Jitendra Kumar Sharma Vs ITO (ITAT Jaipur Bench)
Calling Cash Deposits “Students’ Fees” Does Not Reduce Them to ₹10 Commission—Missing Remittance Trail Exposes the Story
Summary: The Jaipur Bench of the ITAT has upheld an addition of ₹14,30,890 where the assessee claimed that cash deposited in his bank account represented examination fees collected from college students and remitted through an E-Mitra operator, but failed to establish the corresponding transfer of the collected amount. The Tribunal found the explanation unsupported by the bank statement, commercially improbable and inconsistent with the assessee’s own return, wherein the entire deposits had been declared as business receipts.
The assessee, Jitendra Kumar Sharma, had deposited cash aggregating to ₹16,68,290 in his bank account. In the return and computation of income, he treated the deposits as gross business receipts and offered presumptive income of ₹1,05,400 u/s 44AD.
During assessment, the assessee explained that he was an employee of a college and had collected examination fees from its students. According to him, the cash so collected was deposited into his personal bank account and thereafter transferred to a registered E-Mitra operator, who ultimately remitted it to the college. The assessee stated that he acted merely as a facilitator and earned a commission of ₹10 for every statement or fee transaction processed.
The AO invoked s.44AD(6), which excludes a person earning income in the nature of commission or brokerage from the presumptive taxation scheme. On that basis, the AO denied the assessee’s computation u/s 44AD.
The AO treated the cash deposits of ₹16.68 lakh as gross business receipts and estimated deductible expenditure on employee salary, electricity and rent at ₹11,000 per month, aggregating to ₹1.32 lakh. The resulting business income was computed at ₹15,36,290. After substituting this figure for the business income of ₹1,05,400 already returned, the AO made a net addition of ₹14,30,890.
The assessee did not appear before the CIT(A), who consequently confirmed the assessment.
Before the ITAT, the assessee changed the emphasis of his case. It was argued that the entire cash deposits had been inadvertently shown as his business turnover. In reality, the money belonged to the students and was collected only for onward payment to the college through the E-Mitra operator. Therefore, only the small commission earned by the assessee represented his real income.
The Tribunal examined the bank statement to verify whether the cash deposited had actually been transferred onwards in the manner claimed. A specific cash deposit of ₹2,17,420 made on 17.12.2016 was considered. If the assessee’s explanation was correct, there ought to have been a corresponding transfer of the same or substantially matching amount to the E-Mitra operator.
No such matching transaction was found.
Even according to the explanation offered by the assessee’s counsel during the hearing, only approximately ₹70,000 out of this deposit was transferred onwards. The claimed transfer was also not specifically identifiable from the bank statement. When confronted with the absence of a transfer corresponding to the collected fees, the assessee could offer no satisfactory explanation.
The ITAT observed that if the assessee had merely collected students’ money as an intermediary, the entire amount should ordinarily have travelled onwards to the E-Mitra operator or the college, except for the agreed commission. The failure to demonstrate this movement of funds materially undermined the explanation.
The assessee’s own return also operated against him. He had originally characterised the complete cash deposits as his business receipts and offered presumptive profit on that basis. Had the money genuinely belonged to the students and been collected in a fiduciary or intermediary capacity, there was no apparent reason to disclose the gross collections as the assessee’s own turnover.
The assertion that the assessee earned commission of ₹10 per transaction was also unsupported by documentary evidence. There was no adequate material establishing the number of transactions, the terms of authorisation, the rate of commission or the actual remittance of the collections.
The Tribunal also found the proposed arrangement commercially unusual. The assessee was already an employee of the college. If students were paying cash to him, they could have paid the college directly. Similarly, when students could themselves use the E-Mitra facility, the need to interpose a college employee—who deposited the money in his personal account before transferring it to another intermediary—remained unexplained.
There were further gaps in the supporting material. The evidence related only to examination-fee collections during December 2016 and did not adequately explain the total cash deposits made throughout the year. No receipts were apparently issued to students, and the complete chain from the students to the assessee, from the assessee to E-Mitra and thereafter to the college was not established.
The ITAT, therefore, characterised the explanation as unreliable and upheld the treatment of ₹16.68 lakh as gross business receipts. After allowing estimated expenditure, the business income of ₹15.36 lakh and the consequent addition of ₹14.30 lakh were confirmed. The appeal was dismissed.
