2016 (1) TMI 69 - AT - Income Tax

Addition on the consultancy charges paid to sister concern - CIT(A) deleted the addition - Held that - As argued by the ld. Departmental Representative that no details are available as to why the present assessee has received the amount on behalf of the sister concern i.e. East Cost consultant from M/s. Commercial Buildwell Pvt. Limited. The facts brought on record do not suggest the reason for the same and services rendered by East Cost consultant to M/s. Commercial Buildwell Pvt. Limited. Being so, in our opinion, it requires re-examination of the issue. We are not in a position to express any opinion regarding the nature of service rendered by East Cost consultant and in the absence of the reason for receipt of the above amount by the assessee on behalf of the East Cost consultant, from M/s. Commercial Buildwell Pvt. Limited. Accordingly, we are not in a position to uphold the of the Commissioner of Income Tax (Appeals) and accordingly this issue is remitted back to the Assessing Officer for fresh consideration. - Decided in favour of revenue by way of remand. Addition being the sale of ancestral property reminded as unexplained - CIT(A) deleted the addition - Held that - It was brought on record by the Commissioner of Income Tax (Appeals) that the assessee has received this amount from his brother Shri. P. Srinivasan as loan for which the assessee had paid interest thereon. Further, the name of the assessee s mother is typed instead of assessee s brother, is only a typographical error which is to be condoned. Since the assessee s brother Shri. P. Srinivasan has confirmed the loan given to the assessee and the transaction was routed through banking channel, the identity of the lender is proved as well as the genuineness of the transaction. Accordingly, the deletion of addition made by the Commissioner of Income Tax (Appeals) is justified. - Decided against revenue Addition on the cash deposit with Axis Bank being unexplained cash deposits - CIT(A) deleted the addition - Held that - As narrated by the Commissioner of Income Tax (Appeals) the funds transactions are duly reflected in the books of accounts of the assessee and the assessee also explained the parties from whom the funds were received. Hence, these deposits cannot be claimed as unexplained deposits. In our opinion, the findings of the Commissioner of Income Tax (Appeals) is justified and the same is confirmed. - Decided against revenue

Summary

Issues Involved:
1. Deletion of addition of Rs. 15,50,000/- made by the Assessing Officer on consultancy charges paid to a sister concern.
2. Deletion of addition of Rs. 15,00,000/- made by the Assessing Officer being the sale of ancestral property treated as unexplained.
3. Deletion of addition made by the Assessing Officer on cash deposits with Axis Bank of Rs. 35,55,580/- and State Bank of Rs. 5,64,325/- being unexplained cash deposits.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 15,50,000/- on Consultancy Charges:
The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting the addition of Rs. 15,50,000/- made by the Assessing Officer (AO) on consultancy charges paid to the assessee's sister concern, M/s East Coast Consultants. The AO observed that the payment was made through a book entry on the last day of the financial year without actual cash flow. The assessee claimed the amount was collected on behalf of East Coast Consultants and subsequently paid by cheque, which was reflected in the sister concern's return of income. The CIT(A) verified the documents and deleted the addition. However, the Tribunal found that the facts did not clearly explain the reason for the receipt and the nature of services rendered by East Coast Consultants. Hence, the Tribunal remitted the issue back to the AO for fresh consideration.

2. Deletion of Addition of Rs. 15,00,000/- on Sale of Ancestral Property:
The Revenue challenged the CIT(A)'s deletion of Rs. 15,00,000/- added by the AO as unexplained credit. The assessee explained that the amount was a loan from his brother, Shri P. Srinivasan, who confirmed the loan. The AO did not consider this explanation and added the amount as unexplained credit. The CIT(A) found that the loan was confirmed by the brother, routed through banking channels, and the interest was paid on it, proving the genuineness of the transaction. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

3. Deletion of Addition on Unexplained Cash Deposits:
The Revenue contested the deletion of additions made by the AO on cash deposits of Rs. 35,55,580/- with Axis Bank and Rs. 5,64,325/- with State Bank, which were treated as unexplained. The assessee, an advocate, showed gross earnings of Rs. 67,41,080/- as consultancy charges. The AO observed discrepancies in cash deposits and concluded that the cash book and explanations provided by the assessee were unreliable. The CIT(A) found that the cash deposits were duly reflected in the books of accounts and cash flow statements, and the AO's calculations contained errors. The Tribunal agreed with the CIT(A) that the deposits were explained and reflected in the assessee's accounts, confirming the deletion of the additions.

Conclusion:
The appeal of the Revenue was partly allowed for statistical purposes, with the Tribunal remitting the issue of Rs. 15,50,000/- consultancy charges back to the AO for fresh consideration, while upholding the CIT(A)'s decisions on the other two issues. The order was pronounced on 11.11.2015.