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Assessee represented by Shri Parin Shah, CA Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 18/04/2023 Date of pronouncement 30/06/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 26/07/2022 for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. The order passed by NFAC is bad I law and required to be quashed.
2. Ld. NFAC erred in law and on facts in confirming estimation of income @ 8% made by AO without pointing out any defects in books of accounts or without rejecting books of account ignoring fact that appellant has already offered actual commission income in books of accounts.
3. Ld. NFAC erred in law and on facts in giving direction to AO to estimate commission income @ 8% considering cash deposited between 01/06/2016 to 22/12/2016 without assigning any reason ignoring fact that appellant has already offered actual commission income in books of accounts.
Nareshbhai Vijaybhai Gamit Vs ITO 4. Ld. NFAC ought to have consider the fact that appellant is retailer and quantum of cash transactions in retail mobile recharge business cannot be ruled out..
5. Without prejudice to the above and in alternative, ld. NFAC ought to have estimated reasonable profit considering nature of business and prevailing market practices of identical business.
Charging of interest u/s 234B, 234C is not justified.
Initiation of penalty proceedings u/s 270A is justified.”
Perusal of record shows that the impugned order was passed by the ld. CIT(A)/NFAC on 26/07/2022, however, the present appeal is filed only on 22/11/2022. Thus, there is delay of 59 days in filing appeal before the Tribunal. The assesse has filed his affidavit for condonation of delay. The learned Authorised Representative (ld. AR) of the assessee submits that the order of ld. CIT(A)/NFAC was delivered in Spam folder of assessee, thus the assessee could not realize about passing of order by ld. CIT(A). When the department initiated recovery of outstanding demand, the assessee checked the web portal and found that appeal of assessee has already been decided by granting part relief. The assessee immediately checked his e-mail and forward the appeal order to his consultant for further action. The assessee was suggested to file appeal before the Tribunal. The assessee on getting proper advice, filed the present appeal on 22/11/2022. The ld. AR of the assesse submits that delay in filing appeal was neither intentional nor deliberate but for the reasons that the order was received in Spam folder in his e-mail and the assessee has no intention to file appeal belatedly. The assessee has good case on merit and likely to succeed in case, delay is condoned. On Nareshbhai Vijaybhai Gamit Vs ITO the contrary, the revenue will not suffer any prejudice if they have any merit in their favour. To support such contention, the ld. AR of the assessee relied upon the decision of SMC Bench of Surat Tribunal in Sureshbhai Sukhabhai Mistry Vs ITO in order dated 31/03/2023 and in Nasim Vazir Shaikh Vs ITO in ITA No. 77 & 78/Srt/2023 order dated 17/03/2023.
On the other hand, the learned Senior Departmental Representative (ld. Sr.DR) for the revenue submits that the assessee is casual in taking timely action for filing appeal before the Tribunal. The assessee has cooked up his own story for seeking condonation of delay.
I have considered the submissions of both the parties and find that the impugned order was passed by the ld. CIT(A) on 26/07/2022 and the present appeal is filed on 22/11/2022. The registry of this office has issued a defect memo pointing out a delay of 59 days in filing appeal. The assessee has already filed his affidavit for condoning the delay narrating the circumstances that the order of NFAC/CIT(A) was delivered in his Spam folder of e-mail and realized about dismissal of appeal only on initiation of recovery by the department. The ld. AR of the assessee made his submission of similar lines. I find that the assessee has deposited all such fact on oath by filing his affidavit. I find that the delay in filing appeal seems to be neither intentional nor deliberate as the assessee is not going to be benefitted in filing appeal Nareshbhai Vijaybhai Gamit Vs ITO belatedly. Therefore, considering the facts and circumstances of the case and the cause of delay explained by ld. AR of assessee, I find that the assessee has reasonably explained the delay, therefore, the delay in filing appeal is condoned. Now adverting to the merit of the case.
