E IN INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER . I.T.A. No.7774 Mum 2014 [ [ Assessment Year : 2011-12 Assistant Commissioner of Trail Blazer Tours Ind ia Income Tax-1 1 3 1 , Private Limited v. Room No. 427, 170, B Wing, Jee na House Aayakar Bhavan, M K Marg, O M Sagar, Sahar,Andheri Mumbai-400 020 East, Mumb ai-400 099 . PAN : AACCT6 365J Appellant .. Respondent Revenue by Shri Vishwas Jadhav,DR Assessee by : Ms. Aarti Sathe Date of Hearing : 04-08-2016 Date of Pronouncement : 07-10-2016 O R D E R PER RAMIT KOCHAR, Accountant Member This appeal, filed by Revenue, being ITA No. 7774 Mum 2014, is directed against appellate order dated 22nd October 2014 passed by learned Commissioner of Income Tax Appeals - 18, Mumbai hereinafter called CIT , for assessment year 2011-12, appellate proceedings before learned CIT arising from assessment order dated 20th February 2014 passed by learned Assessing Officer hereinafter called AO u s 143 3 of Income Tax Act,1961 Hereinafter called Act . 2 ITA 7774 Mum 2014 2. grounds of appeal raised by Revenue in memo of appeal filed with Income Tax Appellate Tribunal, Mumbai hereinafter called Tribunal read as under:- 1. Whether on facts and in circumstances of case and in law, was Ld. CIT justified in deleting addition of Rs.17,91,690 - made on account of non-deduction of tax u sec. 194I on rent paid on basis of additional evidences submitted by assessee during assessment proceedings nor remand proceedings and hence should not have been admitted as per Rule 46A of I T Rules 1962. 2. Whether on facts and in circumstances of case and in law , was Ld. CIT justified in deleting addition made on account of non-reconciliation of entries in 26AS without appreciating that additional evidence submitted by assessee during appellate proceedings were neither filed during assessment proceedings nor remand proceedings and hence should not have been admitted as per Rule 46A of I T Rules 1962. 3. Whether on facts and in circumstances of case and in law, was Ld. CIT justified in not appreciating ratio laid down by 4. appellant prays that order of CIT on above grounds be set aside and that of A.O. be restored. 3. brief facts of case are that assessee is engaged in business of providing services relating to tours and travel. It was observed by AO during course of assessment proceedings u s 143 3 read with Section 143 2 of Act that assessee has made short deduction of tax deducted at source on rent to tune of Rs.1,79,169 - as under: S.No. Name of Total Rent TDS to be TDS Difference Party paid deducted actually In Rs. during @10% deducted year In Rs. In Rs. In Rs. 3 ITA 7774 Mum 2014 1 Orion Projects 26,44,152 2,64,415 2,39,724 24,691 2. Nitras Exports 14,44,930 1,44,493 18,177 1,26,316 Private Limited 3. Crystal Complex 26,30,258 2,63,026 2,38,464 24,562 Private Limited 4. Seema C. Jain 2,88,000 28,800 25,200 3,600 TOTAL 7,00,734 5,21,565 1,79,169 assessee did not furnished any explanation as to why tax has not been deducted as per rates prescribed in Act. Thus, AO added corresponding expenditure of Rs.17,91,690 - to income of assessee vide assessment order dated 20-02-2014 passed by AO u s. 143 3 of Act. 4. Aggrieved by assessment order dated 20.02.2014 passed by AO u s. 143 3 of Act , assessee filed first appeal with learned CIT and contended that AO calculated TDS on service tax component included in rent and details were furnished before learned CIT . Further, it was submitted that w.r.t. Nitras Exports Private Limited, party has given low deduction of tax at source certificate authorizing to deduct tax at source @2% instead of 10%. assessee relied on CBDT circular no 4 dated 28-04- 2008 wherein CBDT clarified that service tax amount should be excluded while calculating TDS on rent as service tax is collected to be paid to Government. In Remand Report also AO submitted that there is short deduction of TDS on rental payments. learned CIT allowed appeal of assessee on this ground relying on CBDT circular no 4 dated 28-04-2008 that Tax is not to be deducted at source under Section 194I of Act on service tax component and shall be deducted on rental component only vide appellate order dated 22-10-2014 passed by learned CIT . 