Sunder Singh Yadav Vs ITO (ITAT Delhi)
Delhi ITAT Deletes Ad Hoc 2% Commission Addition on Huge Cash Deposits—When Assessee Is Only a Money-Transfer Agent, Actual Commission Supported by Agreements and Form 26AS Must Prevai
The Delhi ITAT deleted an ad hoc addition of commission income estimated at 2% of the total cash deposited in the assessee’s bank accounts, holding that once the actual commission earned was established through commission agreements, prescribed rate charts and Form 26AS, there was no justification for estimating a higher commission merely because the volume of cash deposits was substantial.
The assessee operated a proprietorship, Rama Krishna Travels, and functioned predominantly as a Master Distributor/Distributor/Super Stockist in the financial-services ecosystem. He had approximately 20–25 sub-agents/retailers who collected cash from customers for domestic money transfers, AEPS transactions, bill payments, ticket bookings, mobile recharges and similar fintech services. The assessee aggregated such cash, deposited it into designated current bank accounts and thereafter transferred the funds electronically through RTGS/NEFT to principal companies. The corresponding credits were then pushed into the retailers’ digital wallets for carrying out customer transactions.
The assessee worked with several principal companies, including Hermes I Tickets Pvt. Ltd., Spice Money Ltd., NICT Technologies Pvt. Ltd., RNFI Services Ltd. and CSC E-Commerce Services Pvt. Ltd. His remuneration was only the prescribed commission based upon the volume and category of transactions, which was electronically credited by the principal companies after deduction of TDS under Sections 194H/194C.
Significantly, the commission-rate charts reproduced on page 4 of the order showed that actual distributor commissions were extremely small compared with transaction value. For example, Hermes’ Super Stockist rates for several services were around 0.10%, while Spice Money’s DMT distributor commission generally ranged from 0.10% to 0.26% depending upon monthly business volume. Thus, the commercial evidence itself demonstrated why the quantum of cash passing through the bank accounts could be many times the commission income actually earned.
The AO himself accepted that the assessee was a commission agent engaged in money-transfer transactions. Nevertheless, because he considered the commission disclosed by the assessee disproportionately low compared with the cash deposited in the current accounts, he estimated commission income at 2% of the entire cash deposits. The CIT(A) confirmed this estimation.
The ITAT rejected this approach. It noted that there was no dispute that the assessee earned only commission income from these transactions. The assessee had furnished the actual commission-rate charts applicable to each line of business and had already offered the corresponding commission to tax. Further, the same method of declaring commission had been followed in earlier years, and in AY 2018-19 a scrutiny assessment under Section 143(3) had accepted the commission income without any addition.
Most importantly, Form 26AS independently reflected the actual commission received from the various principal companies. In the presence of such corroborative evidence, including contractual commission rates and Form 26AS, the Tribunal held that there was “absolutely no basis” to estimate commission at 2% of the total cash deposits. The entire ad hoc commission addition was accordingly deleted.
Since complete relief was granted on merits, the assessee’s other legal grounds were left open and the appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal of the assessee arises out of the order passed by the Commissioner of Income Tax (Appeals) NFAC, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 4336/Del/2026 for A.Y. 2020-21 dated 23.02.2026 which in turn arises out of the order passed by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’) passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 05.02.2025.
