Business Correspondent Bank Credits Not Unexplained Money: ITAT Mumbai

ITO Vs Suraj Somaru Varma (ITAT Mumbai)

₹8.33 Crore Bank Credits Were Customer Funds, Not Agent’s Income: Mumbai ITAT Rejects Revenue’s Appeal

A business correspondent may handle crores of rupees through his bank accounts while earning only a commission for facilitating the transactions. In Suraj Somaru Varma, the Assessing Officer treated ₹8,33,66,925 of bank credits as unexplained money after calculating the transaction volume from the commission paid by just one principal. The Mumbai Tribunal found that this approach ignored the assessee’s work for other principals and the operational nature of the accounts. It upheld the deletion of the addition and dismissed the Revenue’s appeal.

How the ₹8.33 crore addition arose

Suraj Somaru Varma had filed his return for assessment year 2020–21 declaring income of ₹6,60,250. In reassessment proceedings, the Assessing Officer examined deposits and other credits across several bank accounts. The aggregate credits were stated to be ₹11,34,28,125.

The assessee explained that he worked as a Business Correspondent Agent for banks and payment service providers. He collected cash from customers, deposited it into accounts used for that activity and remitted the funds through the relevant principals’ systems. On his account, the customer funds moving through the banks were not his own earnings; his income was the commission received for the service. He furnished agreements and certificates concerning his agency arrangements.