APMC Commission Agent Cannot Be Taxed on Entire Sale Proceeds-Bengaluru ITAT Remands ₹2.67 Crore Cash Deposit Addition

Mohammed Umaruddin Khamruddin Vs ITO (ITAT Bangalore)

APMC Commission Agent Cannot Be Taxed on Entire Sale Proceeds-Bengaluru ITAT Remands ₹2.67 Crore Cash Deposit Addition

The Bengaluru ITAT held that cash deposits made by an APMC commission agent cannot automatically be treated as unexplained money under section 69A, merely because they exceed the turnover disclosed in the return of income. The Tribunal restored the matter to the Assessing Officer for fresh verification after finding that the assessee had produced prima facie evidence showing that he was merely acting as a commission agent.

The assessee, engaged in the business of commission agency in the Yeshwanthpur APMC Yard, had deposited ₹2.67 crore in his bank account. The Assessing Officer treated the differential amount as unexplained cash deposits under section 69A, alleging that the deposits were not reflected in the turnover disclosed in the return. The assessee explained that he sold agricultural produce belonging to farmers, collected sale proceeds in cash from buyers, deposited the collections into his bank account and thereafter remitted the amounts to the farmers, retaining only 5% commission as his income. He also produced his APMC licence, computation of income, GST returns, sales summary and bill books in support of his claim.

The Tribunal observed that the entire cash deposited in the bank belonged to the sellers of agricultural produce and not to the assessee, who merely acted as an intermediary earning commission. It also noted that the GST returns reflected commission sales of about ₹2.85 crore, and 5% thereof worked out to ₹14.25 lakh, which exactly matched the commission income disclosed in the return. Thus, the material on record prima facie supported the assessee’s explanation that only the commission constituted his taxable income.

However, since the Assessing Officer had not examined the bill books and supporting records produced by the assessee, the ITAT considered it appropriate to set aside the assessment and remand the matter for fresh verification. The Tribunal directed the Assessing Officer to examine the evidence and delete the addition under section 69A if the claim is found to be genuine. The appeal was accordingly allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 17/07/2025 in respect of the A.Y. 2020-21.

2. The brief facts of the case are that the assessee is an individual and filed his return of income. Based on the information that the assessee had made cash deposits of Rs. 2,67,73,500/- in his HDFC Bank current account, notices u/s. 133(6) were issued. The AO after verifying the return of income, had found that the assessee had declared gross turnover of Rs. 22,42,862/-.. and alleged that the cash deposits were not declared in the gross turnover. Thereafter notice was issued to the bank and the statement has been obtained from the bank. Since the assessee had not substantiated the nature of the cash deposits with evidence, the differential amount of Rs. 2,45,30,638/- was considered as unexplained cash deposits and proceedings u/s. 148 was initiated. Thereafter notice u/s. 142(1) was issued but the assessee had not responded to the said notice and also not filed any return of income in response to the notice issued u/s. 148 of the Act. Anyhow the assessee had furnished the computation of income, ITR acknowledgment, sales summary, APMC license and certificates and reply letter on 05/10/2024. In spite of that, the AO had treated the said cash deposits as unexplained money u/s. 69A of the Act.

3. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had not accepted the claim made by the assessee and dismissed the appeal.

4. As against the said order, the assessee is in appeal before this Tribunal.

5. At the time of hearing, the Ld.AR submitted that the assessee is a commission agent in APMC Yard, Yeshwanthpur, Bangalore and also owned another business entity in the name of Umar Enterprises and the activities carried out by the assessee is that he will receive the agricultural products such as vegetables and fruits from various suppliers and farmers on regular basis and sold the same to the different buyers by collecting cash. The Ld.AR further submitted that the commodities being in the nature of agricultural produces, they were exempted from GST and the receipt of cash is also inevitable. The Ld.AR further submitted that the assessee deposited the sale proceeds into his HDFC current account which comes about Rs. 2,67,73,500/-. The Ld.AR further submitted that the assessee had paid the sellers / farmers out of the said collections which were deposited into his bank account. The Ld.AR further submitted that while filing their return of income, the assessee had enclosed the computation of income in which the assessee had declared the commission income of Rs. 14,25,662/- out of the commission sales effected at the APMC Yard under the presumptive taxation. The Ld.AR further submitted that the commission sales effected by the assessee was also reported in the GST returns and claimed the same as not taxable. The Ld.AR therefore submitted that the commission of 5% is the income of the assessee which was duly taken into account while computing the income and therefore the entire cash deposits made by way of sales could not be treated as the income of the assessee. The Ld.AR also filed the copies of the GSTR returns and the computation of income in support of his case that the cash deposits are not the income of the assessee. The Ld.AR also submitted that the copies of the bill books and other records would support the claim of the assessee and prayed to allow the appeal.

6. The Ld.DR submitted that the assessee had not responded to the various notices and therefore the AO had correctly made the assessment. The Ld.DR further submitted that the documents now relied on by the assessee were not furnished before the AO and therefore the same need not be entertained and prayed to dismiss the appeal.

7. We have heard the arguments of both sides and perused the materials available on record.

8. From the facts and the details furnished by the assessee, it is a fact that the assessee is a commission agent doing the same in the name of Roohi Traders and earned the commission on the sales effected by him in the APMC Yard, Yeshwanthpur. Normally, he is selling the agricultural produce to the various buyers by cash and deposited the said cash into his bank account and later on, he settled the amount to the sellers. By doing the said activity, he is earning an income of 5% on the total sales effected by him. Therefore, the cash deposited into his bank account could not be treated as his income but belonged to the various sellers. In support of his contention, the assessee had also produced the computation of income, APMC license and related certificates, a brief sales summary and the reply letter while the assessment proceedings are going on. The AO without considering the said details, had concluded that the source for the cash deposits are not verifiable and also the said cash deposits were not reported in the return of income.

9. We have perused the computation of income filed along with the return of income in which in Schedule 1, the assessee had declared an income of Rs. 22,42,862/- calculated on presumptive basis u/s. 44AD of the Act in which the commission amount of Rs. 14,25,662/- from Roohi Traders were also reported to the department. When we considered the said income declared by the assessee, it tallies with the cash deposits made into his bank account and cash sales. Further, the assessee had also furnished the copies of the bill books in support of his case that he is acting as an agent and received commission and therefore the entire cash deposits are not his income. Therefore, we are of the view that the entire cash deposits made into the bank account of the assessee could not be treated as unexplained. We have also perused the GST return filed by the assessee in which the commission sales were reported at Rs 2,85,13,230 and claimed exemption since the commodities are not taxable under the provisions of the GST. If we worked out the 5% commission on the sales declared in the GST returns, the commission income comes about Rs 14,25,662 which was correctly reported by the assessee.

10. The Ld.AR submitted before us that an another opportunity may be granted to the assessee to appear before the AO along with the bill books and other records to establish their case that the cash deposits are not his income and only the commission received by him at 5% is his income which was duly reported in the return of income and therefore the entire addition is not sustainable. Even though the assessee had furnished the details before us, the assessing officer does not have the benefit of verifying the same. Therefore, in the interest of justice, we are inclined to set aside the orders of the lower authorities and remit this issue to the file of the AO for fresh consideration. We, also direct the AO to accept the evidences produced by the assessee and verify the same and if found that the same are genuine, delete the addition made u/s. 69A of the Act.

11. In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 03^rd July, 2026.