2018 (9) TMI 1997 - AT - Income Tax

Appellate Tribunal Overturns CIT(A)'s Decision on TDS Credit Mismatch

The appellate tribunal allowed the appeal of the assessee, ruling that the addition of amounts totaling &8377; 62,27,292/- and &8377; 2,85,366/- ... Treatment of TDS credit vis-a -vis actual receipt - assessment addition based on mismatch between 26AS and return - proof of actual receipt and attribution of commission incomeTreatment of TDS credit vis-a -vis actual receipt - proof of actual receipt and attribution of commission income - Whether the additions made by the AO and confirmed/enhanced by the CIT(A) on account of amounts shown as TDS in the Department's database but not received by the assessee are sustainable - HELD THAT: - The Tribunal examined the assessee's books, the Profit & Loss account and correspondence from the principal (M/s. DWL/Aircel). The assessee's P&L shows commission income of Rs. 3,17,699/-, and a subsequent letter from M/s. DWL dated 08.02.2012 explained that Rs. 65,12,658/- represented payments made directly to retailers as recharge commission and activation charges on behalf of the assessee, whereas only Rs. 3,17,699/- was actually paid to the assessee. The earlier letter of M/s. DWL dated 28.12.2010 (relied upon by the CIT(A)) confirmed the aggregate figure but did not establish that the larger sums were disbursed to the assessee. On the materials before it, and having cross checked figures with the P&L, the Tribunal held that the amounts reflected in the TDS database could not be treated as the assessee's income where the principal had in fact paid those sums to retailers and only a specified commission was paid to the assessee. Accordingly, the additions made to the assessee's income could not be sustained. [Paras 5, 6]Addition of Rs. 62,27,292/- and enhancement of Rs. 2,85,366/- cannot be sustained; the commission income attributable to the assessee is Rs. 3,17,699/- and the appeal is allowed.Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2008-09, holding that amounts shown in the Department's TDS records as paid by the principal to retailers could not be taxed as the assessee's income where contemporaneous books and a clarificatory letter from the principal establish that only a specified commission was paid to the assessee; the impugned additions were set aside. Issues:1. Addition of &8377; 62,27,292/- and &8377; 2,85,366/- based on TDS credit mismatch.Analysis:The main issue in this case pertains to the addition of amounts totaling &8377; 62,27,292/- and &8377; 2,85,366/- by the Ld. CIT(A) based on a mismatch of TDS credit claimed by the assessee and the TDS data in the Department's records. The AO added the initial amount of &8377; 62,27,292/- to the assessee's total income, which was reportedly received from the principal company. The Ld. CIT(A) further enhanced this addition by &8377; 2,85,366/- based on confirmation from the principal company regarding payments made to the assessee. The appellate tribunal was approached by the assessee against this decision.Upon hearing the submissions and examining the case details, it was revealed that the assessee, a distributor under the principal company, had shown a total turnover of &8377; 2,24,22,061/- with a commission received of &8377; 3,17,699/-. The dispute arose from the commission payments made by the principal company directly to retailers, which were reflected as TDS credit on the assessee's account. The appellate tribunal noted that the actual commission attributable to the assessee was only &8377; 3,17,699/-, as clarified by the principal company in a letter dated 08.02.2012. This clarification aligned with the figures in the P&L account and previous correspondence. Consequently, the tribunal concluded that the assessee should not be held liable for amounts not disbursed to them by the principal company.In light of the evidence presented and the clarification provided by the principal company, the appellate tribunal allowed the appeal of the assessee. The tribunal's decision was based on the fact that the commission income attributed to the assessee was accurately reflected in the records, and the disputed amounts were not actually received by the assessee. Therefore, the addition of &8377; 62,27,292/- and &8377; 2,85,366/- was deemed unwarranted, leading to the allowance of the assessee's appeal against the Ld. CIT(A)'s decision.