INCOME TAX OFFICER 41(2)(1) MUMBAI, MUMBAI V. ANISH BALKRISHNA JOSHI, MUMBAI

ITA 894/MUM/2025

AI Insights

The case involves appeals by the Income Tax Officer against the orders of the CIT(A) which partly allowed the assessee's appeal regarding the assessment of undisclosed income and the penalty under section 271B for non-compliance with section 44AB of the Income Tax Act. The assessee, Anish Balkrishna Joshi, proprietor of a travel agency, was accused of not disclosing all bank accounts and failing to explain substantial credits and cash deposits in these accounts. The CIT(A) found that while some income was undisclosed, the assessee's method of accounting for his travel agency business was reasonable, leading to a reduced addition to his income. The Tribunal upheld the CIT(A)'s decision, agreeing with the estimation of income based on the nature of the business and dismissed the Revenue's appeal on the penalty due to the low tax effect involved.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633226 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADITYA RAI
• Assessee Lawyers: DHARMESH SHAH; JIGNA JAIN
• Keywords: Business income; Additional evidence; Tax effect; Source of fund
• Section: 143(3); 68; 44AD

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 893/MUM/2025 (निर्धारण वर्ा / Assessment Year : 2013-14) आयकर अपील सं./ITA No. 894/MUM/2025 (निर्धारण वर्ा / Assessment Year : 2013-14) Income Tax Officer - 41(2)(1), 833, Kautilya Bhavan, Bandra Kurla Complex, Bandra East, Mumbai– 400 051, Maharashtra Vs. Anish Balkrishna Joshi, 1/2, Samadhan Building, LT Road, Mulund East – 400 081, Maharashtra स्थायी लेखा सं./PAN No. : AEHPJ7117G (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) प्रत्याक्षेप सं../C.O. No. 66/MUM/2025 (Arising out of ITA No. 893/MUM/2025) Assessment Year: 2013-14 Anish Balkrishna Joshi, 1/2, Samadhan Building, LT Road, Mulund East – 400 081, Maharashtra Vs. Income Tax Officer - 41(2)(1), 833, Kautilya Bhavan, Bandra Kurla Complex, Bandra East, Mumbai– 400 051, Maharashtra स्थायी लेखा सं./PAN No. : AEHPJ7117G (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) निर्ाारिती की ओर से /Assessee by : Shri Dharmesh Shah & Shri Jigna Jain रधजस्व की ओर से /Revenue by : Shri Aditya Rai (Sr.DR) सुिवधई की तधरीख / Date of Hearing : 05.06.2025 घोषणा की तािीख / Date of Pronouncement : 10.06.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals preferred by the Revenue and Cross Objections of the assessee emanate from the orders of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 2 passed w.r.t. assessment order u/s 143(3) and penalty order u/s 271B of the Income Tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year 2013-14. Since the issues are identical and also the fact that the appeals were heard together, they are being taken up together for adjudication vide this composite order for the sake of brevity. ITA No. 893/MUM/2025 2. The grounds of appeal are as under:- 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in overlooking the explicit finding of the AO that the assessee failed to disclose all bank accounts during the assessment proceedings. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee failed to satisfactory explain the account of credit found in the said bank accounts amounting of Rs. 1,70,37,539/-. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee failed to satisfactory explain the cash deposits u/s. 68 of the Act, of Rs. 1,46,77,930/. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in overlooking the undisclosed business receipts of Rs.82,00,509/-. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the business income of Rs. 25,37,237/- Le. 8% of turnover of Rs. 3,17,15,469/- without applicability of section 44AD of the Act. 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the business income to Rs.16,76,193/- (Rs.25,37,237/- 1.e. 8% of 3,17,15,469/4) Rs.8,61,044. 7. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in non applicability of section 44AB of the Act, in spite of considering assessee's turnover of Rs. 3,17,15,469/-. 3. The assessee is the proprietor of M/s. Krishna Tours and Travels in the business of Travel agent and filed the return of income declaring total ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 3 income of Rs.12,32,980/-. The case was selected for scrutiny under CASS and the assessment was completed u/s.143(3) of the Act by assessing the total income at Rs.2,41,18,660/-. As per the AO the assessee had not disclosed all his bank accounts and accordingly the credits found in the said bank accounts amounting to Rs.1,70,37,539/- were undisclosed. It is further stated that out of the said receipt, the assessee made payments to various travel agents amounting to Rs.74,52,889/- during the year. Hence, the balance amount of Rs.95,84,650/- (Rs.1,70,37,539/- (-) Rs.74,52,889/-) was the profit out of the said receipt of Rs.1,70,37,539/-. Since, the assessee had already