2022 (1) TMI 587 - AT - Income Tax

Disallowances on related to commission of income not reflected in assessees P L account - disallowance 10% of the expenses - HELD THAT - As emanating that assessee has submitted that it was an error in accounting. The said receipt was actually entered as adjustment to the purchase, instead of separate credit receipt. It is submitted that there is no effect on the profit reflected. This submission need factual verification. If the submission is found to be correct, the contention can be accepted that there is no effect on profit shown and addition again would result in double taxation. Hence, in the interest of justice, we remit the issue to the file of the AO. The AO shall examine the issue afresh after giving the assessee proper opportunity of being heard. In the result, this appeal by the assessee is allowed for statistical purpose.

Summary

Issues:
1. Confirmation of total income by CIT(A)
2. Addition of commission income
3. Disallowance of expenses

Confirmation of Total Income by CIT(A):
The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the total income at a specific amount compared to the returned income. The appellant had accepted the failure to show commission income in the return of income. The addition made by the assessing officer was confirmed by CIT(A) based on this admission and the facts of the case. The appellant argued that the commission income was duly recognized and offered to tax, even though it was not separately shown in the profit and loss account. The appellant's submissions were not fully considered by the assessing officer, leading to the conclusion that the commission income remained unaccounted for. However, the appellant maintained that the accounting treatment was an inadvertent mistake and that there was no intention to avoid tax on the income. The CIT(A) dismissed the appeal, but the Income Tax Appellate Tribunal (ITAT) remitted the issue back to the assessing officer for a fresh examination after giving the appellant a proper opportunity to be heard.

Addition of Commission Income:
The assessing officer had made an addition on account of commission income not reflected in the profit and loss account. The appellant explained that the commission income was mistakenly treated as discount receivable and credited to the purchase account. The appellant argued that this treatment did not impact the revenue recognition, as the income was duly recognized and TDS was claimed on it. The appellant requested the deletion of the addition, emphasizing that there should not be double taxation on the same source of income. The ITAT allowed the appeal for statistical purposes, remitting the issue back to the assessing officer for further examination.

Disallowance of Expenses:
The assessing officer had made an ad hoc addition on certain expenses debited to the profit and loss account. The appellant chose not to press this ground of appeal before the CIT(A). Consequently, the addition was confirmed, and the ground of appeal was dismissed. The ITAT did not provide specific details on this issue in the judgment.

In summary, the ITAT Mumbai judgment involved issues related to the confirmation of total income by CIT(A), the addition of commission income, and the disallowance of expenses. The appellant's arguments centered around the inadvertent accounting treatment of commission income, emphasizing that there was no intention to avoid tax and no impact on the profit. The ITAT remitted the issue of commission income back to the assessing officer for a fresh examination, ultimately allowing the appeal for statistical purposes.