Chandra Kanta Yadav Vs ITO (ITAT Jaipur)
Evidence Cannot Be Ignored: ITAT Deletes Cash Addition, Allows Retailer Commission and Grants Partial Salary Relief
Documents on Record Deserved Consideration
The Jaipur Bench of the Income Tax Appellate Tribunal granted substantial relief to a telecom recharge distributor whose cash deposits and business expenditure had been questioned by the Department.
The Tribunal deleted an addition of ₹4,31,985 under Section 69A, allowed retailer commission expenditure of ₹20,88,033, and granted a deduction of ₹5 lakh towards salary expenses. However, the balance salary claim of ₹6,58,106 remained disallowed because the entire expenditure was not adequately substantiated.
The decision draws a useful distinction between ignoring evidence already furnished and finding that the evidence does not establish the full claim.
Departmental Information Had Doubled the Cash Deposits
The assessee had not originally filed her return for the relevant year. Information on the Department’s Insight portal indicated cash deposits of ₹4,24,94,980 in an Andhra Bank account and commission receipts of ₹31,53,306 from telecom-related companies.
The assessment was reopened, and the assessee filed a return declaring nil total income and a loss of ₹2,55,353.
She explained that she operated a telecom recharge distribution business under the name Aarambh Enterprises. The cash deposits represented collections from selling recharge coupons, while the commission receipts arose from the distribution business.
Importantly, the AO accepted that the departmental information had counted the cash deposits twice. The actual deposits were ₹2,12,47,490.
Nevertheless, since the turnover disclosed was ₹2,08,15,505, the AO treated the difference of ₹4,31,985 as unexplained money.
Gift Explanation Was Overlooked
The assessee had explained that the bank deposits included a cash gift of ₹6,50,000 from her daughter-in-law. This explanation was supported by a notarised affidavit.
Before the Tribunal, her representative demonstrated that the gift explanation had been placed before the AO and supported by documentary evidence. However, both the AO and CIT(A) had concentrated on the business-receipts explanation and overlooked the gift.
The Tribunal held that the evidenced receipt of ₹6,50,000 sufficiently explained the disputed deposit of ₹4,31,985. It accordingly directed deletion of the Section 69A addition.
The relief rested on the particular explanation and evidence available in the case. The Tribunal did not lay down that every cash deposit accompanied by a gift affidavit must necessarily be accepted.
Retailer Commission Was Routed Through the Distributor
The second dispute concerned commission expenditure of ₹20,88,033, disallowed for alleged lack of substantiation.
The assessee explained that the telecom companies paid both distributor commission and retailer commission. Since the retailers were unorganised and did not have PAN details, their commission was routed through the assessee, who passed the relevant amounts to them.
Accordingly, the gross commission credited to her account did not represent an amount wholly belonging to her. The retailer portion was reflected as commission expenditure.
This explanation was supported by invoices separately identifying retailer commission and distributor commission. The assessee also furnished affidavits from three recipients confirming commission payments of ₹20,421, ₹53,433 and ₹2,36,205.
Missing Details Did Not Justify Disregarding Existing Evidence
The Revenue argued that the assessee had not discharged the burden of proving the genuineness of the commission expenditure. The CIT(A) had referred to the absence of confirmations, PAN details, addresses and payment records.
However, the Tribunal found that the authorities had identified no infirmity in the business explanation or the documents furnished. Nor had the CIT(A) explained why the invoices and affidavits were insufficient to establish the claim.
Merely referring to records that were not furnished, without evaluating the evidence actually produced, did not justify treating the entire expenditure as unsubstantiated.
The Tribunal held that the genuineness of the commission expenditure had been established and directed allowance of the full ₹20,88,033 claim.
Salary Expenditure Received Only Partial Relief
The assessee had also claimed salary expenditure of ₹11,58,106. She argued that a recharge distribution business with turnover exceeding approximately ₹2 crore could not be conducted without employees.
Affidavits from certain employees had been furnished. The Tribunal noted that the CIT(A) had rejected them without explaining why they could not be entertained, and the Revenue had pointed out no defect in those affidavits.
