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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 14.11.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of rectification-order dated 23.12.2022 passed by learned ITO-Circle-4(1), Indore [“AO”] u/s 154/143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17, the assessee has filed this appeal on following grounds:
“1.The Ld. CIT(A) NFAC has erred in upholding the addition of Rs. 1,46,13,858/- as income u/s 69C of the Income Tax Act, 1961. 2.The Ld. CIT(A) NFAC failed to appreciate that the issue of notice is a mandatory requirement of law for taking action u/s 154 of the Income Tax Act, 1961 and therefore non service of the same and not giving proper Page 1 of 5 AY 2016-17 opportunity to the assessee of being heard is against the principle of natural justice. 3.The Ld. CIT(A) NFAC failed to appreciate that the present issue regarding non linking of commission with the profit and loss account would not be considered as mistake apparent on the face of record, since it requires to be established by long drawn process of reassessing on the point. 4.The Ld. CIT(A) NFAC has erred in confirming the finding of the Ld. AO that the assessee had incurred expenditure of Rs. 1,46,13,858/- out of books of accounts merely on the basis of audit report, which did not apparently disclose as to whether the commission paid to the commission agents of cultivators was debited in the books of accounts or not.
5. The lower authorities failed to accept the contention of the assessee that in his books of accounts commission had been debited to the personal account of the commission agent of the cultivators. 6.The lower authorities failed to consider that this system of accounting has been followed since past many years and the same has also been accepted by the Department. 7.The addition of Rs. 1,46,13,858/- may please be deleted and the returned income be accepted.”
The background facts leading to present appeal as culled out from orders of lower-authorities are as under:
(i) The assessee-individual is engaged in the business of commission agent for sale of banana. For AY 2016-17, the assessee filed his return of income u/s 139 declaring a total income of Rs. 2,61,83,940/- inclusive of income from commission agent activity. The case of assessee was selected for scrutiny under CASS and the AO issued notices u/s 143(2)/142(1) which were complied by assessee.
Ultimately, after necessary scrutiny, the AO accepted returned income of assessee and closed assessment vide order dated 24.12.2018.
Page 2 of 5 u/s 154 for rectification of assessment-order but the same remained unattended by assessee. Ultimately, the AO passed rectification-order dated 23.12.2022 making an addition of Rs. 1,46,13,858/- u/s 69C on account of ‘unexplained/unrecorded expense’.
(iii) Aggrieved by rectification-order, the assessee went in first-appeal.
However, the CIT(A) upheld AO’s order and dismissed assessee’s appeal without giving any relief.
(iv) Now, the assessee has come in next appeal before us.
We have heard learned Representatives of both sides and carefully perused the case record including the orders of lower authorities and the documents held in Paper-Book to which our attention has been drawn.
The issue involved and underlying facts are very limited and does not require much elaboration. The Ld. AR for assessee successfully demonstrated with reference to various documents held in Paper-Book that the AO has made impugned addition by picking a figure of Rs. 1,46,13,858/- which was reported by tax auditors in ‘Clause 34(a) of Form 3CD’ requiring the reporting of TDS deducted and paid by assessee during the year in a tabular format. In the said table, the auditors made a reporting that the assessee deducted TDS u/s 194H out of ‘Commission or brokerage” payment of Rs. 1,46,13,858/-. The AO examined assessee’s P&L A/c and did not find any figure of expenditure of Rs. 1,46,13,858/- having been debited
Page 3 of 5 the assessee has credited the revenue earned from ‘commission received’ from different constituents/clients for which the assessee worked during the year as commission agent. Ld. AR further showed from P&L A/c that there is no sale/purchase of goods credited/debited therein. Ld. AR explained the nature and manner of business carried on by assessee according to which the assessee has worked on behalf of his ‘constituents/clients’ and procured goods (i.e. banana) through ‘other agents’ for and on behalf of his ‘constituents/clients’. Therefore, the entire cost of purchase inclusive of commission/brokerage charged by ‘other agents’, have been debited to the a/c of ‘constituents/clients’ and same does not form part of assessee’s P&L A/c. However, the assessee, while making payment of commission/ brokerage to other agents, deducted TDS u/s 194H to ensure compliance of section 194H. Hence, the auditors have merely reported the relevant figures of compliance made by assessee in Form No. 3CD but the fact remains that the commission/brokerage of Rs. 1,46,13,858/- paid by assessee to other agents was not at all expenditure of assessee and hence not debited to P&L A/c. Therefore, there is nothing like ‘unexplained/unrecorded expenditure’ as understood by AO and therefore no disallowance was required to be made u/s 69C. The Ld. DR for revenue though dutifully relied upon the order of AO but, however, understood the case of assessee and left the matter to the wisdom of bench. After a careful consideration of the business/facts of assessee as explained by Ld. AR with reference to documents in Paper-Book,
Page 4 of 5 the addition made. The assessee succeeds in this appeal.
Resultantly, this appeal is allowed.