disclosed an amount of Rs. 13,84,141/- as income from business in the return of income, the balance amount of Rs.82,00,509/- {Rs.95,84,750/- (-) Rs.13,84,141/-} was treated by the AO as undisclosed business receipt. Regarding, cash deposits of Rs. 1,46,77,930/- found in his bank accounts, the AO claimed that the assessee failed to prove their source. Accordingly, he added the cash deposit of Rs. 1,46,77,930/- u/s 68 of the Act and also an amount of Rs.82,00,509/- was added as undisclosed business receipt out of the other total credits of Rs.1,76,37,539/- found in other bank accounts. Since, total sales turnover for the year exceeded Rs.1 crore for which the assessee did not furnish the required tax audit report and audited statement of accounts, the AO has also initiated penalty proceedings u/s.271B of the Act. ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 4 4. In the subsequent appeal, the assessee submitted that he is in the business of tours and travels acting as travel agent for its number of clients. In the course of the said business activities, he often received cash towards cost of booking of tickets of flights, cost of tours to be arranged for the clients, cost of charges payable to various Govt. Agencies in connection with the passport, visa, reimbursement of various expenses, etc. These cash so received are deposited in the bank accounts and payments for tickets and visa charges, cost of tour arrangements through other travel agents and tour operators, etc., are paid. Sometimes, cash is deposited by clients from outside Mumbai as it may be inconvenient for such clients to send funds to his office here. The cash summary and bank summary filed before the AO clearly reflected these details. However, without assigning any reason for disregarding this explanation given by him, the AO made addition of the entire cash deposits in the bank accounts. It is submitted that the receipts in cash is common phenomena in case of travel agency business. Moreover, the clients can be from various geographical areas. The assessee's clients are basically from Mumbai, Pune, Nashik and many other locations within Maharashtra. In order to provide services to these clients, the parties were allowed to directly deposited cash in the bank accounts of the assessee from their locations. Thereafter, upon such deposits, the assessee would start making arrangements for booking of tour and tickets for respective clients. Under these circumstances, cash deposits could not be treated as income of ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 5 the assessee. In support of the contentions that the amount received by him represented cash received from various clients, he submitted bank statements of all the bank accounts held in the name of the his business concerns, statements of the bank accounts held in the personal name on sample basis, ledger account pertaining to various sources of income duly reflected in the profit and loss account and sample copies of receipts raised by him in the name of the clients from whom cash was received and deposited in the bank. It was also submitted that the assessee being a travel agent, his turnover constituted commission and other income earned by him. The profit & loss account filed clearly showed that the gross receipts in the form of commission, service charges, etc., were much less than the limit of turnover provided u/s. 44AB of the Act. It was also pleaded that the bank summary submitted before the AO clearly reflected payments to vendors much more than the above amount. These payments were made to the agents like, Akbar Travels, Globus Holidays, Riya Travels, etc., towards the cost of booking of tickets for clients, cost of tour, visa and other charges. These payments were fully supported by the documentary evidences in the form of receipts issued by the recipients of the amount. During the relevant year, he has maintained eight bank accounts out of which six were related to the business concern and the remaining two accounts were his savings bank accounts. In support of the same, the assessee has furnished the evidences related to carrying out as business activity such as invoices, ledger account ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 6 and the relevant bank account statement before the ld.CIT(A). However, these details being additional evidence submitted before the ld.CIT(A),he forwarded them to the AO calling for remand report. 4.1 In response the AO has submitted remand report which has been duly considered by the appellate authority who observed that the assessee has been engaged in the business of tours and travels and acting as a travel agent during the year. During the course of said business activity, he has received cash towards cast of booking tickets, flights, cost of tours to be arranged for the clients, cost of charges payable to the various government agencies in connection with the passport, visa, reimbursement of various expenditures etc from its clients. The said cash received were deposited in his bank accounts. Out of the said receipt, he had incurred expenditure by way of making payments to the various travel agents. Accordingly, he filed the return of income by declaring the total income of Rs.12,32,980/- by way of his business activity. Further, the assessee has submitted that the above bank accounts were duly accounted and the profit out of such business activity was offered to tax. It is also observed that the AO did not reject the books of account during the assessment proceedings. He further noted that he was engaged in the business of tour and travel agent and his turnover constituted income by way of commission and other income. Since, the gross receipts of the assessee was in the form of commission and service charges, he had shown the said receipt as net of commission & service ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 7 charges received as his turnover. On examination of the financial submitted by the assessee, the ld.CIT(A) observed from the Profit and Loss account that, the turnover by way of sale of tickets was shown as Rs. 1,87,20,930/-, whereas the total deposits in various bank accounts as per the assessment order during the year was amounting to Rs. 3,17,15,469/- (Rs. 1,46,77,930/- by way of cash deposits + Rs. 1,70,37,539/- by way of credits). Hence, the assessee was asked to reconcile the same. In response, he submitted that the turnover reflected in the Profit and Loss account comprised of the receipt from various customers in cheque as well as in cash towards the cost of tickets. It did not reflect any other receipts other than ticket cost. Out of the said turnover, he had earned commission income which was duly reflected in the Profit and Loss account. The assessee also submitted that apart from the sales of tickets, he also received amounts from the customers in the nature of out of pocket expenses, which included arranging tours for the customers, arranging tickets for the customers, providing passport and visa services and making arrangement for hotel booking, etc. In the course of rendering these services, many customers insist the assessee to pay government charges or any other cost related to travel services. Accordingly, they pay the entire amount of cost to him including service charges of the assessee. As such, several out of the pocket expenses and reimbursement charges were collected from the customers. Since some of these amounts collected were merely in the nature of reimbursement of expenses, the same ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 8 were not routed through the Profit and Loss account. Accordingly, the total collection of the funds from the customers included out of pocket expenses received by the assessee and the same were duly accounted for in the books of account and to the extent deposited in the bank, the same was forming part of the total cash and cheque deposits in the bank account. In view of the above, it was observed by the ld.CIT(A) that assessee’s turnover constituted income by way of commission on sale of air tickets and other income whereas, as admitted, he had also received ‘out of the pocket’ expenses and reimbursement charges from the customers and the same were not routed through the Profit and Loss account. It was noticed from the P&L account that, the gross profit of the travel agent business was shown as Rs.14,92,346/-and net profit of Rs.23,84,197/- which was inclusive of other income like income from partnership firm and interest income of Rs. 15,23,153/-. If, the said other income was excluded, the Net Profit of the assessee out of his business activity was only Rs.8,61,044/-, which is 2.7% of the total credit of 3,17,15,469/-. It was further noted that, the assessee had not submit the basis of arriving at ‘Other income’ such as income from service charges, passport income and other documentation charges. Since, he could not substantiate the basis of arriving the fee/charges collected for other services rendered as mentioned above and also the had not routed the ‘out of the pocket’ expenses and reimbursement charges received ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 9 from the customers through the Profit and Loss account, the ld.CIT(A) concluded that the estimation of the Net profit of the appellant @8% of the total credits found in his bank account would be reasonable by considering the nature of the business of the assessee. Hence, the difference in the Net Profit offered by the assessee amounting to Rs. 16,76,193/- (Rs.25,37,237/-, i.e 8% of 3,17,15,469/-(-) Rs.8,61,044/-) was to be added as additional income for the year. Accordingly, the AO was directed to add the said amount of Rs.16,76,193/- to the total income of the current year and delete the addition made in the assessment order amounting to Rs. 2,28,78,439/- on account of the cash deposits of Rs. 1,46,77,930/- u/s.68 of the Act and Rs.82,00,509/- on account of undisclosed business receipts and rework the total income. As a result, the appeal was partly allowed. 