Marappan Jayalakshmi Vs ITO (ITAT Chennai)
Chennai ITAT Deletes ₹1.28 Crore Addition, Holds Commission Agent Cannot Be Taxed on Entire Sale Proceeds
The Chennai ITAT condoned a delay of 151 days in filing the appeal and considered the assessee’s challenge against additions of ₹1,27,93,500 under Section 69A and ₹4,75,810 under Section 28 for AY 2017-18. The assessment had been reopened based on information regarding cash deposits, TDS on insurance commission, professional fees, commission or brokerage, and cash withdrawals. The assessee explained that she acted as a commission agent for a Hero Honda dealer, displaying and selling vehicles on its behalf, depositing sale proceeds into her bank account and subsequently transferring the amounts to the dealer through RTGS/NEFT while earning only commission. The Tribunal examined the dealer’s ledger, certificate, the assessee’s bank statements and Form 26AS reflecting TDS on commission, and found these sufficient to substantiate the claim that the assessee acted as an intermediary. It observed that the lower authorities failed to understand the assessee’s business model. Accordingly, the Tribunal sustained the addition of ₹4,75,810 under Section 28 towards commission income but deleted the addition of ₹1,27,93,500 made under Section 69A in respect of cash deposits. The appeal was partly allowed.
The Chennai ITAT partly allowed the appeal of an assessee engaged in facilitating the sale of Hero Honda two-wheelers on behalf of an authorised dealer. The Assessing Officer had treated cash deposits of ₹1.28 crore in the assessee’s bank account as unexplained money u/s 69A and also made an addition of ₹4.76 lakh towards commission income. The assessee contended that she merely displayed and sold vehicles on behalf of the principal dealer, collected sale proceeds from customers, remitted the amounts to the dealer through banking channels, and earned only commission for the services rendered.
The Tribunal examined the ledger accounts, bank statements, certificate issued by the principal dealer and Form 26AS, all of which demonstrated that the cash deposited from vehicle sales was immediately transferred through RTGS/NEFT to the principal dealer. It also noted that tax had been deducted at source on the commission paid to the assessee by the dealer, corroborating the assessee’s claim that she was merely an intermediary and not the owner of the sale proceeds. The Tribunal observed that the lower authorities had failed to appreciate the assessee’s business model despite the relevant evidence already being available on record.
Accordingly, the Tribunal held that the entire cash deposits of ₹1.28 crore could not be treated as unexplained money u/s 69A, as they represented sale proceeds belonging to the principal dealer and not the assessee’s income. However, it sustained the addition of ₹4.76 lakh towards commission income assessable u/s 28, holding that the commission constituted the assessee’s real taxable income. The appeal was therefore partly allowed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
