DCIT, CENTRAL CIRCLE - 4(1), KOLKATA, INCOME TAX DEPARTMENT, KOLKATA vs. SUVENDU KUMAR MAJUMDER, KOLKATA

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ITSSA 46/KOL/2024Status: DisposedITAT Kolkata24 February 2025AY 2020-218 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee was engaged in the business of cash transfers (hawala transactions) from one place to another in lieu of commission, as admitted by the assessee during the recording of his statement under Section 132(4). The Tribunal noted that the cash transactions, in the form of receipts and payments, could not be treated as money belonging to the assessee, even though the parties involved could not be identified due to the nature of hawala dealings. The Tribunal found that the assessee's job was to transfer cash from one place to another on a commission basis. Therefore, the CIT(A) was correct in partly allowing the appeal by applying the commission rate of 0.15% on the cash transactions and deleting the addition made by the AO under Section 69A. The Tribunal found no infirmity in the CIT(A)'s order. The addition of ₹25,32,94,167 was deleted, and the commission income declared by the assessee of ₹4,69,103 was accepted. The appeals of the Revenue were dismissed.

What were the facts?

The Revenue filed appeals against the orders of the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Years (AY) 2019-20 and 2020-21. The appeals were filed with a delay of 90 days, which the Tribunal condoned. A search action under Section 132(1) of the Income Tax Act, 1961, was conducted on the assessee, Suvendu Kumar Mazumder, on April 23, 2019. The assessee filed a return of income declaring ₹64,08,232. The Assessing Officer (AO) assessed the income at ₹24,30,27,870, making an addition of ₹24,14,19,640 under Section 69A for unexplained money based on peak cash credit from seized documents, ignoring commission income offered by the assessee. The assessee failed to provide details of parties from whom cash was received and to whom it was paid.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating cash credits as cash of other parties and deleting the addition of ₹25,32,94,167 made under Section 69A of the Income Tax Act, 1961, as unexplained money in the hands of the assessee, especially when the assessee furnished no explanation regarding the parties from whom such cash credits were availed and to whom it was facilitated? Assessee's Contention: The assessee argued that he acted as a carrier/handling agent for others' cash, facilitating fund transfers for a commission of 0.15%. This commission income of ₹44,61,807 was offered in the return. The assessee contended that he was not the owner of the money and therefore Section 69A was not applicable. Reliance was placed on judicial pronouncements like 'Shri Naresh Jhawar v. DCIT' and 'Smt. Aruna Sankhala v. The DCIT'. Revenue's Contention: The Revenue argued that the cash transactions found during the search could not be explained by the assessee regarding the source and destination of funds, justifying the addition under Section 69A. The Revenue prayed for the reversal of the CIT(A)'s order and restoration of the assessment order.

Which sections of the Income-tax Act were involved?

Section 132(1),Section 69A,Section 143(2),Section 142(1),Section 153A,Section 143(3),Section 69B,Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri A.K. Tulsyan, AR
For Respondent: Shri Subhendu Data, DR
Hearing: 05.02.2025Pronounced: 24.02.2025

Per Rajesh Kumar, AM:

These are appeals preferred by the Revenue against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 10.02.2024 for the AY 2019-20.

2.

At the outset, we note that there is delay of 90 days in filing the appeals by the Revenue for which the condonation petitions have been moved by the Revenue dated 10.05.2024 for both the assessment years, wherein it have been stated that in order to file the appeal, the files have to go through various stages in the administrative hierarchy for obtaining and approvals and hence, the delay of 90 days in filing the appeals. Considering the contents of the condonation and the arguments of the rival parties, we are quite convinced about the

ITA No. 45/KOL/2024

3.

The ground of appeal in ITA No. 45/KOL/2024 is extracted below:-

“That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the cash credits of assessee as per seized documents as the cash of other parties especially when assessee has furnished no explanation regarding parties from whom such cash credits were availed and to whom it was facilitated and in deleting the addition u/s 69A of the I.T. Act 1961, ₹25,32,94,167/- as per seized documents as 'unexplained money' in the hand of the assessee, without going into the merits of the case” 04. The facts in brief are that a search action us/ 132(1) of the Act was conducted on the assessee on 23.04.2019, and case of the assessee was selected for compulsory scrutiny. The assessee filed the return of income on 30.03.2021, declaring total income of ₹64,08,232/-, which was followed by the issuance of notices u/s 143(2) and 142(1) of the Act. There was no compliance to the said notices. Finally, a show cause notice was issued to the assessee and in response to the same, assessee furnished the submissions on 20th September, 2021 and 23rd September, 2021. Thereafter, taking into account the submissions of the assessee, the ld. AO assessed the income at ₹24,30,27,870/- u/s 153A read with section 143(3) of the Act vide order dated 29.09.2021, by making an addition of ₹24,14,19,640/- on account of unexplained money u/s 69A of the Act. The said addition was made by the ld. AO on the basis of peak cash credit by ignoring the fact that the commission income of ₹44,61,807/- was offered by the assessee for felicitation services of fund transfer directly in the return of income filed in response to notice u/s 153A of the Act. During the assessment proceedings, the ld. AO noted that the assessee has failed to furnish the details of persons from whom the amounts were received in cash

5.

