DCIT, MYSORE V. SHARPWATCH INVESTIGATION SECURITY SERVICES PVT LTD, MYSORE

ITA 2156/BANG/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A), which partly allowed the assessee's appeal regarding discrepancies in income reporting and commission payments. The Revenue contended that the CIT(A) erred in considering net profit instead of confirming the addition due to unmatched turnover figures reported in Form 26AS and the books of accounts. Additionally, the genuineness of commission payments totaling Rs.88,93,644 to five agents was questioned. The Tribunal found merit in revisiting these issues and remitted the case back to the AO for detailed examination and reconciliation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 43511 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2021-2022
• Other Referred Cases: COLLECTOR, LAND ACQUISITION v. Mst. KATIJI (1987) 167 ITR 471 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAVISHANKAR S.V
• Keywords: Opportunity of being heard; TDS; FORM 26AS
• Section: 131

Judgement Text

"IN INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI. LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI. SOUDARARAJAN K, JUDICIAL MEMBER ITA No.2156/Bang/2024 Assessment Year : 2021-22 DCIT, Circle –1(1), Mysore. Vs. M/s. Sharpwatch Investigation Security Services Pvt. Ltd., No.71, 5th Main, 8th Cross, Saraswathipuram, Mysore – 570 009. PAN :ABECS 0521 J APPELLANT RESPONDENT Assessee by : Shri. Ravi Shankar S. V, Advocate Revenue by : Shri. E. Sridhar, CIT(DR)(ITAT), Bangalore. Date of hearing : 27.01.2025 Date of Pronouncement : 31.01.2025 ORDER Per Laxmi Prasad Sahu, Accountant Member : This appeal filed by the Revenue against the Order passed by the National Faceless Appeal Centre (NFAC), vide DIN and Order No.ITBA/APL/S/250/2024-25/1064961531(1) dated 17.05.2024, on the following grounds of appeal: ITA No.2156/Bang/2024 Page 2 of 5 2. At the outset of hearing, it was noticed that the appeal filed by the Revenue is time barred by 103 days. In this regard, Shri. M. H. Hussaian, DCIT, has filed an affidavit dated 20.11.2014 and the reasons for delay in filing of appeal has been explained. After hearing the assessee and keeping in mind the principles enunciated in the case of COLLECTOR, LAND ACQUISITION v. Mst. KATIJI (1987) 167 ITR 471 (SC) we are satisfied that the appeals have to be decided on merits in the interest of justice since the delay in filing of appeals was due to reasons beyond the control of the revenue. We, therefore, condone the delay and take up the appeals for hearing. 3. Briefly stated, the facts of the case are that the assessee has filed return of income under section 131 of the Act on 21.01.2022 declaring total income at Rs.5,33,40,740/-. The case was taken up for scrutiny and other statutory notices were issued to the assessee. During the course of hearing of assessment proceedings, various details were called for. During the course of examination, it was noted that the assessee has paid Rs.88,93,644/- as commission to 5 parties and PAN of 4 parties were provided. In this regard, the details were called for and assessee submitted details. From the details submitted, the AO was not satisfied and he doubted the genuineness of claim of payment of commission to 5 agents for business purpose and disallowed the claim. Further, it was noticed that there is a difference in the income and TDS reported in Form .26AS as claimed by the assessee and reconciliation statement was submitted. But the AO ITA No.2156/Bang/2024 Page 3 of 5 did not accept that there is mismatching with the Form 26AS and TDS claimed and the total variation was noted as per Form 26AS is Rs.5,94,81,175/-. 4. Aggrieved form the above Order, assessee filed appeal before the CIT(A). The details were also submitted. While deciding the mismatching reported in Form .26AS, the CIT(A) considering 6.56% of profit on differences observed by the AO and partly allowed the appeal and further in regard to commission expenditure after verifying the submissions of the assessee, the CIT(A) partly allowed appeal of the assessee. 5. Aggrieved from the Order of the CIT(A), Revenue filed appeal raised the above grounds. 6. Learned DR relied on the Order of the AO and submitted that the CIT(A) has wrongly considered the net profit whereas he ought to have confirmed the addition because the assessee was unable to reconcile the turnover declared in the books of accounts with the figures reported in Form 26AS. Further, in regard to payment of commission, assessee was unable to satisfy the genuineness of the expenditure claimed. 7. On the other hand, the learned Counsel for the assessee relied on the Order of the CIT(A) and submitted that earlier the assessee was carrying on business in the name of proprietorship concern and in between in impugned Assessment Year, the proprietorship was converted into company. Therefore, there was a difference in the reporting in Form 26AS by the contractee. The assessee is in the business of security services where the payments to be made to the security staff (employees) cannot be doubted. Further, in respect of the commission expenditure, everything was filed before the CIT(A) and CIT(A) after satisfying himself has allowed the payment commission. ITA No.2156/Bang/2024 Page 4 of 5 8. Considering the rival submissions, we noted from the Order of the CIT(A) at page No.6, the submissions of the assessee are incorporated, In the reconciliation table there is a net difference of Rs.3,70,25,605/-. However, the AO has calculated the difference in turnover of Rs.5,94,81,175/- and the Revenue authorities have not doubted that earlier the business was carried out in the capacity of proprietorship, however, it got changed during the year. During the course of hearing before us, it was brought to the knowledge of both the parties that there might be TDS deduction and reporting in Form 26AS in the capacity of proprietorship because while awarding contract works to the assessee, it was in the name of proprietorship and PAN was also given in the name of proprietorship. Therefore, there might be wrong reporting in Form 26AS and it was accepted by both the parties. In view of this, considering the facts of the case and in the interest of justice, we are remitting this issue back to the file of AO for reconciliation with the books of accounts maintained by the assessee as well as figures reported in Form 26AS. 9. Further, we noted that the Revenue has raised issue regarding commission paid to the agents of Rs.88,93,644/- that the facts have not been examined/considered by the CIT(A). The CIT(A) noted that the commission has been paid for introduction of new clients during the year. However, before the AO, assessee had submitted as per the agreement made with agents the payments have been made towards supply of manpower. Before the AO, there were two contradictory claims of services received by the assessee. However, the CIT(A) has considered only one fact. There is no doubt that the payments have been made and out of 5 agents some of them have filed their income tax returns. But the actual services rendered by the agents have not been proved by the assessee with the necessary documents. Therefore, considering the findings by both the authorities below, we are remitting this issue back to the file of the AO for fresh consideration. The AO is directed to provide opportunity of being heard to the ITA No.2156/Bang/2024 Page 5 of 5 assessee and assessee is directed to produce necessary documents as required by the Revenue for speedy disposal of the appeal. 10. In the result, appeal filed by the assessee is allowed for statistical purposes. Pronounced in the court on the date mentioned on the caption page. Sd/- Sd/- (SOUNDARARAJAN K) (LAXMI PRASAD SAHU) Judicial Member Accountant Member Bangalore, Dated : 31.01.2025. /NS/* Copy to: 1. Appellant 2. Respondent 3. Pr.CIT 4.CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "