AI Insights
The case involves Faiyaz Yunus Patel, who was running a proprietary concern under the name of M/s Patel Enterprises, engaged in distributing mobile recharges and providing money transfer services through Vodafone M-Pesa. The Assessing Officer made additions to the assessee's income, treating certain cash receipts as unexplained under section 68 and disallowing rent expenses under section 40(a)(ia) due to non-deduction of tax at source. The assessee appealed against these additions, which were confirmed by the CIT(A). The Tribunal, after considering the submissions and evidence, ruled in favor of the assessee, directing the removal of the additions and disallowances made.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 123782 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-07-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Next Hearing Date
05-07-2023
Assessment Year
2017-2018
Appeal Filed On
16-04-2023
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 1272/MUM/2023 Assessment Year: 2017-18 Faiyaz Yunus Patel, Flat NO. 602, VMK CHS, LBS Marg, Chirag Nagar, Ghatkopar (W), Mumbai-400086. Vs. ITO-27(1)(4), Room No. 409, 4 th floor, Tower NO. 6 Vashi Railway Station Commercial Complex Vashi, Navi Mumbai-400703. PAN NO. AKXPP 9040 L Appellant Respondent Assessee by : Mr. Navin Prakash Mishra Revenue by : Ms. Indira Adakil, DR Date of Hearing : 06/07/2023 Date of pronouncement : 10/07/2023 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against the order dated 28.02.2023 passed by the Ld. Commissioner of Income- tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds: 1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal), NFAC erred in confirming the addition of Rs. 12,67,239/- on account of the routine business Cash Receipt from retailers on account of Vodafone M Pesa and treating it as unexplained cash credit by invoking provisions of of the Act. Provisions of the Act ought to have been properly construed and regard being had to facts of the case such income should not have been assessed under section 68 of the Act. Reasons assigned by Assessing Officer are wrong and insufficient to assess Rs. 12,67,239/ credit under section 68 of the Act. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal), NFAC erred in confirming disallowance of Rs.75,600 by invoking provisions of section 40(a)(ia)of the Act on rent expense. Provisions of the Act ought to have been properly construed and regard being had to facts of the case such expense should not have been disallowed under section 40(a)(ia) of the Act as there Assessee for the relevant assessment year. Reasons assigned by Assessing Officer are wrong and insufficient to disallow Rs.75,600 under section 40(a)(ia) of the Act on Rent Expenses. 3. The order made under section bad-in-law, ultra virus and without allowing reasonable opportunity of the hearing, without appreciating facts, submission and evidences in their proper perspective is liable to be annulled. 4. The appellant crave leave to ad vary any of the grounds of appeal before or at the time of hearing. 2. Briefly stated, facts of the case are that the asessee is an individual, and was running a proprietary concern under the name of M/s Patel Enterprises for the y proprietary concern was engaged as a distr recharges of brand “Vo ITA No. unexplained cash credit by invoking provisions of Provisions of the Act ought to have been properly construed and regard being had to facts of the case such income should not have been assessed under section 68 of the Act. Reasons assigned by Assessing Officer are wrong and ient to assess Rs. 12,67,239/- as unexplained cash credit under section 68 of the Act. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal), NFAC erred in confirming disallowance of Rs.75,600 by voking provisions of section 40(a)(ia)of the Act on rent Provisions of the Act ought to have been properly construed and regard being had to facts of the case such expense should not have been disallowed under section 40(a)(ia) of the Act as there is no TDS provision applicability to the Assessee for the relevant assessment year. Reasons assigned by Assessing Officer are wrong and insufficient to disallow Rs.75,600 under section 40(a)(ia) of the Act on Expenses. The order made under section 143(3) of the Act is illegal, law, ultra virus and without allowing reasonable opportunity of the hearing, without appreciating facts, submission and evidences in their proper perspective is liable to be annulled. The appellant crave leave to