Being aggrieved, the assessee preferred an appeal before the ld. CIT (A) and the ld. CIT (A) after taking into account the assessee’s contentions and submissions partly allowed the appeal by observing and holding as under:-

“6.2. Discussion and decision 6.2.1. I have gone through the assessment order as well as the submission of the assessee. The assessee is engaged in the business of providing services of transfer of funds from one party to another as a middle man. On examining the same, it is noticed that during the search and seizure operation conducted upon the assessee, the assessee had disclosed his commission income of Rs.4,69,103/- which was calculated by the assessee at 0.15% of the total turnover as per the seized document i.e., Rs.31,27,35,382/- disclosed u/s 132(4) of the Act. It is noticed that, during the assessment proceedings, the assessee was asked to produce details of all the payer as well as the receivers of the said fund transaction and the also the details of persons for whom the assessee had worked on commission basis. However, the requisite details and documents furnished by the assessee was not satisfactory to the AO and consequently, the AO had treated the peak credit of Rs.25,32,94,167/- out of the total credits attributed to the said seized documents as assessee’s undisclosed money u/s 69A of the Act and added back the same to the total income of the assessee. 6.2.2. Further, the assessee had stated that he was acting as carrier/handling agent of other’s cash from one place to another through middlemen for consideration i.e., for service charges/commission payable @ 0.15%. The assessee stated that in this type of trade, face to face meeting between the principal and agent is rare; rather, the principal keeps his identity undisclosed and in most of the cases, the principal and his clients (to whom moneys are handed over) are known by their pseudo names and all instructions are received through mobile phones or sometimes by messages. The principals select trustworthy agents who they know from their own source, will not misappropriate their money. Many times, agents (who work as handling agents) do not even know whether they act as direct agent or as subagent and/or whether and how many agents are there in the chain. Sometimes, the client/customers themselves come to the designated place of the agent for collecting money. Thus, commission is paid to the agent/sub-agent for holding cash and for carrying cash. Basically, commission is paid for taking the risk of keeping and carrying cash. The modus operandi of the assessee is facilitating cash transfers between various parties and earning commission on such facilitations of cash transfer. The assessee maintained rough notings of the parties from whom the cash is received and as well as delivered. Taking peak credit from middle man who is handling the cash of unknown parties is not justified. In this line of activities, there will be many layers of middle man. The commission received

7.

The ld. Authorized Representative vehemently submitted before us that assessee was rendering services as carrier, handling agents of others cash from one place to another middle man in lieu of commission at 0.15% which during the instant financial year amounted to ₹44,61,807/- which was duly offered to tax in the return of income filed. The ld. Authorized Representative submitted that the rate of commission was not in dispute and has been accepted by the ld. AO as evident from the assessment order. The ld. Authorized Representative submitted that it was stated before the ld. AO that the assessee was working as carrier, middle man / handler of money by transferring money from one place to another place for which the assessee was charging commission. Therefore, the assessee was never the owner of any money so as the invoke u/s 69A of the Act. The ld. Authorized Representative submitted that even during the search, the assessee has categorically stated in reply to question no.11, that he was engaged in the business of handing cash transfers (Hawala transactions) in any city of India, Bangladesh and Dubai to the beneficiaries in lieu of cash commission and the commission charged was 100 per lakh depending on the nature of transactions and city where the beneficiaries was located. Therefore, the ld. CIT (A) has rightly applied the commission in order to estimate the income and deleted the addition made by the ld. AO u/s 69A of the Act. In defense of his arguments the ld. Authorized Representative relied on the following decisions:

ii. Smt. Aruna Sankhala Vs. The DCIT in ITA No. 484/JP/2016 for A.Y. 2009-10 vide order dated 01.12.2017.

8.

After hearing the rival contentions and perusing the materials available on record, we find that assessee was undoubtedly engaged in the business of cash transfers (hawala) from one place to another place in lieu of commission as has been admitted by the assessee during the recording of statement u/s 132(4) of the Act, wherein in reply to question no.11, the assessee stated that he was engaged in the business of carrier/ transport of money from one place to another place in lieu of commission and therefore, there is no doubt that the business of the assessee was handling of cash from one place to another place on commission basis, which was stated to be ₹100 per lakh. Now, the issue before us is that whether the cash amounts which were found to be received and paid by the assessee were belonging to the assessee and could be added u/s 69A of the Act as unexplained investments. We note that obviously, the cash transactions by the assessee in the form of receipts and payments cannot be treated as money belonging to the assessee though the persons who gave the cash and to whom the cash was handed over could not be explained as the assessee was hawala dealers. But the fact remains that this is just a business of the assessee and his job was to transfer the cash from one place to another place in lieu of commission. Therefore, the ld. CIT (A) has correctly deleted the addition partly by applying the commission of 0.15% on the said cash transactions. Therefore, we do not find any infirmity in the order of

ITA No. 46/KOL/2024

9.

The issue raised in this appeal is similar to one as decided by us in ITA No. 45/KOL/2024 for A.Y. 2019-20. Accordingly, our decision would apply, mutatis mutandis, to this appeal of assessee in ITA No.46/KOL/2024 as well. Hence, the appeal of Revenue in in ITA No. 46/KOL/2024 is dismissed.

10.

In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 24.02.2025.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 24.02.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata

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