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Facts
The assessee, engaged in SIM card distribution, did not file an income tax return for AY 2012-13. The Assessing Officer (AO) reopened the case based on information about cash deposits and Form 26AS showing commission payments. The assessee eventually filed a return declaring income, but the AO made an addition of Rs. 78,60,594/- on account of the difference between Form 26AS and declared income.
Held
The Tribunal noted that the assessee did not claim the TDS credit appearing in Form 26AS, and there was no corresponding credit in bank accounts. It also observed that the AO accepted that some transactions in Form 26AS were entered twice. Therefore, the Tribunal restored the matter to the AO for further inquiry and directed deletion of the addition if no corresponding credit is found.
Key Issues
Whether the addition made by the AO based on discrepancies in Form 26AS, where TDS was reflected but no corresponding income was credited to the assessee's account and not claimed by the assessee, is justified? Also, the validity of reopening under section 147.
Sections Cited
147, 148, 149, 151, 254(1)
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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of ld. CIT(A)/NFAC
dated 31.07.2024 for Assessment Year (AY) 2012-13. The assessee has raised following grounds of appeal:
1. THE ORDER BAD, ILLEGAL AND WITHOUT JURISDICTION 1.1 In the facts and the circumstances of the case, and in law, the appellate order framed by the Commissioner of Income tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, ['Ld. CIT (A)'] is bad, illegal and without jurisdiction, as the same is framed in breach of the statutory provisions and the scheme and as otherwise also is not in accordance with the law. 1.2 Otherwise also, in the facts and the circumstances of the case, and in law, the appellate order so framed by the Ld. CIT (A) is bad and illegal as the same is arbitrary and perverse.
2. NATURAL JUSTICE 2.1 The Ld. CIT (A) erred in not granting proper, sufficient and adequate opportunity of being heard to the Appellant while framing the appellate order. 2.2 It is submitted that, in the facts and the circumstances of the case, and in law, the appellate order so framed be held as bad and illegal, as: (i) and The same is framed in breach of the principles of natural justice;
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani
(ii) The same is passed without application of mind to the facts. 2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such action was called for.
WITHOUT PREJUDICE TO THE ABOVE
3. REASSESSMENT 3.1 The Ld. CIT (A) erred in confirming the action of the A.O. in initiating the reassessment proceeding and framing the assessment of the Appellant by invoking the provisions of section 147 r.w.s. 148 of the Act. 3.2 While doing so, the Ld. CIT (A) failed to appreciate that: (1) The case of the Appellant did not fall within the parameters laid down by section 147 r.w.s. 148 r.w.s. 149 & 151 of the Act; and (ii) The necessary preconditions for initiating the reassessment proceeding and completion thereof were not satisfied. 3.3 It is submitted that in the facts and the circumstances of the case, and in law, the reassessment so framed is bad, illegal, void and without jurisdiction.
WITHOUT FURTHER PREJUDICE TO THE ABOVE
4. ON MERITS ADDITION OF ALLEGED COMMISSION /BROKERAGE INCOME AS BUSINESS INCOME OF RS. 78,60,594/- 4.1 The Ld. CIT (A) erred in confirming the action of the A.O. in making addition of Rs. 78,60,594/-, being difference between the credit as per Form 26AS and the gross commission declared by the Appellant in the Profit and Loss Account, as business income of the Appellant. 4.2 While doing so, the Ld. CIT (A) erred in: (i) Basing his action only on surmises, suspicion and conjecture; (ii) Taking into account irrelevant and extraneous considerations; and (iii) Ignoring relevant material and considerations as submitted by the Appellant (iv) Applying into illogical conclusion and decision. (v) Not taking into consideration all the documents and explanation submitted during the scrutiny and the appellate proceeding. (vi) Not taking into consideration the return of income filed by the Appellant. (vii) Disallowing all the expenses incurred for the business purpose. 4.3. It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. 4.4 Without prejudice to the above, assuming but not admitting - that some addition was called for, the Ld. CIT (A) failed to appreciate that the computation of the addition made by the A.O. is arbitrary, excessive and not in accordance with the law.