Author’s Comments
The ruling illustrates the difference between explaining the nature of a transaction and merely describing it. Once substantial cash belonging to third parties enters an assessee’s personal bank account, the assessee must establish the complete money trail. A general explanation that the deposits represented collections for somebody else will carry little weight unless supported by student-wise details, receipts, college authorisation, E-Mitra records and matching onward remittances.
There were two independent difficulties in the assessee’s case. First, s.44AD could not be invoked if the activity was truly commission business because s.44AD(6) expressly excludes commission or brokerage income. Secondly, even the underlying commission story was not proved. Thus, the assessee’s explanation simultaneously undermined his claim under s.44AD without satisfactorily establishing that only the commission component belonged to him.
Nevertheless, the decision should not be understood as laying down that every collection deposited by an agent constitutes the agent’s income. Properly documented pass-through collections ordinarily retain their character. The result turned upon the absence of a matching remittance trail, inconsistency with the return and the commercially unexplained route adopted.
The practical lesson is clear: when money is claimed to belong to another person, every link in its journey must be visible. Without proof of onward payment, a “collection” may quickly become the collector’s taxable receipt.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR
The present appeal has been filed by the assessee against the order passed by the Office of the Commissioner of Income Tax, Appeal Addl/JCIT(A), Mysore (hereinafter referred to as “Ld. CIT(A)”), dated 15.12.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The grounds raised read as under:-
1. Ground No. 1 The Learned CIT (Appeal) erred in sustaining addition made by the Assessing Officer amounting Rs. 1430890 to the declared total income by not allowing computation made u/s44AD and estimating income on presumptions and assumptions
2. The appellant craves leave to add, alter OR amend any of the grounds of appeal before OR at the time of hearing of appeal
3. The solitary grievance in the present appeal pertains to addition made to the income of the assessee of Rs.14,30,890/-. Orders of the Authorities below reveal that the assessee was found to have deposited cash amounting to Rs.16,68,290/- in his bank account. In the computation of income/return of income filed , the assessee treated the said cash deposit as receipts from his business and returned to tax net profits on the same on presumptive basis u/s 44AD of the Act amounting to Rs.1,05,400/-.
4. When asked to explain the nature of business, the assessee contended that the amount of Rs.16,68,290/- had been received from the students of college for filing examination form which in turn were transferred to one registered owner of E-Mitra kendra , Mr. Dharamveer ,who in turn transferred the amount to the College. The AO noted that the assessee was earning commission in the process and was entitled to Rs.10 per statement filed or fees filed of students. Referring to provisions of Section 44AD Sub-Section (6) of the Act, which excluded commission business from presumptive tax regime, he held that the assessee was not entitled to claim the benefit of returning profits on presumptive basis as per Section 44AD of the Act. He therefore assessed the income of the assessee treating Rs.16,68,290/- deposited in his bank account in cash as his commission income and deducted therefrom expenses incurred on salary to employee, electricity expenses, rent all estimated at Rs.11,000/- per month thus, allowing claim of deduction on account of expenses to the tune of Rs.1,32,000/-. He accordingly, assessed the income earned by the assessee from his business of commission agent at Rs.15,36,290/- and substituted the same to the business income returned by the assessee of Rs.1,05,400/-.
5. Before the Ld. CIT(A) none appeared for the assessee. Accordingly the ld. CIT (A) confirmed the findings of the AO.
6. Aggrieved by the same the assessee has come up in appeal before me.
7. I have heard both the parties. The short issue for adjudication is the treatment of the cash found deposited in the bank account of the assessee amounting to Rs.16,68,290/-, which the assessee treated as his business income returning profits thereon u/s 44AD of the Act of Rs.1,05,400/- , while the AO/CIT(A) have denied the presumptive basis adopted by the assessee u/s 44AD of the Act and computed profits earned after allowing set off of expenses estimated at Rs.1,32,000/- against the cash deposited in Bank Rs.16,68,290/- treating it as his business turnover.
8. The fact on record therefore is that both the assessee and the Revenue have treated the entire deposits in his bank account in cash of Rs.16,68,290/- as his gross receipts from his business.
