KARTHIKEYAN SELVAM,NAGAPATTINAM vs. ITO, WARD-1,, NAGAPATTINAM

The assessee is an individual and engaged in the business of providing financial facilitation services to small retail customers by temporarily arranging funds for renewal of their gold loans pledged with Manappuram Finance Ltd. The assessee for providing such services is earning commission / service charges from customers @ 0.25% to 0.50% on daily cash deposits made on behalf of the customers. The assessee did not file the return of income for A.Y 2019-20. The A.O received information that there have been huge cash deposits in the bank account of the assessee and therefore reopened the assessment by issuing notice u/s. 148 of the Act. The assessee submitted before the A.O that he provides financial assistance to retail customers where he makes payments to Manappuram Finance Ltd. on behalf of customers through net banking and the customer would return the temporary loan in cash after renewing the jewel loan. The assessee further submitted that the cash received from customers is deposited in the bank on daily basis for the purpose of providing temporary loans and in this regard commission @ 0.25% is earned on daily basis. The A.O however did not accept the submissions of the assessee and proceeded to estimate the income @8% on the total receipts to make an addition of Rs. 24,43,950/-. On further appeal, the CIT(A) upheld the addition made by the A.O stating that the assessee failed to discharge the onus of providing the genuineness of the cash deposit and did not substantiate any verifiable evidence for the low margin commission income. The assessee is in appeal before the Tribunal against the order of the CIT(A).

We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee submitted that the nature of business the assessee is engaged in is not disputed by the revenue while making the addition @ 8%. The Ld. AR further submitted that the estimation of income @ 8% which is provided u/s. 44AD of the Act for trading activity whereas the assessee is a commission agent and therefore adopting the said rate as income is not correct. The Ld. AR also submitted Karthikeyan Selvam :- 3 -: that in the given case it is an established fact that the assessee is a small time financier providing temporary loans to retail customers of Manappuram Finance Ltd. to meet their interim need for renewal of jewel loans. The Ld. AR accordingly argued that the estimation of income @ 8% is very high in the line of business the assessee is engaged in. It is also brought to our notice that the assessee while filing the return of income in response to notice u/s. 148 of the Act has already declared commission income @1.5% and therefore no further addition is warranted. From the perusal of the order of the lower authorities, we notice that the nature of activity the assessee is engaged in has not been disputed by the revenue. Therefore, the limited issue for our consideration in the present appeal is whether the estimation of income @ 8% is justified given the nature of business the assessee is engaged in. Considering the overall circumstances and the facts peculiar to the assessee's case, we are of the view that income @ 4% would be reasonable. Accordingly direct the A.O to restrict overall estimation of income (including the income already declared by the assessee) @ 4%. It is ordered accordingly.

In the result, the appeal of the assessee is partly allowed. Order pronounced on 13th day of March, 2026 at Chennai.