SHALOO MAKHARIYA,ADILABAD vs. ITO, WARD -1 , ADILABAD

Succinctly stated, the assessee had filed her original return of income for AY 2016-17 on 10/10/2016 declaring an income of Rs.2,85,570/-. Subsequently, the AO based on information that the assessee during the subject year had deposited an amount of Rs.88,88,525/- with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd., initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 31/03/2021 was served

During the course of the assessment proceedings, the AO called upon the assessee to put forth an explanation regarding the source of the deposits of Rs.88,88,525/- made in her bank account with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd. In reply, the assessee had come forth with two-fold explanation regarding the same, viz., (i) cash proceeds sourced from the sale of agricultural produce as a commission agent on behalf of farmers at different places where the branches of the cooperative society bank were situated: Rs.63,88,525/-; and (ii) documentary evidence regarding the transfer entries: Rs.25 lakhs. It was submitted that on the cash sale proceeds of agricultural produce of Rs.63,88,525/- commission income of Rs.31,934/-, i.e., @ 0.5% on gross sale proceeds, was earned. Although, the AO accepted the explanation of the assessee regarding the transfer entries of Rs.25 lakhs, but rejected her claim that the amount of Rs.63.88 lakhs (approx.) represented the cash sales proceeds of agricultural produce that was sold by the assessee on behalf of the farmers in lieu of commission income. It was observed that as the assessee had failed to substantiate her said claim based on supportive documentary evidence, the same did not merit acceptance. Accordingly, the AO vide his order passed under section 147 r.w.s 144B of the Act, dated 28/03/2022 determined the income of the assessee at Rs. 66,74,093/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) who deliberating on the observations of the AO in the backdrop of the contentions advanced by the assessee found favour with her claim that the cash deposits of Rs.63.88 lakhs (supra) were the cash sale proceeds of agricultural produce of farmers sold by the assessee in lieu of commission income. Accordingly, the CIT(A) based on his aforesaid conviction determined the income of the assessee from the aforesaid stream of income @ 15% of Rs.63,88,525/- and partly allowed the appeal.

The assessee, aggrieved with the order of the CIT(A) has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.

Sri Narahari Biswal, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the CIT(A) had though rightly appreciated that the cash deposits of Rs.63.88 lakhs (supra) were the cash sale proceeds of the agricultural produce sold by the assessee as a commission agent on behalf of the farmers, but he had erred in quantifying the income element on the said amount @ 15% of the said amount which was highly exorbitant. The Ld. AR submitted that the solitary issue involved in the present appeal was the quantification of the 5 Shaloo Makhariya vs. ITO income generated from the aforesaid stream of income, i.e., commission agent of agricultural produce. Elaborating further on his contention, the Ld. AR submitted that involving identical facts, the case of the assessee for the immediately preceding year, i.e., AY 2015-16 was reopened under section 147 of the Act, wherein total credits of Rs.1,16,52,759/- were made in the bank account of the assessee with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd. The Ld.AR submitted that as the AO while framing the assessment vide his order passed under section 147 r.w.s 144B of the Act, dated 22/05/2023 for the said preceding year had accepted the explanation of the assessee that the said credits were the sale proceeds of agricultural produce carried out by the assessee as a commission agent on which he had earned commission ranging to 0.5% to 1.5%, i.e., Rs.58,264/-, therefore, on the same footing the income of the assessee in light of principle of consistency should be taken on the same basis.

Per contra, Shri G V Pavan Kumar, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied upon the orders of the authorities below.

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties.

Controversy involved in the present appeal lies in a narrow compass i.e., the quantification of the commission income earned by the 6 Shaloo Makhariya vs. ITO assessee on the cash deposits Rs.63,88,525/-, which had been held by the CIT(A) as the cash sale proceeds of agricultural produce sold by the assessee as a commission agent. As the Department has not assailed the characterization of the aforesaid cash deposits by the CIT(A) as the sale proceeds of agricultural sale proceeds, the said finding has attained finality.

In our view, there is substance in the Ld. AR’s contention that involving identical facts the AO while framing the assessment in the assessee’s own case for immediately preceding year, i.e., AY 2015-16 had not only accepted her claim that the credits of Rs.1,16,32,353/- in her bank account with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd were the sale proceeds of agricultural produce of the farmers on which she was in receipt of commission income, but had also quantified the commission income @ 0.5%, i.e., Rs.58,264/-. We are of the view that as the facts involved in the case of the assessee for the subject year remains the same, therefore, adopting a consistent approach, the commission income of the assessee on the cash deposits of Rs.63,88,525/-, i.e., sale proceeds of agricultural produce of the farmers deposited in her bank account can safely be taken @ 1% i.e., Rs.63,885.25/- (1% of Rs.63,88,525/-).

In the result, appeal filed by the assessee is partly allowed in terms of our aforesaid observations.

The Principal Commissioner of Income Tax, Hyderabad.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file