9. The Ld. Counsel for the assessee’s contention before me was that the had inadvertently returned the entire cash deposits in bank as his business turnover. That in truth the said amounts were fees collected of students , which in turn he had transferred to an E mitra for deposit in the College. That he had earned only commission income in the process. That he was acting as an agent for collecting fees from students of college where admittedly, he was a salaried employee drawing salary from the very same college and that he depositing the cash in his bank account and from there transferring the fees so received to a registered e-mitra by the name of Mr. Dharamveer. That all the aforestated facts were submitted to the authorities below with necessary evidences.
10. I find no merit at all in the explanation of the assessee. I have perused all the evidences furnished by the assessee before me and I find that the explanation of the assessee falls flat on facts itself. The contention of the assessee is that he used to collect examination fees from students of the college, deposit it in his bank account and subsequently transfer it to the E mitra. That the cash deposits in his Bank account therefore did not represent his income but the fees collected from students and that he was liable to be taxed only on the commission income earned in the process. Copy of the bank account was placed before me at paper book page No.51 to 67. One entry of Rs.2,17,420/- of cash deposited on 17.12.2016 was pointed out to the ld. Counsel for the assessee. Admittedly, the same was part of the total amount of cash deposited in the bank account which as per the assessee himself was received by way of a fees collected from students. Corresponding to the receipt of this amount of Rs.2,17,420/- from students, I noted no entry in the bank account transferring this amount to the e-mitra, Jitendra Kumar.
11. Even as per the Ld. Counsel for the assessee’s explanation before me, out of total Rs.2,17,420/- deposited in cash only a total amount of Rs.70,000 approximately was admittedly transferred to the e-mitra. Though the transfer to the e-mitra of this amount is also as per the statement of the Ld. Counsel for the assessee only and the same was not reflected specifically in the bank account. If the assessee was collecting fees from students and transferring it to the e-mitra there was no question of the entire amount of fees collected not being transferred to the e-mitra. The ld. Counsel for the assessee when confronted with this fact at bar had no explanation to offer.
12. It is evident therefore that, the assessee’s explanation of acting as a commission agent for collecting fees of students and transferring it to the e-mitra false flat on the facts itself before me. The assessee has been unable to corroborate and evidence this facts from the bank statement of the assessee showing transaction of the equivalent amount of cash collected from students to e-mitra. Therefore the contention of the assessee that the cash deposited in Bank of Rs.16,68,290/- was not his income but fees collected from students is found to be incorrect and rejected.
13. Even otherwise, the assessee himself has returned the entire amount of cash deposited in his bank account as his business receipts and returned net profits on the same on presumptive basis. If the cash collected was fees from students and the same was to be transferred to the e-mitra, there was no question for the assessee to treat the entire amount as his business income. The AO has noted the assessee to have stated that he earned commission of Rs.10 for every said fees collected. But there is no evidence on record to substantiate the same. In fact, the evidences on record itself demolish the case of the assessee.
14. Some very surprising facts have emerged while hearing the case. The assessee is the employee of the very same college which allegedly has authorized it to collect fees from students, deposit it in his bank account and transfer it to the e-mitra who in turn would transfer the amount to the college. I fail to understand why any college would follow such a circuitous route to collect fees. E-mitras are facility created/provided to the general public for facilitating easy access / to different facilities provided by the government. They are one window facility provided to the public facilitating dealing with the different departments of the Government. When the e-mitra themselves are there for facilitating the interaction with the different bodies of the Government, I fail to understand why there was the need for another person to come in the chain of facilitation of collection of fees from students. More particularly, when the students could have themselves gone to the e-mitra. And strangely enough this person is an employee of the college from whom students the fees collection is being facilitated by appointing him as an intermediary. If the students are giving cash to this employee they may as well deposit it in the college itself. How the appointment of the assessee as a facilitator for collecting fees from students is serving any purpose I fail to understand. Strangely enough the college is allowing a circuitous route to collect fees, asking students to give cash to their employee who is being allowed to deposit cash in his bank account without issuing any receipts to the students, and who is turn is depositing the fees with an E mitra who then finally pays it to the college.
15. Further, I have noted that the assessee has filed evidence showing collection of such fees only in the month of December 2016 and that too only the examination fees. Why are the other fees not being collected through e-mitra is another question. The entire explanation therefore of the assessee appears to be bogus.
16. I therefore confirm the orders of the Authorities below treating the entire cash deposited in the Bank account of the assessee as receipts from his business and taxing net profits estimated to be earned thereon of Rs.14,30,890/- as the business income of the assessee.
17. In effect, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 10.09.2026
