DCIT, CENTRAL CIRCLE - 4(1), KOLKATA, INCOME TAX DEPARTMENT, KOLKATA V. SUVENDU KUMAR MAJUMDER, KOLKATA

ITSSA 46/KOL/2024

AI Insights

The case involves appeals by the Revenue against the orders of the CIT(A) which pertained to the assessment years 2019-20 and 2020-21. The primary issue was the addition made under section 69A of the Income Tax Act, 1961, which the Assessing Officer (AO) treated as unexplained money in the hands of the assessee, Suvendu Kumar Mazumder. The CIT(A) found that the assessee was engaged in the business of facilitating cash transfers (hawala transactions) and earned a commission for these services. The Tribunal agreed with the CIT(A)'s decision, noting that the assessee had declared his commission income and that the cash did not belong to the assessee but was part of his business operations.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41222 (ITAT-KOLKATA)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Other Referred Cases: Shri Naresh Jhanwar v. DCIT, Smt. Aruna Sankhla v. DCIT
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHENDU DATA
• Assessee Lawyers: A. K. TULSYAN
• Keywords: Document seized; Peak credit; Documents seized; Search and seizure; Assessment record
• Section: 143(3); 142(1); 143(2); 48; 153A; 68; 69; 69B; 69A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM IT(SS)A No. 45 & 46/KOL/2024 (Assessment Years: 2019-20 & 2020-21) DCIT, Kolkata Room No. 512, 5th Floor, Aaykar Bhavan Poorva, Kolkata-700107, WB Vs. Suvendu Kumar Mazumder A-267, Sector-III, Salt Lake City, Kolkata-700097, West Bengal (Appellant) (Respondent) PAN No. AEZPM9391R Assessee by : Shri A.K. Tulsyan, AR Revenue by : Shri Subhendu Data, DR Date of hearing: 05.02.2025 Date of pronouncement : 24.02.2025 O R D E R Per Rajesh Kumar, AM: These are appeals preferred by the Revenue against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 10.02.2024 for the AY 2019-20. 02. At the outset, we note that there is delay of 90 days in filing the appeals by the Revenue for which the condonation petitions have been moved by the Revenue dated 10.05.2024 for both the assessment years, wherein it have been stated that in order to file the appeal, the files have to go through various stages in the administrative hierarchy for obtaining and approvals and hence, the delay of 90 days in filing the appeals. Considering the contents of the condonation and the arguments of the rival parties, we are quite convinced about the Page | 2 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 sufficiency and genuineness of the reasons for delay and accordingly, condone the same by admitting the appeals for adjudication. ITA No. 45/KOL/2024 03. The ground of appeal in ITA No. 45/KOL/2024 is extracted below:- “That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the cash credits of assessee as per seized documents as the cash of other parties especially when assessee has furnished no explanation regarding parties from whom such cash credits were availed and to whom it was facilitated and in deleting the addition u/s 69A of the I.T. Act 1961, ₹25,32,94,167/- as per seized documents as 'unexplained money' in the hand of the assessee, without going into the merits of the case” 04. The facts in brief are that a search action us/ 132(1) of the Act was conducted on the assessee on 23.04.2019, and case of the assessee was selected for compulsory scrutiny. The assessee filed the return of income on 30.03.2021, declaring total income of ₹64,08,232/-, which was followed by the issuance of notices u/s 143(2) and 142(1) of the Act. There was no compliance to the said notices. Finally, a show cause notice was issued to the assessee and in response to the same, assessee furnished the submissions on 20th September, 2021 and 23rd September, 2021. Thereafter, taking into account the submissions of the assessee, the ld. AO assessed the income at ₹24,30,27,870/- u/s 153A read with section 143(3) of the Act vide order dated 29.09.2021, by making an addition of ₹24,14,19,640/- on account of unexplained money u/s 69A of the Act. The said addition was made by the ld. AO on the basis of peak cash credit by ignoring the fact that the commission income of ₹44,61,807/- was offered by the assessee for felicitation services of fund transfer directly in the return of income filed in response to notice u/s 153A of the Act. During the assessment proceedings, the ld. AO noted that the assessee has failed to furnish the details of persons from whom the amounts were received in cash Page | 3 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 and likewise also failed to furnish the details of persons to whom the amounts were paid. Therefore, the cash receipts as well as cash payments remained unexplained. 