2015 (5) TMI 608 - AT - Income Tax

Additions on account of Gross Receipts - A.O. making addition by alleging that the same has been accrued to the Appellant from M/s. Standard Chartered STCI Capital Markets Ltd. - Held that - We agree with the revenue authorities that since the amount became due and/or accrued to the assessee, the income has emerged and therefore had to be taken as income of the assessee. The case cited by the AR has different facts, and till then it would remain contingent. But in the case in hand, the work was completed and it was the assessee who failed to have a proper collection from her clients to be paid to SC-STCI, on this default by the assessee, the amount though due was not paid to her, therefore, it was her income and the revenue authorities have correctly brought the same tax. As a result, we sustain the orders of the revenue authorities. - Decided against assesse. Irrecoverable amount of R21,20,714/- retained by M/s. Standard Chartered-STCI Capital Markets - whether the same may be allowed as bad debt? - Held that - The assessee actually suffered loss, not only from the clients, who did not honour their commitments, but from her principal, i.e. SC-STCI, as well who did not pay her in line of their receipts from business and as per clause 6.15. We, therefore, hold that it was a business loss for the year under consideration. We, therefore, direct the revenue authorities to allow ₹ 21,20,714/- as business loss and consequential benefits attached to it. - Decided in favour of assesse. Payment of commission by the assessee to its constituents - non-deduction of TAS - Held that - Since the revenue authorities have disallowed the payments of ₹ 4,08,872/- and ₹ 13,08,872/-, for non-deduction of TAS, the issue has created a major block to come to a logical conclusion.In these circumstances, we are of the opinion that these issues need to be adjudicated afresh in line with legal provisions of section 40(a)(ia). Thus direct the AO to examine the deduction of TAS and if the contentions of the assessee are correct, allow the expense. - Decided in favour of assesse for statistical purposes. Unexplained cash credit u/s 68 & Unexplained expenditure u/s 69C - Held that - We have not been able to find out as to how the two figures were derived by the AO. In such a circumstance, most appropriate view would be that the orders of the revenue authorities be set aside with the directions to the AO to re-adjudicate the issues, if required. - Decided in favour of assesse for statistical purposes.

Summary

Issues Involved:
1. Additions on account of Gross Receipts
2. Disallowance on account of Bad Debts
3. Disallowance of Commission Paid
4. Disallowance under Section 40(a)(ia)
5. Addition on account of Unexplained Cash Credit under Section 68
6. Addition on account of Unexplained Expenditure under Section 69C
7. Liability to pay interest under Sections 234A, 234B, and 234C

Detailed Analysis:

1. Additions on account of Gross Receipts
The assessee contested the addition of Rs. 21,20,714 made by the AO, arguing that the amount was retained by Standard Chartered-STCI Capital Markets Ltd. due to non-clearance of dues by clients. The assessee claimed this amount was irrecoverable and should either be deleted or allowed as a bad debt or business loss. The CIT(A) upheld the AO's decision, stating that the income had accrued and must be taxed. The ITAT agreed with the revenue authorities, stating that the income had emerged and was correctly brought to tax, rejecting grounds A2, A3, and A4.

2. Disallowance on account of Bad Debts
The assessee claimed Rs. 6,13,413 as bad debts, which was disallowed by the AO and upheld by the CIT(A). The ITAT noted that the issue was similar to the one in Ground A and required further examination. The ITAT set aside the orders of the revenue authorities on this issue and directed the AO to adjudicate afresh, allowing grounds B6 and B7 for statistical purposes.

3. Disallowance of Commission Paid
The assessee contested the disallowance of Rs. 4,08,872 out of the total commission paid and the direction to disallow Rs. 13,08,872 under Section 40(a)(ia). The ITAT noted that the revenue authorities had disallowed the payments for non-deduction of TDS. The ITAT set aside the orders and directed the AO to re-examine the deduction of TDS and allow the expense if the assessee's contentions were correct, allowing grounds C8, C9, D10, and D11 for statistical purposes.

4. Disallowance under Section 40(a)(ia)
This issue was linked to the disallowance of commission paid. The ITAT directed the AO to re-examine the deduction of TDS and allow the expense if the assessee's contentions were correct, as discussed in the previous section.

5. Addition on account of Unexplained Cash Credit under Section 68
The assessee contested the addition of Rs. 31,427 as unexplained cash credit. The ITAT noted that the assessment order did not clearly explain how this figure was derived. The ITAT set aside the orders of the revenue authorities and directed the AO to re-adjudicate the issue, allowing ground E12 for statistical purposes.

6. Addition on account of Unexplained Expenditure under Section 69C
The assessee contested the addition of Rs. 68,941 as unexplained expenditure. Similar to the unexplained cash credit issue, the ITAT noted the lack of clarity in the assessment order. The ITAT set aside the orders and directed the AO to re-adjudicate the issue, allowing ground F13 for statistical purposes.

7. Liability to pay interest under Sections 234A, 234B, and 234C
The assessee denied liability to pay interest under these sections. The ITAT noted that the computation of interest is consequential and depends on the final figure of assessed income.

Conclusion:
The appeal was partly allowed, with several issues being remanded back to the AO for fresh adjudication. The ITAT directed the revenue authorities to re-examine the disallowances and additions, particularly concerning the gross receipts, bad debts, commission paid, unexplained cash credit, and unexplained expenditure. The liability to pay interest under Sections 234A, 234B, and 234C will depend on the final assessed income.