YOGESHWAR SHARMA,NEW DELHI vs. ITO WARD 43(1), DELHI

Being aggrieved the order of the Ld. NFAC the assessee is in appeal before the Tribunal.

The ld. AR of the assessee has submitted that lower authorities erred in making addition of Rs. 22,13,60,055/- under section 69A without appreciating the fact that such money was collected by assessee on behalf of another companies from their customers as collection agent in lieu of commission. He submitted that the sole basis of the addition is that cash deposits were not explained to the satisfaction of the AO and there is no finding either by the AO or by the CIT(A) that the cash belonged to the assessee. It was further submitted that mere deposit of cash in a bank account cannot lead to an inference of unexplained income. The bank statement itself demonstrates a complete pass through of funds, with no accumulation or personal use. Gross collections handed in an agency capacity cannot be taxed as income. It was further submitted that it is a settled law that only profit embedded should be taxed instead of gross cash deposit/credits and in a recent decision of the Hon’ble Jurisdictional Bench in the case of DCIT vs. MKF Logistics (P) Ltd. (2025) 181 taxmann.com 740, has taken a similar view. It was further submitted that assessee is duly assessed in immediately preceding previous year (AY 2017-18) for the same reason that is “large cash deposit”. This assessment was completed by accepting returned income only after detailed enquiry which is evident from the notices issued u/s. 142(1) from time to time. There is no change in nature of business and modus operandi as well during the year under consideration. In view of above, it is submitted that the addition in dispute may be deleted by allowing the appeal of the assessee.

Ld. DR relied upon the orders of the authorities below.

We have heard the rival contentions and perused the material available on records. It is an admitted fact that cash in question was collected from retailers / customers of the principal companies in the ordinary course of agency business and was deposited into the appellant’s bank account only as a matter of operational convenience, followed by immediate transfer to the respective principal companies. The assessee retained only a nominal commission of about 0.20% which was duly offered to tax. It is noted that both the lower authorities have not disputed the existence, identity, or genuineness of the principal companies, nor has it been alleged that the assessee carried on any independent business generating such cash. In absence of any such adverse finding, the entire cash collection cannot be treated as unexplained money in the hands of the assessee. It is settled law that where an assessee acts as an agent, the gross receipts collected on behalf of the principals do not constitute income of the assessee, and only the commission earned can be brought and as a result, the addition in dispute which represent gross collections and do not real income, is therefore, unsustainable. It is noted that assessee receives the charges/ commission against the service rendered as well as the cash on behalf of its principal and the cash so received is deposited into the assessee account and they pay it back to the respective companies through banking channels amount of service. The addition represents gross receipts and not real income of the assessee and taxing the entire cash deposit is against the settled principle. The assessee’s real income is only the commission earned, which has already been offered to tax and accepted in earlier and subsequent years. It is settled law that where an assessee acts as an agent, only commission income is taxable and not the entire turnover passing through his bank account. It is noted that during the hearing the Ld. DR argued and alleged that the assessee had not furnished any details during the course of the assessment proceedings among others and the said submission of the Ld. DR is not factually correct, however, the assessee during the course of assessment proceedings, duly furnished complete details including details of the principals for whom the assessee has worked, and details of the retailers from whom cash collections were made. Ld. AR drew our attention towards copy of bank statement at page no. 61 to 198 of the Paper Book and after carefully perusing the same, we note that the bank trails clearly establishes pass – through nature of funds. The bank statement clearly demonstrates that cash is deposited and transferred to principal companies without any abnormal time gap and also there is no accumulation of cash balance, there is no evidence of personal use of funds by the assessee. The lower authorities have ignored the principle of consistency of earlier assessment year, including the scrutiny assessment, the same business model was accepted and only commission income was taxed. In the assessment year 2017-18 the detailed inquiry was carried out by the AO based on the detailed enquiry the assessment order was passed by accepting the returned income.

We find that the Coordinate Bench of the Delhi Tribunal in the case of DCIT vs MKF Logistics (P) Ltd. (2025) 181 Taxmann.com 740, on identical issue, has observed as under:-

In the background of the aforesaid discussions and respectfully following the binding precedent, as aforesaid, in our considered view the addition in dispute deserve to be deleted.

In the result, appeal of the assessee is allowed in the aforesaid manner.