2011 (1) TMI 1528 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of Rs. 95 lacs received as compensation.
2. Admission of additional evidence by CIT(A) without following Rule 46-A.

Summary:

Issue 1: Taxability of Rs. 95 lacs received as compensation

The assessee, a film actress, filed her return of income declaring Rs. 1,57,54,384/-. During assessment, the A.O. noted that the assessee received Rs. 1.45 crores from M/s CoCo-Cola India Ltd., out of which Rs. 50 lacs was offered to tax, while Rs. 95 lacs was treated as a capital receipt not chargeable to tax. The A.O. treated the entire amount as income, citing the absence of an explanation from the assessee. The CIT(A) confirmed the addition, stating that the entire amount of Rs. 1,45,00,000/- was compensation and should be taxed as revenue receipt, as there is no provision in Income Tax law to treat part of such receipts as capital in nature. The assessee argued that Rs. 95 lacs was compensation for damage to her reputation and should be treated as a capital receipt, citing various judicial pronouncements. The Tribunal noted that the CIT(A) did not properly examine the nature of the receipt and wrongly invoked section 28(ii).

Issue 2: Admission of additional evidence by CIT(A) without following Rule 46-A

The Tribunal observed that the CIT(A) admitted additional evidence without passing a speaking order or giving the A.O. an opportunity to examine the evidence, violating Rule 46-A of the Income Tax Rules, 1962. The Tribunal cited the case of CIT vs. Ranjeet Kumar Chowdhary, where it was held that admitting additional evidence without complying with Rule 46-A is unjustified. Consequently, the Tribunal set aside the order of the CIT(A) and remitted the matter back to him for fresh adjudication in accordance with law after complying with Rule 46-A.

Conclusion:

The appeal of the assessee is treated as allowed for statistical purposes, with the matter remitted back to the CIT(A) for fresh adjudication after complying with Rule 46-A.