INCOME TAX OFFICER, WARD-2(3)(6), SURAT, ADAJAN V. KIRITBHAI JOITARAM PATEL, PARVAT PATIYA

ITA 373/SRT/2024

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 4726 (ITAT-SURAT)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 02-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVIKANT GUPTA
• Keywords: Unexplained cash credit; Tax effect; Co-operative Credit Society
• Section: 147; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No. 373/SRT/2024 (AY: 2015-16) (Physical hearing) I.T.O., Ward-2(3)(6), Surat. Vs Kiritbhai Joitaram Patel, No. 101, Saraswati Apartment, Ganesh Nagar, Parvat Patiya, Magob, Surat-395010. PAN : ARNPP 5317 P APPELLANT/REVENUE RESPONDEDNT/ASSESSEE Respondent by Shri Ravi Kant Gupta, CIT-DR Assessee by None Date of Institution of Appeal 04/04/2024 Date of hearing 29/08/2024 Date of pronouncement 05/09/2024 Order under Section 254(1) of Income tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the revenue is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/ learned Commissioner of Income Tax (Appeals), dated 08/02/2024 for Assessment Year (AY) 2015-16. The Revenue has raised following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred restricting the addition of Rs. 3,56,27,727/- made by the Assessing Officer under section 69A of the Act to the extent of 2% of the total transactions ignoring the fact that the assessee has failed to prove the source of credits, genuineness and nature of his business activities. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has allowed the appeal without appreciating the fact that the AO has made the said addition when the assessee has totally failed to furnish details regarding from whom and to whom these transactions were made during year with documentary evidences as it is not possible to ran such business without maintaining of details of person who advancing money to assessee on trust and also details of the person to whom money required ITA No.373/SRT/2024 ITO Vs Kiritbhai Joitram Patel 2 to be hand over. The Ld. CIT(A) has also ignored the fact that assessee has done illegal business without any license and intentionally not furnished the details of customers before the AO during the assessment proceedings. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs. 3,56,27,727/- under section 69A of the I.T. Act to 2% of the total transactions found in bank account as commission income out of cheque discounting business without appreciating the fact that the assessee could not establish with documentary evidences during the assessment proceedings that the unexplained credit entries reflected in the bank account of the assessee are of his cheque discounting business . 4. On the facts and in the circumstances of the case and in law, that the ld. CIT(A) has erred in treating the 'undisclosed bank transactions' as 'trading transactions of assessee's regular course of business while the assessee has failed to establish that he has actually done the 'cheque discounting business' and he has earned only commission income from such undisclosed bank transactions.” 2. Brief facts of the case are that assessee is an individual, engaged in the business of Facilitator/Aangadiya services for transfer of money, filed his return of income for A.Y. 2015-16 on 07/03/2016 declaring income of Rs. 2,49,450/-. Initially, the return was accepted. However, later on, the Assessing Officer received information about high risk transaction on their inside portal and found that income shown by the assessee were not commensurate with the cash deposit/credit in the bank account of assessee with Shree Remuka Mata Multi State Urban Co-operative Credit Society (in short, SRMSCS). On perusal of bank account, the Assessing Officer found that the assessee has made cash deposit/credit of Rs. 3.56 crores in his bank account. The Assessing Officer issued show cause notice to substantiate source of transaction in bank. The assessee filed its reply and submitted that ITA No.373/SRT/2024 ITO Vs Kiritbhai Joitram Patel 3 he is engaged in the business of general Aangadiya services (Facilitator). While doing such business, the assessee collects cash from the customers for transfer of funds at the give place and deposit the same in his bank account and withdraw it immediately to pay cash to the person concerned. On such transaction, the assessee earned commission income at 2% per lac. Out of this commission, SRMSCS charged 1.5% per lac commission for the service provided which can be verified from his bank statement. As the transaction is to be made in cash to the customer, the assessee has no control over the depositors or beneficiaries and the assessee is merely acting as a facilitator on behalf of depositor of the fund and handing over the amount almost on the same day and hardly any balance left in his bank account. The assessee has eared commission income @ .50% of Rs. 3.56 crores. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer vide further show cause notice dated 31/01/2023 again asked the assessee about the nature of business activities carried out during the year, list of the persons from whom cash was received for deposit in bank account, list of the persons to whom funds were transferred, copy of bank statement of relevant period, copy of Profit & Loss Account and certificate issue by any statutory body for doing such business. The assessee filed his reply on 10/02/2023 wherein he has filed copy of ITR, copy of bank account with SRMSCS and submitted that he acting as a facilitator/Angadiya for transfer of cash from one place to another and charging 2% per lac commission out of which SRMSCS charged 1.5% per law for service provided. The assessee further vide reply dated 07/04/2023 submitted that the funds were deposited in his ITA No.373/SRT/2024 ITO Vs Kiritbhai Joitram Patel 4 bank account at various locations across India which was transferred in favour of customers as per their instructions as the transactions as the transactions were made in cash. The assessee transferred such cash on the same day. No certificate is issued by any statutory authority for authorizing such business. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer held that the assessee is given vague reply and not provided name and address of the persons on whose behalf, the assessee made transaction. The assessee has not discharged his onus. The assessee is binding to prove the fact that the funds deposited relates to other parties without any supporting evidence. The Assessing Officer treated the entire deposit of Rs. 3.56 crores as unexplained credit in the assessment order dated 29/04/2023 passed under Section 147 r.w.s. 144B of the Act. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions. Submission of assessee are recorded in para 4 of order of ld. CIT(A). The assessee in his submission repeated similar contention that he is merely acting as a facilitator for transfer of fund from one place to another place as an Angadiya and earned commission income and also after paying society commission (bank charges) @ 1.5%, the assessee earned a meagre income of Rs. 2,49,450/-. The assessee also stated that out of the commission charged by assessee, the assessee has paid commission to his banker @ 1.5% which is evident from his bank statement. The amount in his bank account was deposited by his customers and such amount was transferred/handed over to the beneficiary on the same day. The assessee ITA No.373/SRT/2024 ITO Vs Kiritbhai Joitram Patel 5 also relied on a decision of Ahmedabad Tribunal in the case of Patel Somabhai Kanchanlal & Co. Vs DCIT (1997) 58 TTJ 206 (Ahd) wherein it was held that where the assessee firm was carrying Angadiya business i.e. carrying cash and valuables pertaining to different persons from one place to another and keeping in view the peculiar nature of Angadiya business, only addition is to be made on the basis of real income. The assessee also relied on the decision of another case in ITO Vs. Dineshchandra Shantilal Shah (HUF) (2013) 34 taxmann.com 187 (Ahd. Trib). 4. The ld. CIT(A) on considering the submissions of assessee, held that in appeal for A.Y. 2014-15, his predecessor has estimated/determined commission income @ 2.00% of total transaction. Thus, the ld. CIT(A) by following the decision of his predecessor, restricted the addition to the extent of 2.00 % of total transaction of Rs. 3.56 crores. Aggrieved by the order of ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 5. None, appeared on behalf of assessee despite service of notice by way of e- mail on more than two occasions as well as through registered post. Notice was served through ld. CIT-DR, copy of acknowledgement of service of notice is placed on record. Despite the service of notice, none appeared on behalf of assessee, therefore, we left no option except to hear the submission of ld. CIT-DR for the revenue and to decide the case on the basis of material available on record. 6. The ld. CIT-DR for the revenue supported the order of Assessing Officer and would submit that during the assessment, the assessee failed to discharge his onus in making honest reply to various show cause notices issued by the ITA No.373/SRT/2024 ITO Vs Kiritbhai Joitram Patel 6 Assessing Officer. The assessee failed to furnish name and address of the persons to whom such cash was transferred by assessee from one place to another place. The ld. CIT(A) followed the order of his predecessor wherein the addition was restricted to 2.00% of total transactions. The revenue may not have filed appeal against such decision due to low tax effect. The ld. CIT- DR for the revenue prayed to restore the order of Assessing Officer by setting aside the order of ld. CIT(A). 7. We have considered the submissions of ld. CIT-DR for the revenue and perused the orders of the lower authorities carefully. We find that the Assessing Officer made addition of Rs. 3.56 crores on the basis of total transaction/credit in the bank account of assessee. We further find that plea of assessee throughout the proceeding before the Assessing Officer is that he is engaged in providing accommodation entries and charged 2.00% commission per law out of which 1.5% commission was paid to his banker i.e. SRMSCS. The Assessing Officer added the entire transaction. The entire transaction can never be income of the assessee. We find that in assessee’s own case for A.Y. 2014-15, the ld. CIT(A) restricted the addition to the extent of 2.00 % of total transaction/credit in his bank account. The ld. CIT(A) while considering the appeal for assessment year under consideration i.e. for A.Y. 2015-16, restricted the addition to the extent of 2%. Considering the nature of business activities of assessee, 2.00% commission estimated on the basis of overall material available on record, on overall transaction is justified. No contrary fact or law is brought to our notice to take other view, therefore, we ITA No.373/SRT/2024 ITO Vs Kiritbhai Joitram Patel 7 affirm the order of ld. CIT(A). In the result, grounds of appeal raised by the revenue are dismissed. 8. In the result, this appeal of the revenue is dismissed. Order pronounced on 05/09/2024 in the open court. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 05/09/2024 *Ranjan Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By Order Assistant Registrar/Sr.PS/PS, ITAT, Surat