SHRI SAI COMMUNICATION,SURAT V. INCOME TAX OFFICER, WARD-2(3)(6), SURAT

ITA 741/SRT/2024

AI Insights

The case involves Shri Sai Communication, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming additions made by the Assessing Officer under sections 69A and 68 of the Income-tax Act, 1961. The additions were related to cash deposits made during the demonetization period and estimated commission income from bank transactions. The Tribunal found that while the separate addition of cash deposits during demonetization could lead to double taxation, a 20% addition was justified to prevent revenue leakage. The Tribunal also upheld the estimated commission income addition, as the assessee failed to provide adequate evidence to support a lower commission rate.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26815 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-11-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 02-07-2024
• Other Referred Cases: Amrita Gems Pvt. Ltd. vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVISH BHATT
• Assessee Lawyers: KIRAN K. SHAH
• Keywords: Business expenditure
• Section: 142(1); 68; 69A; 20

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.741/SRT/2024 Assessment Year: (2017-18) (Physical Hearing) Shri Sai Communication, Shop No.1, Opp – Ganesh Temple, Essar Truck Parking, Hazira, Surat - 394270 Vs. The ITO, Ward – 2(3)(6), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: ACXFS8143D (Appellant) (Respondent) Appellant by Shri Kiran K. Shah, CA Respondent by Shri Ravish Bhatt, Sr. DR Date of Hearing 13/11/2024 Date of Pronouncement 22/11/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 03.05.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment years (AY) 2017-18. 2. The grounds of appeal raised by the assessee are as under: “1) The learned CIT(A) grossly erred in confirming addition of Rs.28,18,000/- u/s 69A of the Act being cash deposited in the bank account during demonetization period as discussed in para 6 of the CIT(A) order though profit on transactions for cash/cheques/draft discounting was already taxed on entire transactions of both the bank accounts. 2) The learned CIT(A) grossly erred in confirming addition of Rs.7,63,120/- u/s 68 of the Act being estimate of 1% commission of entire bank transactions of both the accounts instead of 0.15% shown by the assessee as discussed in pra 6 of the CIT(A) order. 2 ITA No.741/SRT/2024/AY.2017-18 Shri Sai Communication 3) The appellant reserves right to add, alter and withdraw any grounds of appeal.” 3. Brief facts of the case are that the assessee had filed his return of income for AY.2017-18, declaring total income atRs.2,386/-. During the demonetization period, the assessee deposited cash of Rs.11,77,500/- in his bank account No. 34391009594, maintained with SBI Bank. The assessee had also deposited cash of Rs.16,14,500/- in account No.35915757203 in the same period. Various statutory and show cause notices were issued to the assessee u/s 143(2), 142(1) and 144 of the Act. The assessee did not comply with any of the notices. The Assessing Officer (in short, ‘AO’) observed that the assessee has failed to furnish details of business activities, nature of income earned, details of bank accounts and sources of cash deposits. Therefore, the AO passed ‘best judgment assessment’ u/s 144 of the Act and made additions of Rs.28,18,000/- u/s 69A of the Act. The assessee has also received credit entries in this bank accounts to the extent of Rs.10,52,93,816/-. The AO issued show cause notice and asked the assessee as to why the income should not be estimated at 1% of the total credit because the assessee has mentioned his business as commission agent. After reducing Rs.1,62,526/- declared by the assessee as its income in the the ITR, he added Rs.7,63,120/-; though he had proposed addition of Rs.9,26,647/- in the show cause notice. This amount was added u/s 68 of the Act. Accordingly, the total income was assessed at Rs.35,83,510/-. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) issued 5 notices, but there was no response. The assessee had requested for adjournment in response to the first notice, but thereafter he did not respond to any notice. Therefore, the CIT(A) decided the appeal on the basis of materials 3 ITA No.741/SRT/2024/AY.2017-18 Shri Sai Communication available on record. He has reproduced the assessment order and given his findings at para 6 of the appellate order. Since the assessee was non-complaint before AO as well as CIT(A), the CIT(A) has dismissed the appeal by stating that in absence of any corroborative evidence/material and submission by the assessee, there was no reason to alter the additions made by AO. