SHRI GAJRAJ NATUBHA JETHVA,JAMNAGAR V. THE ITO WARD-3 (2), JAMNAGAR, JAMNAGAR

ITA 426/RJT/2023

AI Insights

The case involves Gajraj Natubha Jethva, the appellant, who contested the disallowance of expenses related to commissions and credit notes to retailers amounting to Rs. 25,64,689 and Rs. 13,92,937 respectively, for the Assessment Year 2016-17. The initial disallowance was made by the Assessing Officer under section 143(3) of the Income Tax Act, 1961, and was upheld by the Commissioner of Income-tax (Appeals). The appellant argued that these expenses were legitimate business expenses related to the sale of recharge vouchers. The Tribunal found that the appellant had provided sufficient documentation and evidence to substantiate the transactions and directed a re-evaluation of the profit at a nominal rate of 1% on the total sales, thereby allowing the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653016 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV; LD.
• Assessee Lawyers: ASTHA MANIYAR; LD
• Keywords: Business income; Additional evidence; Corroborative evidences; Onus to prove; Principle of natural justice; Third party statement; TDS
• Section: 143(3); 142(1); 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकरअपीलसं./ITA No. 426/RJT/2023 ( नधा\u000fरणवष\u000f / Assessment Year: (2016-17) (Hybrid Hearing) Gajraj Natubha Jethva Sikka Patiya, Moti Khavadi, Jamnagar-361140 Vs. Income Tax Officer, ITO ward – 3(2), Taranjali Building, Nr. Amber Cinema, Pt. Nehru marg, Hospital Road Jamnagar - 361140 \u0013थायीलेखासं./जीआइआरसं./PAN/GIR No.: AKYPJ9388E (Appellant) (Respondent) Appellant by : Smt. Astha Maniyar, Ld. AR Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR Date of Hearing : 24/03/2025 Date of Pronouncement : 17/06/2025 आदेश / O R D E R PER DINESH MOHAN SINHA, JM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2016-17, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), dated 20.10.2023, which in turn arises out of an order passed by the Assessing Officer u/s 143(3) of the Act, on 29.12.2018. 2. Grounds of appeal raised by the assessee are as follows: 1) 1 The Ld CIT(A)-NFAC, Delhi has erred in law and on facts in confirming the disallowance made by the AO of Rs. 25,64,689/- being commission paid to retailers Page | 2 ITA No. 426/Rjt/2023 (AY 2016-17) GAJRAJ N. JETHVA v. ITO 2) The Ld CIT(A)-NFAC, Delhi has erred in law and on facts in confirming the disallowance made by the AO of Rs 13,92,937/- being credit notes given to retailers The assessee craves leave to add, amend, delete or alter one or more grounds of appeal. 3. Brief facts of the case that the assessee is an Individual and has e-filed Return of Income on 13.10.2016 declaring total income at Rs.4.85.800/-. The same was processed u/s. 143(1) of the Act. The case was selected for complete scrutiny through CASS for the reason - Law Income compared to large commission receipts. A Notice u/s. 142(1) dated 22.05.2018 and subsequently notice u/s.142(1) r.w.s. 129 dated 03/10/2018 issued through ITBA e-assessment calling for various details of profit and loss account, Balance-Sheet, Capital Account, Trading Account, Audit report along with Annexures were called for. Further questionnaire various details regarding, Bank details, TDS liability, cash deposits, complete details of expenses, ledger for commission paid of Rs. 25,64,689/-, credit note to retailer of Rs.13,92,937/-, ledger accounts and details of creditors vide point 1 to 12 of the notices. Bank Statement of the assessee was called from the Banks u/s. 133(6) of the IT Act. In e-response on 28.11.2018 the assessee submitted the following remarks:- \"Respected honour The assessee deriving gross one point four percent commission after deducting indirect expense his net profit is zero point fourty five percent and the certificate is attached from Vodafone idea Ltd for your kind reference.\" i. The reply of the AR of the assessee submitted online on 26/12/2018 is considered regarding reconciliation of purchases with the audit report (Purchases 12.63.19,420 +44,46,445 13.07.65.892 +5,67,885 13,13,33,750 and various entry in the passbook The assessee vide point no. 02 of Page | 3 ITA No. 426/Rjt/2023 (AY 2016-17) GAJRAJ N. JETHVA v. ITO submission dated 26/12/2018 stated that he had recorded Gross Commission on Sales amount, i. e. Rs 44,46,4451-as a Direct Income On Trading Account. The commission income passed on by the assessee to the retailer of Rs.25,64,680 & Credit Note of Rs. 13.92.937/- is not verifiable and no supporting evidences was given by the AR of the assessee during assessment proceedings. Further, the notice issued at the address of retailer given by the Assessee were returned un-served by the Postal Department. Filed inquiry made by the Inspector reports non existence of some of the retailer. By issuance of show cause notice dated 19/12/2018 onus to prove the genuineness of the transaction regarding passing of Commission and Credit Note is upon the assessee. ii. Regarding genuineness of expenses, the contra confirmation asked vide show cause notice dated 19/12/2018 was not discharged by the assessee till the date of assessment order. In the books of accounts assessee credited commission of Rs.44.46.445/- under the head Direct Income and claimed expenses commission on sales to retailers of Rs.25.64.689/-. The same way the assessee shown 'credit note from Vodafone of Rs. 13,92,937/- under the head of Indirect Income and claimed the same amount of expenses of Rs.13.92.937/- 'credit note to retailer expenses' under the head Sales & Administrative Expenses. iii. The assessee could not give contra confirmation of any of the retailers to whom he transfer the Credit Note and Commission during the year. The fact that assessee also shown all the commission paid to retailers below Rs.5000/- in such a way that no TDS liability occurs as also assessee could not submit contra confirmation for genuineness of the transaction It is also very unusual in the line of Assessee's business that not a single party of the Page | 4 ITA No. 426/Rjt/2023 (AY 2016-17) GAJRAJ N. JETHVA v. ITO assessee having transferred ETOP balance above Rs.2,50,000/- and commission transferred above R$5,000/- The same can be checked from the list uploaded of retailer by the assessee regarding Balance and commission. iv. Considering the above facts and material gathered during the assessment proceedings total expenses related to commission to retailers of Rs.25,64,689/- and credit note of Rs. 13.92.937/-are disallowed and added to the total income of the assessee. Further I am satisfied that assessee has furnished inaccurate particulars of income in return and in balance sheet, therefore penalty proceedings u/s.271(1)(c) r.w.s. 274 are initiated for furnishing inaccurate particulars of income. 