4 ITA 7774 Mum 2014 5. Aggrieved by appellate order dated 22-10-2014 passed by learned CIT , Revenue is in appeal before Tribunal wherein learned DR contended that additional evidences were filed by assessee before learned CIT which were not filed before AO in assessment proceedings nor in remand proceedings and hence learned CIT erred in admitting additional evidences without forwarding same to AO in violation of Rule 46A of Income Tax Rules, 1962, while learned AR relied on orders of learned CIT and submitted that tax cannot be deducted at source u s 194I of Act on service tax component while it can be only deducted at rent component as per CBDT circular no 4 dated 28-04-2008. Further learned counsel submitted that with respect to Nitras Exports Private Limited , said party has submitted lower deduction TDS certificate issued by Revenue to deduct TDS@ 2%instead of 10%. On being asked to produce said certificate of lower deduction of TDS furnished by Nitras Exports Private Limited, learned counsel for assessee stated that same shall be produced with copy to learned DR. It is say of learned counsel for assessee that powers of learned CIT is co-terminus with powers of AO. 6. We have heard rival contentions and perused material on record. We have observed that assessee has paid rentals on which tax was deducted at source as per chart produced in preceding para s. assessee did not deducted tax at source u s 194I of Act on service tax component as per CBDT circular no 4 dated 28-04-2008 for which we are in agreement with contentions of learned counsel for assessee which has also been upheld by learned CIT . Revenue is aggrieved in instant appeal that additional evidences being admitted by learned CIT in violation of Rule 46A of Income Tax Rules, 1962 as same were not forwarded by learned CIT to AO for verification and hence these additional evidences were not evaluated by learned AO in assessment 5 ITA 7774 Mum 2014 proceedings nor in remand proceedings. Thus, for limited purposes of verification of claim of assessee that service tax component was separately charged from rent paid by assessee and assessee duly deducted tax at source on rent paid u s 194I of Act and it is only on service tax component , no tax was deducted at source u s 194I of Act,we are remanding matter back to file of AO for limited verification as stipulated by us as above. Secondly, with respect to rent paid to Nitras Exports Private Limited, assessee deducted TDS @2% instead of 10% as mandated u s 194I of Act. assessee did not produce lower deduction of tax at source certificate issued by Revenue authorizing deduction of TDS @2% instead of 10% u s. 194I of Act before Tribunal as stated during course of hearing before Bench by learned counsel for assessee and hence we are remanding matter back to AO whereby assessee shall produce said certificate of lower deduction of tax at source before AO for necessary verifications and examination. With above stated directions, ground no 1 is disposed off. We order accordingly. 7. next effective ground raised by Revenue is with respect to deletion by learned CIT of addition made by AO with respect to difference in income as reported in 26AS vis-a-vis with income as reported in return of income filed with Revenue by admitting additional evidences without complying with requirements of Rule 46A of Income Tax Rules, 1962 where in said additional evidences were not filed before AO during assessment proceedings as well during remand proceedings. It was observed by AO that there is mismatch of income reported in AS 26 vis- -vis income as recorded in books of accounts. assessee did not give reconciliation details to reconcile two figures of receipts based on AS26 and books of accounts maintained by assessee . Thus, AO made 6 ITA 7774 Mum 2014 addition of Rs.1,74,09,425 - based on difference between receipts declared in Profit and Loss Account vis- -vis receipts appearing in 26AS database as under :- Interest Income u s. 194A : S.No. Name of Party Income as Income as Differance Per 26AS per P & L account 1. ICICI Bank Limited Rs.7,533 - Nil Rs.7,533 - 2. Kotak Mahindra Rs.89,265 - Nil Rs.89,265 - Bank Limited TOTAL Rs.96,798 - Nil Rs.89,265 - b Commission Income u s. 194H: S.No. Income as per 26AS Income as per P Difference & L account 1. Rs.4,99,45,153 - Rs.3,26,44,993 - Rs.1,73,00,160 - c Rent Income u s 194I: S.No. Name of Party Income as Income as Differance Per 26AS per P & L account 1. TATA AIG General Rs.20,000 - Nil Rs.20,000 - Insurance TOTAL Rs.20,000 - Nil Rs.20,000 - 7 ITA 7774 Mum 2014 Thus, AO made addition of Rs.1,74,09,425 - based on difference between receipts declared in Profit and Loss Account vis- -vis receipts appearing in 26AS database vide assessment order dated 20-02-2014 passed by AO u s 143 3 of Act. 8.Aggrieved by assessment order dated 20-02-2014 passed by AO u s 143 3 of Act, assessee filed first appeal with learned CIT and contended that if one goes through schedule 13 annexed to and forming part of accounts , it is clearly stated that :- Business Auxiliary Services Rs. 30,17,339 - Commission Income Net Rs.3,26,44,993 - Interest Banks Rs. 2,63,281 - As per books of accounts details of commission are as follows: Commission Received Rs.4,63,48,908.11 Less: Discount Allowed Rs. 1,36,03,915.10 -------------------------- Net