05. Being aggrieved, the assessee preferred an appeal before the ld. CIT (A) and the ld. CIT (A) after taking into account the assessee’s contentions and submissions partly allowed the appeal by observing and holding as under:- “6.2. Discussion and decision 6.2.1. I have gone through the assessment order as well as the submission of the assessee. The assessee is engaged in the business of providing services of transfer of funds from one party to another as a middle man. On examining the same, it is noticed that during the search and seizure operation conducted upon the assessee, the assessee had disclosed his commission income of Rs.4,69,103/- which was calculated by the assessee at 0.15% of the total turnover as per the seized document i.e., Rs.31,27,35,382/- disclosed u/s 132(4) of the Act. It is noticed that, during the assessment proceedings, the assessee was asked to produce details of all the payer as well as the receivers of the said fund transaction and the also the details of persons for whom the assessee had worked on commission basis. However, the requisite details and documents furnished by the assessee was not satisfactory to the AO and consequently, the AO had treated the peak credit of Rs.25,32,94,167/- out of the total credits attributed to the said seized documents as assessee’s undisclosed money u/s 69A of the Act and added back the same to the total income of the assessee. 6.2.2. Further, the assessee had stated that he was acting as carrier/handling agent of other’s cash from one place to another through middlemen for consideration i.e., for service charges/commission payable @ 0.15%. The assessee stated that in this type of trade, face to face meeting between the principal and agent is rare; rather, the principal keeps his identity undisclosed and in most of the cases, the principal and his clients (to whom moneys are handed over) are known by their pseudo names and all instructions are received through mobile phones or sometimes by messages. The principals select trustworthy agents who they know from their own source, will not misappropriate their money. Many times, agents (who work as handling agents) do not even know whether they act as direct agent or as subagent and/or whether and how many agents are there in the chain. Sometimes, the client/customers themselves come to the designated place of the agent for collecting money. Thus, commission is paid to the agent/sub-agent for holding cash and for carrying cash. Basically, commission is paid for taking the risk of keeping and carrying cash. The modus operandi of the assessee is facilitating cash transfers between various parties and earning commission on such facilitations of cash transfer. The assessee maintained rough notings of the parties from whom the cash is received and as well as delivered. Taking peak credit from middle man who is handling the cash of unknown parties is not justified. In this line of activities, there will be many layers of middle man. The commission received Page | 4 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 will be shared among all the layers of middle man. This commission is paid basically for taking the risk of keeping and carrying. Hence, working out peak credit in the hands of middle man for the rough notings is not justifiable. 6.2.3. Further, it is evident from the assessment records as well as the submission of the assessee that the assessee is the carrier of funds and is engaged in the disbursement of funds from one party to another party and earns commission income out of the said activity. Which is also recognized in the assessment order by the AO. The seized documents seized from the assessee proves that the money is coming and going mostly within the same day. Hence, it cannot be inferred that the cash belongs to the assessee to work out peak. Hence, it’s not logical to treat the peak credit as assessee’s undisclosed income in his line of business. Moreover, in this case, the assessee had suo-moto declared his commission income @0.15% of the total credits i.e., the turnover and filed in his return of income 6.2.4. The AO one side accepted 0.15% of commission in the hands of the assessee treating him as a middle man. On the other side the AO worked out peak credit on the turnover found in the seized documents. The AO has depended on the turnover found in the sized documents to calculate peak credit and also commission income. However, the assessee had placed his reliance in the following judicial pronouncements which uphelds the assessee’s view of 0.15% commission for hawala cash transfer agents. 