Insurance Agent deposited cash received from clients in his bank accounts to make the payment of premiums of client: Validity of Addition under section 69A
Short Overview When all the corroborative evidences were clearly suggestive of the fact that assessee had simply acted as a facilitator to make payment on behalf of policy holders and where each entry was traceable and identifiable, addition could not be made in the hands of assessee.
Assessee was Senior Territory Manager who had worked for first ten months of the year with M/s Reliance Life Insurance Co. Ltd. and two months thereafter with M/s Bajaj Alliance Life Insurance Co. Ltd. As per AIR information available with AO, assessee had two bank accounts in which cash of Rs. 26 lakhs and Rs. 1 lakh was deposited during the year. Necessary details of cash deposits in these accounts were called for by AO and confronted to assessee so as to know the source of these cash deposits because as per claim of assessee his main source of income was salary which was not sufficient enough to explain these deposits. Assessee explained that he collected these amounts from investors and provided facility to make investment in various investment plans of M/s Reliance Life Insurance Co. Ltd. As investors were non-residents, so their confirmation in regard to the deposits could not be collected and filed within short time given by AO. Further, it was also submitted that between him and the investors there were mediators, i.e., sub-agents who facilitated to fetch more business and collect the amount from investors for further investment. As assessee could not produce the confirmation from respective persons and also could not produce them in person, AO treated amount of cash deposits as unexplained under section 69A.
It is held that Assessee submitted a plethora of documents to prove genuineness of the transactions. He was a salaried employee and it was not possible for him to maintain full Accounts Department for his small business and clients. It was duty of assessee to contact various groups of clients along with his sub -agents and to convince them to buy insurance policies and to provide them pre-insurance stage services and post-insurance stage services like collecting information, filling the forms, getting documentary evidences and forwarding same to the company, getting medical clearance certificate, collecting premium from them and making payments thereof and to supply them their policies along with premium receipts after the insurance is taken and transaction was completed. Assessee had not deposited his own fund in the impugned bank accounts but he had deposited amount received from his clients to facilitate payment of premiums to insurance company. Insurance premium paid from said bank accounts was not unaccounted receipt or income of assessee but said deposits were clearly identifiable amount attributable to the premium of his clients. Assessee had given detailed explanation of each deposits and provided sufficient details and evidences to suggest that impugned deposits were not in the nature of income of assessee. The evidences like insurance premium receipts of different persons along with corresponding deposited amount in the bank account clearly established nexus of source of deposits and their subsequent outflow in form of insurance premium. When all the corroborative evidences were clearly suggestive of the fact that assessee had simply acted as a facilitator to make payment on behalf of policy holders and where each entry was traceable and identifiable, addition could not be made in the hands of assessee.
Decision: In assessee s favour.
IN THE ITAT, SURAT BENCH
PAWAN SINGH, J.M. & A.L. SAINI, A.M.
Ashish Natvarlal Vashi v. ITO
ITA Nos. 2744 & 1403/Ahd/2015 & ITA No. 2219/Ahd/2016
11 May, 2021
Assessee by: Rasesh Shah, CA
Revenue by: Anupama Singla, Sr. DR