VENGALATHUR KUMAR,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

details from the assessee. Since the assessee denied having any bank account with ICICI Bank, Bombay, the A O made further enquiries with the bank and ascertained that the assessee was operating a Savings Bank account, Nungambakkam Branch, Chennai into which cash totaling Rs.61,00,965/- had been deposited on various dates. The assessee submitted an explanation stating that this account was opened for the exclusive purpose of deposit of receipts from intended purchasers of Oils through cash or transfer the advances and the same were withdrawn either at the time of purchase directly from sellers or taking back of their advances, these amounts are neither his income nor his money and hence the same has not been accounted in the accounts of his sole proprietorship concern and further, that the account was closed long time back as no such advances were received subsequently on account of deep fall in outside purchases. The assessee also claimed that these facts were brought to the notice of the ITO, Media ward III, Chennai by him, through his letter dt.20.4.2012. However, the AO observed that the amounts credited have been immediately withdrawn by ATM Card and the assessee has not furnished any evidence to-prove that these withdrawals were done by a third party. Not even a single confirmation from either the Buyer or Seller was furnished by the assessee to explain the transactions as described/claimed by the assessee. In view of this, the A O brought to tax the entire amount of Rs.61,00,965/-, as unexplained money u/s. 69A.

Aggrieved, the assessee filed an appeal before the CIT (A). The CIT (A) called for a Remand Report from the AO and after considering the Remand :- 3 -: Report, dismissed the appeal. Aggrieved, the assessee filed this appeal with following grounds :

• The Commissioner (Appeals) erred in holding that the total cash deposits in the bank account were the appellant’s unexplained investments.

• The learned Commissioner (Appeals) ought to have appreciated the fact, that the appellant was only a broker entitled to a commission for procuring edible oil on commission basis and that the money deposited in the bank account, represented the advances given by the purchasers to be passed on to the ultimate sellers through the appellant after taking his commission.

• The learned Commissioner (Appeals) ought to have appreciated the fact, that all the customers who had responded to the summons issued by the Assessing Officer had confirmed that their relationship with the assessee had been only a commission trader arranging supply of oil for a commission from different oil dealers in Chennai.

• The learned Commissioner (Appeals) ought to have appreciated the fact, each cash deposit in the bank account represented the advance received from the buyer and each following withdrawal represented the payment made to the ultimate seller.

ITA No.204/Mds/2017 :- 4 -:

• The learned Commissioner (Appeals) ought to have appreciated the fact, that the appellant was entitled to commission only which was admitted in the return, as income from his business and such admission was more than the peak of the cash deposit in the bank account.

• Even assuming, but not admitting, the deposits noticed in the bank statement was the appellant’s money, it is submitted that, The learned Commissioner (Appeals) ought to have appreciated the fact that every cash deposit entry in the bank account is immediately followed by a withdrawal entry and hence the theory of peak deposit and roll on effect ought to have been taken into account instead of adding the sum total of all the cash deposits as unexplained income.

ITA No.204/Mds/2017 :- 5 -: received and paid respectively from purchasers and sellers need not be reflected in the accounts. He submitted that the cash deposits found in the bank account are cash received from purchasers and cash withdrawals are cash paid to sellers of oil respectively. All the constituents to whom summons had been issued by the Income tax Officer had all confirmed this information and the Assessing Officer and the Commissioner (Appeals) had not disputed the same. The cash deposits found in the bank account in the circumstances ought not to have been added to the total income but the commission imbedded in them only should be assessed as income. The difference between the cash deposits and the cash withdrawals which represents the assessee’s commission had been truly reflected in the accounts and there is no omission of any commission.

There is no adverse material on this fact in the order of the Income Tax Officer and the Commissioner (Appeals). At the time of hearing, the tribunal wanted to know whether any invoices were drawn for the transactions done by the assessee as a commission trader. In this regard, it is submitted that the transactions done by the assessee did not attract any VAT and hence there was no necessity to draw any invoices in cases where there is no payment of any VAT tax. Hence, there are no invoices for the commission transactions done by the assessee. The AR submitted that during the enquiry done by the Assessing Officer with the customers, they have all confirmed their relationship with the appellant had been in the nature of a commission trader only. In this regard, he invited our attention to the copy of the sworn statement

ITA No.204/Mds/2017 :- 6 -: recorded by the A O with the partner of JPN Enterprises and also a copy of confirmation letter issued by JPN Enterprises. The department had been following the CBDT circular No.452 dated 17.3.1986 in letter and spirit in all cases of commission traders. Wherever the assesses explain that the cash deposits in the bank account represented receipts in the course of a Commission trade in commodities etc., the department is adopting only the profit element involved in the commission transactions and the cash deposits are not treated as unexplained money under section 69A. To prove his stand, the AR filed copies the orders passed in the case of N.

Thangavel by Income tax Officer Ward-I(2), Pollachi wherein the cash deposits were treated only as turnover in a commission business in coconuts and coconut pith and in case of Sulthan lbrahim by Income tax Officer Ward-2, Ramanathapuram where the cash deposits in the bank account were accepted as receipts in the course of business in running a petrol pump for a commission only. Thus, the AR submitted that the ITO’s across Tamil Nadu accepted this practice and assessed in accordance with the Board Circular. Further, the AR submitted inviting our attention to this tribunal order in dt 26.3.2015 that this tribunal while dealing with section 40(a) (ia) had endorsed the practice of admitting only commission in the profit and loss account where the nature of business is commission trade. The returns of income filed by the assesse from the very first year had stated clearly that the assessee’s source of income had been from commission trade only. The AR further submitted that to hold otherwise, the department has to collect

ITA No.204/Mds/2017 :- 7 -: corroborative evidences that the explanation of the assessee is not correct . In the absence of any specific information against the assessee, the addition made requires deletion. Alternatively, the AR pleaded that every cash deposit is followed by an immediate cash withdrawal in the bank statement. The Assessing Officer in the nature of transactions found in the bank account ought to have worked out only the peak deposit allowing set off of each previous withdrawal against each following cash deposit. Doing so, the peak deposit comes to only Rs.1,99,000/- on 28.11.2010. The income offered by the assessee is more than the peak deposit and hence the addition made is not correct. Per contra, the DR supported the orders of the AO & the CIT (A).

ITA No.204/Mds/2017 :- 8 -: that he was a broker in that line of trade. The assessee had been a commission trader right from the beginning as seen from the copy of first return filed for 2001-2002 on 16.6.2001 wherein he has reported that he is carrying on brokerage & commission business in purchase & sale of edible and non-edible oil etc. With these material, the assessee pleads , as canvassed supra, that his assessment has to be done on the lines on which similar cases were done by the other AO’s in accordance with the CBDT circular No.452 dated 17.3.1986. It is seen that CIT (A) decided the case mainly for the reason that the letters of 3 confirming parties were identically worded and for an apparent contradiction between the transaction in the assessee’s bank statement vis a vis the accounts with m/s JPN enterprises. On the other hand , the assessee pleads that all of them confirmed that he is a broker. The impugned transactions are from the intended purchasers for oils through cash or transfer as advances, amounts withdrawn are either at the time of purchase directly from sellers or to pay back the advances, the frequency of cash deposits and withdrawl of such deposits either in the same day or immediately thereafter and adequacy of withdrawals etc evidences his plea in his favour. Further, the assessee pleads that as per CBDT circular he was not required to maintain books and accordingly he did not maintain . In such circumstances, his plea should not be rejected based on the entries in others book . To hold otherwise, the department has to collect corroborative evidences that his explanation is not correct . In the absence of any specific information against the assessee, the addition :- 9 -: should not be sustained. In the facts and circumstances, we deem it fit to set aside the order of the CIT (A) and remit the issue to the AO for a fresh examination, de novo. The AO , after giving adequate opportunity, shall pass a speaking order.

Order pronounced in the Open Court on 23rd August, 2017, at Chennai.