R.CHANDRASEKAR,CHENNAI vs. ITO, CHENNAI

The assessee has filed this appeal challenging the order dated 24.3.2014 passed by ld CIT(Appeals)-V, Chennai confirming the addition of `14,40,130/- made by the Assessing Officer for AY 2007-08. is franchisee of Reliance Retail Limited. The assessee declared gross commission income of `7,78,825/-. The Assessing Officer noticed from the TDS certificates that the Reliance Retail Limited has deducted tax at source on an amount of `22,18,955/- Though the assessee explained that the difference represents ‘reimbursement of expenses’, yet the same did not find favour with the Assessing Officer. The Assessing Officer took the view that the assessee has failed to disclose the difference amount of `14,40,130/- as his income in the Profit and Loss account and accordingly assessed the same. The Ld CIT(Appeals) also confirmed the said addition.

Before us, the Ld A.R submitted that the assessee has accounted for all the expenses in the books of account and has shown the same as Balance Sheet item. Accordingly he submitted that the Assessing Officer was not right in insisting that the same should have been routed through the Profit and Loss account. He submitted that the assessing officer, in the alternative, should have allowed corresponding expenses as deduction, if the gross receipts was taken at `22.18 lakhs. Accordingly, he prayed that the matter may be restored to the file of the assessing officer for considering the issue afresh.

On the contrary, the Ld D.R placed strong reliance on the order passed by Ld CIT(Appeals).

Having heard the rival contentions, we are of the view that there is merit in the submissions made by Ld A.R. If the receipts covered by the TDS certificates are taken as the gross income of the assessee, then the corresponding expenditure is required to be allowed as deduction, of course, subject to verification. Besides the above, it is the contention of the assessee that he has taken the ‘reimbursements’ as a Balance Sheet item. We have noticed that the Assessing Officer has rejected the claim of the assessee only on the reasoning that the reimbursements were not routed through the Profit and Loss account, but failed to allow deduction of corresponding expenditure. Under these set of facts, we are of the view that this issue requires fresh examination at the end of the Assessing Officer. Accordingly, we set aside the order of Ld CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer with the direction to examine the same afresh in the light of discussions made supra.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.