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TMI Blog2025 (4) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said to be verified by mere production of evidence of deduction of TDS." 2. "The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 3. The solitary issue in the present appeal pertains to the disallowance of expenses made by the Assessing Officer (AO) of Rs. 5,34,64,619/-, which was deleted by the Ld. CIT(A). 4. The orders of the authorities below reveal that the assessee was noted to be in the business of clearing agent and the addition/disallowance made to its income related to the difference between the agency charges shown in its profit and loss account of Rs. 2,52,25,291/- whereas the individual transaction statement (26 AS) showing such receipts at Rs 7,82,73,468. The assessee explained the same to be in the nature of expenses, incurred on their behalf by the assessee while acting as clearing agent, reimbursed to it by its clients and filed a reconciliation statement to this effect. The AO however was not convinced with the reply of the assessee noting that by any stretch the assessee could not have disclosed its turnover net of expenses reimbursed to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t while the professional charges were credited in the account of agency charges, the rest of the amounts were credited to the respective Ledger accounts of the clients. Copy of the sale register and reimbursement ledgers explaining the method of accounting followed was filed as also a list of all such payments made by the assessee during the year and the summary of all accounts where the assessee got the reimbursement. The assessee contended that it had been regularly following this method of accounting over the years. 7. The Ld. CIT (A) forwarded the submissions of the assessee along with the evidences filed by it in the form of sales register and reimbursement Ledger for the comments of the AO, who filed his report on the same, which in turn was confronted to the assessee who filed a rejoinder to the report of the AO. During the course of hearing before the Ld. CIT(A) the assessee was asked to submit few details especially with respect to TDS on various reimbursement of expenses claimed by it to prove the genuineness of the expenses which the assessee duly submitted, pointing out that out of the total expenses incurred by it during the year including the reimbursement of expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts nor is the case that in absence of these documents, adverse view w.r.to authenticity or correctness of books of accounts has been taken leading to rejection of books of account and estimation of accounts. In fact, the appellant is found to have adduced all required details and documents called for by the AO and on consideration of the same, the AO has adjudicated the matter on legal/technical basis w.r.to accounting principles, gross receipts and gross turnover. In my considered view, details and documents so filed on subject matter of remand are necessarily in the nature of extension i.e. Ledger account which is part of regular books of accounts and goes in to the root of deciding the issue of dispute and therefore needs admission. The Jurisdictional High Court in the case of CIT vs. Virgin Securities & Credits (P) Ltd. 332 ITR 396 has held as under: "It was only after considering the remand report the Commissioner (Appeals) had admitted the additional evidence. It could not be disputed that this additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of claim made by the assessee. The plea of the assessee which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant had in fact followed the system of accounting wherein the amount received by it against expenses spent by it on behalf of its clients were reduced from the respective expenses. The Assessing Officer claimed that the method of accounting followed by the assessee is faulty as the receipts shown in the Balance Sheet does not tally with the receipts shown in Individual Transaction Statement (Form 26AS). He explained the meaning of "Turnover/gross receipts as defined under the Central Sales Tax Act, 1956, the Companies Act. 2013 and various Guidance Note issued by the Institute of Chartered Accountants of India (ICAI). The appellant vehemently challenged the opinion of the Assessing Officer in this respect. In the reply dated 19/01/2018, mention of para 5.17 and 5.18 of the 'Guidance Note on Tax Audit u/s 44AB of the Income Tax Act, 1961' Issued by ICAI was made which is given as under- "5.17-the following items would not form part of "gross receipts in business for the purpose of section 44AB. (i)..... (ii)... (vi) Reimbursement of customs duty and other charges collected by a clearing agent; ...." "5.18-Thus, the principle to be applied is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the method of accounting followed by the assessee is faulty as the receipts shown in the Balance Sheet does not tally with the receipts shown in Individual Transaction Statement (Form 26AS). He explained the meaning of "turnover/gross receipts" as defined under the Central Sales Tax Act, 1956, the Companies Act, 2013 and various Guidance Notes issued by the Institute of Chartered Accountants of India. Therefore, the bone of contention in the case of appellant is whether the system of accounting, which has been followed by the appellant consistently, is correct system of accounting and thereby had shown correct income? 4.14 The appellant contented that it had in fact followed the system of accounting wherein the amount received by it against expenses spent by it on behalf of its clients were reduced from the respective expenses. The appellant vehemently challenged the opinion of the Assessing Officer in this respect and had even referred to the Guidance Note on Tax Audit u/s 44AB of the Income Tax Act, 1961' issued by ICAI, wherein, through the mode of which the appellant has claimed that the accounting system followed by it is true and correct. Besides, the appellant explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger account of the various clients, the learned AO had no adverse comments to make after verification of the same. The Ld. DR was also unable to controvert the factual finding of the Ld. CIT(A) appeal that the assessee had suitably demonstrated the genuineness of the expenses by showing TDS deducted on 68.57% of all expenses incurred by it including reimbursement of expenses and showing the rest of the expenses to not attract the provisions of tax deduction at source. 11. In the light of the same, we do not find any reason to reverse the order of the Ld. CIT(A) deleting the disallowance of reimbursement of expenses of Rs. 5,34,64,619/-, whose order we find is based on concrete finding of uncontroverted facts that the assessee consistently following method of accounting its income net of reimbursement of expenses, that the expenses reimbursed were duly accounted for in its books of accounts in the Ledger account of the clients and TDS deducted on such expenses wherever applicable. The Ld. CIT(A), we hold, based on these factual findings has rightly recorded the finding of the expenses to have been demonstrated to have been genuinely incurred by the assessee. 12. The reliance place ..... X X X X Extracts X X X X X X X X Extracts X X X X
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