2024 (12) TMI 387 - AT - Income Tax

Estimation of income - unexplained cash deposits in bank account - assessee has not filed any return of income u/s 139 or in response to notice u/s 148 - CIT(A) estimating income of the Appellant at 8 percent on the total Turnover - HELD THAT - CIT (A) has restricted the addition to 8% of the total deposits as against the addition made by the AO of total deposits in the bank account. Now the assessee is seeking further relief by claiming that, the income of the assessee is only 1.5% of the deposits as the commission income and relied upon the order of the CIT (A) for the A.Y 2017-18 dated 27/06/2024 whereby the CIT (A) has deleted the addition made by the AO on account of unexplained cash deposits in the bank account. Assessee has also relied upon the assessment order in case of Shri Anand Rao Mouglikar for the A.Y 20912-13 passed by the Income Tax Officer Ward-1 Nirmal dated 16/12/2019 wherein the AO has accepted the commission income @ 1.5%. It is pertinent to note that once the AO has accepted the business activity of the assessee as a commission agent as well as dealership in drip irrigation system on behalf of the farmers, then the income of the assessee was required to be assessed on some reasonable basis. Though the CIT (A) has estimated the income of the assessee @ 8%, however, in the subsequent A.Y, the CIT (A) has deleted the addition made by the Assessing Officer on account of unexplained cash deposits in the bank account. It is not clear from the order of the CIT (A) for the A.Y 2017-18 whether the assessee has offered any income on account of commission or not. Accordingly, we are of the considered opinion that this matter requires a proper verification and examination of the relevant facts in the light of order of the learned CIT (A) for the A.Y 2017-18 as well as the assessment order in case of Shri Anand Rao Moglikar as relied upon by the assessee. Since the deposits in the bank account of the assessee represents two kind of receipts (i) as a commission agent and another (ii) activity of the assessee in respect of drip irrigation system under the scheme of the State Govt. Therefore, there cannot be a single percentage of commission in both kind activities. Hence, the matter is remanded to the record of the Assessing Officer with a direction to the AO to reconsider the issue - Assessee is allowed for statistical purposes.

Issues:
1. Dispute regarding estimation of income for assessment year 2015-16.
2. Addition made by Assessing Officer on unexplained cash deposits in bank account.
3. Assessment of income of the assessee as a commission agent and dealer of drip irrigation system.
4. Discrepancy in income estimation between different assessment years.

Analysis:
1. The appeal was filed against the order of the CIT (A) for assessment year 2015-16. The assessee contested the estimation of income by the Commissioner and raised various grounds challenging the assessment. The AR of the assessee argued that the income should be calculated based on the commission earned, as certified by the BIS through commission certificate. The AR referred to relevant circulars and remand reports to support the claim that the assessee is a commission agent working on behalf of the government under a subsidy scheme. The AR highlighted previous assessment orders where commission income was accepted at 1.5%.

2. The Assessing Officer had made an addition to the total deposits in the bank account of the assessee under section 69A of the Income Tax Act, 1961. The DR argued that the assessee failed to provide adequate supporting evidence to explain the source of the deposits. The AR, however, contended that the deposits were related to the commission agent/dealership business and should be considered as income. The CIT (A) had estimated the income at 8% of the total turnover, which the assessee had agreed to. The DR supported the CIT (A)'s decision in this regard.

3. The remand report submitted by the Assessing Officer confirmed that the assessee was involved in supplying irrigation material and acting as a commission agent for agricultural produce. The report acknowledged the business activities of the assessee on behalf of farmers under a government scheme. The CIT (A) limited the addition to 8% of the total deposits based on this report. However, the Tribunal found discrepancies in the income estimation process and ordered a reexamination by the Assessing Officer to apply an appropriate rate for income estimation considering the nature of the activities carried out by the assessee.

4. The Tribunal noted inconsistencies in the assessment of income between different assessment years and emphasized the need for a thorough verification of facts. The Tribunal directed the Assessing Officer to reevaluate the income estimation process, taking into account the specific activities of the assessee as a commission agent and dealer of drip irrigation systems. The matter was remanded for further examination to ensure a fair and accurate assessment of the assessee's income.

In conclusion, the appeal was allowed for statistical purposes, and the matter was remanded to the Assessing Officer for a reevaluation of the income estimation process based on the specific business activities of the assessee.

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