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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri N.V.Vasusdevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-VIII, Kolkata in appeal No.319/CIT(A)-VIII/Kol/11-12 dated 18.12.2012. Assessment was framed by ITO Ward-7(2), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.12.2011 for assessment year 2009-10. Revenue has raised sole issue, which is reproduced below:- “1. That the Ld. C.I.T.(Appeals)-VIII, Kolkata has erred in facts in deleting the addition made by the A.O of the commission income that is the difference in its commission income details as shown in the P & L A/c and as per details in form No. 26 as an amount of Rs.1,05,63,109 – 26,80,206 that is ITO Wd-7(2), Kol. v. M/s Quartro Travel & Cargo Pvt. Ltd. Page 2 Rs.78,82,903, and also the AR of the assessee, during the course of scrutiny proceedings, could not submit any clarification by which the claim of the assessee could be substantiate, after giving several opportunity for reconciliation.”
Issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for an amount of ₹78,82,903/- on account of understatement of commission income.
2.1 Facts in brief, are that assessee in the present appeal is a Private Limited Company and engaged in business of Custom House Agent (Cargo & Travel). During the year under consideration, assessee declared following income from the source of commission:- a) commission of ₹26,80,206/- b) commission income again airlines of ₹50,96,167/- c) sales promotion of ₹11,81,143/- d) service charges of ₹32,61,504/- During the course of assessment proceedings, AO found that as per the Form 26 AS the commission income should have been to ₹1,05,64,109/- on which the TDS has been deducted u/s 194H of the Act. However, assessee has declared the commission income to ₹26,80,206/- as per profit and loss account so there arises the difference of ₹78,82,903/- which has been understated by assessee. Accordingly, AO called upon assessee for explanation. In compliance to the notice thereto assessee submitted that entire income stated above is from the source of commission only but the same has been shown under different category. The total commission income shown in the return is of ₹1,22,19,021/-. So the question of understatement of income does not arise. However, AO disregarded the claim of assessee by observing that the assessee failed to produce party-wise reconciliation of the discrepancy noted in its commission income and also failed to substantiate its claim by producing supporting documents: like bills, vouchers, party-wise ITO Wd-7(2), Kol. v. M/s Quartro Travel & Cargo Pvt. Ltd. Page 3 ledger to prove that such commission income has been included under different category of commission income as stated aforesaid.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that commission income of ₹1,22,19,021/- has been duly declared in its return under different category such as airlines commission, sales promotion and service charge, which were shown in Schedule-II of profit and loss account but same was not considered by AO while framing assessment order. Accordingly, Ld. CIT(A) deleted the addition made by AO by observing as under:- “5.1 Ground No. 1 & 2: These grounds of appeal of the appellant are directed against the action of the AO in not appreciating that Total Receipts as for TDS certificates were not commission only it was for Commission (Airlines), Commission Sales promotion and Service Charges also and not considering the Schedule-II forming part of Profit & Loss A/c and the Tax Audit Report duly audited by a Chartered Accountant. It is submitted that the appellant is a Limited Company. Its business is that of Customs House Agent (Cargo & Travel). As regards the alleged shortfall of Commission as per TDS Certificates, it is contended that the appellant received as per profit & loss A/c an amount of Rs.1,22,19,021/- as Air Lines Commission, Commission, Sales Promotion Charges and Service Charges from different parties from which Tax of Rs.9,82,601/- was deducted at source (vide annexed chart and schedule—II of Profit & Loss A/c.) Whereas as per TDS Certificates the amount from which Tax was deducted was Rs.1,05,56,132/-. So there was no shortfall. However, it is stated that the ITO surmised that tax was deducted from commission only which is not correct. Tax was deducted not only from commission but also from others receipts stated above. The A/R of the appellant explained that the appellant declared total receipt of Rs.1,22,19,021/- as per Profit & Loss A/c, as shown in the annexed chart and also at page 3 of the assessment order but as per TDS certificates it was Rs.1,05,56,132/- Therefore, it is argued that the receipts shown was excess and not shortfall as alleged by the AO. The reason of difference is that some of the receipts were of lesser amounts which was not liable to TDS. In support of this contention, the AR furnished a detail chart showing the total receipts amounting to Rs.1,22,19,021/- as Air Lines Commission, Commission, Sales Promotion Charges and Service Charges from different parties from which Tax of Rs.9,82,601/- was deducted at source. Accordingly, it is urged that the alleged shortfall of Rs.78,82,903/- is liable to be deleted as the figure as per TDS certificates was less than receipts declared.
