TDS Mismatch on Commission Income Compared to Form 26AS: ITAT Upholds Deletion of ₹2.16 Crore Addition citing Audited Books [Read Order]
The Tribunal held that when the assessee's audited books of account reflected all total receipts (including cash and bank transactions) and the discrepancy only pertained to a mismatch with Form 26AS entries, the addition under Section 69A was not justified
TDS, Commission Income, Form 26AS
TDS, Commission Income, Form 26AS
The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) confirmed the deletion of an addition of ₹2,16,27,822 made under Section 69A of the Income Tax Act, 196 due to a mismatch between the commission and other income reported in the books and the figures reflected in Form 26AS.
Samarth Lifestyle Retailing Pvt. Ltd. (assessee), a private limited company, was selected for complete scrutiny for the Assessment Year (A.Y.) 2018-19, partly on the issue of "Low income compared to large commission receipts."
The Assessing Officer (AO) observed a discrepancy of ₹2,33,29,736 in commission income compared to the figures reflected in Form 26AS and issued a show cause notice.
The assessee furnished a detailed reconciliation, explaining that the entire receipts reflecting in Form 26AS were already incorporated and declared in the audited financial statement under the head "Commission and other income" and "Rent and CAM income."
The assessee provided party-wise explanations, noting that in some cases the TDS deductor had made mistakes in reporting the section (e.g., reporting under Section 194-I instead of 194-C or 194-H) or the reported amount in 26AS was incorrect.
The AO rejected the detailed reconciliation on the grounds that the assessee failed to provide contra confirmations from the deductor parties and did not submit sufficient supporting evidence for the transactions.
The AO proceeded to make an addition of ₹2,16,27,822 under Section 69A of the Act and treated the cash deposits/receipts as unexplained income, without fully addressing the detailed reconciliation provided for the Form 26AS mismatch.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) observed that the assessee had explained the source of its receipts, stating that all transactions were reported in the books of account, which were duly audited under Section 44AB of the Act.
The CIT(A) further noted that the source of the receipts, including cash, was fully explained as cash received from work carried out and cash received from debtors. The CIT(A) concluded that the addition and treating the receipts as unexplained under Section 69A of the Act was not justified when the amounts were already accounted for in the audited books.
Aggrieved by the CIT(A)'s order, the department filed an appeal before the ITAT. The department argued that the CIT(A) erred by deleting the addition without calling for a remand report on the new explanations/material.
The two-member bench comprising Gagan Goyal (Accountant Member) and Narinder Kumar (Judicial Member) confirmed that the assessee had explained the total receipts, and the addition was made simply on the basis of a mechanical mismatch with Form 26AS entries, ignoring the audited financial statements.
The tribunal noted that when all transactions are recorded in the books of account, and the books are audited, an addition under Section 69A (unexplained money) cannot be made merely because of reconciliation issues with Form 26AS entries.
The Tribunal upheld the deletion of the addition. In the result, the appeal filed by the department was dismissed.
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