5. LIBERTY The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”
Brief facts of the case are that assessee is an individual and proprietor of Prisha Enterprises, engaged in the business of distribution of SIM card and ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani recharge coupons as a distributor of Unitech Wireless (Tamilnadu) Private Limited. No return of income was filed by the assessee for Assessment Year (AY) 2012–13. The Assessing Officer was having information that the assessee has made cash deposit of Rs. 23,29,130/- and, as per Form 26AS, there was a transaction of commission payment of Rs. 1.99 crores, the source of which has not been declared by the assessee. The assessing officer after obtaining prior approval of the ld. Pr. CIT reopened the case of assessee on 07.03.2019. Notice under section 148 dated 07.03.2019 was served upon the assessee. In response to such notice, the assessee filed his return of income for AY 2012–13 on 09.10.2019 declaring income of Rs. 7,38,619/-. The Assessing Officer noted that a show-cause notice was issued to the assessee to explain the cash deposit and transaction in Form 26AS and while such credit of cash deposit in bank account should not be added to the income of assessee. In response to such show cause notice, the assessee furnished statement of bank account of Bank on India. On perusal of such statement in the bank account, the Assessing Officer (AO) recorded that there is credit entry aggregating of Rs. 3.09 crores. As per Form 26AS, the actual brokerage commission is shown Rs. 99.75 lakh, and most of the transactions are entered twice which is confirmed through traces / Form AS26. The assessee furnished copy of consolidated distributor payment of commission stating that during the year, the total turnover is Rs. 21,15,357/- by way of commission and brokerage only. The assessee also explained that he is distributor of Unitech Wireless (Tamilnadu) Private Limited and earned commission / brokerage of the ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani transaction on sale of recharge coupon and SIM Card. The commission to sub-distributor paid separately. The assessee along with sub-distributor after collecting business receipts deposited in his bank account and remitted to the account of Unitech Wireless (Tamilnadu) Private Limited.
The reply of assessee was not accepted by AO by taking view that assessee failed to furnish any agreement regarding his business and commission. The AO was of the view that from the reply of assessee it is not ascertained that how much profit earned by the assessee and how much business receipts sent to Unitech Wireless (Tamilnadu) Private Limited. The assessee failed to explain the business operandi and only furnished e-mail correspondence with Unitech Wireless (Tamil Nadu)
Private Limited, authentication of which has not been proved. The assessee failed to furnish balance sheet and expenses vouchers as claimed.
Accordingly, a fresh show cause notice was issued to the assessee vide in its dated 20.12.2019 requiring specific detail as mentioned in para 6.3 of assessment order. As per show cause notice, the AO required copy of balance sheet, profit and loss account, copy of bills on which commission was received with documentary evidence, on the basis of which amount was transferred to Unitech Wireless (Tamilnadu) Private Limited, confirmation of sub-broker that they have received commission directly from Unitech Wireless (Tamilnadu) Private Limited and copy of confirmation in the books of Unitech Wireless (Tamilnadu) Private Limited.
The AO recorded that assessee failed to substantiate with document about the genuineness of credit and no evidences furnished to justify brokerage
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani commission of Rs. 21,15,375/-. The assessing officer reduced the total receipt of commission, which is shown by assessee from the total credit shown in Form AS-26 (Rs. 99,75,969/- - Rs. 21,15,375/-) and worked out addition of Rs. 78,60,594/-) and added to the income of assessee as a business income.
Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written submissions. The submissions of assessee are recorded in para-4 of impugned order. In the written submissions, the assessee contended that he is individual and proprietor of Prisha Enterprises. He was engaged in the business of distributor of one of telecom operator namely Uninor which is registered in the name of Unitech Wireless (Tamilnadu) Private Limited. In response to notice under section 148, the assessee filed return of income on 09.10.2019 declaring total income of Rs. 8,51,554/-. The assessee has declared net income at Rs. 8,51,554/-. The cash deposit in the Bank of Rs. 23,29,210/- was against the cash collected for retailer’s payment and sale of recharge coupons. The retail recharge coupon was supplied by Unitech Wireless (Tamilnadu) Private Limited. The assessee was appointed as collecting agent for collection of cash/cheque on the basis of bills raised by Unitech. The cash collected was deposited in the Bank of India and Dena Bank’s current accounts. The amount collected by assessee was remitted / reimbursed to Unitech which is shown in the bank statement of Bank of India and Dena Bank. The commission of Rs. 2,98,015/- was separately shown in profit and loss account. The amount was remitted / reimbursed
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani on weekly basis. The similar system is followed by Airtel and Vodafone collecting agents, who are also paid commission on the collection of outstanding amounts. The assessee was also responsible for paper work of the client of new SIM Card and to furnish all such documents to telecom operator in order to activate the SIM card. On such activation, the assessee was getting commission ranging from Rs. 10/- to Rs. 50/- per SIM card.
