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.
2. The only effective issue to be decided on merits is as to whether the Learned CITA was justified in confirming the addition made on account of commission income on an adhoc basis in the facts and circumstances of the instant case.
3. I have heard the rival submissions and perused the materials available on record. The assessee is an individual carrying on a proprietorship business under the trade name “Rama Krishna Travels” at village Naharpur, near Lal Building, Sector 6, IMT Manesar, Gurgaon, Haryana-During the year under consideration, the assessee operated as the master distributor / distributor / super stockist level in the financial services agency ecosystem – the second highest tier in the principal company hierarchy, one level above the stockist and two levels above the retail agent. The assessee’s business model operated in the following manner as formally documented in agreements, appointment letters and portal infrastructure: –
Principal companies (Hermes I Tickets Pvt. Ltd., Spice Money Ltd., NICT Technologies Pvt. Ltd., Relisec Consultancy Services Pvt. Ltd., RNFI Services Ltd., CSC E-Commerce Services Pvt. Ltd., and Osiris Infotech Pvt. Ltd.) appointed the Appellant as their Master Distributor/Super Stockiest for a defined geographic area in Haryana.
The Appellant had a network of approximately 20-25 sub-agents / retailers operating in the surrounding area, each equipped with a digital wallet/portal account maintained by the respective principal company.
The retailers collected cash from end customers for money transfer (DMT), AEPS transactions, bill payments, ticket bookings, recharges, and other fintech services, and reported their daily requirements to the Appellant.
The Appellant aggregated this cash, deposited it into his designated current bank accounts (Yes Bank accounts 002684000000607 and 002684100000108, SBI account 00000034021257814, and Central Bank of India account 3254396954), and transferred the funds electronically through RTGS/NEFT -to the principal companies’ designated bank accounts. Bank statements of all three current accounts clearly show outward transfers captioned ‘TRANSFERINB TECH_HERMTR Payments’ and similar RTGS/NEFT entries to Hermes, Spice Money, and other principals, immediately following cash. deposits.
From the principal company’s portal, the corresponding credit was pushed down to each retailer’s digital wallet. The retailers then used that credit to service end customers for their respective transactions.
The Appellant also directly serviced some end customers himself at the retail level as a sub-retailer, but the predominant business was the Master Distributor/Distributor aggregation function.
The commission earned by the Appellant was fixed and paid by the principal companies based on the volume and category of transactions facilitated. All commission was credited electronically and TDS was deducted by the principal companies under Section 194H (commission) and 194C (contractual payments) before payment.)
4. It was submitted that the business model is identical to the model used across millions of agents in India’s payment ecosystem under RBI regulated Business Correspondent and prepaid payment instrument frameworks, operated through companies like Spice Money, Hermes 1 Tickets (The Smart Shop), NICT / BOI BC, CSC e-Governance, RNFI and others. The assessee furnished the official commission rate charts of the two largest principal companies from which commission was earned. These charts established the actual, commercially applicable commission rates at the master distributor / distributor / super stockist level:-
A. Hermes I Tickets Pvt. Ltd. – Super Stockiest Commission (The Smart Shop)
As per the Hermes I Tickets Business Module (official document received at the time of enrolment as Super Stockiest), the commission rates at the Super Stockiest level the Appellant’s level are as follows:
5. The Learned AO received information that assessee had made cash deposits in the current account maintained with Yes Bank, State Bank of India and Central Bank of India. Accordingly, in order to examine the same, notice under section 133(6) of the Act were issued to the assessee. The assessee submitted his reply to the same. After considering the reply, the Learned AO accepted the fact that assessee is a commission agent for transfer of money. The Learned AO concluded that even though assessee was in receipt of only commission income from all the transactions, the commission income disclosed by the assessee is not commensurate with the total value of cash deposits made in the current account and accordingly proceeded to estimate the commission income on an ad-hoc basis at the rate of 2% of the total cash deposits and sought to add the same in the reassessment completed under section 147 read with section 144B of the Act on 5-2-2025. This action of the Learned AO was upheld by the Learned CITA.
6. It is not in dispute that assessee has been earning only commission income on all the transactions considering the business model of the assessee. The assessee had furnished the rate chart of commission earned by him for each of the business models operated by him. The said commission income had been duly offered to tax in the regular return filed by the assessee. It is pertinent to note that the assessee has been offering the commission income in the same fashion as per the rate chart applicable for each line of business activity in the past also and assessment for the assessment year 2018-19 was completed under section 143(3) read with section 144B of the Act vide order dated 23-4-2021, accepting the commission income offered by the assessee in the return of income without making any addition. Even for the year under consideration, I find from Form No. 26AS, the actual commission income earned by the assessee from various parties. The Form No. 26AS are enclosed in pages 71 to 77 of the paper book. In these circumstances, there is absolutely no basis for the lower authorities to resort to ad hoc commission of 2% of the total value of cash deposits when there are corroborative evidences in the form of commission agreements and Form No. 26AS, wherein the actual rate of commission is duly disclosed. Hence, I have no hesitation to delete the ad hoc addition of commission income made at the rate of 2% of value of total cash deposits by the lower authorities in the instant case. Accordingly, the grounds raised by the assessee challenging the addition on merits are hereby allowed.
7. Since the relief is granted to the assessee on merits, the other legal grounds raised by the assessee need not be adjudicated and they are left open.
8. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 10/07/2026