4. That the assessee filed an appeal before the Ld. CIT(A) against the order of the Ld. AO, vide order dated 29.12.2018. That the Ld. CIT(A) dismissed the appeal of the assessee with following remarks: “I have considered the submission of the appellant. I find that the appellant by replying on the various decisions has requested to admit the additional evidence. Considering the facts of the case, and submission filed by the assessee, the additional evidence furnished by the appellant is admitted by following the principle of natural justice. However, I find that the appellant has not submitted any comments on the adverse finding given by the AO in the remand report in respect of addition of Rs. 25,64,689/- and Rs. 13,92,937/-. Therefore the addition made by the AO are confirmed since the appellant has failed to justify the allowability of these expenses with supporting evidences. Thus the grounds of appeal raised by the appellant are dismissed.” 5. That the assessee filed an appeal before us, against the impugned order of the Ld. CIT(A), order dated 02.12.2023. Page | 5 ITA No. 426/Rjt/2023 (AY 2016-17) GAJRAJ N. JETHVA v. ITO 6. Before us, during the course of argument, the Ld. Counsel of the assessee stated that the assessee directed to furnish a copy of argument and the same was placed on record. Before the, Ld. Counsel of the assessee during the course of assessment for AY 2016-17. The assessee did not deposit any cash in the current account in the ___ bank. The Ld. Counsel further submitted during the course of argument that the assessee used to make payment to Vodafone Essar Gujarat Ltd. (VEGL) for purchase of recharge vouchers (easy vouchers) and used to sale the same to the various retail shops in around areas. Out of the entire sale and purchase transactions of recharge vouchers, the assessee used to earn commission as specially in the term of argument. i.e., total gross primary discount of 3% or 4% contesting of 2% for retailer and 1.4% for distributor. The assessee has stated in the assessment order that the amount received out of sake on your business receipt deposited in the bank and payment transferred to VEGL for purchased of new type of time. Recharge vouchers the income earned from business was terms by the assessee amount of Rs. 4,85,800/- as per Return of Income filed by the assessee. During the year under consideration, the assessee received the same of Rs. 12,63,19,420/-, however, the assessee has purchased recharge vouchers amount noted of Rs. 13,92,937/-, therefore, the main payment of Rs. 44,46,445/-. The entire payment was made to the VEGL from the business , which are reflected in the bank statement of the assessee and also confirm by the VEGL that the assessee submitted of the known to the department the assessee enclosed with the reply following documents; a) Financial Statement; b) Profit and loss accounts; c) Balance-sheet; d) Bank statements; e) Income Tax Return acknowledgement; Page | 6 ITA No. 426/Rjt/2023 (AY 2016-17) GAJRAJ N. JETHVA v. ITO f) Details of cash received for various periods for AY 2016-17 g) The statement of received cash in AY 2016-17 and deposited in concerned bank. 7. On the contrary, the Ld. Sr. DR of the revenue supported the order passed by the lower authorities. 8. We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. Keeping in view the overall facts and circumstances of the case, we find that the assessee being distributors of recharge vouchers (top-up). As it is distributor of VEGL for selling of recharge vouchers etc. The amount received from different businesses, receipt deposited in the bank account of the assessee and reinvested in the purchasing of recharge vouchers from VEGL, there is recharge vouchers in the bank statement. We also find that the assessee furnished bank statement placed on record. The assessee also furnished the financial statement, balance-sheet, cash receipt from municipality and statement of cash receipt and deposited in the bank. The assessee made sale of Rs.13,07,99,120/- by way of sale recharge vouchers. The Ld. CIT(A) and NFAC, Delhi has not considered the fact as well as documents submitted by the assessee and made addition of entire amount of Rs. 4,85,800/- + Rs. 25,64,689/- + Rs. 13,92,937/- total amount is 44,43,430/-, and confirmed by the Ld. CIT(A), as income of the assessee. Considering the facts of the case, and direct the assessing officer to calculate and estimated profit @1% i.e., 13,07,991/- on the transaction value of Rs. 13,07,99,120/- being net income of the assessee. Consequently, the addition made u/s. 69A of the Act is hereby quashed. Since, the nature and source of deposit clearly established. The Ld. AO is directed to issue a Page | 7 ITA No. 426/Rjt/2023 (AY 2016-17) GAJRAJ N. JETHVA v. ITO demand notice as per law. Grounds of appeal No. 1 & 2 of the assessee are disposed off accordingly. 9. In the result, appeal filed by the assessee is allowed in terms indicated above. Order pronounced in the open court on 17-06-2025 Sd/- Sd/- (A. L. SAINI) (DINESH MOHAN SINHA) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot (True Copy) \u001bदनांक/ Date: 17 /06/2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot "