Addition made by AO based on mere assumption without making any cross-verification of evidences filed by assessee is not sustainable
Income—Distribution commission income—Assessee filed return of income—During assessment proceeding, AO noted that assessee entered into an agreement with M/s S for payment of distribution fees—As per said agreement, assessee would get 5% distribution commission of monthly fees received by M/s S but assessee showed distribution commission income which was lower than what it had to be—Therefore, AO held that assessee had suppressed income in form of distribution commission and accordingly, made addition in this regard—CIT(A) called for remand report where, AO had not pointed out any specific mistake so far alleged addition was concerned—Thus, CIT(A) allowed assessee’s appeal—Held, commission was receivable only when payment of monthly fee covered under distribution agreement was made before last date of following month and there were outstanding opening balance on account of fee, payment of which was not eligible for commission since same was not covered under agreement—Distribution commission from M/s S contained both old dues and current fees and distribution commission was available only on monthly distribution fees—This aspect was ignored by AO—Assessee filed detailed computation of commission, during assessment stage, however, AO without making any cross-verification of actual receipt of commission or enquiry with M/s. S to ascertain whether computation given by assessee was correct or not, disallowed amount—Therefore, action of AO insofar as this addition was concerned was not justifiable—Revenue’s ground dismissed.
ASSISTANT COMMISSIONER OF INCOME TAX & ANR. vs. INDIA CABLE NET CO. LTD. & ANR.
(2019) 55 CCH 0209 KolTrib