add, amend, alter and/ or vary any of the grounds of appeal before or at the time of Briefly stated, facts of the case are that the asessee is an was running a proprietary concern under the name of M/s Patel Enterprises for the year under consideration. The said proprietary concern was engaged as a distributor of mobile recharges of brand “Vodafone” and its other relates services. The Faiyaz Yunus Patel 2 ITA No. 1272/Mum/2023 unexplained cash credit by invoking provisions of section 68 Provisions of the Act ought to have been properly construed and regard being had to facts of the case such income should not have been assessed under section 68 of the Act. Reasons assigned by Assessing Officer are wrong and as unexplained cash On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal), NFAC erred in confirming disallowance of Rs.75,600 by voking provisions of section 40(a)(ia)of the Act on rent Provisions of the Act ought to have been properly construed and regard being had to facts of the case such expense should not have been disallowed under section 40(a)(ia) of is no TDS provision applicability to the Assessee for the relevant assessment year. Reasons assigned by Assessing Officer are wrong and insufficient to disallow Rs.75,600 under section 40(a)(ia) of the Act on 143(3) of the Act is illegal, law, ultra virus and without allowing reasonable opportunity of the hearing, without appreciating facts, submission and evidences in their proper perspective is d, amend, alter and/ or vary any of the grounds of appeal before or at the time of Briefly stated, facts of the case are that the asessee is an was running a proprietary concern under the name ear under consideration. The said ibutor of mobile and its other relates services. The assessee earned nominal margin of income on sale of balances to retailers. assesee by the ‘Vodafone’ in the form of ‘ recharge balance’ only, which was monetised by the assesee by way of sale of those recharge balance to retailors. by some of the margin in the form of sale of recharges. During the year under consideration, the assessee also provided services of transfer of money through ‘Vodafone M-pesa’ i.e. an online wallet commission . 2.1 For the year under income on 02.11.2017 declaring total income of Rs.4,48,860/ return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income (in short ‘the Act’) were issued and complied with. The assessee filed necessary documents including tax audit report u/s 44AB of the Act, loan confirmation, bank statement etc. The Assessing Officer completed the assessment u/s 143(3) of the Act on 10.12.2019 and made two additions. as unexplained cash credit u/s 68 of the Act in relation to cash deposits received in various bank accounts from the retailers against ‘Vodafone M disallowance of Rs.75,600/ account of non-deduction of tax at source ITA No. assessee earned nominal margin of income on sale of to retailers.This nominal margin was provided to the assesee by the ‘Vodafone’ in the form of ‘ recharge balance’ only, which was monetised by the assesee by way of sale of those recharge balance to retailors. by The asessee further passed on margin in the form of ‘charge balance sale of recharges. During the year under consideration, the assessee also provided services of transfer of money through i.e. an online wallet application For the year under consideration, the assessee filed return of income on 02.11.2017 declaring total income of Rs.4,48,860/ return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income t’) were issued and complied with. The assessee filed necessary documents including tax audit report u/s 44AB of the loan confirmation, bank statement etc. The Assessing Officer completed the assessment u/s 143(3) of the Act on 10.12.2019 and additions. Firstly, addition of Rs.12,67,239/ as unexplained cash credit u/s 68 of the Act in relation to cash deposits received in various bank accounts from the retailers Vodafone M-Pesa’ service facility. Secondly f Rs.75,600/- was made u/s 40(a)(ia) of the Act on deduction of tax at source (TDS) payment of rent of Faiyaz Yunus Patel 3 ITA No. 1272/Mum/2023 assessee earned nominal margin of income on sale of recharge argin was provided to the assesee by the ‘Vodafone’ in the form of ‘ recharge balance’ only, which was monetised by the assesee by way of sale of those The asessee further passed on rge balance’ to retailers on sale of recharges. During the year under consideration, the assessee also provided services of transfer of money through