The ITO, Ward-5(2)(2), Ahmedabad V. M/s. Bhavi Tours & Travels, Ahmedabad

ITA 790/AHD/2019

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the CIT(A) which had deleted the addition made by the Assessing Officer (AO) regarding commission income for the Assessment Years 2012-13 and 2013-14. The assessee, M/s. Bhavi Tours & Travels, a partnership firm engaged in the business of tours and travel, had shown net commission income in its books after deducting commissions paid to sub-agents and discounts given to customers. The AO added back the discounts as income, which was contested by the assessee. The CIT(A) ruled in favor of the assessee, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127157 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-04-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-05-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside
• Section: 143(3)

Judgement Text

आयकर अपील य अ धकरण, अहमदाबाद यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’A’’ BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 790/AHD/2019 नधा रण वष /Asstt. Year: 2012-2013 ITO Ward-5(2)(2), Ahmedabad Vs. M/s. Bhavi Tours & Travels 8, Rainbow Complex, Nr. Old High Court Rly. Crossing, Navrangpura, Ahmedabad PAN: AADFB6613P (Applicant) (Respondent) Revenue by : Shri M. K. Patel, A.R. Assessee by : Ms. Bhavnasingh Gupta, Sr. D.R. स ु नवाई क तार ख/Date of Hearing : 11/04/2023 घोषणा क तार ख /Date of Pronouncement: 19/04/2023 आदेश/O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-5, Ahmedabad (in short “Ld. CIT(A)”) order dated 28.02.2019 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-2013. 2. The Revenue has raised the following grounds of appeal: “1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 53,89,163/- (A.Y. 2012-13) & Rs. 42,02,457/- (A.Y. 2013-14) made on account of commission income. 2. On the facts and circumstances, the ld. CIT(A) ought to have upheld the order of the AO. ITA no.790/AHD/2019 Asstt. Year 2012-13 2 3. It is therefore prayed that the order of the Ld. CIT(A) be set aside and that of the order of the Assessing Officer be restored to the above extent. 4. The appeal is being filed as the order of CIT(A) was composite order for A.Y. 2012-13 & 2013-14 where issue was similar. Therefore, the case for both A.Y.s falls under exception condition laid down in para 5 of CBDTs Circular no. 3/2018 dt. 11.07.2018. Also, The issue pertaining to A.Y. 2012-13 falls under exception condition 10(c) of CBDT’s circular no. 3/2018 dt. 11.07.2018.” 3. The only effective issue raised by the Revenue is that the learned CIT-A erred in deleting the addition made by the AO for A 53,89,163.00 on account of commission income. 4. The facts in brief are that the assessee in the present case is a partnership firm engaged in the business of tours and travel. The assessee in the year under consideration has earned gross commission income of A 3,45,63,260.00 but it has shown net commission income in the books of accounts at A 1,05,50,448 only. The necessary breakup of the gross commission income viz a viz the net commission shown in the books of accounts stand as under: Particulars As per Books Gross Commission Income 3,45,63,260 Less: Commission given to sub agents 1,86,23,649 Less: Tickets sold to Customers at lower margin by passing on commission and giving discount 53,89,163 Net Commission as per Books and reflected in the P & L A/c on page 16 of PB 1,05,50,448 5. As per the assessee, it has passed on the discount to the customers amounting to A53,89,163.00 against the commission income earned by it. As such, the assessee has shown commission income net of the discount given to the customers. 6. However, the AO was not satisfied with the explanation of the assessee as discussed above on the reasoning that the income to it has accrued in the form of commission on gross basis which has subsequently been surrendered to the amount of A 53,89,163.00 by way of discounts to the customers which is nothing but the application of income. Therefore, the AO added the same to the total income of the assessee. ITA no.790/AHD/2019 Asstt. Year 2012-13 3 7. Aggrieved assessee preferred an appeal to the learned CIT-A who deleted the addition made by the AO by observing as under: “3.6 The appellant contended that his nature of business demands the payment of commission to sub agents and payment of discount to the customer who got ticket directly. The appellant further submitted that the objection of the AO that the commission has not shown and foregone by the appellant which has to be shown in the profit and loss account u/s. 29 of the Act is factually not correct. It is observed that the difference is only due to method of accounting and commission. The appellant has shown the net commission payment after deducting the commission paid to the sub-agent and discount given to the direct customers. The appellant submitted the details and working of the net commission shown in profit & loss account, which was also filed before the A.O. It is noted from the commission summary that during the year, the appellant has received total commission of Rs.3,45,63,260/-, out of which commission of Rs.1,86,23,649/- was given to the sub-agent on which proper TDS was deducted. Apart from this, the appellant has also paid the discount / commission to the direct customer of Rs. 53,89,163/- and after reducing both commission sub agent and discount to direct customers, the appellant has shown the net commission in the profit and loss account at Rs.1,05,50,448/-. The AO has not raised any doubt about the genuineness of the commission/discount payment to the sub-agent and direct customer. The AO mainly contended that the net gross commission was not shown in the profit and loss account and thus the appellant has foregone the commission paid to direct customer. However, this contention of the AO is not correct as the AO has accepted the commission payment to the sub-agent but only disallowed the commission/discount payment to the direct buyer. It is observed that total commission was shown in the books of account but in the Profit and loss account net commission was reflected. It is also observed that the appellant could show the relevant bills and document fled related to direct commission/discount given to the direct customer. Considering the facts mentioned above the contention of the AO is not tenable and addition made by the A.O. is deleted. The grounds of appeal are allowed.” 8. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 9. The learned DR before us vehemently supported the order of the AO whereas the learned AR before us filed a paper book running from pages 1 to 122 and contended that the assessee has passed on the discount to the customers against the commission income and after adjusting the discount given to the customers, the net commission income was disclosed in the books of accounts. The learned AR in support of his contention has drawn our attention to the summary of the gross commission income, commission given to the sub- agents and the discount offered to the customers which is placed on page 52 of the paper book. The learned AR vehemently supported the order of the learned CIT-A. ITA no.790/AHD/2019 Asstt. Year 2012-13 4 10. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the assessee has earned gross income by way of commission at A 3,45,63,260.00 which was reduced by the following amounts: i. Commission given to sub- agents A 1,86,23,649.00 ii. Discount given to the customers A 53,89,163.00 10.1 As such the assessee adjusted the gross commission of A3,45,63,260 against the above amount of commission given to the sub- agents and the discount given to the customers. The balance amount of A 1,05,50,448.00 was shown in the books of accounts of the assessee. 10.2 There was iota of doubt raised by the revenue with respect to the commission given to the sub- agents of A1,86,23,609 which was adjusted against the gross commission income. In other words, the commission income was shown net of the commission given to the sub- agents of A1,86,23,609 which was also accepted by the revenue. However, the revenue did not accept the manner of showing the gross commission income after adjusting the discount given to the customers which seems to be contrary to the stand of the revenue. It is since that the revenue accepted the commission given to the sub- agents which was not shown in the books of accounts but did not believe on the discount given to the customers despite the fact, the necessary sample invoices were furnished by the assessee having passed on discount to the customers which are available on pages 106 to 116 of the paper book. 10.3 In addition to the above, we also note that the genuineness of the discount offered by the assessee to the customers has nowhere been doubted by the AO. What has been doubted is that the commission income was accrued to the assessee on a gross basis, but the assessee has shown commission income in the books of accounts on a net basis i.e. after adjusting the discount given to the customers. To our understanding, it is a manner of presentation of the income of the assessee. Even, if we follow the version of the AO, then also there would not ITA no.790/AHD/2019 Asstt. Year 2012-13 5 be any change in the income offered by the assessee in the income tax return as far as discount offered by the assessee to the customers is concern. As such, the assessee will show the gross income in the profit and loss account and against which it would claim the discount offered to the customers as an expense which will lead to the tax neutral exercise. Thus, we do not find any infirmity in the order of the learned CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. 11. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 19/04/2023 at Ahmedabad Sd/- Sd/- (SUCHITRA KAMBLE) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 19/04/2023 Tanmay आदेश क त ल प े षत/Copy of the Order forwarded to : आदेशान ु सार/BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation : 18/04/2023(Dictated in his dragon software by Hon’ble Member) 2. Date on which the typed draft is placed before the Dictating Member 18/04/2023 3. Date on which the approved draft comes to the Sr.P.S./P.S. - /04/2023 4. Date on which the fair order is placed before the Dictating Member for Pronouncement /04/2023 5. Date on which the file goes to the Bench Clerk .. : 19/04/2023 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order.......................... Date of Despatch of the Order.................. 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A) 5. !वभागीय $त$न ध, आयकर अपील य अ धकरण / DR, ITAT, 6. गाड& फाईल / Guard file.