Commission Income Credited to P & L c Rs.3,26,44,993.01 --------------------------- Hence, as per books of accounts gross income is bifurcated as follows: Gross Income Rs.4,62,48,180.35 Business Auxiliary Rs. 30,00,000.00 ------------------------ Tour Income Rs.5,01,52,113.17 ------------------------- I It was submitted by assessee before learned CIT that income as per form 26AS is Rs. 4,99,45,153.00 while income as per Income and Expenditure account is Rs 5,01,52,113.17. It was also submitted that interest income of Rs.2,63,281 - was clearly reflected in Schedule 14 in 8 ITA 7774 Mum 2014 which tax deducted at source was amount of Rs.96,798 - which is reflected in Form No. 26AS it was submitted by assessee before learned CIT that income shown in books of accounts is more than income shown in form no. 26AS.It was submitted that in schedule 13 other services income of Rs.1,41,12,922 - includes Tata AIG General Insurance Co. Ltd commission of Rs.20,000.00 . It was submitted that income as disclosed in Profit and Loss Account as per schedule 13 under heading income from services , sub-heading commission income net Rs.3,26,44,993 - which is outcome of Gross Amount of Commission received of Rs. 4,62,48,908 - less discount given Rs.1,36,03,915 - .It was submitted that net commission is disclosed in Profit and Loss account which is normal accounting practice followed by assessee year after year and certified by auditors. Thus, it was submitted that net amount disclosed as per Profit and Loss account tallies with income as per form no 26AS. learned CIT observed that AO asked assessee to reconcile Income between as declared in books of accounts and as reflected in form no 26AS but assessee reconciled only TDS figures as indicated in form no 26AS with TDS as reflected in books of accounts. learned CIT observed that assessee has submitted that difference is on account of accounting for net commission in books of accounts due to adjustment of discount given of Rs.1,36,03,915 - from gross commission of Rs.4,62,48,908 - , to reflect net commission income of Rs.3,26,44,993 - in books of accounts while Form No 26AS reflected gross commission income, which was submitted to be normal accounting practice followed by firm in earlier years. net amount of commission amounts were certified by auditors as disclosed in Profit and Loss Account. It was also observed by learned CIT that assessee submitted that there was no rental income from TATA AIG General Insurance Co. Ltd but said income was from professional sources and credited to Tour Income. It was 9 ITA 7774 Mum 2014 observed by learned CIT that there was no discrepancy as pointed by AO. learned CIT called for remand report from AO whereby AO submitted that assessee only reconciled TDS amount and did not reconciled difference in receipts as reflected in Profit and Loss account with Form No AS 26 and it was submitted by AO that difference to tune of Rs.1,74,09,425 - was thus added by AO to total income of assessee . learned CIT deleted additions made by AO and allowed appeal of assessee on this ground as assessee has shown total receipt of Rs.5,01,52,113 - in books of accounts against entries of Rs.4,99,45,153 - shown in form no 26AS which means that assessee has itself shown receipts more than given in form no 26AS and it was mainly due to method of accounting whereby net commission after deducting discount from gross commission is reflected in Profit and Loss Account while Form no 26AS reflected gross commission, which led to reconciliation of commission income after adjusting discount of Rs.1,36,03,915 - allowed. Thus, as per books gross commission income as per books came to Rs.4,62,48,180 - before adjusting discount , business auxiliary income of Rs. 30,17,339 - and tour income of Rs.9,03,932 - totaling to Rs.5,01,52,113 - against income as declared in form no AS26 of Rs.4,99,45,153 -. Thus, income as per profit and loss account before adjusting discount on commission was higher than income as perform no 26AS and hence addition to income of Rs.1,74,09,425 - was deleted by learned CIT vide appellate orders dated 22.10.2014. 