The assessee received total activation commission of Rs. 18,17,360/- and other commission on retail customer of Rs. 2,98,015/-. The assessee also explained the nature of expenses which includes travelling and conveyance of Rs. 1,20,000/-, salesman commission of Rs. 3,29,460/-. The cash deposits in bank account are not of assessee. The assessee has received total commission of Rs. 21,15,375/- out of which Rs. 10,03,352/- in cash and balance was paid by cheque as has been shown in the expenses. The assessee submitted the sample copy of debit note and statement of total commission received. The assessee submitted that Unitech is now closed.
The case of assessee for A.Y. 2012-13 is reopened after seven years which bad in law. The old record is destroyed and scanned copies of documents are corrupted due to mal-functioning. The figures shown in Form AS-26 is wrong, the assessee has not earned such corresponding amount of alleged commission is reflected or credited in his bank statement. The addition by assessing officer of Rs. 78,60,594/- is not justified. No addition on the basis of mistake in TDS details can be added in the hand of assessee. To support his submission, the assessee relied upon the decision of Kolkata Tribunal in ITO vs Star Consortium in & C.O. No. 08/Kol/2020
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani dated 07.04.2021 wherein it has been held that AO cannot make addition merely on the basis of information available in TDS certificate or on account of mismatch of amount between AS26 and turnover shown by assessee in its profit and loss account.
The ld. CIT(A) after considering the submission of assessee upheld the account of AO. The ld. CIT(A) held that assessee failed to produce proper evidence that only portion of commission income was received and not as
per statement in Form 26AS. Form 26AS clearly shows that the commission received directly linked to the assesses PAN Number. If there was a mismatch, the assessee ought to have applied for correction. Further, aggrieved the assessee has filed present appeal before Tribunal.
We have heard the submission of learned Authorized Representative (ld.
AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld AR of the assessee submits that he has challenged the validity of reopening as well as addition on merit. The assessee during the F.Y. 2011-12 relevant to A.Y. 2012-13 was distributor of SIM card and prepaid recharge coupon of Unitech. The area of assessee was Dahisar (East and West), Mumbai. The assessee acted purely in the capacity of a collection agent. The recharge coupons were not independently owned by assessee but supplied by Unitech Wireless (Tamilnadu) Private Limited. The limited role of assessee was for collection of KYC papers of new SIM card corresponding sale proceeds of recharge coupon and to remit to the Unitech. The amount collected by assessee is shown in the cash book, copy of which is filed at page no. 53
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani to 71 for accounting purposes. The amount collected by assessee is deposited in his current bank accounts. Apart from recharge coupon, the assessee was also given work of distribution of SIM card to retailers within specified area. The assessee used to collected KYC document of perspective buyers and then to send to Unitech for activation. Against such activity, the assessee was remunerated through variable commission and performance based incentives depending upon adding of new customer and successful processing of their KYC documents. The similar modus operandi is applicable in another telecom operator like Airtel and Vodafone. During the year under consideration, there was aggregate deposit of Rs. 2.56 crores, which consists of deposit in Bank of India of Rs. 1.76 crores and in Dena Bank Rs. 80.01 lacs. Against these collections, the assessee reimbursed total of Rs. 3.01 crores to Unitech Wireless (Tamilnadu) Private Limited during the year. The apparent difference represents the amount received by assessee from customers, retailers by cheques which were also remitted to Unitech. During the year, the assessee only commission income was of Rs. 2,98,015/- which duly credited in the profit and loss account. In addition to, the assessee also received commission ranging from Rs. 10/- to Rs. 50/- per sim card, depending on the parameters fixed by Unitech Wireless (Tamilnadu)
Private Limited. For such business, the assessee received aggregate commission of Rs. 18,17,360/- which is also duly accounted as a part of business income. So far as expenditure is concerned the assessee incurred various expenses on manpower, sales commission, conveyance,
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani rent, interest and other operative cost. Some expenses such as salesman commission and travelling expenses were paid out of cash collected from retailers while other were settled through cheques or direct debits. The ld.
AR furnished the breakup of expenses of Rs. 4,85,725/- paid by way of cheques to Adde Flexione, Adecco Flexione Workforce Adecco Flexione W Sol, Frontline Business and Telemax Consultation. All expenses were incurred by way of cheques. The assessee also incurred expenses of Rs. 8,04,059/- which were incurred in various heads. Thus, the assessee incurred aggregate expenses of Rs. 12,89,784/-.
