TaxTMI 
TaxTMI 
2012 (9) TMI 63
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....e business of the assessee is to facilitate Air Cargo Movement as a Commission agent for various airlines by booking cargo for them, issuing airway bill, collecting freight on their behalf in respect of prepaid freight paid consignments and consequently reimbursing the same in a consolidated manner to the airlines. The assessee is getting business directly as well as through sub agents. The return for the A.Y. 2003-04 was filed on 27.11.2003 declaring an income of Rs. 1832894/- which was processed u/s. 143(1) of the I.T. Act, 1961 on 8.3.2004. No scrutiny assessment u/s. 143(3) of the I.T. Act was carried out in this case. Later on, discrepancy to the tune of Rs. 48,99,461/- was noticed by the Assessing Officer between the commission income shown by the assessee in its profit and loss a/c and the commission income as per TDS certificates. The discrepancy noticed by the Assessing Officer was as follows:- Commission income as per TDS Certificate Income as per P/L account Difference Rs. 1,06,15,785/- Rs. 57,16,324/- Rs. 48,99,461/- In the opinion of Assessing Officer, this difference of Rs. 48,99,461/- was liable to be added back to the taxable income of the assessee. Again the....
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.... amount of Rs. 17,12,743/- as petty commission on which no tax was deductible) and the same was credited in the books of account. However, the assessee also incurred expenses on account of commission of Rs. 58,42,946/- paid to sub agents, rebate and discount Rs. 4,41,757/- and TC charges Rs. 3,27,500/- during the relevant assessment year and these expenses were netted off from the commission income and net figure of Rs. 57,16,324/- (Rs. 1,23,28,528) - (Rs. 58,42,946 + Rs. 3,27,500) was shown in the profit and loss account for the assessment year 2003-04. It was further submitted that assessee accounted for all the income and receipts as per the TDS certificates in the books of accounts. This method of the netting off the commission income with related expense was as per the accounting method and the same method has regularly been followed by the assessee. 4.2 Regarding freight receipts, it was submitted that the freight payable to the airlines is billed to the client on whose behalf assessee handles outbound consignments. Since freight collected for carriage of goods on behalf of airlines is only a receipt against liability already incurred and credited to airlines account this do....
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....re also produced. Assessing Officer did not consider them before making the additions. Assessee further submitted that what was taxable in the hands of assessee was the commission earned less commission paid. The facts about the netting of commission was also disclosed by way of note to the balance sheet for the relevant assessment year. The assessee had been adopting this method of accounting right since inception and the same was accepted by department in the past. Considering the above Ld. Commissioner of Income Tax (A) held as under:- "6.2 Keeping in view the aforesaid trend of the business and the accounting principles, the case of the appellant was examined. It is seen that the appellant has credited the "net" commission income in it's profit and loss A/C A note in this regard was found to be given by the auditors of the appellant in the notes to the accounts to the balance sheet as on 31.3.2003 (as per clause 3). The Assessing Officer's finding in the assessment order is found to be incorrect in this regard. It is further seen that during the reassessment proceedings before the AO, the appellant has duly furnished the reconciliation statement of commission as per TDS certif....
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....issioner of Income Tax (A) concluded as under:- "6.3 On these facts and circumstances of the case, I am of the considered opinion that the AO has erred in considering all the amounts received by the appellant 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. The learned Assessing Authority has considered entire payment made 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. Profit is income less expenditure." 5. Against the above order the Revenue is in appeal before us. 6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that Ld. Commissioner of Income Tax (A) has given a finding that assessee has credited the net commission income in profit and loss account. A note in this regard was found to be given by the auditors of the assessee in the notes to the accounts. We further note that assessee has duly furnished the reconciliation statement o....