Unexplained cash deposits and commission estimation in a money transfer agency were reassessed based on traced collections and declared rates.

Cash deposited during demonetization from a money transfer agency business was found traceable to amounts collected for principals and remitted onward, so it was not treated as unexplained money under section 69A. The commission from the agency activity was also to be recomputed on a 1% basis, as the higher 2% estimate was considered excessive on the facts and inconsistent with the declared commission pattern. The unexplained cash addition was deleted, and income was directed to be recalculated on the lower commission rate, giving the assessee partial relief.

---

---

Issues: (i) Whether cash deposited in specified bank notes during the demonetization period, being collections received by the assessee as a money transfer agent and subsequently remitted to the principals, could be treated as unexplained money under section 69A. (ii) Whether the commission income from the assessee's agency business should be computed at 2% of gross deposits or at 1% as reflected by the assessee's declared commission income.

Issue (i): Whether cash deposited in specified bank notes during the demonetization period, being collections received by the assessee as a money transfer agent and subsequently remitted to the principals, could be treated as unexplained money under section 69A.

Analysis: The cash deposits were supported by details showing that the assessee received amounts as a collection agent for payment service providers and transferred the same to the accounts of the respective principals. The corresponding commission income from the agency activity was accepted, and the source of the funds was thus linked to the principals rather than to unexplained assets of the assessee.

Conclusion: The addition made under section 69A was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the commission income from the assessee's agency business should be computed at 2% of gross deposits or at 1% as reflected by the assessee's declared commission income.

Analysis: The nature of the business as a commission-based money transfer agency was not doubted. However, the estimated 2% rate adopted below was held to be excessive in the facts of the case, and the assessee's declared commission pattern of 1% on gross deposits was found to be the proper basis for recomputation.

Conclusion: The matter was remitted to the Assessing Officer to apply commission at 1% on gross deposits and recompute income, resulting in partial relief to the assessee.

Final Conclusion: The disallowance relating to unexplained cash deposits was set aside, and the commission income was directed to be recomputed at a lower rate, leaving the appeal partly allowed overall.

Ratio Decidendi: Cash received and remitted in the course of an established agency business, when traceable to principals and supported by transfer details, cannot be assessed as unexplained money; commission income must be estimated on a reasonable basis consistent with the nature of the business and the evidence on record.

---