application, and earned consideration, the assessee filed return of income on 02.11.2017 declaring total income of Rs.4,48,860/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 t’) were issued and complied with. The assessee filed necessary documents including tax audit report u/s 44AB of the loan confirmation, bank statement etc. The Assessing Officer completed the assessment u/s 143(3) of the Act on 10.12.2019 and , addition of Rs.12,67,239/- was made as unexplained cash credit u/s 68 of the Act in relation to cash deposits received in various bank accounts from the retailers Secondly, the was made u/s 40(a)(ia) of the Act on payment of rent of Rs.2,52,000/-. On further appeal, the Ld. CIT(A) rejected the request of the assessee for adjournment and dismissed the appeal ex-parte. 3. Before us, the Ld. Counsel of the assessee filed a Paper Book containing pages 1 to 38. The Ld. Counsel referred to page No. 38, which is a copy of the acknowledgement of the adjournment before the ld CIT(A). He further Paper Book to demonstrate that amount of Rs.12,67,239/ was received from retailers in cash The Ld. Counsel submitted that since this money of Rs.12,67,239/ was received from retailers in cash on behalf of the and the assessee has substantiated that said amount was transferred to Vodafone and the assessee earned only commission therefore, the addition made by the Assessing Officer invoking section 68 of the Act is not justified. 3.1. The Ld. Departmental Representative (DR) on the other hand relied on the order of the lower authorities. 3.2. We have heard rival submission of the parties and perused the relevant material on record. The brief facts qua the issue in dispute are that the assessee alon recharge balances of Vodafone for transfer of instant money using wallet scheme launched by Vodafone namely ‘M ITA No. . On further appeal, the Ld. CIT(A) rejected the request of the assessee for adjournment and dismissed the appeal Before us, the Ld. Counsel of the assessee filed a Paper Book containing pages 1 to 38. The Ld. Counsel referred to page No. 38, which is a copy of the acknowledgement of the adjournment before the ld CIT(A). He further referred to pages 22 to 32 Paper Book to demonstrate that amount of Rs.12,67,239/ was received from retailers in cash, was transferred to The Ld. Counsel submitted that since this money of Rs.12,67,239/ was received from retailers in cash on behalf of the and the assessee has substantiated that said amount was transferred to Vodafone and the assessee earned only commission therefore, the addition made by the Assessing Officer invoking section 68 of the Act is not justified. tmental Representative (DR) on the other hand relied on the order of the lower authorities. We have heard rival submission of the parties and perused the relevant material on record. The brief facts qua the issue in dispute are that the assessee alongwith the business of distribution of recharge balances of Vodafone, also opted for services of Vodafone for transfer of instant money using wallet scheme launched by Vodafone namely ‘M-Pesa’. In respect of business of distribution Faiyaz Yunus Patel 4 ITA No. 1272/Mum/2023 . On further appeal, the Ld. CIT(A) rejected the request of the assessee for adjournment and dismissed the appeal Before us, the Ld. Counsel of the assessee filed a Paper Book containing pages 1 to 38. The Ld. Counsel referred to page No. 38, which is a copy of the acknowledgement of the adjournment sought referred to pages 22 to 32 of the Paper Book to demonstrate that amount of Rs.12,67,239/- which was transferred to ‘Vodafone’. The Ld. Counsel submitted that since this money of Rs.12,67,239/- was received from retailers in cash on behalf of the M/s Vodafone and the assessee has substantiated that said amount was transferred to Vodafone and the assessee earned only commission therefore, the addition made by the Assessing Officer invoking tmental Representative (DR) on the other hand We have heard rival submission of the parties and perused the relevant material on record. The brief facts qua the issue in dispute the business of distribution of also opted for services of Vodafone for transfer of instant money using wallet scheme launched by n respect of business of distribution mobile recharge balances and sale of recharge/talk time but the services of M purely service of money transfer like bank therefore, Vodafone gave a nominal commission as handling charges. For the purpose of handling cash received account in the bank of ICICI was opened where