ITO, WARD - 30(4), KOLKATA, KOLKATA vs. SHRI SURESH KUMAR AGARWAL, KOLKATA

ORDER Per M.Balaganesh, AM

Suresh Kumar Agarwal A.Yr. 2004-05 3. The brief facts of this issue is that the assessee is an individual engaged in the business of clearing & forwarding agency. The assessee had filed his return of income for the Asst Year 2004-05 declaring total income of Rs 2,46,400/-. This return was processed u/s 143(1) of the Act allowing credit for TDS in the sum of Rs 1,06,328/-. The ld AO later on perusal of profit and loss account of the assessee observed that assessee had reported the following incomes:- i) C&F service charges - Rs 14,37,361/- ii) Fixed reimbursement - Rs 17,32,620/- --------------------- Rs 31,69,981/- iii) Interest on security deposit - Rs 24,000/- --------------------- Rs 31,93,981/- But as per TDS certificate filed along with the return of income, the total receipts were disclosed as under:- i) C&F service charges & Fixed reimbursement - Rs 17,32,620/- ii) Brokerage & Commission - Rs 6,41,536/- iii) Interest on security deposit - Rs 24,000/- --------------------- Rs 40,03,749/- Accordingly the ld AO observed that the difference of Rs 8,09,768/- representing income of the assessee had escaped assessment. Therefore, notice u/s 148 of the Act was issued on 12.10.2007 and duly served on the assessee. The assessee filed a reply vide letter dated 27.8.2008 stating that the return filed on 28.10.2004 may be treated as return filed in response to notice u/s 148 of the Act. During the course of re-assessment proceedings, the stated that he had received during the year reimbursement of expenses on actual basis and as the expenses which are not debited to the profit and loss account and neither credited to the profit and loss account, and as such there is no suppression of the income on the part of the assessee. With regard to interest income on security deposit, he stated that interest of Rs 48,000/- as shown in TDS certificate actually represents interest amount of two Asst Years i.e Asst Years 2003-04 and 2004-05 . 2

Suresh Kumar Agarwal A.Yr. 2004-05 Since assessee maintains accounts on mercantile basis, he has accounted for Rs 24,000/- as interest income in its accounts for the Asst Year 2003-04. The ld AO did not agree to these contentions of the assessee and proceeded to make an addition towards the differential sum of Rs 8,09,768/- in the assessment.

“5. I have considered all the facts and circumstances of this case. First of all, I would like to deal with the difference in the interest amount added by the AO. The AR has clarified that the assessee was to receive interest of Rs. 24,000/- every year from one of its principals namely, Corporate Stationery Pvt. Ltd. The assessee included this interest in his books of accounts every year on accrual basis. However, during the previous year relevant to assessment year 2004-05 the assessee received interest of Rs. 48,000/- including the interest of Rs. 24,000/- for earlier year also. The principal deducted TDS on the whole amount of Rs. 48,000/- at the time of payment of the interest. Since the interest related to the earlier year is already included in the income for assessment year 2003-04 therefore it cannot be included in the assessment year under consideration. On this issue I agree with the submission of the AR. Since, interest of Rs. 24,000/- has already been shown on accrual basis it cannot be added again on receipt basis. Therefore, this addition is deleted.

As regards the difference of Rs. 7,85,768/- added on account of difference in reimbursement expenses. I find that the assessee has submitted a lot of documents to explain the expenses which were reimbursed to him by Heinz India Pvt. Ltd. The assessee has also furnished a certificate from Heinz India Pvt. Ltd. in which it is mentioned that they have deducted TDS on all the expenses reimbursed to the assessee including the variable expenses reimbursed on actual basis. From the details furnished by the assessee it is seen that for the previous year under consideration the assessee was to receive following amount from Heinz India Pvt. Ltd.

