Surajnath Bhimnath Sidh Vs ITO (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT), Surat, disposed of two appeals filed by the assessee for Assessment Years 2012-13 and 2013-14 through a consolidated order, as both involved identical issues.
For Assessment Year 2012-13, the assessee had originally filed a return declaring taxable income of ₹4,77,770 and subsequently filed a return in response to a notice under Section 148. During reassessment, the Assessing Officer noticed credit entries aggregating ₹170.09 crore in various bank accounts. The assessee explained that he was engaged in the business of cheque and draft discounting and had earned commission income, which had been disclosed in the return. The Assessing Officer was not satisfied with the explanation and estimated commission income at 1% of the total credits, resulting in an addition of ₹1,66,81,852 after giving credit for the commission already disclosed. Separately, based on an investigation relating to RIPL and routing of funds through Madan Overseas, the Assessing Officer treated ₹43,00,000 received in the assessee’s Bank of India account as unexplained income. The Commissioner of Income Tax (Appeals) dismissed the assessee’s appeal.
Before the Tribunal, the assessee submitted that the Revenue had accepted the nature of his business as cheque and draft discounting and that all transactions were conducted through regular bank accounts. It was contended that the Assessing Officer estimated 1% commission merely because details of parties involved in the cheque discounting business could not be furnished. The assessee relied upon judicial decisions, including an earlier order in his own case for Assessment Year 2018-19, where the Tribunal had adopted a net profit margin of 0.35%. Regarding the addition of ₹43,00,000, the assessee submitted that no loan had been received from Madan Overseas and that the amount represented discounted cheques, with the assessee earning only commission income.
The Tribunal noted that in the assessee’s own case for Assessment Year 2018-19, a net profit margin of 0.35% had been adopted. Following the same approach, it directed the Assessing Officer to restrict the estimated commission to 0.35% of the cheque discounting transactions, amounting to ₹59,53,203, after giving credit for the commission income already disclosed in the return.
On the second issue, the Tribunal observed that the records showed transactions of ₹104.12 crore through the Bank of India account and that the ₹43,00,000 pertaining to Madan Overseas represented discounted cheques. It found that the assessee had not taken any loan from Madan Overseas but had merely discounted its cheques and earned commission income. Accordingly, it held that the addition of ₹43,00,000 was not justified and deleted it.
As the issues in Assessment Year 2013-14 were identical, the Tribunal applied the same findings and allowed that appeal as well. Consequently, both appeals filed by the assessee were allowed.
Cases Discussed
- Rohit P. Panwala, ITA No. 608 to 612/Ahd./2010
- Umeshchandra Garg V/s. ACIT, (2004) 91 TTJ Agra 549
- C. K. Telang V/s. ACIT, ITA No. 4538/Del./1993
FULL TEXT OF THE ORDER OF ITAT SURAT
These appeals filed by the assessee are against the orders passed by the Learned Commissioner of Income Tax (Appeals), Surat [in short “CIT(A)”] even dated 01.08.2025 for the Assessment Years (in short “AY”) 2012-13 & 2013-14.
2. As the facts are identical in both the appeals, we hereby pass a consolidated order by taking ITA No.1056/SRT/2025 pertaining to A.Y. 201213 as the lead case.
3. The assessee has raised the following grounds of appeal:
“) The learned CIT (A) grossly erred in confirming addition of Rs. 1,66,81,852/- in respect of alleged huge profit on commission of draft / cheques discounting as discussed in para 6.2 of the appeal order.
2) The learned CIT (A) grossly erred in confirming addition of Rs. 43/- lacs in respect of transactions of cheques discounting of Madan Overseas as discussed in para 7.2 & 7.3 of the appeal order.
3) The appellant reserve right to add, alter and withdraw any grounds of appeal.”