5. The ld.DR before us relied on the grounds of appeal and the contents of the assessment order. Per contra the ld.AR supported the appellate order. 6. We have carefully considered all the relevant facts of the case. As discussed above business receipts of the assessee from travel agency business comprise partly in cash and partly in cheque. He admitted the fact that the assessee derives income from commission income from his travel agency business only. The ld.CIT(A) has duly considered all the evidences and contentions of the assessee as also the contents of the remand report from the AO and to our mind he is fully justified in holding that the bank ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 10 deposits represented his business receipts only and could not be considered as undisclosed income in terms of the provisions of section 68.However,he found some infirmities in the books of account as certain receipts were not duly supported by cogent evidences and were not properly accounted for in the books. Moreover, the accounts of the assesse itself being not audited, considering the totality of facts and the circumstances of the case, he applied the rate of 8% to total credits in the bank accounts being business receipts and determined the income of the assessee accordingly giving partial relief to the assessee. We do not find any infirmity in the appellate order which is quite well reasoned and judicious one based on detailed analysis of receipts. Therefore, the same is upheld. Accordingly, the grounds of the Revenue are dismissed. 7. C.O. 66/MUM/2025 1. The Ld. CIT(A) has erred in law and in facts in making addition on account of estimated net profit from the business of the appellant at Rs. 16,76,193/-. 2. The Ld. CIT(A) has erred in law and in facts in making addition on account of estimated net profit thereby enhancing the income of the appellant without complying with the provision of s. 251 of the Act. 3. The Ld. CIT(A) has erred in law and in facts in computing the addition by applying net profit rate of 8% on the total credits found in the bank account of appellant instead of the turnover of the appellant. 8. Since we have already upheld the appellate order which is based on cogent materials duly taking a pragmatic view of the all relevant facts of the case, we do not find any merit in the CO which is accordingly dismissed. 9. ITA No. 894/MUM/2025(Penalty) 10. This appeal by the Revenue is directed against the penalty order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 11 Delhi (hereinafter referred to as 'the CIT(A)for assessment year 2013-14 claiming that on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s 271B of Rs.1,50,000/- in spite of considering assessee’s turnover is more than Rs 1 crore and its account is not audited u/s 44AB of the Act. 11. The ld.AR appearing on behalf of the assessee submitted at the outset that this appeal by the Revenue suffers from low tax effect. Referring to Form no. 36, he pointed that tax effect in appeal is Rs.1,50,000/- which is far less than the monetary limit specified by the Board vide Circular No. 09/2024 dated 17.09.2024 for filing of appeal by the Department before the Tribunal. He further submitted that the AO had levied penalty u/s. 271B of the Act of Rs 1,50,000/-for violation of the provisions of section 44AB of the Act. The ld. DR fairly admitted that as per Form No. 36 tax effect involved in appeal was less than the monetary limit specified by the Board Circular (supra). 12. We have carefully pondered over the issue. The Revenue is in appeal against the findings of ld.CIT(A) in deleting penalty levied u/s. 271B of the Act. A perusal of Form No. 36 shows that tax effect involved in appeal is Rs. 1,50,000/-. The Board Circular (supra) has enhanced monetary limit for filing of appeal before the Tribunal to Rs.60,00,000/-. Thus, in light of aforesaid Board Circular, appeal of the Revenue is liable to be dismissed on ITA No.893, 894/Mum/2025 CO.No.66/Mum/2025 A.Y. 2013-14 Anish Balkrishna Joshi, Mumbai 12 account of low tax effect. In the result, grounds of appeal of the Revenue are dismissed. 14. Consequently, both the appeals of the Revenue in ITA No.893 & 894/Mum/2025 are dismissed and Cross objection in CO No.66/Mum/2025 filed by the assessee is also dismissed. Order pronounced in the open court on 10.06.2025. Sd/- Sd/- SANDEEP GOSAIN PRABHASH SHANKAR (न्यायिक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: मुंबई/Mumbai ददिधंक /Date 10.06.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकि आयुक्त / CIT 4. निभागीय प्रनतनिनर्, आयकि अपीलीय अनर्किण DR, ITAT, Mumbai 5. गार्ा फाईल / Guard file. सत्यानपत प्रनत //True Copy// आदेशानुसार/ BY ORDER, उि/सहािक िंजीकार (Dy./Asstt. Registrar) आिकर अिीलीि अयिकरण/ ITAT, Bench, Mumbai. "