What did the Tribunal hold?

The Tribunal restored both issues back to the AO for fresh adjudication. The AO was directed to consider the assessee's replies, verify the payments to clients, and examine the source of funds for bank deposits by calling for necessary evidence.

The assessee, while employed full-time, earned commission income by providing advisory services. The Assessing Officer (AO) made additions for undisclosed commission income and unexplained bank deposits, disallowing the deduction of 90% commission paid to clients and not properly considering the explanation for bank deposits.

What were the issues?

Whether the AO properly considered the assessee's explanation regarding commission income and bank deposits, and whether the disallowance of commission paid to clients was justified.

Sunil Bahl vs ITO | s.143(3) | ITAT Mumbai 2017

Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM

For Appellant: Shri Harshad Ajmera

For Respondent: Ms. Beena Santosh

Hearing: 26/04/2017Pronounced: 26/04/2017

आदेश / O R D E R PER R.C.SHARMA (A.M):

This is an appeal filed by the assessee against the order of CIT(A)- 46, Mumbai dated 31/08/2016 for the A.Y. 2011-12 in the matter of order passed u/s.143(3) of the IT Act.

The only grievance of assessee relates to addition made on account of difference between commission receipts as per 26AS and also on account of deposit in the bank account.

Rival contentions have been heard and record perused.

Facts in brief are that assessee was working as a full time employee at Rolta India ltd on salaried basis. In order to earn extra Income in F.Y. 2010-11 provided advisory services for ICICI Prudential Life Insurance Co. Ltd and earned commission of Rs.12,35,243.78. During the course of Mr. Sunil Bahl assessment AO found that assessee has not disclosed commission income in terms of Form 26 AS, accordingly assessee was asked to file the details. It was explained by assessee that he is required to pay 90% of the commission to the clients which is a general practice in insurance business. Accordingly same was claimed as deduction within gross commission income which was not allowed by the AO.

With regard to the AO’s query regarding cash deposited in the bank account it was explained that ICICI Prudential Life Insurance Co. offers additional incentives and rewards to complete targets periodically. However, it does not accept cash beyond Rs.20,000/-. When the deadlines are approaching, Assessee helped his clients in obtaining account payee demand drafts by accepting cash and arranging the DD on their behalf. For this purpose Assessee had opened a separate account with Thane Janata Sahakari Bank and deposited the cash so received from clients for and on their behalf only to arrange DD's on their behalf within the periodic time line of IClCI Prudential Life Insurance Co. This was also explained to the ITO in detail vide letter dated 23.12.2013. It appears that reply of the assessee has not been considered properly.

In the interest of justice and fair play, I restore both the issue back to the file of the AO by deciding afresh after giving due opportunity and considering the assessee’s reply. The AO is also at liberty to call for the person to whom assessee has paid back 90% of its commission so as to find the factual position. AO is also at a liberty to call assessee’s clients for whom assessee has deposited cash in bank for obtaining drafts, so

SUNIL BAHL,MUMBAI vs. ITO 26(2)(4), MUMBAI

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