VIJAYKUMAR GOLANA,MEDAK vs. ITO., WARD-1, SANGAREDDY

Assessee preferred appeal before the Ld. CIT(A). In respect of the addition of Rs. 8.14 lakhs under section 69A of the Act, assessee pleaded that it represents the collections made against distribution of recharge cards, which the Ld. CIT(A) rejected on the ground that the assessee did not produce any details like receipts/invoices to establish that the deposits had business relations, and further held that it is against human probability. Similarly, Ld. CIT(A) rejected the contention of the assessee that under the agreement, the assessee does not get 8% of profit in his business, stating that the assessee failed to produce any agreement to that effect. Lastly, in respect of the disallowance of the claim for deduction under chapter VIA of the Act also Ld. CIT(A) looked for evidence and in its options confirmed the addition.

Assessee is, therefore, before me in this appeal contending that in spite of proper explanation offered by the assessee, the authorities went on to make addition of Rs. 8.14 lakhs under section 69A of the Act in respect of the cash deposits made in the bank and the assessee is permitted to receive the payments towards pre-paid mobile top-up to a limit of Rs. 500/- per top-up. It is further contended that estimation of income of assessee at 8%, when the assessee is entitled only for commission, cannot be sustained. Learned AR also submitted that the assessee has evidence to support the claim for deduction under chapter VIA of the Act.

Per contra, learned DR submitted that there is no dispute that the assessee deposited Rs. 8.14 lakhs during demonetization period and to establish any business relation to such amount, it is for the assessee to establish the same by producing that the assessee in fact purchased such pre-paid recharge coupons and since the assessee failed to produce such evidence, the Revenue authorities are justified in treating such an amount as unexplained deposits and making addition under section 69A of the Act. In respect of the estimate of business profit, learned DR submitted that it is for the assessee to prove that he does not get any profit over and above the commission he receives by producing agreement for such commission and till today, assessee did not produce any such agreement and, therefore, the Revenue authorities are justified in estimating the business profits. Lastly, he submitted that no evidence is produced before the learned Assessing Officer or the Ld. CIT(A) to support the claim for deduction under chapter VIA of the Act.

I have gone through the record in the light of the submissions made on either side. Firstly, coming to the addition under section 69A of the Act, according to the assessee, it is business receipt and under the operational aspects of the scheme of demonetization, it is permissible for the assessee to receive cash towards pre-paid mobile top-up. On a perusal of the list of the exempt categories, I find that the cash receipts towards pre-paid mobile top-up to a limit of Rs. 500/- per top-up, was permissible and such payments were also permissible. This fact is taken into consideration by a Co-ordinate Bench of the Tribunal in the case of Rajesh Rana vs. ACIT in by order dated 26/10/2023. Since the business of the assessee is not in dispute, nor his turnover in the business at Rs. 1.38 crores, asking for a specific receipt or voucher will not fit in the approach of the Revenue authorities. Since business and business income of the assessee are accepted, I am of the view that there is nothing suspicious in respect of this Rs. 8.14 lakhs and I consider the same as business income, and direct the learned Assessing Officer to delete the addition so made.

Coming to the estimate of commission, learned Assessing Officer excluded Rs. 8.14 lakhs covered under section 69A of the Act from out of the total turnover of the assessee at Rs. 1,37,52,034/- and estimated the profit at 8% on the balance of Rs. 1,29,38,034/-. Since now I am considering Rs. 8.14 lakhs also as business receipt, the entire deposit of Rs. 1,37,52,034/- has to be considered as business receipt. Grievance of the assessee is that estimate at 8% is too high when compared to the commission he receives. The assessee, however, does not produce any document to say that he is receiving only commission, but not any profit. At the same time, no basis is established to justify the estimation at 8%. Having regard to the facts and circumstances of the case, I consider that estimate at 4% is just and proper and will meet the ends of justice. I direct the learned Assessing Officer to estimate the business income of the assessee at 4% on Rs. 1,37,52,034/-.

Coming to the last addition of Rs. 1,82,300/- by disallowing claim of the assessee for deduction under chapter VIA of the Act, assessee produced two receipts issued by LIC and submits that they are in the process of collecting some more receipts to justify the claim. Since this requires verification at the end of the learned Assessing Officer, I set aside this issue to the file of the learned Assessing Officer for verification of the evidences produced by the assessee, after affording an opportunity to the assessee of being heard.

In the result, appeal of the assessee is treated as partly allowed for statistical purposes.