ITO,WARD-2(3), KOLKATA, KOLKATA vs. M/S. HAPPY E ZONE LTD, KOLKATA

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ITA 1301/KOL/2012Status: DisposedITAT Kolkata12 February 2016AY 2006-073 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the deletion of the addition by the CIT(A). The CIT(A) had accepted the assessee's reconciliation, supported by a revised clarification from BSNL, that the commission was in the nature of discount/rebate on sale bills.

What were the facts?

The Assessing Officer (AO) made an addition to the assessee's income on account of commission income, citing a difference between the commission disclosed and the amount reflected in TDS certificates. The assessee company is a franchisee of BSNL and involved in IT and commission agency business.

What were the issues?

Whether the difference between disclosed commission and TDS certificate amount was taxable commission or a discount/rebate on sales.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH: KOLKATA

Before: Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]

Hearing: 16.02.2016Pronounced: 16.02.2016

Per Shri Mahavir Singh, JM:

1.

This appeal by revenue is arising out of order of CIT(A)-I, Kolkata vide Appeal No. 448/CIT(A)-1/Wd-2(3)/08-09 & 957/CIT(A)-1/Wd-2(3)/11-12 dated 22.06.2012. Assessment was framed by ITO, Wd-2(3), Kolkata u/s. 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2006-07 vide his order dated 28.12.2011.

2.

At the outset, it is noticed from the order of CIT(A) that the order is a combined order for assessment framed by AO u/s. 143(3) and reassessment framed u/s. 147/143(3) of the Act. This was pointed out by Ld. Counsel for the assessee and subsequently he also drew our attention to the revised grounds filed by revenue withdrawing first ground pertaining to assessment framed u/s. 143(3) of the Act. Now only ground remains to be adjudicated is as regards to the addition made by the AO but deleted by the CIT(A) in respect to commission income of Rs.5,75,87,065/- for the reason that the assessee is able to reconcile the receipt of commission.

3.

Briefly stated facts are that the assessee company is authorized franchisee of BSNL and also engaged in the business of IT and commission agency. The AO during the course of assessment proceedings noticed that it has credited commission account by a sum of Rs.20,11,544/- but the commission received is much more than that amount. According to AO, the assessee has received commission from Super Diamond Nirman Pvt. Ltd. amounting to Rs.14,88,802/- and also reveled from TDS certificates issued by BSNL that the total commission received is at Rs.5,81,34,307/-. The following is the detail of commission received from BSNL:

Sl. Name of the Deductor Nature of Amount credited TDS made Amount of payment Rs. TDS Rs. 1. Biplab Kr. Dey, Sr. Accounts Officer Commission 4,33,88,768/- @ 0.24% 1,08,471/- (C/S), telephone Bhawan, Kolkata-

1. 1.

2. Tara Shankar Mukherjee, Sr. Accounts Commission 1,47,45,539/- @ 0.25% 36,948/- Officer (C/S II), Telephone Bhawan, Kolkata-1. Total Rs. 5,81,34,307/- 1,45,419/- Accordingly, there is difference in commission received and disclosed at Rs.5,75,87,065/- and he made addition of this to the returned income of the assessee. Aggrieved, assessee preferred appeal before CIT(A), who after taking remand report from the AO and also clarification letter issued by BSNL that the commission credited on account of assessee is to the tune of Rs.1,92,08,841/-, he deleted the addition. Aggrieved, revenue is in second appeal before Tribunal.

4.

We have heard rival submissions and gone through facts and circumstances of the case. We find that originally BSNL in its TDS certificates disclosed commission payment to assessee at Rs.5,81,34,307/- but subsequently, BSNL issued TDS certificate (revised) with a clarification letter dated 03.02.2012 stating that the total commission paid to the assessee was to the tune of Rs.1,92,08,841/-. The relevant clarification by virtue of which it was explained that correct amount of payments made by BSNL vide letter dated 03.02.2012, reads as under:

Sl. No. Name of the Deductor Amount Credited Rs. Amount of TDS Rs. 1. Rabindra Nath Mondal (Previously 44,63,302/- 1,08,471/- Biplab Kr. Dey) Sr. Account Officer (C/S), Telephone Bhawan, Kolkata-1 2. Tara Shankar Mukherjee, Sr. Account 1,47,45,539/- 36,948/- Officer (C/S-II), Telephone Bhawan, Kolkata-1. Total 1,92,08,841/- 1,45,419/- It was explained before us and all the documents were filed before AO during remand proceedings by the assessee that the above referred commission amounting to Rs.1,92,08,841/- are in the nature of discount/rebate only, which was allowed by BSNL in the sale bills and IT cards and Excel Call Cards issued respectively. He explained the procedure that BSNL are in system of raising the sale bills stating face value of their products as gross amount of sale and the gross margin allowed as commission. Ld. Counsel for the assessee drew our attention to one such sale bill wherein commission is only 10% and balance is sale price of the product. The net Happy e Zone Ltd., AY 2006-07 payable amount after adjusting the commission as referred above was paid while making purchase of BSNL products. The assessee submitted copies of these bills in its paper book which were available before the lower authorities also. In term of this reconciliation filed before us, ld. Counsel for the assessee stated that there is no discrepancy whatsoever in its accounts qua this commission and hence, according to him, CIT(A) has rightly deleted the addition. We find from the facts and circumstances that as per TDS certificate issued by BSNL and the receipts shown in the ledger account of the assessee as well as P&L Account are to the tune of Rs.44,63,302/-. The assessee’s detailed reconciliation regarding purchase debited in P&L Account are to the extent of Rs.37,09,83,965/- on net account basis including the sales made to BSNL. Accordingly, We are of the view that CIT(A) has rightly deleted the addition and there is no infirmity in the order of CIT(A) and hence, dismiss this appeal of revenue.

5.

In the result, appeal of revenue is dismissed. Order pronounced in the open court.

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