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ITO vs Anish Balkrishna Joshi, Mumbai | s.143(3), 271B | ITAT Mumbai 2025 | BharatTax

INCOME TAX OFFICER 41(2)(1) MUMBAI, MUMBAI vs. ANISH BALKRISHNA JOSHI, MUMBAI

ITA 894/MUM/2025Status: DisposedITAT Mumbai10 June 2025AY 2013-14Bench: SHRI SANDEEP GOSAIN (Judicial Member), SHRI PRABHASH SHANKAR (Accountant Member)14 pages

AI SummaryDismissed

Facts

The assessee, a travel agent, filed his return of income. The Assessing Officer (AO) made additions to the total income, treating bank deposits and business receipts as undisclosed income. The CIT(A) partly allowed the appeal, restricting the addition. The Revenue appealed against this.

Held

The Tribunal upheld the order of the CIT(A). The bank deposits were considered business receipts, not undisclosed income. The penalty appeal by the Revenue was dismissed due to low tax effect.

Key Issues

Whether bank deposits constitute undisclosed income or business receipts, and whether the penalty imposed for non-compliance with Section 44AB is sustainable.

Sections Cited

143(3), 271B, 68, 44AB, 251

AI-generated summary — verify with the full judgment below

Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

Hearing: 05.06.2025Pronounced: 10.06.2025

O R D E R PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals preferred by the Revenue and Cross Objections of the assessee emanate from the orders of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai passed w.r.t. assessment order u/s 143(3) and penalty order u/s 271B of the Income Tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year 2013-14. Since the issues are identical and also the fact that the appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity.

2.

The grounds of appeal

are as under:-

1.

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in overlooking the explicit finding of the AO that the assessee failed to disclose all bank accounts during the assessment proceedings.

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee failed to satisfactory explain the account of credit found in the said bank accounts amounting of Rs. 1,70,37,539/-.

3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee failed to satisfactory explain the cash deposits u/s. 68 of the Act, of Rs. 1,46,77,930/.

4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in overlooking the undisclosed business receipts of Rs.82,00,509/-.

5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the business income of Rs. 25,37,237/- Le. 8% of turnover of Rs. 3,17,15,469/- without applicability of section 44AD of the Act.