Nevertheless, there were no salary registers, vouchers or payment proofs establishing the entire expenditure.
The Tribunal therefore rejected complete disallowance but did not accept the full claim. Considering the business volume and incomplete documentation, it allowed ₹5 lakh and sustained disallowance of ₹6,58,106. The appeal was partly allowed.
Author’s Comments
The strongest feature of this decision is its insistence that evidence furnished must be examined before a claim is rejected. An assessment or appellate order cannot simply list missing documents while leaving the available invoices and affidavits unanswered.
The commission issue also highlights a recurring practical problem: gross receipts appearing in departmental information may include amounts payable to other participants in the business. Here, invoices distinguishing the two categories of commission gave substance to the explanation.
The salary finding provides the corresponding caution. Business necessity helped defeat a complete disallowance, but it could not establish the precise expenditure claimed. Affidavits supported the existence of employees; inadequate payment records prevented allowance of the entire salary claim. The differing outcomes reflect the differing strength of the evidence.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 14.11.2025 u/s 250 of the Income Tax Act, 1961, (hereinafter referred to as “the Act”).
2. Briefly stated the assessee had not originally filed its return of income for the impugned year. There was information available in the Insight portal of the Department that the assessee had entered into financial transactions during the impugned year, being cash deposited in its bank account in Andhra Bank amounting to Rs.4,24,94,980/- and the assessee having received commission income of Rs.31,53,306/- from various parties being Vodafone m-pesa Ltd, Idea Cellular Ltd and Reliance Webstore Ltd.. Based on the said information, the case of the assessee was reopened by issuing notice u/s 148 of the Act, in response to which, the assessee filed return of income declaring total income of NIL, claiming loss of Rs.2,55,353/-.
3. Thereafter, the assessee was asked to explain all the financial information available with the Department and justify the same with the return of income filed by the assessee. The assessee submitted that it worked as a distributor for various telecom service operators, selling their recharge coupons and the cash deposited represented the cash so collected in course of carrying out the said business. That the commission income also pertained to that earned on account of acting as a distributor of the telecom operators.
4. The Ld. AO accepted the assessee’s explanation of the cash deposited in the bank account of the assessee pertaining to cash collected in course of carrying out its business of selling recharge coupons of various telecom operators. However, he noted that while the assessee had reflected a turnover of Rs.2,08,15,505/- in its ITR, the cash deposits in the bank account amounted to Rs.2,12,47,490/-. The AO acknowledged the fact that the cash represented to be deposited by the assessee in its bank account in the Insight portal of Rs. 4,24,94,980/- was an incorrect figure,having reflectedtwice thefigure of cash deposited and agreed that cash deposited in the bank account of the assessee amounted to Rs.2,12,47,490/-. However, noting that the cash deposited in the bank account of the assessee exceeded his turnover by Rs.4,31,985/- he treated the excess amount as having remained unexplained and added the same to the income of the assessee.
5. The AO also made addition of the commission expenses claimed by the assessee against the commission income earned, amounting to Rs.20,88,033/-,in the absence of any evidence filed by the assessee for the same. Similarly, the salary expenses claimed by the assessee of Rs.11,58,106/- were also disallowed for lack of substantiation.
6. The AO accordingly made addition on account of the aforesaid assessing the income of the assessee at Rs.34,22,771/- as opposed to a loss of Rs.2,55,353/- returned by the assessee.
7. The matter was carried in appeal before the Ld. CIT(A), who confirmed the order of the AO.
8. Aggrieved by the same, the assessee has come up in appeal before me raising the following grounds of appeal:-
1. On the facts and circumstances of the case, as well as in law, the Ld. CIT(A) NFAC has grossly erred in confirming the addition of Rs.4,31,985/- made by ld. AO treating the cash deposits in the Bank accounts of the assessee as unexplained money u/s 69A of the Income Tax Act, 1961. Such addition being incorrect, invalid in the law as well as facts of the case hence, deserves to be quashed.
2. On the facts and circumstances of the case, as well as in law, the Ld. CIT(A)-NFAC has further erred in upholding the addition of Rs.20,88,033/-made by ld. AO by disallowing the commission expenses. Such addition being arbitrary, unjustified, and unwarranted hence deserves to be quashed.
