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Facts
The Revenue filed an appeal against the CIT(A)'s order concerning disallowance of commission expenses and mismatch in turnover reporting. The assessee had declared total income and claimed commission expenses, which were doubted by the AO due to lack of substantiation.
Held
The Tribunal condoned the delay in filing the appeal. For the mismatch in turnover, the issue was remitted back to the AO for reconciliation. For commission expenses, the matter was also remitted to the AO for fresh consideration due to contradictory claims and lack of documentary evidence.
Key Issues
Whether the commission expenses were genuine and sufficiently substantiated, and whether the turnover mismatch with Form 26AS requires further examination by the AO.
Sections Cited
131
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. SOUDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This appeal filed by the Revenue against the Order passed by the National Faceless Appeal Centre (NFAC), vide DIN and Order No.ITBA/APL/S/250/2024-25/1064961531(1) dated 17.05.2024, on the following grounds of appeal:
At the outset of hearing, it was noticed that the appeal filed by the Revenue is time barred by 103 days. In this regard, Shri. M. H. Hussaian, DCIT, has filed an affidavit dated 20.11.2014 and the reasons for delay in filing of appeal has been explained. After hearing the assessee and keeping in mind the principles enunciated in the case of COLLECTOR, LAND ACQUISITION v. Mst. KATIJI (1987) 167 ITR 471 (SC) we are satisfied that the appeals have to be decided on merits in the interest of justice since the delay in filing of appeals was due to reasons beyond the control of the revenue. We, therefore, condone the delay and take up the appeals for hearing.
Briefly stated, the facts of the case are that the assessee has filed return of income under section 131 of the Act on 21.01.2022 declaring total income at Rs.5,33,40,740/-. The case was taken up for scrutiny and other statutory notices were issued to the assessee. During the course of hearing of assessment proceedings, various details were called for. During the course of examination, it was noted that the assessee has paid Rs.88,93,644/- as commission to 5 parties and PAN of 4 parties were provided. In this regard, the details were called for and assessee submitted details. From the details submitted, the AO was not satisfied and he doubted the genuineness of claim of payment of commission to 5 agents for business purpose and disallowed the claim. Further, it was noticed that there is a difference in the income and TDS reported in Form .26AS as claimed by the assessee and reconciliation statement was submitted. But the AO
Aggrieved form the above Order, assessee filed appeal before the CIT(A). The details were also submitted. While deciding the mismatching reported in Form .26AS, the CIT(A) considering 6.56% of profit on differences observed by the AO and partly allowed the appeal and further in regard to commission expenditure after verifying the submissions of the assessee, the CIT(A) partly allowed appeal of the assessee.
Aggrieved from the Order of the CIT(A), Revenue filed appeal raised the above grounds.
Learned DR relied on the Order of the AO and submitted that the CIT(A) has wrongly considered the net profit whereas he ought to have confirmed the addition because the assessee was unable to reconcile the turnover declared in the books of accounts with the figures reported in Form 26AS. Further, in regard to payment of commission, assessee was unable to satisfy the genuineness of the expenditure claimed.
On the other hand, the learned Counsel for the assessee relied on the Order of the CIT(A) and submitted that earlier the assessee was carrying on business in the name of proprietorship concern and in between in impugned Assessment Year, the proprietorship was converted into company. Therefore, there was a difference in the reporting in Form 26AS by the contractee. The assessee is in the business of security services where the payments to be made to the security staff (employees) cannot be doubted. Further, in respect of the commission expenditure, everything was filed before the CIT(A) and CIT(A) after satisfying himself has allowed the payment commission.
Page 4 of 5 8. Considering the rival submissions, we noted from the Order of the CIT(A) at page No.6, the submissions of the assessee are incorporated, In the reconciliation table there is a net difference of Rs.3,70,25,605/-. However, the AO has calculated the difference in turnover of Rs.5,94,81,175/- and the Revenue authorities have not doubted that earlier the business was carried out in the capacity of proprietorship, however, it got changed during the year. During the course of hearing before us, it was brought to the knowledge of both the parties that there might be TDS deduction and reporting in Form 26AS in the capacity of proprietorship because while awarding contract works to the assessee, it was in the name of proprietorship and PAN was also given in the name of proprietorship. Therefore, there might be wrong reporting in Form 26AS and it was accepted by both the parties. In view of this, considering the facts of the case and in the interest of justice, we are remitting this issue back to the file of AO for reconciliation with the books of accounts maintained by the assessee as well as figures reported in Form 26AS.
Further, we noted that the Revenue has raised issue regarding commission paid to the agents of Rs.88,93,644/- that the facts have not been examined/considered by the CIT(A). The CIT(A) noted that the commission has been paid for introduction of new clients during the year. However, before the AO, assessee had submitted as per the agreement made with agents the payments have been made towards supply of manpower. Before the AO, there were two contradictory claims of services received by the assessee. However, the CIT(A) has considered only one fact. There is no doubt that the payments have been made and out of 5 agents some of them have filed their income tax returns. But the actual services rendered by the agents have not been proved by the assessee with the necessary documents. Therefore, considering the findings by both the authorities below, we are remitting this issue back to the file of the AO for fresh consideration. The AO is directed to provide opportunity of being heard to the
In the result, appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the court on the date mentioned on the caption page.