2016 (1) TMI 859 - AT - Income Tax

Addition on interest income on the basis of AIR data - Held that - There is no dispute to the fact that the assessee is following mercantile system of accounting. Moreover, as per the AIR information available in Assessing Officer s record, assessee in the relevant F.Y. has received interest of ₹ 6,60,822 from Everest Niwara. This fact is also evident from form no.26AS, a copy of which is submitted before us by the learned Counsel for the assessee. Therefore, once the interest amount has been credited to the assessee and tax has been deducted by the payer, the assessee cannot take the plea of not offering the income on the ground that he has not actually received the same. We, therefore, do not find any infirmity in the action of the Departmental Authorities in assessing the amount of ₹ 6,60,822. However, we accept assessee s alternative claim that if the said amount is treated as income of the assessee, then credit for TDS has to be given. As it appears from Form no.26AS, an amount of ₹ 68,064, has been deducted at source by the payer while crediting the interest amount of ₹ 6,60,822. We, therefore, direct the Assessing Officer to verify this fact and give credit of the TDS to the assessee accordingly. Disallowance of professional fee and salary expense - non deduction of tax as reason as no proof of same has been submitted - Held that - The assessee has submitted documents by way of additional evidence to indicate that expenditure incurred towards professional fee and salary are genuine. Considering the fact that the evidence produced have a crucial bearing for determining assessee s claim, we admit them as additional evidence. However, it is a fact on record that these evidences were not filed before the Departmental Authorities. Moreover, it has been contended by the learned counsel that payment of professional fee would not attract the provisions of section 194J in view of the second provision to sub section (1) of section 194J. It is found that this argument advanced by the learned counsel before us was not taken before the Assessing Officer or the first appellate authority. Therefore, considering the submissions made by the learned counsel as aforesaid on applicability of section 194J as well as the additional evidence produced, we are of the view that the matter relating to allowance of assessee s claim on professional fee and salary requires examination afresh.

Summary

Issues:
1. Addition of interest income based on AIR data.
2. Disallowance of professional fee for non-deduction of tax.
3. Disallowance of salary expense due to lack of proof.

Issue 1: Addition of Interest Income:
The assessee declared a total income for the assessment year but did not include interest income from M/s. Everest Niwara as per AIR data. The Assessing Officer added the amount as income, which the Commissioner (Appeals) upheld. The assessee argued not receiving the interest and being unaware of it, but as per mercantile accounting, once accrued, it must be shown. The ITAT agreed with the Departmental Authorities, stating that since the interest was credited and tax deducted by the payer, it must be considered income. However, the ITAT directed to credit the TDS amount to the assessee.

Issue 2: Disallowance of Professional Fee:
The Assessing Officer disallowed a portion of professional fee citing lack of proof and non-deduction of tax. The Commissioner (Appeals) upheld the disallowance partially. The assessee contended that as an individual, tax deduction was not required for professional fees. The ITAT admitted additional evidence submitted by the assessee and restored the matter to the Assessing Officer for fresh examination, considering the evidence and the applicability of tax deduction provisions.

Issue 3: Disallowance of Salary Expense:
The Assessing Officer disallowed a portion of salary expense due to lack of proof and non-deduction of tax. The Commissioner (Appeals) partially allowed the claim. The assessee submitted additional evidence showing the genuineness of the expenses. The ITAT admitted the evidence and remanded the issue back to the Assessing Officer for reevaluation, ensuring a fair opportunity for the assessee. The matter was restored for proper verification and examination.

In conclusion, the ITAT partially allowed the assessee's appeal for statistical purposes, directing a reevaluation of the disallowed professional fee and salary expense, considering additional evidence and relevant tax provisions.