In a recent ruling, the Kolkata bench of the Income Tax Appellate Tribunal (ITAT) gave relief to Sujit Biswas, a vegetable trader and commission agent. The appeal was against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NAFC) for the Assessment year 2016-17.
Sujith Biswas, the assessee, also the proprietor of Baba Lokenath Sahal Sabji Bhandar, filed his income tax returns for the Assessment Year 2015-16, declaring a total of ₹2.9 Lakhs as income. The return included income from vegetable sales amounting to ₹32 Lakhs and commission income of ₹6.9 Lakh from acting as the middleman between fruit and vegetable growers and sellers. During the assessment, however, the ITO noticed a cash deposit of ₹1Cr in the assessee’s ICICI Bank account, which exceeded his declared income return.
This confusion led the ITO to issue a show-cause notice (SCN) demanding an explanation for the cash deposit. The ITO treated the excess deposit of ₹ 62 Lakhs as unexplained cash deposits under Section 68 of the Income Tax Act and initiated penalty proceedings under Sections 271A and 271B of the act for failing to maintain books of accounts and conduct an audit. The CIT(A) also later upheld this order.
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Biswas replied to the SCN that the cash deposits were from his role as a commission agent. Acting as a middleman, he was tasked with procuring fruits and vegetables from growers and supplying them to retailers, receiving cash from buyers that he later deposited into the bank. These funds were used to pay off the growers. The assessee further submitted that his balance sheets, profit and loss statements and bank statements for the year under consideration proved this: the assessee’s authorised representative, Adv. Dilip Chatterjee(AR) asserted that these deposits were made under the assessee’s line of work, vehemently opposing the order upheld by the CIT(A).
The ITAT, after hearing the submissions, held that it was evident to the tribunal that Biswas played a double role, acting as a trader and a commission agent and that the cash deposits were primarily the proceeds from sales and commission activities. The tribunal held that the cash deposits into the ICICI Bank account were directly correlated to the withdrawals made to pay the growers, which left a minimal balance in the account that had already been stated.
The Tribunal observed that the assessee’s financial records over multiple years substantiated this practice and his claims and that all commission income and business turnover were consistently reported. The Tribunal also observed that the ITO and the CIT(A) failed to examine the nature of the work the assessee had conducted for years and incorrectly added the cash deposits as unexplained income under Section 68 of the Act.
The two-member bench consisting of Pradip Kumar Choubey (Judicial Member) and Rajesh Kumar (Accountant Member) stated that the assessee adequately explained the cash deposits as business receipts. The tribunal directed the deletion of the addition, and as a result, the appeal was allowed.
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