On the payment shown on TDS statement in Form 26AS, the ld. AR of the assessee submits that such TDS is wrongly shown in assesses PAN. TDS of Rs. 9,97,597/- is shown in assesses PAN. Being honest person, he has not claimed such TDS in his return of income as such amount is never credited in the bank account of assessee. Such TDS is inadmissible credit even though it is appearing in his Form 26AS. Unitech Wireless (Tamilnadu) Private Limited is a defunct and is not operational they have so many issues in Government department for not providing correct account and data. The assessee was not provided correct detail, thus, this was the main reason for not filing return of income in time. Unitech Wireless (Tamilnadu) Private Limited has not responded to various correspondences and communications, copy of numerous e-mail communications is filed on record, which clearly proves that the assessee was making endless efforts to remedial action of TDS issue with Unitech.
During the assessment, the AO insisting for distributor agreement,
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani original copy is with Unitech Wireless (Tamilnadu) Private Limited despite repeated follow. The manner in which the addition is made by assessing officer is absolutely wrong and baseless with there is no credit of Rs.
99,75,696/- in the bank of assessee and the assessee has not claimed corresponding TDS, there was no basis for considering such gross receipts. Otherwise in principle, the assessing officer accepted the actual gross receipt of Rs. 21,15,375/-.
On the ground of appeal on reopening, the ld. AR of the assessee submits that neither the reasons recorded nor copy of approval was provided to the assessee. The assessee in response to notice under section 148 filed his return of income on 09.10.2019 declaring income at Rs. 8,51,554/-.
During assessment, the assessee furnished complete details including details explained before this Bench. The ld. AR of the assessee submits that assessee has good case on merit as well as validity of assessment under section 147 which is made in gross violation of guidelines in decision of Hon’ble Apex Court in GKN Driveshaft’s (India) Ltd. vs CIT 259 ITR 19.
On the other hand, the ld. DR for the Revenue supported the order of lower authorities. The ld. DR for the Revenue submits that entries reflected in Form 26AS is directly have live link with PAN of assessee. The burden was on the assessee to prove that transactions are not related with assessee. The assessee failed to discharge his onus. So far as the reopening is concerned, the AO was having sufficient information to make a belief that income of assessee has escaped assessment as the assessee
ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani has not filed return of income despite huge credit in his bank account as well as credit of TDs in his Form 26AS. No such objection as raised before Tribunal, was raised before lower authorities. The ratio in case of GKN Driveshafts Ltd (supra) is not applicable on the facts of the present case.
We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that business activities of assessee are not in dispute. The sole ground for making addition is the TDS detail in the PAN of assessee. We find that the assessing officer in para 6.2 of his order has accepted the fact that certain transaction are reported twice in Form-AS26. The AO specifically recorded that “However, on further verification of 26AS, it is observed that the actual commission/brokerage made amounting to Rs. 99,75,969/- as most of the transactions entered twice which is confirmed through TRACES/Form 26AS”.
We find that the assessee has filed copy of Form 26AS wherein total TDS of Rs. 9,97,596/- is deducted against the PAN of assessee under section 194J. However, there is no corresponding credit in the bank accounts of assessee, on which TDS was made. Further, it is admitted fact that assessee has not claimed credit of such TDS. Considering the aforesaid factual and legal decision, the matter is restored back to the file of assessing officer, with the direction to make proper enquiry from payer, and in case if it is not feasible, examine the fact that if there is any corresponding credit vis-à-vis, the TDS shown Form 26AS and if no ITA 4889/Mum/2024 (AY 2012-13) Bimal Dilip Samani corresponding credit entry, delete the same. The AO shall keep in his mind that assessee has not claimed credit of such TDS. The assessee is also directed to furnish his reconciliation of commission’s income. The assessee is also directed to explain if there is duplicate entry in FormAS-
With the aforesaid observation, the matter is restored back to the file of jurisdictional assessing officer to pass the order afresh.
In the result, ground No. 4 of the appeal is allowed for statistical purpose.
So far as the validity of reopening is challenged by ld. AR of the assessee, we find that has not filed return of income in response to notice under section 148 within the time allowed in such notice. The assessee filed return of income almost after six months of service of notice. No such demand for supply of reasons recorded or seeking time for filing objection was raised before assessing officer. Thus, keeping in view, this specific fact of the case, we do not find any merit in the corresponding grounds of appeal. In the result, the grounds of appeal against the validity of reopening are dismissed.