Rajendra Kumar Choraria Vs ITO (ITAT Kolkata)
Kolkata ITAT: ₹20.13 Crore Bank Credits Cannot Straightaway Be Treated as Turnover-Commission Agent Gets Fresh Opportunity to Establish Pass-Through Transactions
The assessee, engaged as a commission agent in raw jute, declared income of ₹4.05 lakh. During reassessment, the AO noticed bank credits aggregating to ₹20.13 crore in the assessee’s Dhanlaxmi Bank account. The assessee explained that he was functioning as a jute broker/commission agent (Aarhtia) and that amounts received from jute mills were routed through his bank account for payment to suppliers; consequently, the gross credits did not represent his turnover or income.
The AO rejected the explanation and treated the entire ₹20.13 crore of bank credits as turnover, estimated profit thereon at 8% amounting to ₹1.61 crore, and after allowing expenses assessed business income at about ₹1.57 crore. The CIT(A) confirmed the addition, principally because the assessee had not furnished a complete party-wise reconciliation linking receipts from jute mills with payments to the corresponding suppliers.
Before the ITAT, the assessee relied upon the assessment record itself describing him as a commission agent and produced supporting material concerning the transactions. The Tribunal noted that what was crucial was a proper reconciliation of the bank transactions and supporting evidence-including the identity of jute mills, corresponding suppliers, credit-to-debit linkage, invoices, delivery proofs, commission trail, confirmations and ledger mapping.
The ITAT held that the assessee deserved one more opportunity to establish his case. It therefore set aside the CIT(A)’s order and remanded the matter to the AO for verification. The assessee was directed to furnish the necessary reconciliation and evidence demonstrating that he was merely a commission agent and that the transactions represented funds routed through him rather than transactions of his own business. The AO was directed to examine the material and decide the issue afresh in accordance with law.
Thus, the ₹20.13-crore turnover determination and consequential 8% profit estimation did not attain finality; the matter was restored to the AO to determine, on proper reconciliation and evidence, whether the bank credits were merely pass-through receipts of a commission agent.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2013-14 dated 17.02.2026.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That the Learned CIT(A) has erred in law and on facts in confirming the addition made by the Assessing Officer by treating the entire bank deposits in Dhanlaxmi Bank as turnover of the assessee, without appreciating the true nature of business of the assessee being a commission agent (Aarhtia).
2. That the Learned CIT(A) failed to appreciate that the assessee merely acts as an intermediary (jute broker), wherein payments from jute mills are routed through the assessee to jute suppliers after deduction of commission, and therefore only commission’s act M/s. You see benches… Alleged a Shalls M/s. Income constitutes taxable income.
3. That the Learned CIT(A) and the Assessing Officer erred in rejecting the consistent and established business model of the assessee without bringing any cogent material or evidence on record to disprove the same.
4. That the authorities below failed to consider that in the immediately preceding assessment year, under identical facts and circumstances, in reassessment proceedings under Section 148, the Assessing Officer accepted the assessee’s status as a commission agent and no adverse inference was drawn.
5. That the Learned CIT(A) erred in disregarding the principle of consistency by holding that each assessment year is separate, without appreciating that in absence of any change in facts or law, a consistent view ought to have been followed.
6. That the reopening and consequent addition are based merely on suspicion arising from bank deposits, without establishing any nexus between such deposits and undisclosed income of the assessee.
7. That the Assessing Officer has erred in adopting incorrect and inflated figures of bank deposits, without proper verification or reconciliation with the bank statements and books of account, thereby vitiating the entire basis of addition.
8. That the Learned CIT(A) failed to adjudicate or properly appreciate the factual contention regarding incorrect computation of bank deposits as considered by the Assessing Officer.
9. That the estimation of income at 8% of alleged turnover is arbitrary, excessive, and without any legal or factual basis, particularly when the assessee is not engaged in trading of raw jute but earns only commission income.
10. That the addition sustained is contrary to settled legal principles that in the case of commission agents, only commission income can be brought to tax and not the gross receipts passing through the assessee.
11. That the orders passed by the lower authorities are bad in law, contrary to facts, and liable to be set aside.
12. That the appellant craves leave to add, alter further grounds of appeal”
3. Brief facts of the case are that the assessee had filed the return of income for the AY 2013-14 on 26.07.2013 declaring total income at ₹4,05,730/-. During the assessment proceedings, the Assessing Officer (hereinafter referred to as Ld. ‘AO’) observed large value credits in the assessee’s bank account with Dhanlaxmi Bank during the FY 2012-13 totalling to ₹20,13,11,293/-, which were followed by frequent cash withdrawals and transfers to various proprietorships and companies. The assessee submitted that he was a commission agent dealing in raw jute and that the bank credits were payments routed from jute mills to the suppliers. The Ld. AO rejected this explanation due to the absence of details of sales, purchases, or debtors in the return, and noted that the entire supplier payments were routed from the assessee’s own account rather than being merely commission receipts and treated the entire bank credits of ₹20,13,11,293/- as the total turnover of the assessee. He then estimated the profit at 8% of the turnover, yielding ₹1,61,04,903/-, and allowed claimed expenses of ₹4,20,108/-, resulting in the assessed business income of ₹1,56,84,795/-. The assessment was framed u/s 147 r.w.s. 144B of the Act and the total income was determined at ₹1,59,21,364/-.
3.1 Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who noted that the assessee had failed to furnish complete party-wise reconciliations, confirming exact name of the jute mills and corresponding farmers/suppliers, nor did the assessee provide supporting primary evidence to establish that the credits did not represent receipts from his own business. The Ld. CIT(A) found the assessee’s explanation self-contradictory and lacking human probability given the voluminous nature of transactions routed through the account without proper books or systematic reconciliation. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. Our attention was drawn to page 1 of the assessment order wherein it is mentioned that the assessee is a commission agent. There were total credits of ₹13 crore and an income of ₹7,27,754/-had been shown. Our attention was also drawn to pages 18 to 21 of the paper book for the payment received. The assessee is stated to be a jute supplier and the Ld. AO had applied 8% of the turnover for computation of the net profit of the assessee. It was conveyed to the Ld. AR that the bills do not contain the name of the assessee and the Ld. AR informed that the assessee engages sub-brokers and the name of the proprietorship firm is Lachhiram Nathmul of Shri Rajendra Kumar Chararia, which is mentioned on the bills. Our attention was also drawn to page 6 of the paper book II and page 18 of the paper book I which are extracted as under:
6. The Ld. CIT(A) has discussed this aspect in para 13 on page 8 which is extracted as under:
“13. The Ld. AO observed that the appellant’s bank account reflected total credits of Rs.20,13,11,293/- during FY 2012-13. The appellant declared only commission income and did not show any sales/purchases. Debtors were shown as nil. The Ld. AO further noted that large funds were routed through the appellant’s account and thereafter remitted in small amounts to multiple concerns. In this backdrop, the Ld. AO treated the total credits as turnover and estimated profit @ 8%, allowing expenses as per P&L.”
7. Further in para 14, the Ld. CIT(A) has mentioned as under:
“14. The appellant’s explanation is that he is a kachha arahtia/commission agent and that reimbursements routed through bank are not turnover. However, the appellant has not furnished complete party-wise reconciliation establishing:
(i) exact names of jute mills from whom funds were received,
(ii) corresponding names of farmers/suppliers to whom funds were remitted,
(iii) link of each credit with the corresponding debit, and
(iv) supporting primary evidences for the entire year (all invoices, delivery proofs, broker/sub-broker commission trail, confirmations, and ledger mappings).”
8. The Ld. DR submitted that the issue requires reconciliation of the transactions and the accounts, which exercise was not carried out before the Ld. CIT(A) or even before the Ld. AO.
9. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The Bench was of the view that the assessee needs to be granted one more opportunity to be heard. Therefore, in the interest of justice and fair play, the order of the Ld. CIT(A) is hereby set aside and the issue is remanded to the Ld. AO for verification. The assessee shall file the required reconciliation and evidence before the Ld. AO in support of the claim that he was only a commission agent and the transactions did not relate to his own business. He shall also file the paper book in three volumes filed before us (the third volume not being available at the time of hearing before us) before the Ld. AO, who shall examine the same and thereafter pass an order in accordance with law. Hence, the Grounds of appeal are partly allowed for statistical purpose
10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 10th August, 2026.
