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Shikha Distributors (P) Ltd. Vs. ITO Wd-10(3) Kol. Page 2 The issue raised by assessee is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹24,35,564/- on account of short reporting of income.

3. Briefly stated facts are that assessee, a private limited company is a C & F agent of Cipla Ltd. The assessee on behalf of Cipla Ltd. is receiving goods, storing and distributing the goods and earning income from such activities. The assessee in the year under consideration has declared total gross receipts for ₹1,40,07,155/-. However, it was observed by the AO from the Tax Deducted at Source (TDS) certificate that TDS was deducted by Cipla Ltd. at ₹ 1,64,42,719/- only. Thus, AO observed the difference between total gross receipt shown by the assessee and Cipla Ltd., for ₹24,35,564/-. The AO called upon the assessee to clarify the difference of ₹24,35,564/- as discussed above. In compliance thereto, assessee submitted that there was reimbursement of expenses for ₹11,03,562/- and service tax of ₹14,28,730/- which was received from Cipla Ltd and on the same amount the Cipla Ltd. has also deducted TDS though the Cipla Ltd was not liable to deduct TDS from the amount of reimbursement and service tax. Therefore, the impugned difference on account of TDS has arisen in the income declared by the assessee and the income observed by the AO. However, AO after perusal of the agreement between assessee-company and Cipla Ltd. observed that the reimbursement expense by Cipla Ltd. will be over and above the commission on sales. The assessee in support of its claim also submitted a certificate in the name of Cipla Ltd showing that TDS was deducted on reimbursement amount and service tax amount as well. However, AO disregarded the contention of the assessee by observing that the name and designation of the signing authority on the certificate was not mentioned. Finally, AO treated the amount of ₹24,35,564/- as undisclosed income and added to the total income of assessee.

4. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that Cipla Ltd., has reimbursed a sum of ₹11,03,562/- on which the TDS was deducted by Cipla Ltd. The assessee Shikha Distributors (P) Ltd. Vs. ITO Wd-10(3) Kol. Page 3 further submitted that balance amount of ₹14,28,730/- was representing the service tax on which also Cipla Ltd. deducted the TDS. As such, Cipla Ltd was not liable to deduct the TDS on the aforesaid amount. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:-

3. For that the Ld. CIT failed to appreciate that out of total receipts, a sum of Rs.14,28,730/- was relating to service tax component on which TDs was deducted by the payer but the same cannot be considered as the income of the assessee.

4. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal."

5. Ld. AR for the assessee filed paper book which is running pages from 1 to 40 and submitted that Cipla Ltd. has confirmed the amount of commission paid to the assessee in response to the notice issued u/s. 133(6) of the Act. The Ld. AR drew our attention on pages 22 and 23 of the paper book where the reply of the assessee u/s. 133(6) of the Act was placed. He reiterated the same submissions as were made before Ld. CIT(A).

On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

6. We have heard the rival contentions of both the parties and perused the materials available on record and perused the order of Authorities Below. We find that there is no dispute with regard to the facts of the case therefore, the same are not repeated here for the sake of brevity. At the outset, we find that the reimbursement of expense has been shown by the assessee in its income as reimbursement of expenses for ₹11,03,562/- as evident from the profit and loss account placed on page 6 of the paper book. Therefore, we find that the Shikha Distributors (P) Ltd. Vs. ITO Wd-10(3) Kol. Page 5 observation of Authorities Below that assessee has not shown reimbursement of expense in the income is factually incorrect. Therefore we reverse the order of Ld. CIT(A) in this regard and direct the AO to delete the addition. 6.1 Now, coming to the addition made by Authorities Below on account of service tax of ₹14,28,730/-, in this regard, we find that Cipla Ltd. has duly furnished its confirmation by stating that TDS was deducted on the amount of service tax. The confirmation of Cipla Ltd. is placed on pages 24 and 25 of the paper book. Besides the above the Authorities Below have not brought any defect in the books of account of assessee. Had there been undisclosed income of the assessee then same could have been ascertained from the ledger copies of Cipla Ltd. As such, we find that the addition has been made by Authorities Below on surmise and conjecture. In rejoinder Ld. DR has also not brought anything on record contrary to the arguments placed by Ld. AR. In this view of this matter we reverse the order of Ld. CIT(A) and directed the AO to delete the addition. Hence, this ground of assessee is allowed.