DCIT Vs Sharpwatch Investigation Security Pvt. Ltd. (ITAT Bangalore)
Proprietorship to Company Shift Causes 26AS Confusion: Form 26AS Mismatch & Commission Claims Sent Back: ITAT Orders Fresh Verification
Bangalore ITAT “B” Bench, in DCIT, Vs Sharpwatch Investigation Security Services Pvt. Ltd. (ITA No. 2156/Bang/2024, AY 2021-22; order dated 31.01.2025), set aside the order of CIT(A) & remitted issues relating to Form 26AS mismatch and commission expenditure back to AO for fresh consideration.
Revenue’s appeal, though time-barred by 103 days, was admitted after Tribunal condoned delay by applying the liberal principles laid down in Collector, Land Acquisition Vs Mst. Katiji (SC). Assessee, engaged in the business of security services, had declared income of ₹5.33 crore. AO made additions on two counts – (i) difference between turnover as per books & figures reported in Form 26AS, and (ii) disallowance of commission payments of ₹88.93 lakh paid to five agents, doubting genuineness of services.
CIT(A) partly allowed Assessee’s appeal by estimating profit at 6.56% on the alleged 26AS difference & accepting commission expenditure. Before Tribunal, it was noted that during the year Assessee’s business was converted from proprietorship to company, resulting in TDS & Form 26AS reporting continuing under the old PAN, a fact not disputed by Revenue. Tribunal observed that such wrong reporting in Form 26AS required proper reconciliation with books, which had not been adequately examined.
On commission issue, Tribunal found contradictory claims by Assessee — before AO, payments were stated to be for supply of manpower, whereas before CIT(A), they were claimed to be for introduction of new clients. Though payments were made & some agents had filed returns, actual services rendered were not proved with cogent evidence.
Accordingly, Tribunal remanded both issues to AO with direction to provide reasonable opportunity to Assessee to substantiate reconciliation of turnover & genuineness of commission expenditure. Appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal filed by the Revenue against the Order passed by the National Faceless Appeal Centre (NFAC), vide DIN and Order No.ITBA/APL/S/250/2024-25/1064961531(1) dated 17.05.2024, on the following grounds of appeal:
