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2025 (4) TMI 1433 - AT - Income TaxAddition as commission income in the hands of an auto-rickshaw driver - HELD THAT - Assessee is an auto-rickshaw driver who was lured by Shri Raju Bhimrajka to carry on the business in the name of M/s. Aqua Trading Company. The assessee was offered Rs. 2, 000/- per month for his name. It is beyond one s imagination as to how an auto-rickshaw driver can do transactions of Rs. 103, 33, 86, 100/-. AO was in possession of the complete information of all the three companies mentioned elsewhere. The AO was also in possession of the transactions done through RTGS inter-se bank transfers by the three companies but the AO did not make any verifications from the real culprits and taxed the entire amount in the hands of the autorickshaw driver i.e. the assessee. AO ought to have considered the transactions once the assessee has stated on oath that he is not doing any business but the entire business is done by Shri Raju Bhimrajka there is no evidence on record that the AO made any effort to trace the real business behind the alleged transactions and instead chose to make addition in the hands of the assessee. We are of the considered view that such action of the AO cannot be justified on any count. Therefore considering the peculiarity of the case being that of an auto-rickshaw driver the impugned addition cannot be sustained in his hands and is accordingly directed to be deleted. It is made clear that considering the peculiarity of the case and considering that the assessee is an auto-rickshaw driver our decision should not be considered as precedence in any other case. The AO is free to take action against real culprits and bring them to tax-net. In the interest of justice and fairplay appeal of the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification for Addition of Commission Income in the Assessee's Hands Relevant legal framework and precedents: The income tax law mandates that income must be assessed in the hands of the person who is the true beneficiary or the real owner of the income. Mere appearance on paper does not suffice to attribute income if the person is only a nominal holder without real control or benefit. Precedents have held that the AO must establish a direct link between the assessee and the income claimed to be taxable in his hands. Court's interpretation and reasoning: The Tribunal noted that the assessee was an auto-rickshaw driver with no apparent capacity or means to conduct transactions aggregating over Rs. 103 crores. The assessee's sworn statement under section 131 of the Act clarified that the business was actually carried on by Shri Raju Bhimrajka in the assessee's name, and the assessee was paid only Rs. 2,000 per month as commission, which was offered to tax. Key evidence and findings: The AO had information about three companies-M/s. S5 Trading Pvt. Ltd., Crystal Corporation, and M/s. Aqua Trading Company-operating bank accounts with large inter-se RTGS transfers. Despite this, the AO did not investigate the role of these companies or the individuals actually conducting the business and instead made the addition solely in the hands of the assessee. Application of law to facts: The Tribunal found that the AO failed to apply the legal principle that income must be attributed to the true owner or beneficiary. The assessee's position as a nominal account holder paid a fixed commission was not disputed by any evidence. The AO's addition was therefore not sustainable. Treatment of competing arguments: The Revenue argued for the addition based on the volume of transactions in the bank account held in the assessee's name. However, the Tribunal rejected this argument due to the lack of any evidence linking the assessee to the actual business operations or control over the funds. Conclusions: The addition of Rs. 10,33,38,610/- as commission income in the hands of the assessee was unjustified and was rightly deleted by the Tribunal. Issue 2: Adequacy of AO's Investigation and Compliance with Principles of Natural Justice Relevant legal framework and precedents: The AO is duty-bound to conduct a fair and thorough investigation, including verifying the identity of the real beneficiaries of the transactions and not merely relying on the name in which the bank account is held. The principles of natural justice require that the assessee should not be burdened with income without proper inquiry and evidence. Court's interpretation and reasoning: The Tribunal observed that the AO had complete information about the three companies and their inter-se transactions but failed to investigate the real culprits behind the transactions. Instead, the AO chose to tax the entire amount in the hands of the assessee, who was merely a nominal holder. Key evidence and findings: The assessee's sworn statement under section 131 and the lack of any contrary evidence from the AO demonstrated that the AO did not discharge his investigative responsibilities adequately. Application of law to facts: The Tribunal concluded that the AO's approach was flawed and contrary to the principles of fair play and justice. The AO ought to have pursued the real business operators and brought them within the tax net. Treatment of competing arguments: The Revenue did not produce any evidence of efforts made to identify and tax the real beneficiaries. The Tribunal emphasized that the AO's failure to do so was a critical lapse. Conclusions: The AO's action in taxing the entire amount in the hands of the assessee without proper investigation was unjustified and unsustainable. Issue 3: Credibility of Assessee's Claim as Nominal Account Holder Relevant legal framework and precedents: Courts have recognized that a person may hold assets or conduct transactions in name only, without being the beneficial owner. The burden is on the Revenue to prove that the assessee was the real beneficiary. Court's interpretation and reasoning: The Tribunal accepted the assessee's claim that he was paid a fixed commission of Rs. 2,000 per month for lending his name and that the business was carried out by Shri Raju Bhimrajka. The Tribunal found this credible given the assessee's occupation and the nature of transactions. Key evidence and findings: The assessee's statement recorded under section 131 was unchallenged and supported by the lack of any contradictory evidence from the Revenue. Application of law to facts: The Tribunal applied the principle that the assessee's mere name on the bank account does not automatically translate into taxable income unless the Revenue proves beneficial ownership. Treatment of competing arguments: The Revenue's argument that the large volume of transactions warranted addition was rejected as insufficient to prove beneficial ownership. Conclusions: The assessee's claim as a nominal account holder was accepted and the addition was rightly deleted. 3. SIGNIFICANT HOLDINGS The Tribunal held:
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