MADHAVI R PAWAR, MUMBAI V. ITO 21(3)(3), MUMBAI

ITA 3070/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5412 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: N B CHAVAN
• Keywords: Corroborative evidences
• Section: 143(3); 142(1)

Judgement Text

1 ITA 3070/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO.3070/MUM/2017 (ASSESSMENT YEAR : 2011-12) MADHAVI R PAWAR 13A-307, SHREE RAMDARSHAN CHS LTD, MHADA COLONY, CHANDIVALI, MUMBAI-72 PAN : ASFPP5473K VS ITO, WD.21(3)(3), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI N.B. CHAVAN RESPONDENT BY SHRI D.G. PANSARI DATE OF HEARING 02-05-2019 DATE OF PRONOUNCEMENT 15-05-2019 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-38, MUMBAI DATED 16-01-2017 AND IT PERTAINS TO AY 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED ASSESSING OFFICER ERRED ON THE FA CTS & IN THE CIRCUMSTANCES OF THE CASE IN MAKING ADDITION OF RS.47,82,316/- TO THE TO TAL INCOME OI'LHE APPELLANT DISREGARDING THE FACTS OF THE CASE. 2. THE LEARNED ASSESSING OFFICER ERRED ON THE FAC TS & IN CIRCUMSTANCES OF THE CASE IN MAKING ADDITIONS TO THE TOTAL INCOME MERELY ON THE BASIS OF FORM 26 AS DISREGARDING THE SUBMISSIONS OF THE APPELLANT WITHOUT GIVING ANY COGENT REASONS. 2 ITA 3070/MUM/2017 3. THE LEARNED ASSESSING OFFICER FAILED TO APPRE CIATE THAT THE APPELLANT HAS CONSIDERED THE COMMISSION INCOME IN THE TOTAL INCOM E BY WAY OF REDUCTION IN EXPENDITURE UNDER THE NAME 'TRADE DISCOUNT' 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN PARTLY ALLOWING THE APPEAL OF THE APPELLANT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND PROPRIETRIX OF M/S SHREE ENTERPRISES, ENGAGED IN TH E BUSINESS OF TRADING IN MOBILE RECHARGES AND SIM CARDS EXCLUSIVELY FOR VIDE OCON. THE ASSESSEE HAS FILED HER RETURN OF INCOME FOR AY 2011-12 ON 30-09- 2011 DECLARING INCOME OF RS.14,62,050. THE CASE WAS SELECTED FOR SCRUTINY U NDER CASS AND STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUE D. IN RESPONSE TO NOTICE, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEA RED FROM TIME TO TIME AND FILED VARIOUS DETAILS, AS CALLED FOR. THE ASSESSME NT HAS BEEN COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961 DETERMINING THE TOTAL INCOME AT RS.64,00,980 BY MAKING ADDITION TOWARDS DISALLOWANC E OF COMMISSION ON THE GROUND THAT ALTHOUGH THE ASSESSEE HAS RECEIVED COMM ISSION FROM M/S VIDEOCON TELECOMMUNICATIONS LTD, FAILED TO CONSIDER SUCH COMMISSION IN ITS BOOKS OF ACCOUNT. THE AO ALSO MADE ADHOC DISALLOWA NCE OF EXPENSES CLAIMED UNDER THE HEAD TRAVELLING AND CONVEYANCE, BUSINESS PROMOTION, SUNDRY EXPENSES AND STAFF WELFARE EXPENSES ON THE GROUND T HAT ASSESSEE HAS FAILED TO FURNISH COMPLETE DETAILS OF EXPENSES AND ALSO HOW E XPENSES IS COMMENSURATE WITH ITS BUSINESS TURNOVER FOR THE YEAR UNDER CONSI DERATION. 3 ITA 3070/MUM/2017 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMIT TED THAT THE AO WAS ERRED IN MAKING ADDITION TOWARDS COMMISSION BASED ON FORM 26 AS IGNORING THE FACT THAT THE ASSESSEE HAS ACCOUNTED COMMISSION RECEIVED FROM THE SUPPLIER AND REDUCED THE SAME FROM PURCHASE ACCOUNT BECAUSE THE ASSESSEE HAS CONSIDERED COMMISSION RECEIVED FROM THE SUPPLIER AS TRADE DISC OUNTS WHICH IS NECESSARILY TO BE DEDUCTED FROM THE PURCHASE ACCOUNT. THE ASSE SSEE FURTHER SUBMITTED THAT THE SUPPLIER, M/S VIDEOCON TELECOMMUNICATIONS LTD HAS ISSUED A CONFIRMATION LETTER AS PER WHICH TOTAL COMMISSION P AID FOR THE RELEVANT YEAR IS RS.36,95,261 EVEN THOUGH THE AMOUNT APPEARED IN FOR M 26AS IS MORE. IN THIS REGARD NECESSARY RECONCILIATION BETWEEN BOOKS OF AC COUNT AND FORM 26AS HAS BEEN FILED ALONGWITH SUPPORTING EVIDENCES. INSOFAR AS ADHOC DISALLOWANCE OF EXPENSES, THE ASSESSEE HAS SUBMITTED THAT WITHOUT M AKING ANY ADVERSE COMMENTS ON BOOKS OF ACCOUNT AND SUPPORTING EVIDENC E, NO ADHOC DISALLOWANCE COULD BE MADE WHEN THE ASSESSEE HAS FI LED COMPLETE DOCUMENTS IN RESPECT OF EXPENSES AND ALSO EXPLAINED THE RELEV ANCE OF EXPENDITURE INCURRED UNDER VARIOUS HEADS. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKING NOTE OF CONFIRMATION LETTER FILED BY THE SUPPLIER, ALLOWED PARTIAL RELIEF TO THE ASSESSE E TO THE EXTENT OF RS.7,05,912 AND CONFIRMED BALANCE AMOUNT OF RS.36,95,261 ON THE GROUND THAT THE 4 ITA 3070/MUM/2017 ASSESSEE HAS FAILED TO FILE NECESSARY DETAILS TO PR OVE THAT COMMISSION RECEIVED FROM M/S VIDEOCON TELECOMMUNICATIONS LTD IS ACCOUNT ED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT RECONCILED THE AMOUN T OF COMMISSION REFLECTED IN FORM 26AS IN HER BOOKS OF ACCOUNT. IN ABSENCE O F ANY RECONCILIATION BETWEEN BOOKS OF ACCOUNT AND FORM 26AS, THE BENEFIT OF DOUBT CANNOT BE GIVEN TO THE ASSESSEE THAT THE ASSESSEE HAS CONSIDE RED COMMISSION IN HER BOOKS OF ACCOUNT MERELY ON THE BASIS OF BOOK ENTRIE S AND LEDGER EXTRACTS. SIMILARLY, AS REGARDS ADHOC DISALLOWANCE OF EXPENSE S, THE LD. CIT(A) OBSERVED THAT THE AO HAS MADE A CATEGORICAL OBSERVATION ABOU T NON FILING OF PROPER SUPPORTING EVIDENCES TO JUSTIFY EXPENSES CLAIMED UN DER VARIOUS HEADS. THE LD.CIT(A) FURTHER OBSERVED THAT ADMITTEDLY SUM OF E XPENSES ARE NOT FULLY VERIFIABLE FOR WANT OF THIRD PARTY VOUCHERS AND ACC ORDINGLY, THERE IS NO REASON TO INTERFERE WITH THE FINDING OF THE AO TO DISALLOW 10% ADHOC DISALLOWANCE CLAIMED UNDER VARIOUS EXPENSES. AGGRIEVED BY THE O RDER OF CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD .CIT(A) WAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO TOWARDS COMM ISSION RECEIPTS FROM M/S VIDEOCON TELECOMMUNICATIONS LTD IN SPITE OF ASS ESSEE FURNISHING COMPLETE DETAILS OF COMMISSION RECEIPTS AND ALSO FILED RECON CILIATION BETWEEN FORM 26AS AND BOOKS OF ACCOUNT. THE LD.AR FURTHER SUBMITTED THAT THOUGH AMOUNTS 5 ITA 3070/MUM/2017 APPEAR IN FORM 26AS IS HIGHER THAN THE AMOUNT OF AC TUAL COMMISSION RECEIVED FROM THE SUPPLIER, BUT THE ASSESSEE HAS FILED A CON FIRMATION LETTER FROM THE PARTIES WHERE THEY HAVE SUBMITTED THAT TOTAL COMMIS SION PAYMENT IN FORM OF TRADE DISCOUNT FOR THE YEAR UNDER CONSIDERATION IS RS.36,95,261 FOR WHICH NECESSARY DETAILS HAS BEEN FILED BEFORE THE LOWER A UTHORITIES. THE LD.AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED COMPL ETE SET OF BOOKS OF ACCOUNT, FILED FINANCIAL STATEMENTS AND ALSO EXPLAINED THE M ANNER IN WHICH SUCH TRADE DISCOUNT HAS BEEN ACCOUNTED FOR IN THE BOOKS OF ACC OUNT. THE AO AS WELL AS THE LD.CIT(A) DISREGARDED ALL EVIDENCES FILED BY TH E ASSESSEE AND MADE ADDITION ONLY ON THE BASIS OF FORM 26AS EVEN THOUGH THE ASSE SSEE HAS FILED A RECONCILIATION STATEMENT EXPLAINING THE PURCHASE AM OUNT DEBITED IN THE P&L ACCOUNT WHICH INCLUDES COMMISSION (TRADE DISCOUNT) RECEIVED FROM M/S VIDEOCON TELECOMMUNICATIONS LTD. 5. THE LD.DR, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. THE SOLITARY ISSUE THAT NEEDS TO BE RESOLVED UNDER GIVEN FACTS AND CIRCUMST ANCES OF THIS CASE IS WHETHER THE ASSESSEE IS ABLE TO RECONCILE HER BOOKS OF ACCOUNT WITH COMMISSION INCOME APPEARED IN FORM 26AAS AT INCOME- TAX DEPARTMENTS AIR 6 ITA 3070/MUM/2017 DATA BASE. THE AO HAS MADE ADDITION TOWARDS COMMIS SION RECEIVED FROM M/S VIDEOCON TELECOMMUNICATIONS LTD ON THE BASIS OF FOR M 26AS WHERE THE AMOUNT OF COMMISSION PAYMENT TO ASSESSEE FOR SALE O F SIM CARDS AND RE- CHARGE COUPONS IS APPEARING IN FORM 26AS BECAUSE OF DEDUCTION OF TAX AT SOURCE ON SUCH COMMISSION PAYMENT. THE ASSESSEE CL AIMS THAT SHE HAS ACCOUNTED COMMISSION (TRADE DISCOUNT) IN ITS BOOKS OF ACCOUNT AS PER THE DEBIT NOTES ISSUED BY THE SUPPLIER AND SUCH COMMISSION HA S BEEN REDUCED FROM THE PURCHASE ACCOUNT BECAUSE SHE HAS TREATED COMMISSION RECEIPTS FROM THE PARTY AS TRADE DISCOUNT AND SUCH TRADE DISCOUNT HAS BEEN NECESSARILY REDUCED FROM THE PURCHASE ACCOUNT. THE ASSESSEE HAS FILED COMPL ETE SET OF FINANCIAL STATEMENTS ALONGWITH LEDGER EXTRACT OF PURCHASE FOR THE YEAR. THE ASSESSEE HAS ALSO FILED CONFIRMATION LETTER ISSUED BY M/S VI DEOCON TELECOMMUNICATIONS LTD. WE HAVE GONE THROUGH VARIOUS DETAILS FILED BY THE ASSESSEE AND FOUND THAT THE ASSESSEE HAS REDUCED COMMISSION (TRADE DISCOUNT ) RECEIVED FROM M/S VIDEOCON TELECOMMUNICATIONS LTD FROM PURCHASE ACCOU NT. IN ORDER TO RECONCILE THE PURCHASE, THE ASSESSEE HAS FILED A RE CONCILIATION STATEMENT BEFORE THE LOWER AUTHORITIES AS PER WHICH THE TOTAL PURCHASES FROM M/S VIDEOCON TELECOMMUNICATIONS LTD IS MATCHED WITH PUR CHASES DEBITED IN THE P&L ACCOUNT AFTER REDUCING TRADE DISCOUNT RECEIVED FROM THE PARTY. WE FURTHER NOTICE THAT THE ASSESSEE HAS FILED ALL THOS E EVIDENCES BEFORE LOWER 7 ITA 3070/MUM/2017 AUTHORITIES. BUT, THE AO AS WELL AS THE LD.CIT(A) DISREGARDED ALL EVIDENCES FILED BY THE ASSESSEE AND MADE ADDITIONS ONLY ON THE BASI S OF FORM 26AS ON THE GROUND THAT THE COMMISSION RECEIVED FROM THE PARTY HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. NO DOUBT, THE ASSESSE E IS REQUIRED TO SHOW EACH ITEM OF INCOME AND EXPENDITURE WHICH IS MATERIAL IN NATURE, SEPARATELY IN HER FINANCIAL STATEMENT AND DISCLOSE NECESSARY DETAILS, IN ITS NOTES TO ACCOUNT. BUT, WHEN THE ASSESSEE HAS FOLLOWED AN INCLUSIVE METHOD OF ACCOUNTING AND REDUCED COMMISSION (TRADE DISCOUNT) FROM ITS PURCHA SES AND ALSO EXPLAINED SUCH METHOD OF ACCOUNT TO THE INCOME-TAX AUTHORITIE S BY FILING NECESSARY RECONCILIATION STATEMENT, THEN THERE IS NO REASON F OR THE AO TO DOUBT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE TO AC COUNT COMMISSION RECEIPT IN HER BOOKS OF ACCOUNT MERELY ON THE BASIS OF FORM 26AS. FORM 26AS IS A BASIS FOR RECONCILING INCOME TAX DEDUCTED TO THE BOOKS OF ACCOUNT OF THE ASSESSEE. WHEN THE ASSESSEE IS ABLE TO EXPLAIN AND ALSO RECON CILES THE AMOUNT APPEARING IN FORM 26AS IN HER BOOKS OF ACCOUNT AND ALSO FILES NECESSARY SUPPORTING EVIDENCE, THEN THERE IS NO REASON FOR THE AO TO MAK E ADDITION ONLY ON THE BASIS OF FORM 26AS. IN THIS CASE, WE FIND THAT THERE IS NO ERROR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE INSOFAR AS ACCOUNTING COMMI SSION RECEIPT FROM M/S VIDEOCON TELECOMMUNICATIONS LTD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO AS WELL AS THE LD.CIT(A) HAVE ERRED IN MAKING ADDITION TOWARDS 8 ITA 3070/MUM/2017 COMMISSION. HENCE, WE DIRECT THE AO TO DELETE ADDI TION MADE TOWARDS COMMISSION ON THE BASIS OF FORM 26AS. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-05-2019 . SD/- SD/- (SANDEEP GOSAIN) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 15 TH MAY, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI