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Income Tax Appellate Tribunal, ‘D’ (SMC
Before: SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
These are appeal and cross objection of the Revenue and assessee respectively directed against an order dated 28.02.2017 of ld. Commissioner of Income Tax (Appeals), Salem.
Facts apropos are that assessee a fruit trader had filed his 2. return of income for the impugned assessment year disclosing income of �4,31,720/-. Ld. Assessing Officer was having information that :- 2 -: & CO. 100/2017 there were substantial deposits in the bank accounts maintained by the assessee. It seems there were number bank accounts maintained by members of a family headed by one Shri. K. Lakshmanan (in short ‘KL family’) of which assessee was one. Assessee was required to explain the source of the deposits in his bank account. In reply, assessee filed what has been called an ‘’overall cash flow statement’’ of KL family. Contention of the assessee was that he was a commission agent for grapes. As per the assessee, deposits made in the accounts were proceeds on sale of grapes, made on behalf of the growers. As
per the assessee such amounts were immediately withdrawn from the bank after deducting 3% commission which was due to him. The withdrawn amounts, as per the assessee were distributed to the grape owners.
3. Ld. Assessing Officer examined Shri. K. Lakshmanan after issuing a summon u/s.131 of the Income Tax Act, 1961 (in short ‘’the Act’’). Shri. K. Lakshmanan in his deposition on 13.10.2011 stated that assessees in KL family had made advance payments to the grape growers and labour was arranged by the assessee’s concerned for harvesting, weighing, packing, loading, unloading, etc. According to him, grapes were collected from growers and supplied to twenty three wholesalers of Tamilnadu and Kerala. After considering the above :- 3 -: & CO. 100/2017 deposition of Shri. K. Lakshmanan, ld. Assessing Officer required the assessee to explain with evidence the credits shown in the cash flow statement of the KL family. Ld. Assessing Officer also required the assessee to file name and address of the cultivators to whom advances were paid, monthwise purchase and sale of grapes and details of his employees. Ld. Assessing Officer also required the assessee to give the list of grape growers with whom he had transacted, details of the hired vehicles through which grapes were transported, names of the commission parties who paid the money, details of expenditure incurred etc. Reply of the assessee was that he had not maintained any regular books of accounts.
Ld. Assessing Officer after studying the reply of the 4. assessee, came to a conclusion that assessee could not explain a difference of �27,50,000/- in transfers between his M/s. Axis Bank account, Salem Branch and Axis bank account in Sangli Branch. As per ld. Assessing Officer there were unexplained withdrawals of �36,02,836/- from Agricultural Cash Credit account maintained by the assessee with M/s. Axis Bank, Salem. Further, according to the ld. Assessing Officer, there was a difference of �.17,30,872/- between the amounts credited in assessee’s accounts with Axis Bank, Salem and his claim of receipts from grape sales made on behalf of cultivators. As per :- 4 -: & CO. 100/2017 ld. Assessing Officer assessee’s claim that he was only a commission agent could not be accepted. He came to a conclusion that assessee was a trader in grapes and not a commission agent. Conclusion of the ld. Assessing Officer as it appears at para 15 of his order is reproduced hereunder:-
‘’1. As seen from the above, the assessee though maintains books of accounts for controlling the affairs of his business, he is deliberately not furnishing any details/ information to enable the A.O. to compute the correct taxable income. This fact is further fortified by the sequence of events narrated above. The assessee's total deposits in all the bank accounts are around 6,81,58,394/-. In the context of the above, the assessee's claim that he has not maintained any books of accounts and returned income without any basis is against the economic realities of life.
In view of there being no other alternative, the Income of the assessee is estimated on the basis of cash deposits available in the bank account of the assessee. At this juncture, the assessee has made a plea to offer his peak cash deposits in the Saving Bank account from May 2008 to October 2008, the period being off season for harvesting of grapes at Sangli, as his additional income.
The above plea of the assessee has been considered. The assessee’s contention that the grapes will be sold through Tamilnadu and the cash collection will be deposited in the Salem branch. The same ill be transferred to Sangli and the cash withdrawal will be paid to the Grape Growers. Even though the assessee failed to furnish/ provide even single information/ evidence and his offer as additional income for the non Sangli Season CASH DEPOSIT is found to be acceptable. Therefore the same has been accepted and the authorised representative was requested to file a working for the Peak Cash deposit from May 2008 to October :- 5 -: & CO. 100/2017
2008. 4. The authorised representative filed a peak 29-12-2011. working on The Authorised Representative has failed to appreciate the facts of the case and filed an peak credit working with an opening balance of Rs.(- ) 18,99,971/- on May 2008. This cannot be peak of the May 2008 to October 2008. 5. The peak credit for the cash deposits made by the assessee at Salem Branch Axis Bank SB A/C. number 170010100055949 has been worked out as under Date Cr. 21 May 2007 10,00,000 06 June 2008 4,00,000 24 July 2008 8,50,000 29 July 2008 6,50,000 22 August 2008 4,00,000 29 August 2008 3,50,000 14 October 2008 2,00,000 17 October, 2008 2,00,000
₹40,50,000/- Total
6.Since the assessee has failed to discharge his onus of explaining the cash deposits with corroborative evidence, the peak credit of ₹40,50,OOO/- has been assessed to tax. The ratio decedendi of the decision of the Apex Court in CIT vs Chinnathamban (2007) 162 Taxman 4S9(SC) is, inter alia, relied on’’.
Thus the assessment was completed by making an addition of �40,50,000/- being the peak credit in account of the assessee with :- 6 -: & CO. 100/2017 Axis Bank, for the months of May, June, July, August, September and October, 2008.
Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). Argument of the assessee before the ld. Commissioner of Income Tax (Appeals) was that he was only a commission agent for selling grapes owned by various grape growers at Sangli. According to the assessee, he was entitled only for commission and nothing else. He also relied on a Post Harvest Profile of Grapes, issued by Government of India, Ministry of Agriculture, Department of Agriculture & Cooperation, Directorate of Marketing & Inspection for his argument that as a commission agent, the commission that could be earned was only 3%. Assessee also pointed out that in the case of one other member of the KL family, ld. Commissioner of Income Tax had invoked Section 263 of the Act setting aside a similar assessment. According to the assessee, even though the said order of the ld. Commissioner of Income Tax was setaside by the Tribunal, on a reasoning that the issue was pending before the ld. Commissioner of Income Tax (Appeals), there was a clear finding by the ld. Commissioner of Income Tax in his order under section 263 of the Act that assessee was only a commission agent. :- 7 -: & CO. 100/2017
Ld. Commissioner of Income Tax (Appeals) after taking into account all the details filed by assessee held that assessee was only a commission agent. However, according to him, assessee’s claim of commission income at 3% of the turnover could not be accepted. After taking into consideration the Post Harvest Profile of Grapes, issued by the Government of India, ld. Commissioner of Income Tax (Appeals) held that 5% of total receipts of �2,47,50,000/- admitted by the assessee could be considered as his income. He directed the ld. Assessing Officer to complete the assessment by taking commission income of the assessee at �12,37,500/- and deleted the addition of �40,50,000/- made by the ld. Assessing Officer.
Now before me, ld. Departmental Representative strongly 7. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that no evidence whatsoever was furnished by the assessee for its claim that he was only a commission agent. According to the ld. Departmental Representative Shri. R. Lakshmanan in the statement given u/s.131 of the Act had stated that he was supplying grapes to twenty three wholesalers of Tamilnadu and Kerala. According to him, assessee had deposited money in cash in Axis Bank account and his withdrawals were also made in cash. Ld. Departmental Representative pointed out that assessee himself had filed a letter accepting peak :- 8 -: & CO. 100/2017 cash credit in his saving bank account between May, 2008 to October, 2008 as his income. As per ld. Departmental Representative, the addition of peak deposits during the months of May, 2008 to October, 2008 was made by the ld. Assessing Officer considering the admission of the assessee. According to him, the only adjustment done by the ld. Assessing Officer was ignoring a negative opening balance of �18,99,971/- shown by the assessee, since no evidence was filed by the assessee for such negative balance. According to him, when assessee was unable to show any evidence for his claim that he was only a commission agent, peak credit was rightly considered by the ld. Assessing Officer as income of the assessee. In any case, according to him, the ld. Commissioner of Income Tax (Appeals) had given relief to the assessee based on a lettered dated 12.11.2010 captured Post Harvest Profile of Grapes, Government of India, Ministry of Agriculture, Department of Agriculture & Cooperation, Directorate of Marketing & Inspection which was never produced before the ld. Assessing Officer. According to him, the ld. Commissioner of Income Tax (Appeals) fell in error in allowing relief to the assessee.
