AO Cannot Tax Gross Receipts Where Real Income is Service Charges | ITAT

Case Details: Deputy Commissioner of Income-tax vs. MKF Logistics (P.) Ltd. - [2025] 181 taxmann.com 740 (Delhi - Trib.)

Judiciary and Counsel Details

• Yogesh Kumar U.S., Judicial Member & Srifaur Rahman, Accountant Member
• Om Prakash, Sr DR for the Appellant.
• Saksham Garg, CA & Ajay Wadhwa, Adv. for the Respondent.

Facts of the Case

The assessee, MKF Logistics (P.) Ltd. was engaged in the business of freight forwarding and handling of cargo. For A.Y. 2016-17, it filed its return of income declaring a total revenue of about Rs. 31.32 lakhs. During assessment proceedings, the Assessing Officer observed that the gross receipts reflected in Form 26AS were substantially higher than the turnover disclosed in the profit and loss account.

The assessee submitted that, in the course of its freight forwarding business, it collected gross amounts from customers, of which only the service charges retained by it constituted its income. The remaining amount represented freight charges payable to airlines or shipping companies. These freight collections were credited to a separate “freight payable” account and were neither routed through the profit and loss account nor claimed as expenditure.
The Assessing Officer, however, treated the difference between the gross receipts reflected in Form 26AS and the income disclosed by the assessee as undisclosed income and made an addition. On appeal, the Commissioner (Appeals) deleted the addition, against which the Revenue preferred an appeal before the Tribunal.

Tribunal Held

The Tribunal held that, in a freight forwarding business, the assessee’s real income is confined to the service charges earned, rather than the entire gross collections received from customers. It noted that the assessee had furnished detailed reconciliations along with documentary evidence demonstrating remittance of freight charges to airlines and shipping companies, and that such amounts were not claimed as expenditure.

The Tribunal further observed that the mere reflection of gross receipts in Form 26AS could not, by itself, justify an addition unless it was established that the entire amount constituted consideration for services rendered by the assessee. Accordingly, the Tribunal upheld the order of the Commissioner (Appeals), deleted the addition, and dismissed the Revenue’s appeal.