ITO Wd-7(2), Kol. v. M/s Quartro Travel & Cargo Pvt. Ltd. Page 4 I have carefully considered the submission of the appellant along with the supporting details furnished, perused the facts of the case including the contention of the AO and other materials brought on record. I find substantial force in the argument put forth by the appellant. I agree with the contention of the appellant that the AO has partly considered the deducted tax from commission only which is not correct as the Tax was deducted not only from commission but also from others receipts e.g. Air Lines Commission, Commission, Sales promotion Charges and Service Charges from different parties. I find that the appellant declared total receipt of Rs.1,22,19,021/- as per Profit & Loss A/c, as shown in the annexed chart and also at page 3 of the assessment order but as per TDS certificates it was Rs.1,05,56,132/-. Therefore, it is seen that the receipts shown by the appellant was excess and not shortfall as alleged by the AO. In the light of the above discussion and observation and after considering the entire facts of the case, it is held that the AO was not justified in making the addition on account of alleged shortfall of Commission as per TDS Certificates and therefore the same is hereby directed to be deleted.”
Being aggrieved by this order of Ld. CIT(A) Revenue came in second appeal before us. Shri K.M. Roy, Ld. Authorized Representative appearing on behalf of assessee and Shri Niloy Barana Som, Ld. Departmental Representative appearing on behalf of Department.
We have heard rival contentions of both parties and perused the materials available on record. Before us Ld. DR submitted that no party-wise reconciliation was filed at the time of assessment to justify the commission income that it has not been suppressed. Besides no supporting evidence as desired by the AO in support of its commission income was submitted at the time of assessment. The ld. DR vehemently relied on the order of AO. On the other hand, Ld. AR relied on the order of Ld. CIT(A) and contradicted the argument raised by Ld. DR. The ld. AR submitted that party-wise reconciliation was submitted at the time of assessment as evident from the submission recorded in AO's order.
4.1 From the aforesaid discussion, we understand that assessee is acting as Custom House Agent and its main income is from the source of ITO Wd-7(2), Kol. v. M/s Quartro Travel & Cargo Pvt. Ltd. Page 5 commission. The assessee has bifurcated its commission income into various category and it was presented in the same category in the schedule of profit and loss account. The categories of commission income are sales promotion, commission from airlines and service charges. We find that while framing the assessment the AO observed that commission income is only of ₹26,80,206/- and as per Form 26AS gross commission received should be ₹1,05,63,109/-. Accordingly, AO opined that there is a difference of ₹78,82,903/- which has not been disclosed by assessee in its returned income. As a result the income of assessee has been understated. However, we find from the submission of assessee that the commission income declared by assessee is of ₹1,22,19,021/- which is from the source of commission only. The assessee has also submitted the breakup/ reconciliation of commission income at the time of assessment which is evident as under : “As per verification of our Books of Accounts for the said Financial Year, it is noticed that major part difference of Rs.50.96 lacks had included in ‘FREIGHT ON CARGO’& DUE CARRIER CHARGES’ [Other Heads of Income Group] as per Sch-11 of AUDIDTED FINANCIAL STATEMENT OF P/L A/C, some other parts were shown separately under “SALES PROMOTION” Head having Rs.11.81 Lacks & Rs.32.62 lacks under ‘SERVICE CHARGES’ HEAD. So the total Commission Income’ after accumulating all four come to Rs.122.19 Lacks [Rs.(26.80 + 50.96 + 11.81 + 32.62)] & so far as ACCOUNTING POINT of view the PROFIT would remain same & only a compensating error is occurred in the said Financial Accounts. For your ready reference, one RECONCILIATON STATEMENT & necessary Ledgers, Schedules & other allied documents are attached herewith.” The reconciliation statement submitted by the assessee is as under: RECONCILIATION OF COMMISSION INCOME WITH FREIGHT ON CARGO AS AT 31/03/2009 FREIGHT ON CARGO AS PER SCH -11 46,207,720.72 REVISED FREIGHT ON CARGO (41,132,789.40) DIFFERENCE [A] 5,074,931.32 DUE CARRIER CHARGES AS PER SCH-11 21,891,264.15 REVISED DUE CARRIER/AIRLINES CHARGES (21,870,028.00) DIFFERENCE [B] 21,236.15 COMMISSION INCOME [AIR LINES] REVIWSED [A+B] TOTAL 5,096,167.47 U/S. 194H COVER THE FOLLOWING HEADS OF INCOME AS PER P/L 1] COMMISSION INCOME 2,680,206.05 2] COMMISSION INCOME AIRLINES] 5,096,167.47 3] SALES PROMOTION 1,181,143,93 4] SERVICE CHARGES [PART] 3,261,504,00 TOTAL 12,219,021.45 ITO Wd-7(2), Kol. v. M/s Quartro Travel & Cargo Pvt. Ltd. Page 6 We also find that as per the observation of AO, the income of assessee earned from commission should be at ₹1,05,63,109/- but in actuality assessee has declared commission income of Rs. i.e., ₹1,22,19,021/- which is more than the observation of the AO. From the above facts and circumstances of the case, we understand that it is not the case where income has been understated therefore we uphold the order of Ld. CIT(A). Hence this ground of appeal of the Revenue accordingly dismissed.