ITO Vs Manoharan Ramesh (ITAT Chennai)
ITAT Chennai upheld the order of the CIT(A) restricting addition to 8% of bank credits, rejecting the Assessing Officer’s action of taxing the entire deposits as unexplained under Section 69A.
The assessee, acting as a commission agent for farmers, received sale proceeds of fruits in his bank account and withdrew cash to pay farmers after retaining commission. The AO, however, treated the entire deposits of over ₹2.5 crore as unexplained due to lack of supporting documentation.
The Tribunal noted that confirmations from companies clearly established that the assessee was acting as an intermediary. It also observed that the AO ignored crucial aspects such as corresponding withdrawals and nature of transactions, and mechanically taxed the gross deposits.
At the same time, due to absence of formal agreements, purchase bills, and complete documentation, the CIT(A) found the declared commission rate of 1.5% to be understated and reasonably estimated income at 8% of turnover.
The ITAT held that this approach strikes a balance-rejecting full addition u/s 69A while allowing estimation due to evidentiary gaps and found no infirmity in the CIT(A)’s order.
Accordingly, the Revenue’s appeal was dismissed, affirming that in agency-type cases, only real income (commission) can be taxed, not gross receipts.
FULL TEXT OF THE ORDER OF ITAT CHENNAI