Per contra and in support of his Cross Objection, ld. Counsel for the assessee submitted that assessee had filed before the ld. Assessing Officer during the course of assessment proceedings, letter :- 9 -: & CO. 100/2017 from one large grape cultivator of Sangli, Maharashtra wherein it was confirmed that assessee was only a commission agent receiving 3% commission. According to him, assessee had never agreed before the ld. Assessing Officer that peak cash credit in his Axis Bank account during the period May, 2008 to October, 2008 could be considered as his income. According to him, Post Harvest Profile of Grapes, issued by Government of India on 12.11.2010, was a public document and it was clearly stated therein that the commission that could be earned by the commission agent varied between 4 to 7%. As per ld. Authorised Representative, the said profile did not cover the State of Tamilnadu. Hence, as per the Ld. Authorised Representative, the confirmation by one of the large grape cultivators that commission earned by the assessee was only 3% ought not have been ignored by the ld. Assessing Officer as well as the ld. Commissioner of Income Tax (Appeals). As per the ld. Authorised Representative though the ld. Commissioner of Income Tax (Appeals) was justified in considering total receipts for working out the commission earned by him, 5% commission income fixed by the ld. Commissioner of Income Tax (Appeals) was on the higher side. :- 10 -: & CO. 100/2017
Ad libitum reply of the ld. Departmental Representative was that assessee did not have any evidence for the deposits in his bank account and therefore ld. Assessing Officer was justified in treating the peak cash credit of the assessee as income. Reliance was placed on the judgment of Hon’be Apex Court in the case of CIT vs. K.
Chinnathamban, 292 ITR 682.
I have considered the rival contentions and perused the 10. orders of the authorities below. Ld. Assessing Officer did not accept the claim of the assessee that he was a commission agent. As per the ld. Assessing Officer assessee could not prove that he was a commission agent. Assessee as per ld. Assessing Officer, was a trader in grapes. There is also a finding by Ld. Assessing Officer that assessee was not maintaining any books of accounts and had failed to support the transactions reflected in the combined cash flow statement filed by Shri. KL family, of which assessee was a member.
In the opinion of the ld. Assessing Officer deposits of the assessee during the period from May, 2008 to October, 2008 in his Axis Bank account stood unexplained. Ld. Commissioner of Income Tax (Appeals) on the other hand accepted the contention of the assessee that he was a commission agent based on an order of the ld. Commissioner of Income Tax u/s.263 of the Act in the case of :- 11 -: & CO. 100/2017 another member of the KL family. Ld. Commissioner of Income Tax (Appeals) held that 5% of the total receipts could be considered as income of the assessee as a commission agent. One of the main contention of the ld. Departmental Representative is that assessee itself had offered the peak cash credit during the months of May, 2008 to October, 2008 as income. What was been stated by the assessee in the letter filed by the assessee during the assessment proceedings appears at para 14.1 of the assessment order and this is reproduced hereunder:-
‘’Regarding the cash deposits in S.B. accounts between May, 2008 to October, 2008 being non Sangli season, the assessee submits that they are also commission sale receipts from Bangalore grapes, Panner grapes sales from our lands at Kambam, agricultural income, receipts from 1 lorry (please refer Ans to Q5 in the statement recorded from K. Lakshmanan on 13.10.2011). This is also similar to the transactions at Sangli. These credits have also been taken into consideration to arrive at the commission income’’.
I am of the opinion that above statement does not amount to an admission that peak credit in assessee’s bank account during the months of May, 2008 to October, 2008 could be considered as income.
It is not disputed by the Revenue that assessee had filed a letter from one Shri. Sharad Mahadev Jadhav of Sangli, Maharashtra who was a grape cultivator confirming that Shri. K. Lakshmanan was marketing their produce and 3% commission was being given. :- 12 -: & CO. 100/2017
Even if, I accept the contention of the ld. Assessing Officer that assessee could not prove his business as a commission agent, there is nothing on record to prove that assessee was a trader in grapes. Shri. K. Lakshmanan who as per the ld. Assessing Officer was the head of the family and was the major player in this business had in his deposition clearly stated that he was only a commission agent.