3. On the facts and circumstances of the case, as well as in law, the Ld. CIT(A)- NFAC has also erred in upholding the addition of Rs. 11,58,106/-made by Id. AO by disallowing the salary expenses. Such addition being arbitrary, unjustified, and contrary to the principles of natural justice, and therefore, deserves to be quashed in its entirety.
4. On the facts and circumstances of the case, as well as in law, the Ld. CIT(A)- NFAC has erred in disallowing the claims of the assessee total amounting to Rs.36,78,124 on ad-hoc basis by rebutting the documentary evidences placed on records during the course of appellate proceedings. Such disallowance being completely invalid in law and against the principal of natural justice deserved to be quashed.
5. On facts and in circumstances of the case and in law the Ld. CIT(A). NFAC, has again erred in confirming the determination of the total income of assessee by Id. AO at Rs.34,22,771/-. Such computation of total income being erroneous, unjustified, and contrary to the provisions of law hence deserves to be annulled.
6. On facts and in circumstances of the case and in law the Ld. CIT(A)-NFAC, has erred in confirming the initiation of penalty proceedings u/s 270A, 271B and 271AAC(1) made by the ld. AO. Such initiation of penalty is invalid and incorrect in law and hence deserves to be rolled back.
7. That the appellant reserves the right to add/ alter/ modify/ deleted any or all ground at any time before the hearing.
9. Taking up ground No.1 the assessee has challenged the order of the Ld. CIT(A) confirming the addition of Rs.4,31,985/- on account of cash deposited in his bank account allegedly remained unexplained.
10. In this regard, the contention of the ld. Counsel for the assessee before me was that, both the Authorities below had ignored the explanation of the assessee to the fact that this cash deposit emanated from gift received in cash by the assessee from her daughter-in-law of Rs.6,50,000/-. The said explanation, he pointed out was duly substantiated with an affidavit of the daughter-in-law of the assessee also.
11. It was therefore contended that the source of Rs.4,31,985/- also stood duly explained and the Ld. CIT(A) therefore was not justified in confirming the addition of the same. In this regard, ld. Counsel for the assessee drew my attention to the submissions made before the AO reproduced at page 7 of the assessment order as under:-
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7. The actual amount of cash deposit was only Rs.2.12,47,490/-which is nothing but the amount of cash sales deposited in the bank account along with the amount of gift received in cash amounting to Rs. 6,50,000/- (Affidavit of the same is duly attached as Annexure-1).
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12. He also drew my attention to the copy of the notarized affidavit dated 22.11.2022 of gift received from daughter-in-law of the assessee placed before me at paper book page no.8 to 9.
13. Ld. DR however relied on the order of the Ld. CIT(A) whose findings he pointed out are contained at para 5.3.4 of his order as under:-
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5.3.4. Addition of Rs.4,31,985/- under section 69A:
The appellant has claimed that the cash deposits represented business receipts. The AO, after verification, accepted deposits to the extent of Rs.2,12,47,490/- as explained but found a balance of Rs. 4,31,985/- to be uncorroborated by any books of accounts. The appellant has not produced her cash book or ledger demonstrating the source of this balance amount, nor any corroborating documentary proof. In absence of any evidence, the treatment of the differential amount as unexplained money under section 69A is justified. The addition is therefore confirmed. The ground of appeal against the same is dismissed.
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14. I have heard the rival contentions and have also gone through the orders of the Authorities below. The addition agitated before me of Rs.4,31,985/- pertains to cash deposited in the bank account of the assessee, the source of which allegedly remained unexplained. The Ld. CIT(A), I have noted, has considered the explanation of the assessee recording the cash deposited in the bank account pertaining to the business receipts of the assessee and noting that since the AO had already considered the books of accounts of the assessee and given due credit for the business receipts of the assessee and for the balance amount of Rs.4,31,985/- no evidence was filed by the assessee, therefore, the addition was rightly made by the AO. However, ld. Counsel for the assessee has fairly demonstrated before me, that she had also contended to have received Rs.6,50,000/- from her daughter- in-law which was duly evidenced with the affidavit of the daughter-in- law. This contention of the assessee, I find, has been ignored both by the AO and the Ld. CIT(A), having concentrated only on the explanation of the assessee of the cash deposited pertaining to business receipts of the assessee.
