ITO Vs Dharmesh Rajnikant Trivedi (ITAT Ahmedabad)
1% Estimation of Cash Credits as Shroff Commission Set Aside: ITAT Ahmedabad Orders Fresh Verification
The Ahmedabad Bench of the ITAT allowed the Revenue’s appeal for statistical purposes for AY 2018-19, holding that the CIT(A) erred in restricting a massive addition under section 69A to 1% of total bank credits by presuming Shroff (money-lending/commission) business, without factual verification.
The assessee had not filed a return of income and had huge cash deposits of ₹5.73 crore in his bank account. The AO treated ₹4.78 crore as unexplained money under section 69A and taxed it under section 115BBE. The CIT(A) reduced the addition to ₹4.70 lakh (1%), treating it as commission income, relying on certain tribunal precedents.
The ITAT found this approach legally unsustainable, noting that the CIT(A) failed to verify:
- whether the assessee held any statutory licence to run a Shroff business,
- why no return of income was filed at all, and
- whether similar income was disclosed in earlier or subsequent years.
In the absence of these foundational verifications, presuming a Shroff business was impermissible. Accordingly, the ITAT set aside the CIT(A)’s order and remanded the matter to the AO to grant one more opportunity to the assessee and decide the issue in accordance with law after proper enquiry.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