4. The assessee had filed original return of income showing taxable income of Rs.4,77,770/- on 09.06.2012. In response to notice u/s. 148 of the Act, return of income was filed on 02.04.2019. During the reassessment proceedings, the Assessing Officer (in short “the AO”) found that the assessee had huge credit entries of Rs.170.09/- crores in different bank accounts as mentioned in para 4 of the assessment order. The assessee-submitted that he was in the business of cheques and draft discounting and had earned small amount of commission as shown in the return of income. The AO was not fully satisfied with the explanation and estimated 1% profit on total credits of Rs.170.09/- crores and arrived at the amount of profit on commission for Rs.1,70,09,150/- after giving credit of income shown in the return of income of Rs.3,27,298/-, the addition of Rs.1,66,81,852/- was made. On investigation of DDIT (Inv.), Surat, it was found that RIPL was fully controlled by Prashant Sethi who used export waste and cheap garments from India to Dubai. The monies received by RIPL assess was partly routed through Madan Overseas (Neeru Madan) and the assessee was one of the beneficiaries and hence received Rs.43,00,000/- in the BOI Account No.270020110000952. In this regard, explanation was called for. As stated earlier, the assessee simply submitted that, he was in the business of cheques / draft discounting and had earned small margin of commission. The AO was not satisfied with the explanation and assumed the said amount of Rs.43,00,000/- as unexplained income.
5. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
6. The Ld. Authorised Representative (in short “Ld. AR”) for the assessee in respect of ground No.1 submitted that there was no difference of opinion so far as the nature of business viz. discounting of cheques/drafts on part of the Revenue. The Ld. AR further submitted that there are no unaccounted bank accounts, rather, the cheques/drafts discounting was made through various bank accounts which were part of the regular accounts. The assessee has filed certificate for money lending in order to justify dealings of cash payment against cheques/drafts and the commission income shown for Rs.3,27,298/-on account of cheques discounting was accepted by the Revenue. The balance amount of commission of Rs.1,66,81,852/- was added. The Ld. AR further submitted that the AO had estimated 1% commission merely because the details of the parties of cheques/draft discounting could not be furnished. The Ld. AR submitted that the details of these parties were not given but the margin of net profit ought to have assumed considering the nature of business of the assessee. The Ld. AR relied upon the following decisions:
a. Rohit P. Panwala (ITA No. 608 to 612/Ahd./2010)
b. Umeshchandra Garg V/s. ACIT (2004) 91 TTJ Agra 549.
c. C. K. Telang V/s. ACIT (ITA No. 4538/Del./1993)
7.1 The Ld. AR also relied on the decisions in assessee’s own case for A.Y. 2018-19 being ITA No.1211/SRT/2025 wherein the net margin of the profit has been adopted at 0.35%.
8. The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the CIT(A).
9. We have heard both the parties and perused all the relevant materials available on record. From the perusal of records, it appears that the Tribunal, in assessee’s own case for A.Y. 2018-19 has adopted 0.35% net margin of profit, therefore it is appropriate to consider the same and restrict the addition to the extent of Rs.59,53,203/- (Rs.1,70,09,15,032 @ 0.35%). The AO is directed to take note of this and also give the said benefit thereby reducing it from profit shown in the return of income for Rs.3,27,298/-. Thus, ground No.1 is allowed.
10. As relates to ground No.2, the Ld. AR submitted that the assessee had filed return of income along with audit report and the balance sheet does not show any loan from Madan Overseas as stated by the AO. The assessee also filed bank statement of Bank of India which was part of regular books of accounts and there is withdrawal of cash for payment to them against RTGS from Madan Overseas. The Ld. AR submitted that he had never taken any loan from Madan Overseas rather he discounted cheques of Madan Overseas and is entitled to commission income only.
11. The Ld. DR relied upon the assessment order and the order of the CIT(A).
12. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee has carried out transactions of Rs.104.12 crores through the Bank of India account wherein the amount of Rs.43,00,000/- pertaining to Madan Overseas were discounted. The records show that the assessee had never taken any loan from Madan Overseas rather it was the discounted cheque of Madan Overseas and the assessee was only earning commission income. Therefore, the addition to that extent made by the AO is not justified. Thus, ground No.2 is allowed.
13. Thus, ITA No.1056/SRT/2025 for A.Y. 2012-13 is allowed.
14. As relates to ITA No.1057/SRT/2025, ground No.1 is related to cheque discounting and the assessee earned commission income which was identical to ground No.1 of the A.Y. 2012-13. Thus, ground No.1 of A.Y. 2013-14 is also allowed.
15. Thus, ITA No.1057/SRT/2025 for A.Y. 2013-14 is allowed.
16. In result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 01.07.2026