beneficiary was Vodafone M-Pesa Ltd. Further on the direction of Vodafone company for avoiding bank charges escrew type account Rs.4,26,27,248/- was deposited consideration, which was received in cash from retailors. portion of the M-Pesa transaction was through said Yes Bank M instances, rather than transaction into the said Yes Bank deposited the said M transferred that amount to Yes Bank account or account. The assessee has provided the detail of the total relating to M-PESA transaction during the year under consideration as under: M-PESA Proceed Received through : Directly in Yes Bank Ltd. Exclusive account bearing No. 041963000000156 Through other bank accounts (as mentioned) maintained for normal business transactions ITA No. mobile recharge balances, the assessee earned margin in purchase and sale of recharge/talk time but the services of M purely service of money transfer like bank therefore, Vodafone gave a nominal commission as handling charges. For the purpose of handling cash received from retailers under M-Pesa account in the bank of ICICI was opened where beneficiary was Pesa Ltd. Further on the direction of Vodafone company for avoiding bank charges, the asessee screw type account with Yesh Bank Ltd, wherein total was deposited during the year under consideration, which was received in cash from retailors. Pesa transaction was being made during the said Yes Bank M-Pesa account. However, instances, rather than directly depositing the money of M transaction into the said Yes Bank account, the deposited the said M-Pesa into his other accounts that amount to Yes Bank account or account. The assessee has provided the detail of the total transaction during the year under consideration PESA Proceed Received through : Amount (Rs.) Directly in Yes Bank Ltd. Exclusive bearing No. 041963000000156 4,26,27,248 Through other bank accounts (as mentioned) maintained for normal business transactions 12,67,239 Total 4,38,94,487 Faiyaz Yunus Patel 5 ITA No. 1272/Mum/2023 , the assessee earned margin in purchase and sale of recharge/talk time but the services of M-Pesa being purely service of money transfer like bank therefore, Vodafone gave a nominal commission as handling charges. For the purpose of Pesa , a separate account in the bank of ICICI was opened where beneficiary was Pesa Ltd. Further on the direction of Vodafone the asessee opned a new wherein total of ng the year under consideration, which was received in cash from retailors. The major being made during the year Pesa account. However, in certain the money of M-Pesa account, the assessee had s and thereafter that amount to Yes Bank account or ICICI Bank account. The assessee has provided the detail of the total proceeds transaction during the year under consideration Percentage (%) 97.11% 2.89% 100% 3.3. The assessee before us, submitted that assessee has already declared commission income of Rs.1,09,149/ M-Pesa transaction of Rs.4,38,94,437/ in Form No. 26AS. We find that the Assessing Officer has duly noted this fact of earning commission on M treated the cash received of Rs.12,67,239/ credit. Whereas, the said amount of Rs.12,67,239/ (PB-22 to PB-32) and thus this money was received by the assessee on behalf of the Vodafone M Officer has ignored the factual information provided by the assessee. When the receipt is subjected to commission income assessee was not liable to record the same as turnover of the assessee. In view of the discussion above the Ld. CIT(A) on the issue in dispute is accordingly set aside and we direct the Assessing Officer to delete the addition of Rs.12,67,239/- made u/s 68 of the Act.. The ground of the assessee is accordingly allowed. 4. The ground No. 2 of the appeal of the assessee relates to disallowance of Rs.75, of Rs.2,52,000/- invoking section 40(a)(ia) of the Act. 4.1. We have heard rival submission of the parties and perused the relevant material on record. We find that the assessee has been subjected to tax audit u/s 44AB of the Act for the first time in ITA No. The assessee before us, submitted that assessee has already declared commission income of Rs.1,09,149/- earned from the said Pesa transaction of Rs.4,38,94,437/- and same are also reflected in Form No. 26AS. We find that the Assessing Officer has duly ted this fact of earning commission on M-Pesa. However, treated the cash received of Rs.12,67,239/- as unexplained cash the assessee has before us duly demonstrated that said amount of Rs.12,67,239/- has been transferred to Vodafone and thus this money was