15. In the light of the same, I find that the assessee having duly substantiated with evidence of having received cash of Rs.6,50,000/- from her daughter-in-law, the source of cash deposited of Rs.4,31,985/- stands sufficiently explained. Order of the ld. CIT(A) confirming the addition made by the AO is incorrect for having not appreciated the explanation of the assessee in this regard as noted by me as above duly evidenced by the assessee.
16. In the light of the same, I direct deletion of the addition of Rs.4,31,985/- made to the income of the assessee u/s 69A of the Act. The ground of appeal No.1 is allowed.
17. Ground of Appeal No.2 relates to disallowance of commission expenses incurred by the assessee.
18. The assessee’s explanation of being a distributor of recharge coupons of various telecom operators was accepted by the AO, and he also accepted the fact that the assessee had earned commission income in the process to the tune of Rs.31,53,306/-. However he noted that the assessee had claimed commission expenses of Rs.20,88,033/- which was disallowed for lack of evidence substantiating the said claim of the assessee.
19. The contention of the ld. Counsel for the assessee before me was that the Authorities below had failed to appreciate the explanation furnished by the assessee in this regard. He contended that it had been explained to the Authorities below that the assessee worked as a distributor for various telecom operators and rendered services of selling recharge coupons of the telecom operators in lieu of the commission based on the amount of business generated.
20. That apart from the commission received from the companies, the assessee also earned the difference between the cost price of the recharge packages and the selling price of the same. To expand its business the assessee distributed the packages to various retailers to have a wider reach of earning income and the telecom companies in order to motivate the retailers issued commission to retailers as well. But since, the retailers were unorganized and did not PAN numbers, the companies issued the commission accredited to them, that is the retailers, to the assessee which was then transferred by the assessee to retailers. The assessee explained that the amount of commission credited in its profit and loss account of Rs.31,53,306/- was the commission received from the telecom companies but the entire amount was not accredited to the assessee. That it also included commission accredited to the retailers.That this commission was reflected as expense in the return filed by the assessee amounting to Rs.20,88,033/-. My attention was drawn to the explanation so furnished by the assessee reproduced at page 5 to 9 of the order as under:-
1. The assesse was engaged in the business of Selling recharge coupons of telecoms service operators for the financial year under consideration under the name of “Aarambh Enterprises”.
2. As mentioned in point no. 1, the assesse basically worked as a Distributor for the following named companies such as VODAFONE IDEA LIMITED, RELIANCE WEBSTORE LIMITED, VODAFONE M-PESA LIMITED (hereinafter referred to as ‘companies’) and rendered services of selling rechargecoupons of telecom operators in lieu of commission based on the amount of business generated which was one of the main source of income for the assesse in the entire mobile network service business. Apart from the commission received from the companies, assesse also earned the difference between the cost price of the Recharge Packages of the above mentioned companies and the selling price of the same.
3. To continue and expand the business the assesse further distributed/ sold the packages to various retailers to have a wider reach for earning income as the amount of commission received from the companies was based on the amount of business generated.
4. The Assesse being the main distributor for the region, therefore received various plans/ packages from the companies, which were thereafter sold to the retailers across the city who ultimately sold to the end customers.
5. For better understanding, we may explain the modus-operandi through following example:
Mr. X (The Assesse or the Distributor in our case) has purchased recharges/plans from companies amounting to Rs.1,00,000/- at the cost price of Rs.95,000, then Mr. X sells the plans to various small retailers (generally more than one retailers) say at Rs. 98,000 who ultimately sell the same at Rs. 1,00,000/- to the end use customers.
Herein the whole transaction the assesse who is the main distributor, earns a profit of Rs. 3000/- and apart from this profitthe assesse also used to earn some commission amount from the companies based on the amount of business generated.
Since the whole business of the companies was also influenced by the efforts of the retailers, therefore in order to motivate the retailers the company issued commission to the retailers as well.