Brief facts of the case are that the assessee is an individual, filed his return of income for A.Y. 2017-18 on 30/09/2017 declaring income of Rs. 3,04,147/-. The case was selected for scrutiny. In para three (3) of assessment order, the Assessing Officer recorded/noted that the assessee is running his business in the name of M/s Vatshal Enterprises and deriving commission income from Idea Cellular Limited. During the year under consideration, the assessee deposited cash of Rs. 1.68 crore in his bank account. On confronting such fact, the assessee explained that he is engaged in the business of mobile recharge, coupons, top up, talk time by giving online credit of talk time and top up to various retailers and received cash from them which was deposited in his account. The assessee was asked to furnish the contract agreement with Idea Cellular Limited, ledger confirmation from the books of Idea Cellular Limited, details of commission received and ledger of sales of recharge coupons. The Assessing Officer recorded that the assessee failed to furnish any contract agreement with Idea Cellular Limited, details of transaction, commission received, party wise details of cash received and confirmation from Cellular company. The Assessing Officer on the Nareshbhai Vijaybhai Gamit Vs ITO basis of such observation, issued show cause notice as to why the commission income of Rs. 13,50,745/- should not be estimated by applying commission @ 8% of total cash deposit. The assessee filed his reply and submitted that he has received commission of Rs. 2,87,352/- from Idea Cellular on which TDS was deducted. The assessee furnished copy of Form AS26. On further perusal of assessee bank account with ICICI bank, the Assessing Officer noted that from 01/06/2016 to 22/06/2016, the cash collected was transferred to same account as no name is appearing in the bank statement. However, from 26/12/2016, fund was frequently transferred to Idea Cellular Limited as evident in the bank statement. The Assessing Officer was of the view that in absence of any bank book, ledger account of Idea Cellular Limited or commission of account from books of Idea Cellular Limited, commission income declared by assessee is not reliable. The Assessing Officer estimated income of assessee @ 8% of total cash deposit of Rs. 1.68 crore. The assessee has already declared commission income of Rs. 2,87,352/- in his return of income, thus the difference of commission income of Rs. 10,63,393/- (13,50,745 – 2,87,352) is added in the total income of the assessee.
6. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee submitted that he is an individual, running his business in the name of Nareshbhai Vijaybhai Gamit Vs ITO proprietorship concern. The assessee is in the business of mobile recharge coupons, top up, online recharge for various retailers. The assessee derived commission income from Idea Cellular Limited which is duly disclosed in the return of income. During the course of assessment proceedings, the assessee submitted annual accounts, bank book, bank statement and cash book. The Assessing Officer recorded that no details were furnished by assessee and estimated 8% of net profit of total cash deposit in bank without rejection books of account and without pointing out any defect. The Assessing Officer ignored all the evidences and made addition on predetermined approach.
7. The ld. CIT(A) after considering the submission of assessee held that the assesse has submitted full chart showing the details. However, the Assessing Officer in para 4 of assessment order, recorded that the assessee failed to submit party wise details, which was ignored by Assessing officer. The assessee also submitted month-wise cash flow statement, however, the Assessing Officer did not consider it properly. The Assessing Officer required to submit agreement with Idea Cellular Limited. Idea Cellular Limited is a large company having PAN India presence and they did not enter into agreement with retailers or distributors. Idea Cellular Limited is simply paying commission of transaction with them and deducted TDS, duly reflected in Form 26AS. The assessee furnished copy of such AS26. The assessee furnished one Nareshbhai Vijaybhai Gamit Vs ITO declaration from Idea Cellular Limited which is sufficient to prove that the assessee is a distributor of Idea Cellular Limited, such declaration is filed on record, there is no law which required existence of agreement for such business transaction. The assessee also submitted ledger account, copy of which is furnished before him. The assessee submitted monthly transaction report which proved the genuineness of transaction so there is no need for separate agreement. The Assessing Officer cannot resolve the estimate without properly justifying the same. The Assessing Officer doubted the cash deposit between 01/06/2016 to 22/12/2016 as there were transferred to some accounts where the names of such transferee is missing in the bank statement. However, from 26/12/2016, the Assessing Officer accepted that the funds were frequently transferred to Idea Cellular Limited which is evident in the bank account. The ld. CIT(A) on the basis of aforesaid observation, directed that at the most, the estimate can be made in respect of cash deposit between 01/06/2016 to 22/12/2016 and not for the entire financial year and granted partial relief to the assessee. Further aggrieved, the assessee has filed present appeal before this Tribunal.
I have heard the submissions of ld. AR of the assessee and the ld. Sr.DR for the revenue. The ld. AR of the assessee submits that complete details of summary account of Vatshal Enterprises from 01/04/2016 to 17/03/2017 was submitted before the Assessing Officer. The assessee Nareshbhai Vijaybhai Gamit Vs ITO also furnished certificate of distributor issued by Idea Cellular Limited certifying that Vatshal Enterprises is their distributor since May, 2016. Thus, the assessee furnished complete details of his bank account. The assessee also furnished cash flow statement of Vatshal Enterprises. The assessee received commission @ 2% of total transaction of Rs. 1.68 crores. The assessee also furnished the details of demonetized currency deposited by assessee in his account, copy of such details furnished by assessee’s banker i.e. ICICI bank, Vyara dated 29/03/2017. As per such certificate, the assessee deposited 504 currency note of Rs. 500/- and 161 currency note of Rs. 1000/- thereby total deposit of Rs. 4.13 lacs. The assessee furnished complete details of cash deposit from 01/04/2016 to 8/11/2016 of Rs. 1.05 crore as a cash deposit, from 09/11/2016 to 30/11/2016 Rs. 29.82 lacs and from 31/12/2016 to 31/03/2017 of Rs. 33.94 lacs. The assessee has declared commission income of Rs. 2.87 lacs which is actual commission received from Idea Cellular Limited. Such figure is reflected in the TDS data of AS26. The Assessing Officer estimated the commission income without rejecting the books of account or pointing out any defect in the books of assessee. The ld. AR of the assessee submits that the Hon'ble Madras High Court in PCIT Vs. Marg Ltd. (2017) 84 taxmann.com 52 (Mad)/396 ITR 580 (Mad) held that profit of assessee cannot be estimated without rejecting Nareshbhai Vijaybhai Gamit Vs ITO its books of account. The ld. AR of the assessee also field copy of following decisions: (1) Shree Sanand Textiles Industries Ltd. Vs DCIT dated 06/01/2020. (2) Mistry Niranjan Ishwarbhai Vs ITO ITA No. 252/Ahd/2021 dated 28/09/2022. (3) J.M. Wire Inds Vs CIT (2012) 8 taxmann.com 297 (Delhi) (4) R.S. Diamonds India P Ltd. Vs ACIT ITA No. 2017/Mum/2021 dated 26/07/2022 (5) Anantpur Kalpana Vs ITO (2022) 138 taxmann.com 141 (Bang Trib) (6) Mrs. Umamaheswari Vs ITO ITA No. 527/Ahny/2022 dated 14/10/2022. (7) ITO Vs Sri Tatiparti Satyanarayana ITA 76/viz/2021 dated 16/03/2022.
On the other hand, the ld. Sr.DR for the revenue supported the order of ld. CIT(A). The ld. Sr.DR submits that the assesse has not explained the source of entire cash deposit. As per details furnished by assessee, the assessee has explained the source of Rs. 1.36 crore out of total credit of Rs. 1.68 crore thereby Rs. 36.00 lacs is not explained. As per details of total transaction aggregate of which is reflected on page No. 149 of paper book, the assessee has explained the entry/cash deposit of Rs. 1.36 crore only.
I have considered the submissions of both the parties and perused the orders of the lower authorities carefully. I find that by placing sufficient Nareshbhai Vijaybhai Gamit Vs ITO evidence on record, the assessee has proved the fact that he is engaged in business of recharge of prepaid coupons of Idea Cellular Limited in the name of Vatshal Enterprises. The assessee has also placed on record the TDS certificate in the form of 26AS wherein total tax is deducted at source of Rs. 2,82,222/-. The assessee has declared total income of Rs. 3,04,147/-. The assessee has tried to reconcile the entire deposit in his bank account and claimed that entire bank account has been considered while filing return of income. I find that there is no dispute about business of assessee. The assessee furnished complete books of account. The books of account of assessee was not rejected. The nature of business of assessee is also not doubted. The ld. CIT(A) directed the Assessing Officer to estimate the income in respect of cash deposit between 01/06/2016 to 22/12/2016, which is already offered by assessee by including its commission income in his commission received @ 2% in his return of income. The ld. CIT(A) directed the Assessing Officer to estimate the commission without any basis. If the direction of ld. CIT(A) is followed, it would amount to double taxation of the same income. The Hon'ble Madras High Court in PCIT Vs. Marg Ltd. (Supra) held that profit of assessee cannot be estimated without rejecting its books of account. Thus, respectfully following the decision in PCIT Vs Marg Limited (Supra) I do not find any justification in the direction of ld. CIT(A) to further estimate the income on the deposits between Nareshbhai Vijaybhai Gamit Vs ITO 01/06/2016 to 22/12/2016 which is not in consonance with the decision in PCIT Vs Marg Limited (supra). Even otherwise, the assessee has already included his commission income while filing return of income. In view of aforesaid discussion, the grounds of appeal
raised by assessee are allowed.
11. In the result, appeal of the assessee is allowed. Order announced in open court on 30th June, 2023.