VIJAY HIRALAL RAJPUT,SURAT vs. INCOME TAX OFFICER, WARD-3(2)(9) OLD/ 3(2)(6) NEW, SURAT

(A.Y 12-13) Vijay H Rajput “1. Ld. CIT(A), NFAC, Delhi has erred in law and on facts to confirm Assessing Officer's addition in part to estimate gross commission receipts at 1.50% (as against 2% estimation of the AO) on total banking transaction value and thereby directed to assessee gross commission income at Rs.5,93,557/- over and above commission income declared by the appellant at Rs.7,19,222/-. 2.Ld. CIT(A), NFAC has erred in law and on fact to confirm AO's working of 2 percent commission income on total banking transaction of all banks worked out at Rs.8,75,18,601/- ignoring the fact that major transaction in ICICI Bank and Axis Bank are transfer entries or RTGS or NEFT and some of entries are pertaining to return cheques on which commission income cannot be earned.”

Brief facts are that assessee is an individual, filed his return of income for assessment year 2012-13 declaring income of Rs.5,20,530/-. Subsequently, in the year 2018, the Assessing Officer received information from ADIT(Inv.) Unit- 2, Varanasi that assessee has made various transactions with his bank accounts maintained with Indusind Bank, Axis Bank, Union Bank of India and ICICI Bank and pattern of transactions show credit through cash deposit from non- based branches and RTGS through own account and debited in the account is through self-paid cheques. On the basis of such information, the case of assessee was re- opened after recording the reasons that income of assessee as escaped assessment with regard to various credits in his several bank accounts, the Assessing Officer after serving notice under section 148 dated 30.03.2019. In response to 2 (A.Y 12-13) Vijay H Rajput notice under section 148, the assessee filed his return of income on 23.12.2019 declaring income of Rs.4,00,530/-. The Assessing Officer after serving statutory notice under section 143(2) and 142(1) proceeded for re-assessment. The Assessing Officer on the basis of information gathered from ADIT(Inv.), Unit-2, Varanasi issued notice under section 133(6) to the bankers of the assessee. The bankers of the assessee responded to the notice of Assessing Officer and provided the required details. On the basis of details received from the bankers of assessee, the Assessing Officer prepared the following summary of cash deposits and other credit in various banks of assessee: Bank A/c No. Cash Other Total credits credits ICICI 89005000392 48568371 17590130 66158501 Bank Union 311301010038331 865000 400000 1265000 Bank of India Indusind 200006203782 17261000 600000 17861000 Bank Axis 910010025514503 1055520 1178580 2234100 Bank Total 67749891 19768710 87518601

On the basis of the aforesaid compilation, the Assessing Officer issued show cause notice to assessee as to why the total credit of Rs. 8.75 crores should not be treated as (A.Y 12-13) Vijay H Rajput unexplained credit and added to the income of assessee. In response to show cause notice, the assessee filed his reply and submitted that he is engaged in the business of transportation and money transfer and he used to accept money from labours working in the mills in Surat, Vapi and deposited the said money in his various bank accounts and delivered such money to the family-members of such labours from whom assessee collected the said money. Subsequently, his office at Jaunpur by withdrawing money from his bank accounts after deducting transfer charges, handed over money to the family members of such labourer. The Assessing Officer after considering the submission of assessee added @ 2% of commission on the transaction value and Assessing Officer worked out the amount of Rs.17,50,372/- on the total transaction value of Rs.8.75 crores. The assessee has shown commission of Rs.7,19,222/- in his profit and loss account, thereby giving the credit/set off of such commission income, worked out the addition of Rs.10,31,150/- (Rs.17,50,372 – Rs.7,19,222/-) and added total income of assessee in the (A.Y 12-13) Vijay H Rajput assessment order dated 27.12.2019 passed under section 143(3) r.w.s. 147 of the Act.

Aggrieved by the addition made in the assessment order the assessee filed appeal before Ld. CIT(A) and case of assessee migrated before NFAC/Ld. CIT(A). Before NFAC/Ld. CIT(A) the assessee reiterated similar submission. The assessee further submitted that addition of commission @ 2% is not justifiable as commission charged by assessee ranges 0.75 to 1% respectively. The NFAC/Ld. CIT(A) after considering the submission of assessee restricted the commission income @ 1.5% of total deposits / transaction of Rs.8.75 crores thereby granted partial relief to the assessee. Further aggrieved assessee filed present appeal before the Tribunal. 5. I have heard the submission of Ld. Authorized Representative (Ld. AR) for the assessee and Ld. Senior Departmental Representative (Ld.Sr-DR) for the Revenue. The Ld. AR for the assessee submits that he has a very limited prayer before the Bench that Assessing Officer considered the total cash as well as cheque transactions of Rs.8.75 crores, however, the total transactions were only 7.05 crores. The Ld.AR for the assessee submits that before (A.Y 12-13) Vijay H Rajput NFAC/Ld. CIT(A) prayed that commission charged by the assessee ranges 0.75% to 1% respectively and assessee reiterated his prayer to restrict the commission @ 1% and to grant the set off of commission already offered in the profit and loss account. The Ld. AR for the assessee further submits that he has prepared a summary, wherein certain transactions were made from Indusind Bank to ICICI Bank which are aggregating Rs.1.68 crores though the Assessing Officer while calculating total transactions included transactions entries from one bank to another bank i.e., Indusind Bank to ICICI Bank. The duplicate entry in the form of summary of transactions are given on page 77 of the paper book. The ld AR for the assessee prayed for making direction to the Assessing Officer to verify such transactions and to reduce the turnover to avoid the duplication of entry. The Ld. AR for the assessee further submits the Co-ordinate Benches of Ahmedabad Tribunal in Chintan Niketan Bhandari vs. DCIT in for assessment year 2017-18 dated 29.11.2022, wherein on similar transaction on cheque discounting business the commission was estimated @ 0.25%.

In short rejoinder, the Ld.AR for the assessee submits that the case relates to assessment year 2012-13 and was reopened in March, 2019 and assessee dealing with labourers who were shifted in a time-gap of eight to ten years and it was not possible for assessee to trace them in such unorganized labourers.

I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I find that a very limited issue is involved in the present (A.Y 12-13) Vijay H Rajput appeal, the Assessing Officer made the addition @ 2% of total transactions in various bank accounts of assessee and thereby giving worked out the commission of Rs.17,50,372/- as the assessee has already offered commission income of Rs.7,19,222/-. The Assessing Officer granting such set off income offered in profit and loss account and Assessing Officer thereby made addition of Rs.10,31,150/-. I further find that NFAC/Ld. CIT(A) restricted the addition @ 1.5% of the commission on total transaction. Before me, the Ld. AR for the assessee vehemently submitted that the assessee has charged commission ranging from 0.75% to 1% respectively and there is duplication of entry, details of which he has given as per page-77 of the paper book filed. Considering the overall facts and circumstance of the case, I am of the view that commission @ 1.5% of commission is reasonable one. Thus, the order of ld CIT(A) is upheld to that extent.

So far as other contention, Ld. AR for the assessee that there was duplication of entry i.e., bank transfer entry from Indusind Bank to ICICI Bank. Thus, I direct the Assessing Officer to verify such entry and if there is duplication of (A.Y 12-13) Vijay H Rajput entry from one bank to another bank that such amount may be reduced from total turnover of the assessee. I order accordingly. This ground of assessee’s appeal is partly allowed for statistical purposes.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced on 26/05/2023 in open court.