ITAT treats 0.7% Margin on E-top-up Receipts routed to Vodafone as Taxable Income, dismisses Income Tax Dept’s Appeal [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has dismissed the Revenue’s appeal and upheld the Commissioner (Appeals) finding that 0.7% of bank deposits transferred to Vodafone West Ltd. represented the assessee’s taxable commission income, while the balance deposits were not treated as unexplained after remand examination.

The Tribunal concluded that the Assessing Officer’s blanket addition of bank deposits as unexplained money under Section 69A was unsustainable where documentary and transactional evidence showed the funds represented e-top-up receipts routed to Vodafone and a fixed commission margin of 0.7% could reasonably be treated as the assessee’s income.

The Revenue preferred this appeal against the NFAC, Delhi CIT(A) order for AY 2017-18. The Assessing Officer had completed assessment under section 143(3) read with section 144 after the assessee failed to file returns.

The AO had treated total bank deposits of ₹1,04,79,807 as unexplained money and added the entire sum under section 69A. The CIT(A) remand proceedings resulted in computing income at 0.7% of total transfers to Vodafone and treating the remainder as unexplained, taxable under section 115BBE at 60%. The Revenue challenged that approach before the Tribunal.

Revenue submitted the assessee offered no credible explanation or supporting evidence for the source and nature of cash deposits. The AO argued the deposits were suspicious given absence of formal return and routine banking activity during the demonetisation window.

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The assessee relied on documentary proof including a letter on Vodafone letterhead and bank statements showing transfers to Vodafone West Ltd., asserting the role of a super-distributor earning a 0.7% margin on e-top-up sales. The assessee maintained that deposited sums were routed to Vodafone and therefore not income.

The Tribunal examined the record and remand report relied upon by the CIT(A). It found consistent evidence of cash deposits spanning April 2016 to March 2017 and transactional flows showing transfers to Vodafone West Ltd.

The tribunal then accepted the Vodafone letter and the remand officer’s factual analysis that the assessee operated in e-top-up distribution with a 0.7% commission. In the absence of contradictory material the Bench declined to overturn the CIT(A)’s computation. The Tribunal emphasized that the AO’s original omnibus addition without such inquiry was inappropriate.

The Revenue’s appeal was dismissed. The CIT(A) order computing taxable income at 0.7% of the Vodafone transfers was sustained. The Tribunal thereby restricted the tax liability to the assessed commission and did not uphold the AO’s full addition under section 69A of the Income Tax Act, 1961.

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