9. Aggrieved by appellate order dated 22-10-2014 passed by learned CIT , Revenue is in appeal before Tribunal and it is say of learned DR that learned CIT has admitted additional evidences filed by assessee in appellate proceedings without sending same to AO for 10 ITA 7774 Mum 2014 his comments as mandated under Rule 46A of Income Tax Rules, 1962 and hence order of learned CIT is not sustainable in law. It was submitted by learned DR that despite several reminders , assessee did not come forward to give details before AO to reconcile difference between amount reflected as commission income in Profit and Loss Account as per books of accounts vis- -vis amount of income as reflected in AS 26. learned DR submitted that matter be remanded to AO for necessary verifications and examination. learned counsel for assessee relied upon orders of learned CIT . learned counsel for assessee drew our attentions to paper book filed and submitted that reply was given whereby details of TDS as per form 26AS and bifurcation of TDS was furnished before AO vide reply dated 14-02-2014 pb page58 . It was submitted that on 10-3-2014 i.e. after passing of assessment order dated 20-02-2014 by AO u s. 143 3 of Act , rectification application was moved with AO u s 154 of Act on 12-03-2014 which is placed at paper book page 59-61,66-75 . replies submitted before learned CIT in appellate proceedings is also placed in paper book page 62-65. remand report sent by AO is placed in paper book 76-78. replies submitted by assessee before learned CIT in response to remand report of AO is placed in paper book page 79-81. We have gone through all relevant documents as mentioned above and placed in paper book and submissions of both rival parties including orders of authorities below. assessee did not filed complete details of gross commission income and discount allowed separately before AO in assessment proceedings while only net figures of commission income were placed before AO which were reflected in books of accounts as net commission income earned by assessee while form no 26AS reflected gross commission income and hence mismatch of Rs.1,36,03,915 - being discount allowed by assessee out of commission income. This claim of 11 ITA 7774 Mum 2014 discount of Rs.1,36,03,915 - was never verified and examined by AO during assessment proceedings as only net commission income figures were there before AO as were reflected in Profit and Loss account of assessee as per books of accounts , and gross commission income figures were there before AO during assessment proceedings as were reflected in AS 26 , which difference of Rs.1,36,03,915 - was thereby added to income of assessee by AO as simplicitor difference in income as per books of accounts vis- -vis income as reflected in form no AS 26 , without examining and verifying claim of deduction claimed by assessee of discount allowed of Rs.1,36,03,915 - out of gross commission income as said facts of having allowed discount out of gross commission were never before AO. assessee raised this issue in proceedings u s 154 of Act filed on 12-03-2014 anterior to framing of impugned assessment order dated 20-02-2014 u s 143 3 of Act, which disclosure of details in proceedings u s 154 of Act is irrelevant to appellate proceedings arising from assessment order u s 143 3 of Act. assessee submitted replies before learned CIT in appellate proceedings whereby it explained difference between gross commission income and net commission income and that being discount allowed by assessee of Rs.136,03,915 - out of gross commission income. It is say of learned DR that additional evidences submitted by assessee were never forwarded by learned CIT to AO which is in violation of Rule 46A of Income Tax Rules , 1962 and assessee did not submit details to reconcile difference of receipts in books of account vis- -vis with receipts as reflected in form no 26AS. We are of considered view that interest of justice will be best served if issue is set aside and restored to file of AO for de- novo adjudication of matter on merits with respect to addition of Rs.1,74,09,425 made by AO on account of difference in receipts as reported in books of accounts vis- -vis receipts as reported in Form No 26AS inter-alia, including examination and verification of claim of discount 12 ITA 7774 Mum 2014 given by assessee of Rs.1,36,03,915 - out of gross commission income. Needless to say proper and sufficient opportunity of being heard shall be provided by AO to assessee in accordance with principles of natural justice in accordance with law. assessee will be allowed by AO to produce all necessary and relevant evidences and explanations to support its contentions . assessee is directed to co-operate with Revenue in set aside proceedings. We order accordingly. 10. In result, appeal filed by assessee in ITA No. 7774 Mum 2014 for assessment year 2011-12 is allowed as indicated above. Order pronounced in open court on 07th October, 2016. 07-10-2016 Sd - sd - C.N. PRASAD RAMIT KOCHAR JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 07-10-2016 [ . . . R.K., Ex. Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT - concerned, Mumbai 4. CIT- Concerned, Mumbai 5. , , DR, ITAT, Mumbai E Bench 6. [ Guard file. BY ORDER, True Copy Dy. Asstt. Registrar , ITAT, Mumbai Assistant Commissioner of Income-tax-11(3)(1), Mumbai v. Trail Blazer Tours (India) Private Limited