8% Income Estimation on Unproved Commission Business Upheld: ITAT Nagpur

Iqbal Salim Solanki Vs ITO (ITAT Nagpur)

Unsubstantiated Claim of Commission Agency Business Justifies Estimation of Income at 8 Percent of Bank Credits

Summary: ITAT Nagpur dismissed the assessee’s appeals for AYs 2014-15 and 2015-16 and upheld estimation of income at 8% of total credits where the assessee failed to substantiate his claim that cash deposits represented transactions of a commission agency business. For AY 2014-15, the case was reopened after information gathered during scrutiny of M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society showed cash deposits aggregating to Rs.1,99,33,183/- by the assessee. He claimed to be a Kaccha Aditya (commission agent/intermediary) and contended that the deposits represented business receipts. The AO did not treat the entire deposits as unexplained but applied an 8% profit rate, resulting in an addition of Rs.15,94,655/-, which CIT(A) confirmed. Before ITAT, the assessee argued that he operated as a commission agent in the APMC, facilitated agricultural produce transactions between farmers and traders and earned commission generally ranging between 1%-2%. He contended that cash deposits and withdrawals were integral to this cash-driven business and that the AO had mechanically applied section 44AD. The Tribunal, however, found that no APMC licence, registration as commission agent, accounts of principals/farmers, commission bills, vouchers, confirmations, books or other contemporaneous evidence had been produced. It distinguished Santokh Singh vs. ITO because the commission agency business there was supported by evidence. The assessee failed to discharge the initial onus of proving that the deposits represented commission agency transactions. ITAT therefore found no infirmity in the 8% estimation and applied its findings mutatis mutandis to the connected appeal for AY 2015-16.