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee submitted that both in the assessment as well as appellate proceedings, submission could not be filed as the assessee has no idea about looking into e-mail proceedings. He had transferred the messages to his CA, who has not taken further action. The Ld. AR submitted that the assessee firm is in the business of money remittance and consultancy. The assessee is also authorized to collect cash and remit to the customer through certain private / public financial institutions. The assessee firm earned gross commission of Rs.1,63,526/- and after deducting business expenses, it had shown net income of Rs.2,386/-. The assessee had considered both the bank accounts with SBI while estimating commission income. The assessee normally earns 0.15% commission in this nature of business; but the AO estimated commission income of Rs.10,90,173/- being 1% of the total credits in bank accounts. After reducing commission shown at Rs.1,63,526/-, Rs.9,26,647/- was to be added by the AO but in the computation, he has wrongly added Rs.7,63,120/-. He submitted that in the business of money transfer, the appellant has received cash from various parties which are remitted through bank to different places as per the requirement. Once the entire credit transactions of both banks are taken into 4 ITA No.741/SRT/2024/AY.2017-18 Shri Sai Communication account, separate additions for cash deposited in the demonetization period is not justified. This would amount to double addition which not permissible. The Ld. AR relied on the decision of ITAT, Surat in case of Amrita Gems Pvt. Ltd. vs. ITO, in ITA No.181/SRT/2023, dated 21.08.2023 wherein 10% profit was estimated on cash deposit during demonetization period. He further submitted that the CIT(A) erred in confirming addition of Rs.7,63,120/- u/s 68 being estimate of 1% commission of entire bank transactions instead of 0.15% shown by the assessee. 6. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the revenue supported the orders of lower authorities. He further submitted that the assessee was totally non-compliant before AO and CIT(A). He urged that the ITAT may imposed appropriate cost on the assessee for repeated non-compliance before revenue authorities. 7. We have heard both the parties and perused the materials available on record. We have also carefully perused the decision relied upon by the Ld. AR. In Ground No.1, assessee has contested addition of Rs.28,18,000/- u/s 69A, being cash deposited in the bank account. He submitted that once commission income @ 1% on the entire credit of the bank accounts is estimated, making addition of the cash deposit, which is included in the total credit, would amount to double addition. He has relied on the decision of the ITAT, Surat Bench in the case of Amrita Gems Pvt. Ltd. (supra) where 10% of profit was estimated on cash credit during demonetization period. We find from the assessment order that the assessee had deposited cash of Rs.11,77,500/- and Rs.16,40,500/- in its bank accounts with SBI during demonetization period. The total of these two comes to Rs.28,18,000/-. 5 ITA No.741/SRT/2024/AY.2017-18 Shri Sai Communication These deposits are claimed as part of the total credit of Rs.10,52,93,816/- which has been considered for estimating commission income of the assessee. The Ld. AR has strongly argued against separate addition of the cash deposit during demonetization period. We are not fully convinced about the argument of the Ld. AR. The assessee is engaged in the business of money remittance and the amount deposited in cash during the demonetization period might have been subsequently transferred to various persons. However, the facts remains that the assessee has not given details of the depositors and receivers of the impugned cash during demonetization period. He has not correlated the deposit with subsequent transfer of money. There is no one-to-one nexus between the depositors and the receivers. Therefore, the argument of the Ld. AR cannot be totally accepted. We also find that there are many other instances of cash deposit in the non-demonetization period. The Co-ordinate Bench of Surat in the case of Amrita Gems Pvt. Ltd. (supra) has held that to avoid possibility of revenue leakage, disallowance of 10% of cash generated during demonetization period would meet the ends of justice. In the present case, there are cash deposits during demonetization period as well as remaining period of the year. Hence, we direct the AO to restrict the addition to 20 % of the cash deposit of Rs.28,18,000/- to avoid possibility of revenue leakage and delete the remaining amount. This ground is partly allowed. 8. In the result, ground no.1 raised by the assessee is partly allowed. 9. The next ground is addition of Rs.7,63,120/- u/s 68 of the Act. The facts have already been stated earlier. The AO estimated commission income @ 1% on total deposit of Rs.10,52,93,816/- and reduced Rs.1,63,526/- from it because assessee 6 ITA No.741/SRT/2024/AY.2017-18 Shri Sai Communication has disclosed the above sum in its return. The difference would be Rs.8,89,412/- (i.e., Rs.10,52,938 – Rs.1,63,526) which was required to be added. However, the AO has added only Rs.7,63,120/- and the Ld. AR has submitted that the correct amount is Rs.9,26,647/-. During the hearing before us, the Ld. AR has not argued against the estimation of commission @ 1% by the AO, though in the written submission, he submitted that in the business of money remittance, the commission is normally 0.15% to 0.35%. In absence of complete details regarding the source of deposit and destination of the amounts transferred, it is not possible to accept the contention of the Ld. AR. To be fair, the Ld. AR has also not insisted on this ground before us. Considering the totality of the facts, we uphold the order of CIT(A) and reject the ground. 10 In the result, the ground no.2 is dismissed. 11. In the combined result, the appeal of the assessee is partly allowed. Order is pronounced in the open court on 22/11/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 22/11/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "