2025 (5) TMI 96 - AT - Income Tax

Cash deposit in regular bank account of the assessee - nature of business which is of Air Travel and Air Ticket Agency - HELD THAT - We find that the Assessee is purchasing tickets form the government approved carriers as he has been issued license by IATA (International Air Transport Association). All the sales amounts made by the Assessee are returned back to different airlines deducting the margin / commission of the Assessee. We find that the Assessee has filed details of all the sales he has made to different customers and since there is no bar from sale of tickets in cash therefore the findings given by the authorities below that the sales made in cash do not stand proved seems incorrect. Assessee s commission / margin earned from the same business has been accepted by the Department in the scrutiny assessment in earlier years also and no adverse view was taken in earlier years. In the present year also like in earlier years sale of tickets has been made in cash but all such sale proceedings have been deposited in the account of Airlines therefore there is hardly any possibility of wrong doing on this account. Therefore action of making addition of such cash sales and its sustenance by the ld. CIT(A) is not justified. Accordingly Assessee s appeal on this issue is allowed.

Summary

The core legal question considered in this appeal is whether the addition of Rs. 7,97,10,019/- on account of cash deposits in the assessee's bank account, made by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals), was justified given the nature and modus operandi of the assessee's business as an air travel and air ticket agency earning commission on ticket sales.

The principal issue revolves around the legitimacy and source of cash deposits in the assessee's bank accounts, specifically whether these deposits represent genuine business receipts from ticket sales or undisclosed income. The tribunal also examined the consistency of the assessee's business practice over the years, the adequacy of evidence furnished to establish the source of cash deposits, and the reasonableness of the revenue authorities' demand for additional customer details such as passport and visa copies.

Issue-wise detailed analysis:

1. Legitimacy of Cash Deposits and Source of Income:

The relevant legal framework includes the provisions relating to income tax assessments and scrutiny of unexplained cash deposits, as well as judicial precedents on the evidentiary requirements for proving genuineness of business receipts. The tribunal considered earlier assessments under section 143(3) for AYs 2013-14, 2014-15, and 2015-16, where the assessee's modus operandi and income disclosure were accepted. The tribunal also referred to binding judicial precedents, notably the Bombay High Court's ruling in RB Jessaram Fateh Chand vs. CIT, which held that there is no necessity for an assessee to maintain or supply addresses of customers to prove genuineness of transactions.

The tribunal noted that the assessee's business involved earning commission from the sale of airline tickets, with purchases made through government-approved suppliers and payments routed via banking channels. The assessee furnished detailed records, including sale registers with customer names, transaction numbers, and supplier details, cashbooks, bank statements, and reconciliations linking cash receipts to ticket purchases. The assessee's commission income was reflected in audited financial statements and corroborated by TDS reflected in Form 26AS.

The Assessing Officer accepted matching purchases of Rs. 6,15,08,851/- but disallowed the balance cash deposits of Rs. 7,97,10,019/- on the ground that the assessee failed to produce evidence for these deposits. The CIT(A) confirmed this addition, citing absence of documents such as passports, visas, and journey details, which were demanded to verify the genuineness of cash sales, especially since 99.5% of ticket sales related to foreign travel.

The tribunal rejected the revenue's demand for such customer-specific documents, relying on judicial precedent that failure to maintain or produce such details does not automatically cast suspicion on the genuineness of transactions. It emphasized that the assessee's business practice of accepting cash sales from walk-in customers and remitting payments to government-approved agents through banking channels was consistent and supported by detailed records. The tribunal found no defect pointed out by the revenue authorities in the supplier accounts or the linkage between cash receipts and ticket purchases.

2. Consistency of Business Practice and Past Assessments:

The tribunal highlighted that the assessee's modus operandi and income disclosure had been consistent over several years, with no adverse findings in earlier scrutiny assessments. The commission/margin earned on ticket sales was disclosed in audited accounts and accepted by the department previously. This consistency was a significant factor in the tribunal's reasoning, reinforcing the legitimacy of the cash deposits as business receipts rather than undisclosed income.

3. Burden of Proof and Evidentiary Requirements:

The tribunal examined the burden on the assessee to prove the source of cash deposits. It found that the assessee had furnished extensive documentary evidence, including sale registers, cashbooks, bank statements, supplier ledger accounts, and reconciliation charts. The tribunal held that such evidence was sufficient to establish the genuineness of the cash deposits, especially since payments to suppliers were made through banking channels, reducing the possibility of undisclosed income.

The tribunal also considered the revenue's argument that the assessee should have maintained customer identity documents due to the foreign travel nature of ticket sales. It rejected this contention, citing judicial precedents that non-maintenance of such documents does not warrant adverse inference.

4. Treatment of Competing Arguments:

The revenue authorities relied on the absence of customer-specific documents and partial matching of purchases to justify the addition. The tribunal found the revenue's approach to be overly technical and not supported by the totality of evidence. It noted that the CIT(A) had partly appreciated the assessee's explanation but failed to fully consider the detailed records and reconciliations. The tribunal gave due weight to the assessee's submissions, past assessments, and judicial precedents, ultimately concluding that the addition was not justified.

Significant holdings include the following verbatim legal reasoning:

"There is no necessity for assessee to maintain the addresses of customers and failure to maintain the same or to supply them as and when called for cannot give rise to suspicion with regard to genuineness of transactions."

"All the sales amounts made by the Assessee are returned back to different airlines deducting the margin / commission of the Assessee. We find that the Assessee has filed details of all the sales he has made to different customers and since there is no bar from sale of tickets in cash, therefore, the findings given by the authorities below that the sales made in cash do not stand proved seems incorrect."

"Assessee's commission / margin earned from the same business has been accepted by the Department in the scrutiny assessment in earlier years also and no adverse view was taken in earlier years. In the present year, also like in earlier years sale of tickets has been made in cash but all such sale proceedings have been deposited in the account of Airlines, therefore, there is hardly any possibility of wrong doing on this account."

The tribunal established the core principle that cash sales in the business of air ticket agency, supported by detailed records and consistent past disclosures, cannot be disallowed merely due to absence of customer identity documents or partial matching of purchases, particularly when payments to suppliers are routed through banking channels.

Final determinations:

- The addition of Rs. 7,97,10,019/- made on account of unexplained cash deposits was not justified and was set aside.

- The assessee's explanation regarding the source of cash deposits as genuine business receipts from ticket sales, supported by detailed documentary evidence and consistent past practice, was accepted.

- The demand for customer-specific documents such as passport and visa copies was held to be unreasonable and not a prerequisite for establishing genuineness of transactions in this context.

- The appeal was allowed, and the impugned addition was deleted.