S. 69A cannot be Invoked to Tax Commission on Seized Documents: ITAT Directs AO to Treat 20% of Gross Commission as Income [Read Order]
The Tribunal held that in the absence of any unexplained money or article, the provisions of Section 69A cannot be invoked, as what was found were only documents containing details of the commission.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that Section 69A of the cannot be invoked to tax commission details found on seized documents, as the provision applies only to unexplained money, bullion, jewelry, or other valuable articles and directed to treat 20% of the gross commission as the income of the assessee.
Sanjay Wahi (assessee) filed original return of income for the Assessment Year (AY) 2015-16, and declared a total income of ₹13,60,600. A search and seizure operation under Section 132 of the Act on May 16, 2018, which covered the assessee.
Following the search, the assessee filed a return under Section 153A on January 30, 2021, declaring a total income of ₹5,47,170.
The Assessing Officer (AO) made an addition of ₹11,63,955. This addition was based on a seized document (page 27 of Annexure A-1) which contained a calculation of the total commission earned by the assessee, mentioned at ₹11,63,955. The AO treated this amount as unexplained income under Section 69A of the Act.
The assessee claimed that the gross commission was shared with franchises and a partner, Investor Clinic (IC), and that expenses exceeded the commission, leading to the account being settled on a no-payment basis.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal and confirmed the addition .
The CIT(A) noted that the assessee failed to substantiate the claims regarding commission sharing and expenses with documentary evidence and observed that the law does not permit any deduction out of income chargeable under Section 69A of the Income Tax Act.
The two-member bench of S. Rifaur Rahman (Accountant Member) and Vimal Kumar (Judicial Member) observed that the Revenue authorities invoked Section 69A of the Income Tax Act.
The Tribunal highlighted the conditions for invoking Section 69A, which requires the assessee to be the owner of any money, bullion, jewelry, or other valuable article that was not recorded in the books of account, with an unsatisfactory explanation of its source and acquisition.
The tribunal noted that the revenue had not found any money, bullion, or jewelry in the possession of the assessee
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The Tribunal concluded that in the absence of any unexplained money or article, the provisions of Section 69A cannot be invoked, as what was found were only documents containing details of the commission.
The Tribunal held that the revenue could not make an addition to the gross income but net profit should be considered by acknowledging that the seized documents contained details of the gross commission.
The Tribunal directed the AO to treat 20% of the gross commission as the income of the assessee. The appeal filed by the assessee was partly allowed.
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