(i) Fixed remuneration Rs. 17,32,620/- (ii) Actual expenses to be reimbursed Rs. 7,37,675/- (iii) Variable Commission Rs. 6,49,552/-

The entries at no. (i) and (iii) have been reflected in the profit and loss account of the assessee. The entry no. (ii) is related to various expenses which were incurred on behalf of Heinz India and which were reimbursed by this company on submission of bills and 3

Suresh Kumar Agarwal A.Yr. 2004-05 vouchers by the assessee. The assessee has produced the details of these expenses. Heinz India has confirmed that they deducted TDS on all the amounts paid to the assessee including the reimbursement of expenses. Thus the amount of Rs. 7,37,675/- got reflected in the TDS certificate but it did not come in the profit and loss account as the assessee did not treat it as his receipt or expenses. I feel that there is nothing wrong in this approach as this amount is actually not assessee’s expenses but of the principal i.e. Heinz India. The remaining amount of Rs. 48,092/- is also similar in nature but related to earlier year 2002-03. In view of the above I feel that the difference of Rs. 7,85,768/- between the TDS certificate receipts and the receipts shown in the profit and loss account is also satisfactorily explained. Hence, I delete the addition of Rs. 8,09,768/- made by the Assessing Officer.”

1. That the Ld. CIT(A) erred in fact and law in deleting the addition of Rs. 8,09,768/- as the TDS certificates revealed that the total amount received by the assessee on account of interest on security, C & F charges and Fixed reimbursement during the relevant year was Rs. 40,03,749/- as against Rs. 31,93,981/- disclosed by the assessee in his accounts.

2. That the order of the Ld. CIT(A) is perverse on law and fact as it has presumed that the assessee had spent an amount of Rs. 7,85,768/- on behalf of Heinz India Pvt. Ltd. which has not been debited to the profit and loss account, by simply relying on the version of the assessee which was neither been backed by document as evidence nor by any entry in the books of accounts.

3. That the Ld. CIT(A) erred in fact and law in deleting the addition of Rs. 7,85,868/- by holding that the same need not be treated as receipt on the ground that it has not been debited as expenses in profit and loss account is not based on any recognized principles of accounting and does not reflect the true state of affairs of the business.

6.1. With regard to the remaining addition of Rs 7,85,768/- , the assessee had duly furnished various evidences to prove that these were mere reimbursement claimed by the assessee from M/s Heinz India Pvt Ltd in respect of expenses incurred in the capacity of C&F agent for and on behalf of the assessee. There was no profit element involved in the said reimbursement and the same were paid by Heinz India Pvt Ltd on actual basis subject to production of necessary evidences by the assessee. Admittedly these evidences were produced by the assessee before the authorities below which fact has been verified and acknowledged by the ld CITA in page 6 of his order. The assessee also furnished a certificate from M/s Heinz India Pvt Ltd wherein they mentioned that they had deducted tax at source on the reimbursement portion also along with other payments made to the assessee. It is the case of the assessee, that he has to receive a sum of Rs 48,092.38 as opening balance towards reimbursement of expenses from M/s Heinz India Pvt Ltd and further sum of Rs 7,37,675/- for the financial year 2003-04 being the actual expenses incurred by the assessee for and on behalf of M/s Heinz India Pvt Ltd. The said transactions were kept in separate ledger account in the name of M/s Heinz India Pvt Ltd in the asset side of the balance sheet by the assessee and the amounts as and when received towards reimbursement , were credited to the said asset account. Hence it had not been reflected in the profit and loss account of the assessee. But since the party had deducted tax at source on all payments made to the assessee including the reimbursement portion, there is bound to be difference between the receipts reported in TDS certificate and that reported in the profit and loss account. We hold that the difference had been satisfactorily explained by the assessee with cogent 5

Suresh Kumar Agarwal A.Yr. 2004-05 evidences enclosed in the paper book. We find that the ld CITA had rightly appreciated these evidences and deleted the addition and we do not find any infirmity in the said order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed.

Order pronounced in the Court on 19.02.2018