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

The assessee is an individual engaged in the business of money transfer agency. The assessee filed its return of income for AY 2018-19 declaring a total income of Rs. 4,40,251/- on 21.08.2018. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessee submitted before the Assessing Officer (AO) that, as part of business the assessee collects money from customers in cash and deposits the same in assessee's account which is subsequently transferred to the client's account. The assessee further submitted that commission is charged based on the transaction amount which is declared as in the income tax return. The assessee submitted various details before the AO such as bank statement, Form 26AS containing details of commission earned and the tax deducted there from. The AO on perusing the details furnished by the assessee and Form 26AS noticed that the assessee has received a total commission of Rs. 8,84,029/- out of which Rs. 8,75,004/- was from M/s Vodafone M-Pesa Ltd. The AO did reverse calculation of the transaction amount based on the commission received from M/s Vodafone M-Pesa Ltd. and to conclude that there are other credits in the bank statement for which there is no explanation provided by the assessee. Accordingly the AO treated the balance amount credited to assessee's bank account as unexplained and made an addition of Rs. 2,48,16,756/- under section 68 of the Act. Before the CIT(A) the assessee submitted that the AO has considered only the commission income from M/s Vodafone M-Pesa Ltd. whereas the assessee received commission from two more parties namely (1) IDFC First Bank and (2) Hermes I-ticket Pvt. Ltd. which has not been considered by the AO. The assessee submitted all the relevant documents with regard to the commission income earned from these parties before the CIT(A). The CIT(A) after considering the submissions of the assessee deleted the addition by holding that “DECISION: “I have gone through the above submissions of the Appellant and have considered the facts and evidence on record. The appellant, Suraj Somaru Varma had filed his Return of Income on 12/07/2018 declaring an Income of Rs. 4,40,260/-. Later, the AO completed the assessment u/s 143(3) of the Income tax Act, 1961 by assessing total income at Rs. 2,52,57,016/- by adding an amount of Rs. 2,48,16,756/- under section 68 of the Income tax Act, 1961. Being aggrieved by the above mentioned order of the AO, the appellant filed the instant appeal. The AO stated that the case was selected for Limited Scrutiny assessment under the E-assessment Scheme, 2019 for Cash Deposit. Appellant was running an agency namely M/s Vijay Enterprises Prop. Sh. Suraj Somaru Varma, Apsara Taikishe Bajula Vishal Hospital Vhivandi, Thane and was engaged in the business of money transfer agent through Vodafone M-pesa Limited. During the assessment proceedings, appellant has submitted incomplete bank statement of current account of corporation bank i.e. bank statement from 01.04.2017 to 21.04.2017 and not for the remaining period 22/04/2017 to 31/03/2018. Further, as per information available, appellant has deposited cash amounting to Rs. 2,37,36,700/- in the aforesaid bank and the same was also reflected in the 26AS. The appellant had received commission of Rs. 8,75,004/- from Vodafone M-pesa Ltd which is 0.5% of total transaction amount which worked out to Rs. 17,50,00,800/-. However, the appellant had received total credit of Rs. 19,98,86,581/-. The appellant had total credits amounting to Rs. 19,98,86,581/- out which, the credited amount of Rs. 17,50,00,800/- seemed/appeared to be genuine credit in its bank account. Therefore, the total credited amounting Rs. 17,50,00,800/- was explained. In respect of the balance credited amounting to Rs. 2,48,16,756/- (Rs. 19,98,86,581/- -17,50,00,800/-), the appellant was specifically asked/ confronted to give explanation and justification of source of such cash deposit along with documentary evidence. However, on perusal of reply, it was noticed that the appellant had majorly given details of inter bank transactions among the various bank accounts maintained by him. That he had used it as a colourable device to make it appear to be genuine transactions. Therefore, credits amounting to Rs. 2,48,16,756/- (Rs. 19,98,86,581/- - Rs. 17,50,00,800/- ), remained unexplained cash credit in the appellant bank account. As the onus lied with the appellant to explain satisfactorily the source of such deposit, according to the AO, the appellant had not given any cogent reply and valid explanation and thus it was not found to be satisfactory in nature.

In the result, the appeal is allowed. In the result, the appeal is decided as above.

This order has been passed under Section 250 read with Section 251 of the Income Tax Act, 1961.”

The Ld. DR submitted that the CIT(A) while allowing the claim of the assessee based on the documents furnished before him did not call for a remand report from the AO. The ld. DR further submitted that the CIT(A) has allowed the appeal in violation of Rule 46A by admitting evidences without calling for remand report. The ld. DR also submitted that the CIT(A) has given the relief based on what is submitted by the assessee without proper examination more when the assessee is not maintaining any books of account.

The ld. AR on the other hand submitted that there is no violation of Rule 46A since the assessee has not submitted any additional evidence before the CIT(A). The ld. AR submitted that the fact of assessee receiving commission income from three parties is already part of the record and the assessee in the ITR filed has furnished the details pertaining to the commission received (page 25 of PB). The ld. AR further submitted that in the computation of income while giving the break-up of the income and the TDS claimed the assessee has clearly be provided the details of commission income from the three parties. The ld. AR further drew our attention to the copies of Form 26AS submitted before the AO (page 55 to 59 of PB) and also the written submissions made during the course of assessment (page 60 & 61 of PB). Accordingly, the ld. AR argued that no new additional evidence was submitted before the CIT(A) and therefore there is no requirement to call for a remand report. The ld. AR also drew our attention to the reconciliation statement as extracted in CIT(A)'s order where the commission income is fully substantiated by the Form 26AS of the three parties.

We heard the parties and perused the material on record. For the year under consideration the assessee has earned commission income of Rs. 8,84,029/- from the following three parties: (i) M/s Vodafone M-Pesa Ltd.

From the perusal of the above it is clear that the difference in the amounts credited in the bank account of the assessee which is treated as unexplained pertain to the money transactions carried out by the assessee for IDFC First Bank Ltd and Hermes I-tickets Pvt. Ltd. Therefore there is merit in the submission that the CIT(A) has considered the issue not merely based on the submissions but has examined the documentary evidences in support of the claim to give relief to the assessee. With regard to the contention that there is violation of Rule 46A we notice that the assessee details of commission received along with the party details, TDS are furnished in the ITR, computation of income, TDS return etc., which are part of submissions made by the assessee before the AO during the course of assessment. The assessee has also submitted before the AO that the assessee is a money transfer agent for these three companies. Therefore, in our considered view there is no merit in the claim of the revenue that the CIT(A) has exceeded its juri iction while giving relief to the assessee. In view of these discussions we see no reason to interfere with the decision of the CIT(A).

In result, the appeal of the revenue is dismissed.