1. In the case of ‘Shri Naresh Jhawar v. DCIT (ITA No. 259 & 260/JP/2020)’, the Hon’ble ITAT held that “In other words, while considering the entire case in view of evidence found and submissions thereto advanced by the parties, that the transaction recorded in the seized material cannot be kept altogether apart in isolation and the other circumstantial evidence is totally ignored and kept as part and only the concentration be made with the amount recorded in the seized diary. In the search the assessee has already based on the business practice admitted that they were charging commission of Rs. 100 per to Rs. 200 per lakh money transferred depending upon destination. Based on the evidence found the assessee has already offered a sum of Rs. 48 lac for all the years from financial year 2010-11 to 2016- 17. Before the CIT(A) in the remind proceeding the ld. AO has not specifically co-related the income disclosed by the assessee viz a viz the income offered by the assessee in the return of income. Even the ld. CIT(A) or the ld. AO has not considered the nature of activity carried out by the assessee. The transaction recorded in the diary is mere memorandum records and based on that the income is required to taxed and since this records are not books of account no addition u/s. 68 is called for this ld. AR of the assessee relied upon the judgment of the co-ordinate bench decision in the case of Arun Sankhla Vs. DCIT in ITA no. 484/JP/2016. In this background, addition of total amount recorded in this account is neither income of the assessee nor the credit within the meaning of section 68 of the Act considering the definition of books given in section 2(12A) of the Act. Respectfully following the decision of the co-ordinate bench of Chennai ITAT we hold that based on the facts that the assessee has already clarified that he did not maintain the books of account for money transfer business this loose note, diary cannot be considered as books unless the same is part of books of accounts and thus, since this diary is not books of account the provision of section 68 is not applicable. In the facts of this case ultimately the income is to be computed based on the statement of the assessee and that correct income is to be taxed in the hands of the assessee. As the assessee or the ld. AO has not calculated the amount chargeable to tax based on the Page | 5 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 statement of the assessee that he is earning Rs. 100 to 200 as commission per 1 lac he transfers. As, this amount is not quantified same is required to be determined. Therefore, we vacate the addition of Rs. 4,52,59,300/- but at the same time direct the ld. AO to calculate the commission on this transaction considering the already amount disclosed by the assessee and finally ld. AO is directed to tax correct commission income only in the hands of the assessee if not covered by the disclosure already made. While doing so the ld. AO is directed to recalculate the amount after giving sufficient opportunity of hearing to the assessee. With this direction we are Shri Naresh Jhanwar disposing all the four grounds appeal. In terms of this observations appeal of the assessee is partly allowed.” 2. In the case of ‘Aruna Sankhla vs. DCIT ITA No.484/JP/2016 dt.01.12.2017 (Jaipur) (Trib.)’ held that, \"After considering the rival submissions and the materials available on record, we are of the considered opinion that the seized papers cannot be treated as books of account. Furthermore, only the commission income can be assessed in the hands of the assessee @ 0.10% on a total of the credits of Rs. 91,67,81,272/-. The addition u/s 68 of the Act can be made only if any sum is found credited in the books of the assessee. A book means a collection of sheets of papers bound together with the intention that such binding shall be permanent and papers used are kept collectively in one volume. A book which contains successive entries of items maybe a good memorandum book but until those entries are totaled or balanced or both as the case may be, there is no reckoning and no accounts. A book which merely contains entries of items of which no account is made at any time, is not a \"book of account\" in a commercial sense. Thus the addition made u/s 68 is not justified. ………………... Since the assessee does not maintain any books of account wherein the debtors and creditors are reflected, therefore, this addition has also been wrongly made and upheld u/s 69B of the Act. Hence, in our considered opinion, only commission income has to be determined in this case and nothing more. Accordingly, we reverse the findings of the Ld. CIT(A) and order to delete the entire addition so made. Thus Ground Nos. 3 and 4 of the assessee are allowed.” 6.2.5. In view of the facts of the case and judicial pronouncements that the assessee is only facilitating transfer of funds from one party to another party and merely acted as a carrier/middleman/holder of money from which he has earned commission income. The assessee’s case is fully covered by the aforesaid judgements and the discussions held above, it can be inferred that the commission income as declared by the assessee @0.15% of the total turnover i.e., the total transactions as per seized documents should be treated as income in this line of business. Hence, the AO is directed to delete the addition of Rs.25,32,94,167/-. The commission income as declared by the assessee of Rs. 4,69,103/- is to be accepted. Therefore, this ground of appeal raised by the assessee is allowed. 