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TMI Blog2012 (9) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounting regularly employed by the assessee - in favour of assessee. - ITA No.145/Del/2012 - - - Dated:- 20-7-2012 - R P Tolani, Shamim Yahya, JJ. For Appellants: Shri Aseem Chawla, Adv, Shri Jyoti Bagga/ Ms Shweta Kapoor, CA For Respondent: Shri J S Ahlawat, Sr. DR ORDER Per: Shamim Yahya: This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-VI, New Delhi dated 25.10.2011 pertaining to assessment year 2003-04. 2. The grounds raised read as under:- i) The Ld. Commissioner of Income Tax (A) has erred on facts and in law in deleting the addition of Rs. 7310193/- on account of undisclosed income relating to mismatching of TDS receipts with P L account. ii) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before during the hearing of this appeal. 3. Briefly stated facts of the case are that the assessee is an approved IATA Commission Agent which is engaged in the business of handling outgoing freight of the Carriers /Airlines on behalf of the consignors. The nature business of the assessee is to facilitate Air Cargo Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year, TDS Rs. 6,19,228/- u/s. 194H on the commission of Rs. 1,06,15,785/- was deducted by the airlines etc. It was further submitted that assessee in the normal course of business is making balance sheet and profit and loss account, where commission income is shown after netting off direct expenses on account of commission paid to sub agents, rebate and discount allowed and TC charges (i.e. terminal charges) paid at the airport. It was further submitted that accounting entries in the books of accounts of the assessee are made in the following manner:- (A). On receipt of commission from the airline following accounting entry is passed in respect of commission income: Debit : Airline (Commission net of TDS amount) Debit : TDS (TDS on Commission) Credit : Commission on Freight (Commission amount) (B). When the commission become due to sub-agents: Debit : Commission on Freight (Sub Agent Commission amount) Credit : Sub- Agent Account (Sub Agent Commission net of TDS amount) Credit : TDS payable (TDS on sub agent commission) 4.1 Assessee further submitted before the Ld. Commissioner of Income Tax (A) that during the relevant assessment year assessee company receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Freight It was submitted that as per the books of accounts assessee has accounted for amount of freight received from the consignors including on which TDS has been deducted as liability towards the respective airlines and such receipts are only recoveries on behalf of the Airlines and the same are not the income or the assessee. It was further submitted that as per the Income tax Act only the real incomes are taxable and not all the receipts. It was further submitted that Assessing Officer has made the additions in these case simply on the basis of TDS certificates received without pointing out any defect in the accounts/ method of accounting, which has consistently been followed by the assessee. It was further submitted that during the reassessment proceedings, the assessee company furnished the reconciliation statement of commission as per TDS certificates vis-a-vis the books of A/c, the copies of ledger accounts of commission receipts and payments along with the ledger account of parties concerned, the copies of bank statement etc vide letters dated 26.10.2010 and 29.10.2010 before the AO. It was submitted that the AO also failed to appreciate the difference between incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting consistently and the department has been accepting the same. For example, assessment in the case of appellant was completed for the assessment year 2006-07 u/s 143(3) of the IT Act in which the same method of accounting was accepted by the AO. As per sec.145, income must be computed in accordance with the method of accounting regularly employed by the assessee. The choice of method of accounting lies with the assessee. In this regard the decision of the Hon'ble Supreme Court in the case of UCO Bank V CIT 240 ITR 355 (SC) and the decision in the case of BCGA (Punjab) vs. CIT 5 ITR 279) may be referred to. So long he is adopting the same regularly. In this case, the AO has also failed to appreciate the difference between income receipt. Generally income accrues first and receipt follows on accrual; a right to receive must come in to existence before the actual receipt takes place. But a receipt by itself is not sufficient to attract tax. Ld. Commissioner of Income Tax (A) further placed reliance upon the following cases laws:- - C.I.T. vs. Punjab Tractors 234 ITR 105 - C.I.T. vs. Industrial Engineering 202 ITR 1014 - State Bank of Travancore vs. C.I.T. (19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that additions made by the AO cannot be sustained on this account. That assessee has been following this method of accounting consistently and the department has been accepting the same. That as per sec. 145, the income must be computed in accordance with the method of accounting regularly employed by the assessee. 6.2 In the background of the aforesaid discussion and precedents referred, we agree with the finding of the Ld. Commissioner of Income Tax (A) that Assessing Officer has erred in considering all the amounts received by the assessee company from airlines (towards commission) from Clients (towards reimbursement of expenses) as income and erred in adding back a sum of Rs. 48,99,461/- as income on account of commission and sum of RS. 24,10,732/- on account of contract income. Thus, we hold that the Assessing Officer has considered the entire payment as per TDS certificate as income and has failed to appreciate what is liable is income, real profit and not payment received by the assessee. Accordingly, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (A), hence, we uphold the same. 7. In the result, the appeal filed by the Revenue stan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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