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January 16, 2023

Once the TDS Element is reflected in Form 26AS, the AO is unable to claim that the parties are not real

by CA Shivam Jaiswal in Income Tax

Once the TDS Element is reflected in Form 26AS, the AO is unable to claim that the parties are not real

Fact and issue of the case

1. Briefly stated, the facts of the case are that the assessee is engaged in the business of real estate. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed large sales promotion expenses in its profit and loss account. Therefore, the assessee was asked to produce the details regarding large sales promotion expenses.

2. The assessee did not furnish complete details. Therefore, once again, the assessee was asked to produce entire details with regard to large sales promotion expenses. The assessee was also asked to give details party-wise that per party how many flats were booked and how much payment was made for booking flat with documentary evidences and  to justify the claim of such large sales promotion expenses amounting to Rs. 1,03,94,138/-.

S. No.Name of the partyStatusTotal amount of transaction(in Rs)Nature of expense
1.M/s wonder Media Inc.Returned Undelivered5,48,610/-Advertising through Hoarding Flex,Leaflet canopy,etc.  
2.M/s KP Ad Agency  Returned Undelivered9,65,076/-Advertising through Hoarding Flex,Leaflet canopy,etc.  
3.M/s The Transaction PointReturned Undelivered6,80,000/-Commission on sale of flat  
4.M/s Mathur Associates the property junctionsReturned Undelivered10,20,000/-Commission on sale of float  
1  32,13,686/- 

3. As is evident from the above chart, letter issued u/s 133(6) of the Act returned unserved. However, later on, confirmations were received from M/s The Transaction Point and M/s Mathur Associates. But the Assessing Officer found that M/s Mathur Associates has confirmed Rs. 12,68,688/- instead of Rs. 10,20,000/- and The Transaction Point confirmed Rs. 7,64,047/- instead of Rs. 6,80,000/-.

4. In respect of other payments, the Assessing Officer was of the view that the assessee could not prove the genuineness of the parties and, therefore, the same remained unverifiable and disallowed Rs. 32,13,686/-.

5. The assessee carried the matter before the ld. CIT(A) but without any success.

6. Before us, the ld. counsel for the assessee drew our attention to the ledger account received from M/s Mathur Associates and The Transaction Point and pointed out that in addition to the commission income, there is an element of Service Tax which has been added to the commission income and which is cause for difference in the amount confirmed by the parties and claimed by the assessee.

Observation by the Tribunal

1. The Tribunal has given thoughtful consideration to the orders of the authorities below and have carefully considered the documents referred to hereinabove. We find force in the contention of the ld. counsel for the assessee. Confirmation of accounts from M/s Mathur Associates and The Transaction Point clearly show that in addition to commission, there is an element of Service Tax mentioned in the account and the allegation of the Assessing Officer that the amount confirmed by the parties differ from the amount claimed by the assessee does not hold any water in as much as the difference is because of the Service Tax.

2. In so far as advertisement expenses are concerned, exhibits clearly explain the transaction wherein complete details have been furnished along with TDS details.

3. Once TDS element is reflected in Form No. 26AS, the Assessing  Officer cannot allege that the parties are not genuine. Moreover, full details are available on record. Therefore, we do not find any reason in sustaining the disallowance. Findings of the ld. CIT(A) are set aside and the Assessing Officer is directed to delete the impugned disallowance.

4. In the result, the appeal of the assessee in ITA No. 4523/DEL/2019 is allowed. The order is pronounced in the open court on 30.11.2022.

Read the full order from here

In-the-income-tax-apellete-word

Conclusion

The tribunal has ruled in favour of the assessee and dismiss the appeal

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