7. In the appeal Ground No. 2 (Revised ground) :- General ground. 8. Hence, the appeal of the assessee is allowed.” 06. The ld. DR submitted that the order passed by the ld. CIT (A) is totally against the provisions of the Act as the cash transactions found during Page | 6 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 the search could not be explained by the assessee as to from whom the cash amounts were received and to whom these were paid and therefore, the addition was rightly made u/s 69 of the Act towards unexplained money. The ld. DR therefore, prayed that the order of ld. CIT (A) may be reversed and the assessment order may be restored. 07. The ld. Authorized Representative vehemently submitted before us that assessee was rendering services as carrier, handling agents of others cash from one place to another middle man in lieu of commission at 0.15% which during the instant financial year amounted to ₹44,61,807/- which was duly offered to tax in the return of income filed. The ld. Authorized Representative submitted that the rate of commission was not in dispute and has been accepted by the ld. AO as evident from the assessment order. The ld. Authorized Representative submitted that it was stated before the ld. AO that the assessee was working as carrier, middle man / handler of money by transferring money from one place to another place for which the assessee was charging commission. Therefore, the assessee was never the owner of any money so as the invoke u/s 69A of the Act. The ld. Authorized Representative submitted that even during the search, the assessee has categorically stated in reply to question no.11, that he was engaged in the business of handing cash transfers (Hawala transactions) in any city of India, Bangladesh and Dubai to the beneficiaries in lieu of cash commission and the commission charged was 100 per lakh depending on the nature of transactions and city where the beneficiaries was located. Therefore, the ld. CIT (A) has rightly applied the commission in order to estimate the income and deleted the addition made by the ld. AO u/s 69A of the Act. In defense of his arguments the ld. Authorized Representative relied on the following decisions: Page | 7 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 i. Shri Naresh Jhanwar Vs. DCIT in ITA No. 259 & 260/JP/2020 for A.Y. 2016-17 and 2017-18 vide order dated 17.08.2022. ii. Smt. Aruna Sankhala Vs. The DCIT in ITA No. 484/JP/2016 for A.Y. 2009-10 vide order dated 01.12.2017. 08. After hearing the rival contentions and perusing the materials available on record, we find that assessee was undoubtedly engaged in the business of cash transfers (hawala) from one place to another place in lieu of commission as has been admitted by the assessee during the recording of statement u/s 132(4) of the Act, wherein in reply to question no.11, the assessee stated that he was engaged in the business of carrier/ transport of money from one place to another place in lieu of commission and therefore, there is no doubt that the business of the assessee was handling of cash from one place to another place on commission basis, which was stated to be ₹100 per lakh. Now, the issue before us is that whether the cash amounts which were found to be received and paid by the assessee were belonging to the assessee and could be added u/s 69A of the Act as unexplained investments. We note that obviously, the cash transactions by the assessee in the form of receipts and payments cannot be treated as money belonging to the assessee though the persons who gave the cash and to whom the cash was handed over could not be explained as the assessee was hawala dealers. But the fact remains that this is just a business of the assessee and his job was to transfer the cash from one place to another place in lieu of commission. Therefore, the ld. CIT (A) has correctly deleted the addition partly by applying the commission of 0.15% on the said cash transactions. Therefore, we do not find any infirmity in the order of Page | 8 IT(SS)A Nos.45 & 46/KOL/2024 Suvendu Kumar Mazumder; A.Y. 2019-20 & 20-21 the ld. CIT (A) and consequently the appeal of the Revenue is dismissed. ITA No. 46/KOL/2024 09. The issue raised in this appeal is similar to one as decided by us in ITA No. 45/KOL/2024 for A.Y. 2019-20. Accordingly, our decision would apply, mutatis mutandis, to this appeal of assessee in ITA No.46/KOL/2024 as well. Hence, the appeal of Revenue in in ITA No. 46/KOL/2024 is dismissed. 010. In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 24.02.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 24.02.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "