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ACIT, Circle-49 (1) , New Delhi Versus Sh. Balasubramaniam Alagri, Prop. Ace Instruments

2017 (9) TMI 429 - ITAT DELHI

Advance Commission shown as Sundry Creditors for advances - inaccurately treated the Commission as Advance Commission to defer the tax liability willfully adjusted in future P&L A/c and added back to income- Disallaowance of Commission paid to various parties including spouse - Recorded reason and notice u/s 148 is issued - Set off of House Property Loss against Business Income - penalty proceedings u/s. 271(1)(c) initiated for concealing/ furnishing inaccurate particulars of income - Held That .....

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The Revenue has filed these two Appeals against the common impugned Order dated 26.8.2015 of the Ld. CIT(A)-17, New Delhi relevant to assessment year 2012-13 & 2011-12 respectively. Since the issues involved in these appeals are common and identical, except the difference in figure, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience, by dealing with ITA No. 5859/Del/2015 (AY 2011-12). 2. The grounds raised in ITA No. 5859/Del/20 .....

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lter or amend any / all the grounds of appeal before or during the course of hearing. 3. The grounds raised in ITA No. 5858/Del/2015 (AY 2012-13) read as under:- 1. Whether the CIT(A) has erred in deleting the addition of ₹ 37,62,212/- on account of advance commission by treating it was an advance commission instead of commission of relevant year without considering the fact that the warranty of the equipment is binding on the Original Equipment Manufacturer (OEM) and not on commission age .....

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8377; 1,00,67,907/- against return income of ₹ 34,67,890/- vide order dated 13.3.2013. During the assessment proceedings for AY 2010-11 the AO made addition of ₹ 30,03,946/- on account of advance commission which was booked by the assessee under the head sundry creditors for advance . The AO held that the assessee had inaccurately treated the Commission as Advance Commission for the year to defer the liability of tax and to adjust this willfully in future in the Profit and Loss accou .....

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and AY 2010-11 comes to ₹ 2,86,143/- (Rs. 3290089-3003946). Secondly, the assessee has again shown commission paid of ₹ 3,00,000/- under the head of direct expenses. Therefore, the AO formed an opinion that income chargeable to tax to the extent of ₹ 5,86,143/- (Rs. 2,86,143 + 3,00,000/-) has escaped assessment. Accordingly, after recording reasons notice u/s. 148 of the Act was issued on 27.6.2013 and served upon the assessee through speed post. In response to the aforesaid n .....

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he same, the AR of the assessee attended the proceedings from time to time and submitted relevant details. During the year, the assessee has shown income from Business or Profession and income from other sources. The assessee has also set off house property loss with the business income. During the assessment proceedings, the AO observed that the assessee has shown advance commission as on 31.3.2011 amounting to ₹ 32,90,089/- and the same has been booked under the head Sundry Creditors for .....

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made by the AO for AY 2010-11 on account of advance commission. The CIT(A) deleted the addition on this issue. Further, the assessee has submitted that the gross receipt of the year under reference includes of ₹ 30,03,946/- received as advance commission in the AY 2010-11 and treated as income in the year under reference. 4.1 AO further observed that Department has not accepted the order of the Ld. CIT(A) for AY 2010-11 and the Departmental Appeal is pending before the ITAT. During the as .....

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s received from customers are recognized over the period of contract recognizing it on time basis as a Standard Accounting Policy which is being regularly followed by us. 4.2 The AO found the assessee's contention not tenable and held that the assessee is not the Original Equipment Manufacturer (OEM). He gets commission for procuring orders from the customers on the behalf of OEM. The warranty of the equipment is binding on the OEM and in case of any defect, OEM is liable to rectify and make .....

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f the Auditor, it is noticed that the assessee follows AS-9 accounting standard issued by the ICAI on 'revenue recognition . It is mentioned in the Notes on Account that the Commission (Overseas) are recognized on realization basis. In contrast to the same, the assessee is treating the Commission as advance Commission to defer the liability of tax and to adjust this will fully in future in the P & L account. 4.4 Further, the assessee has submitted that advance commission amounting to  .....

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the year and accordingly added back to the income of the assessee. The penalty proceedings u/s. 271(1)(c) of the I.T. Act, 1961 are initiated for concealing/furnishing inaccurate particulars of income. Accordingly, the AO completed the assessment at ₹ 72,32,110/- u/s. 147/143(3) of the I.T. Act, 1961 on 02/03/2015, after making additions. Against the aforesaid assessment order, assessee appealed before the Ld. CIT(A)-XXVIII, New Delhi, who vide his common impugned order dated 26.8.2015 ha .....

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