.

In the result, appeal filed by the Assessee partly allowed for statistical purpose. Order pronounced in the open Court on 12th June, 2026.