4. In the subsequent appeal, the assessee submitted that he is in the business of tours and travels acting as travel agent for its number of clients. In the course of the said business activities, he often received cash towards cost of booking of tickets of flights, cost of tours to be arranged for the clients, cost of charges payable to various Govt. Agencies in connection with the passport, visa, reimbursement of various expenses, etc. These cash so received are deposited in the bank accounts and payments for tickets and visa charges, cost of tour arrangements through other travel agents and tour operators, etc., are paid. Sometimes, cash is deposited by clients from outside Mumbai as it may be inconvenient for such clients to send funds to his office here. The cash summary and bank summary filed before the AO clearly reflected these details. However, without assigning any reason for disregarding this explanation given by him, the AO made addition of the entire cash deposits in the bank accounts. It is submitted that the receipts in cash is common phenomena in case of travel agency business. Moreover, the clients can be from various geographical areas. The assessee's clients are basically from Mumbai, Pune, Nashik and many other locations within Maharashtra. In order to provide services to these clients, the parties were allowed to directly deposited cash in the bank accounts of the assessee from their locations. Thereafter, upon such deposits, the assessee would start making arrangements for booking of tour and tickets for respective clients. Under these circumstances, cash deposits could not be treated as income of CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai the assessee. In support of the contentions that the amount received by him represented cash received from various clients, he submitted bank statements of all the bank accounts held in the name of the his business concerns, statements of the bank accounts held in the personal name on sample basis, ledger account pertaining to various sources of income duly reflected in the profit and loss account and sample copies of receipts raised by him in the name of the clients from whom cash was received and deposited in the bank. It was also submitted that the assessee being a travel agent, his turnover constituted commission and other income earned by him. The profit & loss account filed clearly showed that the gross receipts in the form of commission, service charges, etc., were much less than the limit of turnover provided u/s. 44AB of the Act. It was also pleaded that the bank summary submitted before the AO clearly reflected payments to vendors much more than the above amount. These payments were made to the agents like, Akbar Travels, Globus Holidays, Riya Travels, etc., towards the cost of booking of tickets for clients, cost of tour, visa and other charges. These payments were fully supported by the documentary evidences in the form of receipts issued by the recipients of the amount. During the relevant year, he has maintained eight bank accounts out of which six were related to the business concern and the remaining two accounts were his savings bank accounts. In support of the same, the assessee has furnished the evidences related to carrying out as business activity such as invoices, ledger account CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai and the relevant bank account statement before the ld.CIT(A). However, these details being additional evidence submitted before the ld.CIT(A),he forwarded them to the AO calling for remand report. 4.1 In response the AO has submitted remand report which has been duly considered by the appellate authority who observed that the assessee has been engaged in the business of tours and travels and acting as a travel agent during the year. During the course of said business activity, he has received cash towards cast of booking tickets, flights, cost of tours to be arranged for the clients, cost of charges payable to the various government agencies in connection with the passport, visa, reimbursement of various expenditures etc from its clients. The said cash received were deposited in his bank accounts. Out of the said receipt, he had incurred expenditure by way of making payments to the various travel agents. Accordingly, he filed the return of income by declaring the total income of Rs.12,32,980/- by way of his business activity. Further, the assessee has submitted that the above bank accounts were duly accounted and the profit out of such business activity was offered to tax. It is also observed that the AO did not reject the books of account during the assessment proceedings. He further noted that he was engaged in the business of tour and travel agent and his turnover constituted income by way of commission and other income. Since, the gross receipts of the assessee was in the form of commission and service charges, he had shown the said receipt as net of commission & service CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai charges received as his turnover. On examination of the financial submitted by the assessee, the ld.CIT(A) observed from the Profit and Loss account that, the turnover by way of sale of tickets was shown as Rs. 1,87,20,930/-, whereas the total deposits in various bank accounts as per the assessment order during the year was amounting to Rs. 3,17,15,469/- (Rs. 1,46,77,930/- by way of cash deposits + Rs. 1,70,37,539/- by way of credits). Hence, the assessee was asked to reconcile the same. In response, he submitted that the turnover reflected in the Profit and Loss account comprised of the receipt from various customers in cheque as well as in cash towards the cost of tickets. It did not reflect any other receipts other than ticket cost. Out of the said turnover, he had earned commission income which was duly reflected in the Profit and Loss account. The assessee also submitted that apart from the sales of tickets, he also received amounts from the customers in the nature of out of pocket expenses, which included arranging tours for the customers, arranging tickets for the customers, providing passport and visa services and making arrangement for hotel booking, etc. In the course of rendering these services, many customers insist the assessee to pay government charges or any other cost related to travel services. Accordingly, they pay the entire amount of cost to him including service charges of the assessee. As such, several out of the pocket expenses and reimbursement charges were collected from the customers. Since some of these amounts collected were merely in the nature of reimbursement of expenses, the same CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai were not routed through the Profit and Loss account. Accordingly, the total collection of the funds from the customers included out of pocket expenses received by the assessee and the same were duly accounted for in the books of account and to the extent deposited in the bank, the same was forming part of the total cash and cheque deposits in the bank account. In view of the above, it was observed by the ld.CIT(A) that assessee’s turnover constituted income by way of commission on sale of air tickets and other income whereas, as admitted, he had also received ‘out of the pocket’ expenses and reimbursement charges from the customers and the same were not routed through the Profit and Loss account. It was noticed from the P&L account that, the gross profit of the travel agent business was shown as Rs.14,92,346/-and net profit of Rs.23,84,197/- which was inclusive of other income like income from partnership firm and interest income of Rs. 15,23,153/-. If, the said other income was excluded, the Net Profit of the assessee out of his business activity was only Rs.8,61,044/-, which is 2.7% of the total credit of 3,17,15,469/-. It was further noted that, the assessee had not submit the basis of arriving at ‘Other income’ such as income from service charges, passport income and other documentation charges. Since, he could not substantiate the basis of arriving the fee/charges collected for other services rendered as mentioned above and also the had not routed the ‘out of the pocket’ expenses and reimbursement charges received CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai from the customers through the Profit and Loss account, the ld.CIT(A) concluded that the estimation of the Net profit of the appellant @8% of the total credits found in his bank account would be reasonable by considering the nature of the business of the assessee. Hence, the difference in the Net Profit offered by the assessee amounting to Rs. 16,76,193/- (Rs.25,37,237/-, i.e 8% of 3,17,15,469/-(-) Rs.8,61,044/-) was to be added as additional income for the year. Accordingly, the AO was directed to add the said amount of Rs.16,76,193/- to the total income of the current year and delete the addition made in the assessment order amounting to Rs. 2,28,78,439/- on account of the cash deposits of Rs. 1,46,77,930/- u/s.68 of the Act and Rs.82,00,509/- on account of undisclosed business receipts and rework the total income. As a result, the appeal was partly allowed.