The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) has ordered a reconsideration, noting substantial evidence indicating that a taxpayer engaged in a money transfer business utilizing platforms such as M-Pesa and other mobile wallets, as evident from the bank statement.
The assessee Hemantha Raju, filed revised return of income on 08.08.2018 declaring total income of Rs.2, 88,670. The case was selected for scrutiny for examination of ‘high value receipt of cash shown from third parties and cash deposits made during the demonetization period and statutory notices were issued to the assessee. The Assessing Officer ( AO ) noted that cash is deposited in the bank accounts of the assessee in Corporation Bank and ICICI Bank of Rs.3,76,38,400 during the year 2016-17 and demonetization period.
Despite multiple notices, the assessee failed to respond, prompting the Assessing Officer (AO) to finalize the assessment under Section 144 of the Income Tax Act. This resulted in an addition of Rs.3,76,38,400 under Section 69A, taxed in accordance with Section 115BBE of the Income Tax Act, as per the order dated 10.12.2019.
The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)]. Subsequently the appeal was migrated to NFAC. The assessee was issued various notices, but the assessee did not respond to any of the notices. Therefore, the CIT(A) decided the issue ex parte on the basis of material available before him. He noted that in the Statement of Facts, the assessee has submitted that the cash deposits pertained to business of money transfer through M-Pesa and other mobile wallets and copy of bank statement was filed along with Form 35.
As per narration of bank statement transfer of money (debit entries) have been made to India Ideas, Rail Term, Tech Process, Vasavi About Travels, SLV Tours, etc. and about 95% of the payments have been made to Rail Term. The bank account pertained to business done by the assessee and accordingly entire cash deposits cannot be considered as income of assessee and he reasonably estimated net profit @ 10% on the total cash deposits of Rs.3, 76, 38,400 as turnover of the assessee and partly allowed the appeal of the assessee.
Mr. V. Parithivel, representing the revenue, highlighted the AO’s order, emphasizing the assessee’s lack of response to multiple notices issued by lower authorities. Furthermore, before the Tribunal, the assessee failed to present credible evidence regarding its bank transactions. The CIT (Appeals) resolved the matter by considering 10% of the total receipts without substantial evidence, thus, advocating for the AO’s decision to be maintained.
Mr. Srinath Rao, representing the assessee submitted that both the authorities below are not justified. The case was taken up for scrutiny on the limited issue of cash deposits during the demonetization period whereas the AO has considered the income under Section 69A of Income Tax Act on the total cash receipts into the bank accounts. The assessee is getting commission only for the transactions of payments made as per instructions of cash depositors and therefore the entire cash deposits cannot be considered as income. The income considered by the CIT(A) is on the very higher side and the AO has made a high-pitched assessment.
The two member bench of the tribunal comprising Beena Pillai (Judicial member) and Laxmi Prasad Sahu (Accountant member) noted that the assessee was engaged in the business of money transfer through M-Pesa and other mobile wallets. It is evident from the bank statements that the assessee is getting commission for discharging the assigned works.
Thus, the ITAT remitted the issue back to the AO for fresh consideration and decision as per law after giving reasonable opportunity of hearing to the assessee. The assessee was directed to substantiate its case with necessary evidence and not to seek unnecessary adjournment for early disposal of the case. Accordingly, the appeal of the revenue was allowed for statistical purposes and the assessee was partly allowed.
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