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आदेश/Order
PER VIKRAM SINGH YADAV, AM
This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal Addl/JCIT(A)-12, Delhi dt. 16/01/2024 pertaining the Assessment Year 2017-18 wherein the sole ground of appeal relates to the sustenance of addition of Rs. 10,64,330/-.
Briefly, the facts of the case are that the assessee filed his return of income declaring total income of Rs. 2,86,800/-. The case of the assessee was selected for scrutiny and notice under section 143(2) and 142(1) alongwith questionnaire were issued and thereafter the assessment was completed under section 143(3) of the Act, wherein the assessed income was determined at Rs. 10,64,330/-.
During the course of assessment proceedings, the AO observed that there were cash deposit of Rs. 16,73,670/- during the demonetization period and in response, the assessee submitted that he was engaged in the business of ticketing and money transfer; and has earned commission income thereon which has been duly reported in the return of income. On perusal of the return of income, the AO observed that the assessee has filed his return of income under Section 44AD of the Act wherein total turnover has been shown at Rs. 10,45,000/-. As per the AO, the commission income is not covered under Section 44AD of the Act and therefore, the assessee was issued a show cause as to why the turnover of Rs. 10,45,000/- should not be considered as commission income and taxed as per the provisions of the Act. In response, there was no compliance on the part of the assessee and thereafter, the AO proceeded and held that the entire turnover of Rs. 10,45,000/- is nothing but commission receipts and which is not covered under section 44AD of the Act, and the entire amount was brought to tax at normal rate. Further the AO observed that the assessee has received commission of Rs. 19,330/- from M/s ITZ Cash Card Limited and on which the TDS was deducted and the said amount would have been received through normal banking channel and since the said amount was not offered for taxation and same was also brought to tax and thereafter the assessment was completed and the assessed income was determined at Rs. 10,64,330/-.
4. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) and it was submitted that the AO has erred in treating the gross turnover amounting to Rs. 10,45,000/- as commission income which is misinterpreted, misconceived without appreciating the nature of the transaction and the earnings of the assessee. It was submitted that the assessee was engaged in money transfer and ticketing business and has a necessary license for that and the money has been received from the customers and thereafter the money has been transferred and the AO without considering the exact nature of the business has considered the gross receipt as commission income which is factually incorrect as the assessee has only earned meager commission income and which has already been offered to tax in the return of income at Rs. 2,86,800/- as against the gross receipt of Rs. 10,45,000/-.
5. The ld. CIT(A) however went ahead and confirmed the findings of the AO. Against the said findings, the assessee is in appeal before us.
During the course of hearing, none appeared on behalf of the assessee nor was any adjournment application filed. Therefore considering the facts and circumstances of the case, it was decided that no useful purpose would be served in adjourning the matter any further and it was decided to hear the ld DR and decide basis material available on the record.
As part of its appeal filing, the assessee has submitted as under:
“1. It is once again emphasized that the assessee is a licensed money transfer-agent, who is carrying on money transfers of small amounts belonging to migrant labour not having access to banking complexities and thus approach the coveted assessee to transfer their small savings to their identified relatives or to their families.
2. The assessee is having the license from the concerned authorities to carry on this business.
3. The assessee is only providing help to normal labour, who are engaged in manual works here at Chandigarh and are quite ignorant to the banking system only they approach the coveted assessee for their small savings transfer to their identified relatives.
While supporting my contention the bank statement of the assessee and the copy of license as money transfer agent is being furnished for your critical and analytical examination.
On your critical and analytical examination you will have a fair idea of the assessee nature of business and the meager commission for money transfer received by him being reflected in his ITAX Return filed with the department.
The leaned CIT also did not take notice of imperiled immovability of the coveted assessee emanating from his severe leg accidental injury impairing his mobility to collect evidence supporting him to furnish reply to his notice in the said case on the coveted date for which the assessee invoked an application online requesting for extension of date for furnishing reply to his queries in the context of appeal filed, against the assessment order of the learned assessing authority which is extremely unprecedented act on the part of the learned CIT Appeal, which required him to be appreciated at his end, while taking into account all facts & circumstances while deciding the case of the coveted most honest assessee.
Misconceived concept & nature of assessee's business thus led the learned assessing authorities & the learned CIT Appeal arousing unnecessary miscalculations regarding his taxable income which led him to take into account the total gross banking receipts as taxable income which in fact the gross receipts of the business the assessee is carrying on is of money transfers of poor wage earness to their near & dear & relatives and parent not having access to any bank.”
Per contra, the Ld. DR has relied on the order of the lower authorities.
Heard the ld DR and purused the material available on record. There is no dispute that the assessee is engaged in the business of ticketing and money transfer and has filed his return of income u/s 44AD declaring total income of Rs Rs. 2,86,800/- on reported turnover of Rs 10,45,000/-. The AO has returned a finding that the commission income is not covered under Section 44AD of the Act and whole of the gross receipts have been brought to tax. In this regard, I refer to the provisions of Section 44AD which provides that in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession". The term "eligible assessee" has been defined as (i)an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008; and(ii) who has not claimed deduction under any of the sections 10-A, 10- AA, 10-B, 10-BA or deduction under any provisions of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes" in the relevant assessment year; and the term “eligible business" has been defined as any business except the business of plying, hiring or leasing goods carriages referred to in section 44-AE; and (ii)whose total turnover or gross receipts in the previous year does not exceed an amount of forty lakh rupees. I therefore find that the assessee, being an individual qualifies as an eligible assessee and he is carrying on the business of ticketing and money transfer which doesn’t fall under the exception to the eligible business, thus, the assessee in the instant case has rightly claimed and filed his return of income under the provisions of section 44AD of the Act offering Rs. 2,86,800/-, being 27.44% of reported turnover of Rs 10,45,000/- as deemed profits to tax. Therefore, the findings of the AO that the commission income is not covered under Section 44AD of the Act is not in consonance with the express provisions of Section 44AD of the Act and the same is hereby set-aside. In view of the same, there is no legal and justifiable basis to hold the gross receipts so reported as commission income and the same is hereby set-aside and the income as offered in the return of income filed u/s 44AD is hereby directed to be accepted.