However, since the retailers were unorganized and in the absence of their PAN numbers, the companies issued the commission amount accredited to them (Retailers) to the Assessee (the main distributor after deducting the TDS u/s 194H on the same), which was then transferred by the assesse to the retailers.
Therefore, the above example duly explains that the receipt of such commission was wholly not attributable to the assesse as the assesse after retaining his portion of commission, used to transfer the assignable amount of commission to retailers.
6. The assesse humbly submits that the information regarding cash deposit of Rs. 4,24,94,980/- in Andhra Bank mentioned in your notice issued under section 148A (b), order passed u/s 148A (d) is incorrect as the SFT information regarding cash deposit has been considered twice, which even renders the order passed under section 148A(d) as well as notice issued under section 148 invalid in law.
7. The actual amount of cash deposit was only Rs.2,12,47,490/-which is nothing but the amount of cash sales deposited in the bank account along with the amount of gift received in cash amounting to Rs. 6,50,000/- (Affidavit of the same is duly attached as Annexure-1).
8. The alleged amount of commission amounting to Rs. 31,53,306/-is nothing but the commission provided by the companies depending upon the business generated by the assesse and the retailers for the companies.
9. It may please be noted that the commission amount mentioned in the above para does not wholly is accredited to the assesse. As mentioned in the modus-operandi above, the companies also provided the commission accredited to the retailers, to the distributor himself (the assesse in the present case) due to unorganized behavior of the small retailers and hence this whole commission income cannot be termed to be the income of the assesse at all.
10. That the actual commission received is not the income of the assesse and some portion is actually the payment to the retailers is evident from the fact that the amount paid to retailers as commission was duly reflected as expense amounting to Rs.20,88,033/-, in the return filed u/s 148 on dated April 26, 2022 vide acknowledgement no. 598135040260422.
11. Since the assesse was exempted by the virtue of second proviso of Section 194H of the Income Tax Act, 1961 and hence he did not deduct TDS u/s 194H of the Income Tax Act, 1961 and therefore the payments of the commission to various retailers were made without deducting any TDS thereon.
12. The actual income which was accrued and received in the form of commission on above referred transactions and other incomes earned in the year under consideration have been duly disclosedin return filed u/s 148 for AY 2018-19 and duly reflected in the Form 26AS of the assesse.
21. Ld. Counsel for the assessee contended that to substantiate its explanation it had furnished the copy of tax invoices related to commission raised on the assessee which were placed before me at paper book page No.16 to 27. Referring to the same it was pointed out that the said invoices clearly reflected retailer commission and distributor commission separately. That the retailer commission pertained to the retailers engaged by the assessee in its business to whom commission was paid by the telecomcompany but routed through the assessee as explained, while the distributor commission was commission earned by the assessee alone. Several copies of such invoices were placed before me at paper book page No.16 to 27.
22. He further contended that the assessee had also filed notarized affidavits of three persons confirming payment made by the assessee placed at paper book Page No.10 to 15.Referring to the same, he pointed out that the three parties had submitted on oath to have received commission of Rs.20,421/-, Rs.53,433/- and Rs.2,36,205/- from the assessee.
23. Ld. Counsel for the assessee contended that considering the explanation of the assessee duly substantiated with evidences as above it had been clearly established to the authorities below that the claim of commission expenses pertained to the commission of the retailers and which had therefore rightly been claimed as expense.
24. Ld. DR however, relied on the findings of the Ld. CIT(A) stressing that the assessee had failed to discharge its onus of proving the genuineness of commission expenses.
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5.3.5. Disallowance of Commission Expense – Rs.20,88,033/- The appellant has claimed to have paid commission to various retailers purportedly on behalf of telecom companies. However, no confirmations, PAN details, addresses, or payment proofs were furnished despite opportunities given. The entire claim remained unverifiable. The commission expenditure, being in the nature of business deduction, must be proved by actual evidence of payment. Mere assertion that the appellant only received commission on behalf of others, without disbursement records, cannot be accepted. Accordingly, the AO’s disallowance of Rs. 20,88,033/- is upheld. The ground of appeal against the same is dismissed.
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25. I have heard the rival submissions and perused the material available on record. The issue for adjudication relates to the genuineness of the claim of commission expenses amounting to Rs.20,88,033/-, which has been denied on account of non- substantiation of the same. The assessee has given a detailed explanation of how the commission expenses arose in its hands. The assessee has explained that it was acting as a distributor of telecom companies and had appointed retailers also to expand its business. That the telecom companies were giving commission to the assessee as a distributor and they were also given retailers commission, which was being given to the assessee to be passed on to the retailers categorizing them separately in the bill raised. As evidence, the assessee has filed copy of invoices reflecting retailers’ commission and distributor commission. The assessee also filed few affidavits of few retailers confirming to have received commission from the assessee for acting as a retailer. The AO/Ld. CIT(A) have not pointed out any infirmity in the explanation of the assessee as above nor in the documents relied upon. The Ld. CIT(A) has given no reason why the evidences filed were insufficient to prove assesses claim of commission expenses. He has only referred to some records or details which the assessee did not furnish, to state that the assesses claim was unsubstantiated without pointing out how the evidences filed by the assessee did not sufficiently discharge assesses onus of proving its claim.
26. In the light of the same, I concur with the ld. Counsel for the assessee that the genuineness of claim of commission expenses was duly established by the assessee and there was no reason at all for disallowing the same as unsubstantiated claim.
27. The order of the Ld.CIT(A) disallowing claim of commission expenses of Rs.20,88,033/- is accordingly set aside and the AO is directed to allow the said claim. Ground of appeal No.2 is allowed.
28. Ground No.3 relates to disallowance of claim of salary expenses. The same was again disallowed on account of un-substantiation of the said claim.
29. The contention of the assessee was that since admittedly it was running a business of selling recharge coupons and had a huge turnover of approximately Rs.2 crores the same could not have been done without the assistance of employees. That the assessee had furnished affidavits of certain employees as proof of payments. That therefore, the assessee’s claim having incurred salary expenses to the tune of Rs.11,58,106/- was duly substantiated and explained.
30. Ld. DR on the other hand relied on the order of the Ld. CIT(A). he drew our attention to para 5.3.6 of the order of Ld. CIT(A) as under:-
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5.3.6. Disallowance of Salary Expense – Rs. 11,58,106/- Despite specific notice and opportunity, the appellant failed to provide salary registers, vouchers, payment proofs, or TDS details. The burden of proof lies with the appellant to demonstrate the genuineness of expenditure claimed as business deduction. During the appellate proceedings also, the appellant has come with the assertion that she submitted “certain affidavits of certain employees”. The AO, therefore, rightly disallowed the same. The addition is confirmed. The ground of appeal against the same is dismissed.
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31. I have heard the rival contentions. I find merit in the contention of the ld. Counsel for the assessee. The Ld. CIT(A) has mentioned that the assessee has substantiated his claim with certain affidavits of certain employees and has rejected the explanation of the assessee, without giving any reason why the affidavits could not be entertained. As rightly pointed out by the ld. Counsel for the assessee when the fact on record is that the assessee is carrying out business of selling of recharge coupons that too with turnover approximately of Rs.2 crores or above it cannot be ruled out that certain employees were engaged by the assessee for carrying the business of such a volume and the assessee having furnished certificates, affidavits of certain employees in which no infirmity was pointed out by the Revenue Authorities, I see no reason to disallow the entire claim of salary expenses incurred by the assessee. However, it is also a fact on record that other than furnishing certain affidavits of certain employees no other evidences were filed by the assessee to prove that it had incurred salary expenses to the tune of Rs.11,58,106/-. No salary registers or vouchers or payment proofs were filed by the assessee.
32. In the light of the same, it cannot be the case that no salary expenses incurred by the assessee, but however since the assessee has not substantiate its entire claim of salary expenses with proper evidences, I consider it just and reasonable to allow salary expenses to the tune of Rs.5 lakhs. The disallowance of the balance claim amounting to Rs.6,58,106/- is confirmed.
33. The ground of appeal No.3 is partly allowed.
34. In effect, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 06.10.2026.