received by the assessee on behalf of the Vodafone M-Pesa. In our opinion, the Ld. Assessing Officer has ignored the factual information provided by the assessee. When the receipt is subjected to commission income assessee was not liable to record the same as turnover of the assessee. In view of the discussion above, The impugned order of the Ld. CIT(A) on the issue in dispute is accordingly set aside and we direct the Assessing Officer to delete the addition of made u/s 68 of the Act.. The ground of the assessee is accordingly allowed. The ground No. 2 of the appeal of the assessee relates to disallowance of Rs.75,600/- being paid as 30% of the rent expenses voking section 40(a)(ia) of the Act. We have heard rival submission of the parties and perused the relevant material on record. We find that the assessee has been subjected to tax audit u/s 44AB of the Act for the first time in Faiyaz Yunus Patel 6 ITA No. 1272/Mum/2023 The assessee before us, submitted that assessee has already earned from the said and same are also reflected in Form No. 26AS. We find that the Assessing Officer has duly Pesa. However, the AO as unexplained cash assessee has before us duly demonstrated that has been transferred to Vodafone and thus this money was received by the assessee the Ld. Assessing Officer has ignored the factual information provided by the assessee. When the receipt is subjected to commission income the assessee was not liable to record the same as turnover of the The impugned order of the Ld. CIT(A) on the issue in dispute is accordingly set aside and we direct the Assessing Officer to delete the addition of made u/s 68 of the Act.. The ground No. 1 of appeal The ground No. 2 of the appeal of the assessee relates to 30% of the rent expenses voking section 40(a)(ia) of the Act. We have heard rival submission of the parties and perused the relevant material on record. We find that the assessee has been subjected to tax audit u/s 44AB of the Act for the first time in assessment year 2017 assessee was not subjected to tax audit u/s 4 year 2016-17, therefo not applicable for the assessment year under consideration and would be applicable assessment year 2018 Officer has ignored the requirement of section 194I of the Act for liability of individual u/s 194 subsequent to the year of audit u/s 44AB of the Act. In view of the above, we direct the Assessing Officer to delete the disallowance the order of the Ld. CIT(A) on the issue in dispute is set aside. The ground No. 2 of appeal of the assessee is accordingly allowed. 5. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 10/07/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. ITA No. assessment year 2017-18 i.e. current assessment year. Since, the assessee was not subjected to tax audit u/s 44AB in assessment 17, therefore, provisions of Chapter XVII not applicable for the assessment year under consideration and would be applicable from subsequent assessment year i.e. assessment year 2018-19. We are of the opinion that the Assessing Officer has ignored the requirement of section 194I of the Act for liability of individual u/s 194-I of the Act in the assessment year year of audit u/s 44AB of the Act. In view of the above, we direct the Assessing Officer to delete the disallowance the order of the Ld. CIT(A) on the issue in dispute is set aside. The ground No. 2 of appeal of the assessee is accordingly allowed. the result, the appeal filed by the assessee is allowed. nounced in the open Court on 10/07/2023. Sd/- KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER forwarded to : BY ORDER, Faiyaz Yunus Patel 7 ITA No. 1272/Mum/2023 i.e. current assessment year. Since, the 4AB in assessment re, provisions of Chapter XVII-B (TDS) were not applicable for the assessment year under consideration and subsequent assessment year i.e. 19. We are of the opinion that the Assessing Officer has ignored the requirement of section 194I of the Act for I of the Act in the assessment year year of audit u/s 44AB of the Act. In view of the above, we direct the Assessing Officer to delete the disallowance the order of the Ld. CIT(A) on the issue in dispute is set aside. The ground No. 2 of appeal of the assessee is accordingly allowed. the result, the appeal filed by the assessee is allowed. /07/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, //True Copy// ITA No. (Assistant Registrar) ITAT, Mumbai Faiyaz Yunus Patel 8 ITA No. 1272/Mum/2023 (Assistant Registrar) ITAT, Mumbai
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