GAUTAM DUTTA,KOLKATA vs. ITO, WARD - 18(2), KOLKATA, KOLKATA

This appeal filed by the assessee is against the order of Ld. CIT(A)-16, Kolkata, dated 14.01.2016 for AY 2008-09. 2. Assessee’s appeal is against the order of Ld. CIT(A) in confirming the addition of Rs.11,19,503/- on account of income from undisclosed sources and in confirming the addition of Rs.4,03,449/- on account of income from unexplained investment.

2.1. Briefly stated facts are that on examination of the saving bank A/C No. 10598381932 and personal A/C no 1066181076 of the assessee Shri Goutam Dutta, the AO found various receipts in the S.B.I A/C No. 10598381932 amounting to Rs. 30,06,598/- and payment of credit card worth Rs. 17,42,923/-. The AO asked clarification from the assessee regarding the source of Rs. 12,63,675/-. Similarly, in the OD A/C No. 1066181076, there was total deposit of Rs. 4,03,449/-. The AO also asked the assessee for explanation regarding the source of this deposit. A show cause notice was issued by the AO as per para 10 of the assessment order. In reply to the show cause, the assessee submitted that he is a Gautam Dutta, AY 2008-09 salaried bank employee of State Bank of India and his wife Smt. Kabita Dutta is a team leader with M/s. Oriflame India Ltd. and that she had received commission income from M/s. Oriflamme India Ltd. and the money was infact routed through the bank account of assessee and that the money routed through his account does not partake the character of income. However according to the A.O. Mrs. Kabita Dutta is a mere name lender, but the real business is done by Mr. Goutam Dutta. The A.O concluded that all the business is carried out either from the joint S.B.I A/C 10598381932 as through Old A/C no 1006181076. The A.O. further observed that Mrs. Kabita Dutta maintained separate Bank Account, but no other amount was credited in the said account except the parking of commission income from M/s. Oriflame India Ltd. Hence, A.O. after considering the submission of the assessee discarded the contention of assessee and made addition of Rs.11,19,503/- as income from undisclosed sources and Rs.4,03,449/- as unexplained investment. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of AO. Aggrieved the assessee is before us.

2.2. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee, Shri Gautam Dutta is an employee of State Bank of India, Main Branch, Kolkata and had shown only income from “salary” in his return of income filed before the department. Due to AIR information, the case of the assessee was taken up for scrutiny. The A.O. observed that the assessee had seven credit cards, out of which six have “add-on” facility and it revealed from the statements of credit cards that total transaction made in the year was to the tune of Rs. 17,42,923/-. The AO also observed that the payments of credit cards were made mainly from the assessessee’s personal O/D A/c No. 10066181076 in SBI, PBB, Deshapriya Park Branch and from a joint savings bank a/c no 10598381932 in SBI, Hazra Road Branch which was jointly in the name of assessee and his wife. When asked by the A.O. about the credit card transactions, the assessee replied that his wife Smt. Kabita Datta was a Senior Gold Director of Oriflame India Ltd. and since products of Oriflame India Ltd. which are cosmetics are not sold in the open market through shops, the products can be obtained by the end customer only through the chain of agents. Even though the business model was explained to the AO and it was brought to the notice of the AO that the assessee’s wife was an income taxpayer on the commission income obtained

Gautam Dutta, AY 2008-09 from the M/s. Oriflame Ltd, the AO did not find the explanation of the assessee convincing and therefore, he made the addition. The Ld. CIT(A), we note that has given partial relief to the assessee, however confirmed the addition of Rs. 11,19,503/- and Rs. 4,03,449/-. We note from a perusal of A-17 of the Paper Book that Smt. Kabita Datta is a Senior Gold Director of Oriflame India Ltd. and she has team members in Bengal and remote corner of Sikkim (upto 500 agents). A perusal of A-18 to A-31 gives the following monthly reports about the monthly figure of purchase made through her, which we note down as under:

Rs. 169418/- (Anx: A18) “July 2007 Aug 2007 Rs. 161788/- (Anx: A18) Sep 2007 Rs. 350941/- (Anx: A18) Nov 2007 Rs. 408904/- (Anx: A18) Dec 2007 Rs. 312659/- (Anx: A18) Jan 2007 Rs. 184298/- (Anx: A18) Rs. 213719/- (Anx: A18) Feb 2007 Rs. 222609/- (Anx: A18)” Mar 2007

-------------------- Rs. 20,24,336/- -------------------- 2.3. We note that since the Oriflame India Ltd. does not give the products from shop, the purchases has to be made by the end customer through the down-line consultants / agents who in turn will place the order through their team leader, Smt. Kabita Datta (wife of assessee) who will in turn would place order with the Oriflame India Ltd. and then thereafter the products are delivered by Courier to the down-line consultants who will be handing over the products of the end customer. At times, since the agents are spread in the remote areas of Bengal and Sikkim, the team-leader Smt. Kabita Datta would place the order and make the payments through the credit cards add-on (with the assessee’s credit card which was a facility given to the assessee’s wife). So once the order for product is placed and payment is made by the assesse’s wife through credit card/ OD/ debit card, then product is delivered to end customer, then the down-line agent collects the cost of product from end customer and hands over the amounts to Smt. Kabita Datta who used to deposit the same in the assessee’s bank account where she had joint account with assessee as well as Gautam Dutta, AY 2008-09 in the personal account of the assessee. The following are the chain like network operation followed by the assessee’s wife which is given as under:

Step 1: The end customer i.e. general public advances to the downline / consultants / Sub agents & orders for the particular product of Oriflame India Pvt. Ltd. Step 2: The advances & list of products is summoned up & collected by team leader (Smt. Kabita Datta)

Step 3: Smt. KabitaDatta issues requisitions for the above products to Oriflame India Pvt. Ltd. in the name of respective sub/agents/downline consultants & sends payment through credit card/debit card to Oriflame India Pvt. Ltd.

