MADHAVI R PAWAR,MUMBAI vs. ITO 21(3)(3), MUMBAI

O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the CIT(A)-38, Mumbai dated 16-01-2017 and it pertains to AY 2011-12. The assessee has raised the following grounds of appeal:-

“1. The learned assessing officer erred on the facts & in the circumstances of the case in making addition of Rs.47,82,316/- to the total income oi'lhe appellant disregarding the facts of the case. 2. The learned assessing officer erred on the facts & in circumstances of the case in making additions to the total income merely on the basis of form 26 AS disregarding the submissions of the appellant without giving any cogent reasons.

2 ITA 3070/Mum/2017

3 ITA 3070/Mum/2017

3. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee submitted that the AO was erred in making addition towards commission based on form 26AS ignoring the fact that the assessee has accounted commission received from the supplier and reduced the same from purchase account because the assessee has considered commission received from the supplier as trade discounts which is necessarily to be deducted from the purchase account. The assessee further submitted that the supplier, M/s Videocon Telecommunications Ltd has issued a confirmation letter as per which total commission paid for the relevant year is Rs.36,95,261 even though the amount appeared in form 26AS is more. In this regard necessary reconciliation between books of account and form 26AS has been filed alongwith supporting evidences. Insofar as adhoc disallowance of expenses, the assessee has submitted that without making any adverse comments on books of account and supporting evidence, no adhoc disallowance could be made when the assessee has filed complete documents in respect of expenses and also explained the relevance of expenditure incurred under various heads. The Ld.CIT(A), after considering relevant submissions of the assessee and also taking note of confirmation letter filed by the supplier, allowed partial relief to the assessee to the extent of Rs.7,05,912 and confirmed balance amount of Rs.36,95,261 on the ground that the 4 ITA 3070/Mum/2017 assessee has failed to file necessary details to prove that commission received from M/s Videocon Telecommunications Ltd is accounted in the books of account. The assessee has not reconciled the amount of commission reflected in form 26AS in her books of account. In absence of any reconciliation between books of account and form 26AS, the benefit of doubt cannot be given to the assessee that the assessee has considered commission in her books of account merely on the basis of book entries and ledger extracts.

Similarly, as regards adhoc disallowance of expenses, the Ld. CIT(A) observed that the AO has made a categorical observation about non filing of proper supporting evidences to justify expenses claimed under various heads. The Ld.CIT(A) further observed that admittedly sum of expenses are not fully verifiable for want of third party vouchers and accordingly, there is no reason to interfere with the finding of the AO to disallow 10% adhoc disallowance claimed under various expenses. Aggrieved by the order of CIT(A) , the assessee is in appeal before us.

4. The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in confirming the addition made by the AO towards commission receipts from M/s Videocon Telecommunications Ltd in spite of assessee furnishing complete details of commission receipts and also filed reconciliation between form 26AS and books of account. The Ld.AR further submitted that though amounts

5 ITA 3070/Mum/2017 appear in form 26AS is higher than the amount of actual commission received from the supplier, but the assessee has filed a confirmation letter from the parties where they have submitted that total commission payment in form of trade discount for the year under consideration is Rs.36,95,261 for which necessary details has been filed before the lower authorities. The Ld.AR further submitted that the assessee has filed complete set of books of account, filed financial statements and also explained the manner in which such trade discount has been accounted for in the books of account. The AO as well as the Ld.CIT(A) disregarded all evidences filed by the assessee and made addition only on the basis of form 26AS even though the assessee has filed a reconciliation statement explaining the purchase amount debited in the P&L Account which includes commission (trade discount) received from M/s

6 ITA 3070/Mum/2017 data base. The AO has made addition towards commission received from M/s Videocon Telecommunications Ltd on the basis of form 26AS where the amount of commission payment to assessee for sale of SIM cards and re- charge coupons is appearing in form 26AS because of deduction of tax at source on such commission payment. The assessee claims that she has accounted commission (trade discount) in its books of account as per the debit notes issued by the supplier and such commission has been reduced from the purchase account because she has treated commission receipts from the party as trade discount and such trade discount has been necessarily reduced from the purchase account. The assessee has filed complete set of financial statements alongwith ledger extract of purchase for the year. The assessee has also filed confirmation letter issued by M/s Videocon Telecommunications Ltd. We have gone through various details filed by the assessee and found that the assessee has reduced commission (trade discount) received from M/s Videocon Telecommunications Ltd from purchase account. In order to reconcile the purchase, the assessee has filed a reconciliation statement before the lower authorities as per which the total purchases from M/s Videocon Telecommunications Ltd is matched with purchases debited in the P&L Account after reducing trade discount received from the party. We further notice that the assessee has filed all those evidences before lower

7 ITA 3070/Mum/2017 authorities. But, the AO as well as the Ld.CIT(A) disregarded all evidences filed by the assessee and made additions only on the basis of form 26AS on the ground that the commission received from the party has not been accounted for in the books of account. No doubt, the assessee is required to show each item of income and expenditure which is material in nature, separately in her financial statement and disclose necessary details, in its notes to account. But, when the assessee has followed an inclusive method of accounting and reduced commission (trade discount) from its purchases and also explained such method of account to the income-tax authorities by filing necessary reconciliation statement, then there is no reason for the AO to doubt the method of accounting followed by the assessee to account commission receipt in her books of account merely on the basis of form 26AS. Form 26AS is a basis for reconciling income tax deducted to the books of account of the assessee.

When the assessee is able to explain and also reconciles the amount appearing in form 26AS in her books of account and also files necessary supporting evidence, then there is no reason for the AO to make addition only on the basis of form 26AS. In this case, we find that there is no error in the books of account of the assessee insofar as accounting commission receipt from M/s Videocon Telecommunications Ltd. Therefore, we are of the considered view that the AO as well as the Ld.CIT(A) have erred in making addition towards

8 ITA 3070/Mum/2017 commission. Hence, we direct the AO to delete addition made towards commission on the basis of form 26AS.

Order pronounced in the open court on 15-05-2019.