2014 (6) TMI 801 - AT - Income Tax

Accrual of income - Addition of advance received before commencement of professional work It was contended by the Ld. Counsel that since the matter before the SEBI was taken up only in 2009 and the proceedings before the SEBI concluded by its order dt. 23.4.2010, the assessee booked the advance received ₹ 12 lakhs as income for financial year 2009-10 pertaining to A.Y. 2010-11 - Held that - The AO has not considered the chronological events of the case - AO has simply added ₹ 12 lakhs on the belief that no client would give money to an Advocate unless some work is done by that Advocate - CIT(A) has confirmed the addition stating that the AO has doubted the genuineness of the evidence filed before him the issue needs re-adjudication at the assessment level thus, the matter is required to be remitted back to the AO for adjudication - assessee is directed to file the details of chronological events which took place before the SEBI alongwith confirmations from the parties Decided in favour of Asssessee.

Summary

Issues:
Appeal against CIT(A) order upholding addition of advance received before professional work commencement for A.Y. 2007-08.

Analysis:
The appellant, a Legal Consultancy Services provider, contested the addition of Rs. 12 lakhs received as advance before starting professional work. The Assessing Officer (AO) noted advance receipts but found no receipts/bills produced. AO believed no client would pay an advance without work done. CIT(A) upheld the addition as business receipts after considering submissions and a remand report. Appellant argued that the advance was for work done in A.Y. 2010-11, shown as income then and assessed accordingly. The Departmental Representative supported lower authorities' findings.

The Tribunal observed the AO did not consider chronological events and added the amount based on a presumption. Considering this, the issue required reassessment at the assessment level. The Tribunal directed the appellant to provide details of events before SEBI with confirmations from parties for AO's fresh verification. Additionally, the AO was instructed to verify if the same income was offered for tax in A.Y. 2010-11 and act accordingly. The appeal was allowed for statistical purposes, and the order was pronounced on 6th June 2014.