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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 11.07.2025 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No. CIT(A), Faridabad/10934/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 25.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that the assessee is an individual and engaged in the business of money transfer agency under the license granted by payments service providers companies like Ezspend Prepaid Payments Solutions Pvt. Ltd., Oxigen Service India Pvt. Ltd., Ebix Payments services Pvt. Ltd. etc. The return of income was filed on 02.02.2018, declaring total income of INR 3,19,351/-. The case was selected for scrutiny through CASS for the year under appeal to verify the source of cash deposited during the demonetization period in Specified bank notes (“SBN”). The AO observed that during the year under appeal, the assessee has deposited cash of INR 9,22,87,000/- in the bank account out of which 40,34,000/- were deposited in SBN during demonetization period, source of which remained unexplained therefore, he made the addition of INR 40,34,000/- u/s 69 of the Act. Besides this, AO has estimated the income of the assessee @ 2 % of the total deposits in the bank account and accordingly, further addition of INR 18,45,740/- was made.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 11.07.2025, partly allowed the appeal of the assessee.
Aggrieved by the order of Ld.CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-
1.“On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eye of law and on the facts.
2.On the fact and circumstances of the case, Id. CIT(A) has erred both on facts and in law in passing the order without giving any finding on the merits of the case.
3.(i) On the facts and circumstances of the case, Id. CIT(A) has erred both on facts and in law in confirming an addition of Rs. 15,40,000/- under section 69A of the Act, despite the fact that hundreds of small laborers paid this cash in very small amount to appellant assessee during the course of his business of agency of money transfer companies and supported by agreements and bank documents.
(ii)That the above said addition has been confirmed without considering the fact that the assessee has already shown the commission received on this deposit in his ITR for the relevant assessment year.
4.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the commission income of Rs.7,07,790/- at estimated 2% of Rs. 3.53 crore, thereby making an addition of Rs.3,88,439/- (Rs. 7,07,790/-less 3,19,351/- income declared by assessee in ITR), ignoring the nature of low-margin agency business and form 26AS.
(ii)That the commission has been charged @ 2%, without there being any basis for the same.
5.The appellant craves leave to add, amend OR alter any of the grounds of appeal.”
Ground of appeal No.1 is general in nature hence, not adjudicated.
Ground of appeal No.2 & 3 are with respect to the addition of INR 15,40,000/- made u/s 69A of the Act and confirmed by Ld. CIT(A).
Heard the contentions of both the parties at length and perused the material available on record. The claim of the assessee was that the cash was deposited by various persons with the assessee as he is working as money transfer agent for various payment service providers and was the receipts of principal companies and accordingly, entire sum so deposited was subsequently transferred to the respective principals. During the course of hearing, the assessee has filed details of such cash deposited according to which total cash of INR 15,40,000/- was deposited in SBN in Two bank accounts maintained with PNB and said sum was subsequently transferred to the account of the principal of Ezspend Prepaid Payments Solutions Pvt. Ltd. and Ebix Payment Services Pvt. Ltd. etc. The necessary chart of the cash in SBN so deposited during the demonetization period and transferred to the money transfer agency have been filed before us.
On careful perusal of the same, it is observed that the amounts were received by the assessee in SBN as Collection Agent for the principals which was subsequently transferred to the accounts of respective principal i.e. money transfer companies and the assessee got the commission from such activity which has been accepted by the AO. When the assessee was acted as a broker for the principals i.e. money transfer agency, no addition is could be made in the hands of the assessee for the money belonged to those principals and more particularly when these funds were ultimately transferred to their accounts. In view of these facts, AO has wrongly treated the cash deposited during the demonetization period in SBN as unexplained money of the assessee and therefore the addition of INR 15,40,000/-made u/s 69A of the Act is hereby deleted. Accordingly, Ground of appeal Nos.2 & 3 raised by the assessee are allowed.
Ground of appeal No.4 raised by the assessee is with respect to the confirmation of addition of INR 3,88,439/- by estimating the income of the assessee by applying the profit of 2 % on the gross deposits of INR 3.53 crores in his bank account.
Heard the contentions of both the parties at length and perused the material available on record. It is observed that Ld.CIT(A) has reduced the amount of cash deposits from INR 9,22,87,000/- alleged by the AO made in Four bank accounts to INR 3,68,29,500/-pertaining to the deposits made in two bank accounts of the assessee. Thereafter, Ld.CIT(A) reduced the addition of INR 15,40,000/-separately made on account of cash deposits in SBN out of the gross receipts and applied 2% commission rate on the balance deposits and allowed credit of the income declared by the assessee in the return of income filed. It was the claim of the assessee that in terms of arrangements provided by the principals, the assessee was entitled for commission ranging between 0.15% to 0.50 % on the total funds routed through him. As observed above, the AO has never doubted the nature of the business of the assessee, therefore, the source of deposits was not doubted. The only issue remains is what would be reasonable rate of commission on such transactions. The assessee has declared commission income @ 1% however, it is observed that assessee has taken gross receipts at INR 3,19,35,100/- only as against the total deposits of INR 3,69,29,500/- from commission agency business appearing in his bank accounts. Therefore, we direct the AO to apply commission rate of 1% on gross deposits of INR 3,69,29,500/- and recompute the income of the assessee. With these directions, Ground of appeal No.4 raised by the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.