2011 (12) TMI 408 - AT - Income Tax

Real estate agent / booking agent - Difference between commission as per TDS certificate and commission as shown in the profit and loss account. - Production of additional evidence - documents lost in fire - revenue challenges the CIT(A) s finding that the assessee s books were destroyed in fire and this is an after thought of assessee to avoid scrutiny of books. - held that - CIT(A) has accepted the additinal evidence concretely - If AO had any issue in this behalf, proper enquires could have been conducted by him. The fire department officer could have been called. AO has not carried out any enquiry from his side. The report of a govt. department which is substantiated by payment of corresponding service charges cannot be brushed aside unless there is material against it. In these circumstances, CIT(A) s finding being based on the facts is to be upheld. Besides, non-production of books do not stop the process of Income tax Act; in this eventuality best judgment assessment u/s 144 is the alternative. AO in any case relied on the assessee s audit statements and passed the order u/s 143(3). - Decided in favor of assessee. Regarding difference in commission in P and L a/c and TDS certificates - held that - CIT(A) has considered the explanation, reconciliation and has given adequate factual findings explaining this discrepancy and as a consequence thereof sustained the addition to the tune of Rs. 1926640/-. In the absence of any contrary comments in remand report or the revenue arguments we see no infirmity in the order of CIT(A) in allowing part relief. Assessee is following mercantile system of accounting and thus the sum of Rs. 1926640/- having accrued in the year is to be taxed as the income of the assessee for the year under appeal. Claim of expenditure on account of commission and discount - dis allowance u/s 40(1)(is) - held that - The material/information and confirmations have not been disputed to be of the business of the assessee i.e. real estate brokerage business. TDS is deducted and paid as per law which is substantiated. Revenue has not raised the ground of section 40(a)(ia) in its ground of appeal. Revenue except raising suspicions could not indicate any valid basis to reject these documentary evidences. - Decided in favor of assessee.

Summary

Issues Involved:
1. Admission of additional evidence by CIT(A) under Rule 46A.
2. Deletion of addition of Rs. 2,24,45,752/- on account of variation in commission.
3. Deletion of addition of Rs. 64,13,493/- on account of commission discount expenses.
4. Sustaining the addition of Rs. 19,26,640/- on account of difference between commission as per TDS certificate and commission shown in the profit and loss account.
5. Disallowance of Rs. 72,770/- out of commission expenses paid to Sh. Surinder Gupta.
6. Sustaining the addition of Rs. 5,20,023/- out of commission expenses on account of the same being non-verifiable.

Detailed Analysis:

1. Admission of Additional Evidence by CIT(A) under Rule 46A:
The CIT(A) admitted additional evidence citing the destruction of the assessee's records in a fire, which was certified by the Fire Department. The Revenue argued that the incident of fire was a fabricated story to avoid scrutiny. However, the Tribunal upheld the CIT(A)'s decision stating that the Fire Department's report is a government document and cannot be brushed aside without evidence to the contrary. The Tribunal found no fault in the CIT(A) admitting additional evidence under Rule 46A, as the AO was given ample opportunity to examine and counter the additional evidence but failed to provide any substantial contrary evidence.

2. Deletion of Addition of Rs. 2,24,45,752/- on Account of Variation in Commission:
The AO observed a discrepancy between the commission income shown in the profit and loss account and the TDS certificates. The CIT(A) accepted the reconciliation provided by the assessee, which explained differences due to service tax components, advances received, and commission reversals. The Tribunal upheld the CIT(A)'s decision, noting that the reconciliation was verified and found accurate. The Tribunal dismissed the Revenue's appeal on this ground, stating that the CIT(A) had followed due process and the AO had not provided any contrary evidence.

3. Deletion of Addition of Rs. 64,13,493/- on Account of Commission Discount Expenses:
The AO disallowed the commission discount expenses due to lack of verification and potential non-compliance with Section 40(a)(ia). The CIT(A) deleted the addition, stating that the commission discount was not covered under Section 194H and thus not subject to TDS. The Tribunal upheld this decision, noting that the assessee provided sufficient evidence to substantiate the expenses, including confirmations, bank statements, and booking records. The Tribunal found no merit in the Revenue's argument and dismissed this ground of appeal.

4. Sustaining the Addition of Rs. 19,26,640/- on Account of Difference Between Commission as per TDS Certificate and Commission Shown in the Profit and Loss Account:
The CIT(A) sustained an addition of Rs. 19,26,640/- due to discrepancies that could not be reconciled. The Tribunal upheld this decision, noting that the CIT(A) had given a detailed explanation and the assessee had not provided sufficient evidence to counter the addition. The Tribunal dismissed the assessee's cross-objection on this ground.

5. Disallowance of Rs. 72,770/- out of Commission Expenses Paid to Sh. Surinder Gupta:
The CIT(A) sustained the disallowance of Rs. 72,770/- due to non-verifiability. The Tribunal upheld this decision, noting that the assessee failed to provide sufficient evidence to substantiate the payment. The Tribunal dismissed the assessee's cross-objection on this ground.

6. Sustaining the Addition of Rs. 5,20,023/- out of Commission Expenses on Account of the Same Being Non-verifiable:
The CIT(A) sustained the addition of Rs. 5,20,023/- due to non-verifiability. The Tribunal upheld this decision, noting that the assessee failed to provide sufficient evidence to substantiate the payment. The Tribunal dismissed the assessee's cross-objection on this ground.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on all grounds, dismissing both the Revenue's appeal and the assessee's cross-objections. The Tribunal found that the CIT(A) had followed due process, and the AO had not provided sufficient contrary evidence to challenge the CIT(A)'s findings. The Tribunal emphasized that the CIT(A) had properly admitted additional evidence and made decisions based on the available material, including the remand report and the assessee's reconciliations and explanations.