ITAT Deletes Additions as AO Ignored Income From Sale of Amway Products

Sureshchandra Paranjivandas Panchal Vs ITO (ITAT Surat)

Credit Card Payment Additions Quashed Because Related Business Transactions Were Not Considered; ITAT Allows Appeal Because Income and Commission Details Were Ignored by Tax Authorities; Undisclosed Income Additions Set Aside Because AO Failed to Examine Available Evidence: ITAT Surat.

The Income Tax Appellate Tribunal (ITAT), Surat, allowed the appeal of the assessee against the order of the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2011-12. The assessee, an individual, had originally filed a return declaring total income of Rs.1,79,840/-.

Based on AIR information, the Assessing Officer (AO) observed that the assessee had made credit card payments of Rs.2,36,100/- to ICICI Bank Ltd. The assessment was reopened under section 147, and notice under section 148 was issued. As the assessee did not respond to statutory notices, the assessment was completed under section 144. The AO treated the credit card payments as unexplained and added Rs.2,36,100/- as undisclosed income. The AO also noted cash deposits of Rs.6,74,600/- in the assessee’s bank account and added Rs.4,38,500/- as unexplained cash deposits. An additional amount of Rs.15,184/- relating to non-cash deposits in the bank account was also added as undisclosed income. The CIT(A) subsequently dismissed the assessee’s appeal.

Before the Tribunal, the assessee sought condonation of a delay of 499 days in filing the appeal, which was accepted as genuine. It was submitted that the assessee, a retired individual earning salary income, was also engaged in the sale of Amway products. Cash received from such sales was deposited in the bank account, while payments towards purchases from Amway were made through online transfers using a credit card. The assessee also earned commission from the company.

The Tribunal observed that the credit card transactions and commission from Amway were duly reflected in the records, but these details had not been considered by either the AO or the CIT(A). Since the assessee had explained the source of the cash deposits and credit card payments through income from sale of Amway products and related commission, the Tribunal held that the additions were not justified. Accordingly, all additions made by the AO were deleted and the appeal was allowed.

FULL TEXT OF THE ORDER OF ITAT SURAT

The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 14.05.2024 for the Assessment Year (in short “AY”) 2011-12.

2. The assessee has raised the following grounds of appeal:

“1. That on facts, and in law, the learned Commissioner of income tax (Appeal) NFAC has grievously erred in confirming the addition amounting of Rs. 6,89,784/- and dismissing appeal of appellant. the

2. Having regard to the facts and circumstances of the case of your appellant, the relief claimed in Ground No. 1 is allowed.

3. Your appellant craves leave to add/alter or amend any of the grounds till the appeal is finally heard and decided.”

3. The assessee is an individual and filed his return of income for A.Y. 2011­12 on 27.03.2012 declaring total income of Rs. 1,79,840/-. As per AIR information, the Assessing Officer observed that the assessee made payment of credit card bills amounting to Rs. 2,36,100/- to ICICI Bank Ltd. The case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued on 28.03.2018. Since the assessee has not responded the statutory notices, the assessment was proceeded under Section 144 of the Act. The Assessing Officer observed that the assessee made payments against the credit card bills of ICICI Bank Ltd. As the assessee did not explain the payments, the Assessing Officer made addition of Rs. 2,36,100/- and treated the same as undisclosed income. The Assessing Officer further observed that the assessee has deposited cash of Rs.6,74,600/- on various dates in the account with ICICI Bank Ltd. and has not explained the cash deposit of Rs. 4,38,500/-. The same was added as undisclosed income. Further the Assessing Officer made addition of Rs. 15,184/- on account of deposits other than cash in bank.

4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5. The Ld. AR submitted that there is delay of 499 days in filing of appeal for which the assessee has filed the condonation of delay application. After going through the same, it appears that the reason for delay is genuine, hence delay is condoned.

6. The Ld. AR submitted that the assessee is retired individual and his source of income for the year was income from salary. The assessee also took agency of Amway products. On sale of the said products, he received cash which he deposited in his bank account. In turn, he has to pay the company by online transfer of purchase value. So he used his credit card to make the said payment to Amway Company of all the sales proceeds he received. In turn, he got commission from the said company. In fact, all these details were reflected in the bank account but was totally ignored by the Assessing Officer. Besides, this the CIT(A) has also passed ex-parte order.

7. The Ld. DR relied upon the assessment order and the order of the CIT(A).

8. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the amount and the transactions through credit card and the Amway company commission is reflected duly. These details were not taken into account either by the Assessing Officer as well as by the CIT(A). Therefore, the Assessing Officer was not justified in making the addition on account of credit card bill as well as cash deposits as the assessee explained all the details about the income received by the assessee from the sale of Amway products to various customers and its commission from the said company. Thus, all the additions made by the Assessing Officer does not sustain.

9. In result, appeal of the assessee is allowed.

Order pronounced in the open court on 03.06.2026