This is clear from the paras 4.1 to 4.3 of the assessment order which is reproduced hereunder:-
‘’4.1 During the course of assessment proceedings It is stated by the assessee that the entire details related to the grape business are fully known to Shri K.Lakshmanan only. Accordingly a summons u/s131 is issued and served on Shri K.Lakshman. He appeared on 13- 10-2011 and sworn statement has been recorded from him. 4.2 Shri K. Lakshmanan has deposed that they (KL Group) are making advance payments to the growers and the labour is arranged by the assessee group for harvesting, weighing, packing, loading & unloading, arranging & payment - Lorries for transport, weighing the market needs and choose the appropriate place to market the grapes, after calculating the demand and supply of the grapes. He supplies the grapes to 23 wholesalers of Tamilnadu & Kerala. He will furnish the names and address of the wholesalers on 14-10-2011. 4.3 After the supply, he collects the sale proceeds and deposits in the Savings Bank account of the respective assessee of his group in Salem. The amount was transferred to Sangli Axis Bank account and withdrawn by self cheque. The withdrawn cash was disbursed to the Grape :- 13 -: & CO. 100/2017
Growers after getting signature from the grape growers. And he will submit the disbursal note in first week of November 2011. The names and address of the 150 grape growers will be submitted during the first week of November 2011’’.
Therefore, I am of the opinion an evidence available on record could support only the case of the assessee that he was a commission agent.
If the ld. Assessing Officer was of the opinion that assessee was only a trader and not a commission agent, I cannot fathom why he chose only the peak cash credit in the months of May, 2008 to October, 2008 for addition, ignoring the total receipt of �2,47,50,000/-.
That apart, the ld. Commissioner of Income Tax in a 12. proceedings u/s. 263 of the Act in the case of another assessee of the same group had made the following observations:-
‘’They reiterated that no books of accounts have been maintained and in this line of trade, it is not possible to maintain books of accounts. However, they have been able to produce rough diary regarding dispatch of materials from Sangli and have tried to corroborate the same with the sale of these materials through various agents and receipt of money and subsequent remittances to the growers. This entire exercise could not be done with reference of A. Y.2009-1010 as the assessee was not in a position to recover these primary records. The records for January 2014 were called for have a better understanding of the assess's business. The assessee has been able to :- 14 -: & CO. 100/2017 establish before me that these transactions are only as a Commission Agent, they have requested for the addition of peak credit be deleted. I find no substance in their arguments as has been clearly pointed out in the Assessment Order’’.
No doubt, above order of the ld. Commissioner of Income Tax was set aside by the Tribunal for a reason that the issue was pending before the ld. Commissioner of Income Tax (Appeals) and there could be no revision u/s.263 of the Act. However, what I observe is that another assessee in the same family was able to establish that he was only a commission agent. Thus, I am of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in considering the assessee to be a commission agent.
Coming to the issue of rate of 5% adopted by the ld. 13.
Commissioner of Income Tax (Appeals) for estimating the commission income, what I find is that ld. Commissioner of Income Tax (Appeals) had relied on a letter dated 12.11.2010 called Post Harvest Profile of Grapes, issued by Government of India, Ministry of Agriculture, Department of Agriculture & Cooperation. There is a table in the letter which reads as under:- :- 15 -: & CO. 100/2017 State Market Commission Sales Licence fee � Per Other fee tax annum charges 1.Andhra 1% 4% -- �1000 to �3000/- Pradesh for 5 yrs depends on value of transaction in the financial year
2. Haryana 2% 5% -- �60/- HRDF-2%
3. Karnataka 1.5% 5% Nil Trade �200/- Commission agent �200/- Broker �100/- Processor �100/- Exporter �100/- Stockist �100/- Retail Trader �25/-
Maharashtra 1.0% 7% -- �200/- Octroi- �10/- per trip in 24 hrs. 5.Punjab 2.0% 5% -- �100/- No doubt, the State of Tamil Nadu does not find a mention in the above table. However, atleast in three states of which one is abutting Tamil Nadu, the commission rate has been considered as 5%. In the case of Andhra Pradesh the commission was estimated at 4%. Only in Maharashtra a higher percentage of 7% was taken. In such circumstances, I am of the opinion that applying 5% on the total receipts of the assessee for estimating his commission income will be on a higher side. Though the letter from the cultivator filed by the :- 16 -: & CO. 100/2017 assessee mentions a commission rate of 3%, in the absence of any books of accounts, in my opinion, applying the industrial rate applicable to Andhra Pradesh which is a state abutting to Tamil Nadu is more appropriate. I therefore direct the ld. Assessing Officer to consider 4% of �2,47,50,000/- as the commission income of the assessee, while confirming the order of ld. Commissioner of Income Tax (Appeals) deleting the addition of �40,50,000/-.
In the result, appeal of the Revenue is dismissed whereas 14. the Cross objection of the assessee is partly allowed.
Order pronounced on Friday, the 27th day of October, 2017, at Chennai.