Step 4: Oriflame India Pvt. Ltd. releases/despatches the physical products only after receipt of the full value of the products ordered. No credit is allowed by Oriflame India Pvt. Ltd.

Step 5: The products are dispatched by Oriflame India Pvt. Ltd. directly to the respective downline consultants through courier.

Step 6: The downline consultants in turn delivers the respective products to the general customers who have earlier ordered for it.

2.4. We note also that Smt. Kabita Datta has gone to Gangtok(Sikkim) and since there was no bank account for the Oriflame India Ltd. and since Oriflame India Ltd. would not release the product without receipt of payment, the credit card facility was utilised by the assessee’s wife as discussed above. In order to prove that she was in receipt of commission from Oriflame India Ltd., she produced the Form-16 issued by the Oriflame India Ltd. which tally with her income she disclosed in her tax return. The commission from Oriflame India Ltd. as per Form – 16A issued to Smt. Kabita Datta are as follows: Assessment Year Commission as per Form 16A TDS 2007-08 134217/- 6845/- 2008-09 290276/- 25689/- 2009-10 242205/- 24947/- 2010-11 298571/- 30274/- 2011-12 411525/- 41154/- 2012-13 565984/- 56598/- 2013-14 566397/- 56642/-

Gautam Dutta, AY 2008-09 2.5. We note from the eight months of business figure of team leader, Smt. Kabita Datta comes to Rs. 20,24,336/- and when an average is taken the business figure of the team leader of Smt. Kabita Datta would be Rs. 30,36,504/-. The following reconciliation is given by the assessee at page A-82 which is as under:

S.B. A/c No: 10598381932 OD A/c No: 11066181076 (ANX: A42 to A75 (ANX: A26 to A41) Gautam Datta & Sm. Kabita Datta Gautam Datta SBI: Hazra Road Branch SBI: Deshapriya Park Br.

Cash/AT Credit At point of Credit At M Card sale swipe card point of machine sale Debit Card swipe machin e Debit Card APR 2007 15000 86000 May 2007 90100 June 2007 129535 86249 July 2007 252000 26000 41000 Aug 2007 90000 41000 107000 176000 59880 Sep 2007 12000 69290 124307 46000 20000 Oct 2007 2000 170425 170822 17019 Nov 2007 216698 20598 10825 Dec 2007 193770 51060 135152.78 Jan 2008 8000 139426 10000 43314 Feb 2008 19000 89269 23000 238765 Mar 2008 6000 6,23,635 9,45,878 5,06,787 852480.78 107724 2.6. We note that the AO erred in taking note that accumulated payment to M/s. Oriflame India Ltd. was to the tune of Rs. 17,89,013/-. This figure is accumulated payment made to M/s. Oriflame India Ltd. only through credit card and not the total purchases from his wife under the assessment year under consideration i.e. A.Y. 2008-09. The learned AR submitted that some of the payments were made to the Oriflame India Ltd. through credit- card, some through cash payments and some through debit cards. We note the source of fund regarding the aforesaid bank account of assessee was the advances / deposits provided by the down-line consultants / sub-agents of Smt. Kabita Datta. Therefore, we note that the assessee’s wife used add-on credit card of assessee for placing the order for the products of M/s. Oriflame Pvt. Ltd. and thereafter, on receipt of the cost of the product by cheques or cash from the down-line agent was duly deposited in the bank account (in assessee’s

Gautam Dutta, AY 2008-09 personal account, joint account with wife) which is nothing but reimbursement of the payments made by assessee’s wife through credit card cannot be by any stretch of imagination by considered as income because, the reimbursed sum is to be given back to credit-card company. The income in this case is only the commission Smt. Kabita Datta received which is supported by Form -16 and TDS is duly credited for it. The wife of assessee who is working with Oriflame India Ltd. from year 2002 onwards, has used her husband’s bank account, joint account and OD facilities and credit card add-on facility while placing the order for the products from Oriflame India Ltd. on behalf of the end customers and made advance initial payment through credit card/cash/debit card and later on when the sum got reimbursed is credited back in the accounts cannot be termed as undisclosed income of the assessee who was only helping his wife do business utilizing his accounts/ credit card/ debit card and the wife taking liberty to do the business using the bank account of the husband being a Bank Officer. Therefore for the reasons and peculiar facts and circumstances of the case, the impugned addition of Rs. 11,10,506/- is directed to be deleted.

Order is pronounced in the open court on 13/06/2018.