2017 (3) TMI 576 - AT - Income Tax

TDS u/s 194J - non-deduction of tax on the payment of professional fees - contention of the assessee is that the payment made to the lawyers is nothing but the reimbursement of expenses - Held that - The assessee has claimed the payment for senior counsel from its client separately. The sample bills produced before us for our consideration justify that the assessee is charging the fees from its clients for the counsels separately. Thus the amount of fees collected from the clients in the name of the senior counsel amounts to reimbursement of expenses. Accordingly the claim of the assessee is that he had no share of income out of these counsel payments and accordingly not liable for the TDS deduction. We find force in the argument of the ld AR but at the same time the gamut of the facts of the case needs verification. On this proposition the learned DR fairly did not dispute the same but prayed to restore the matter to the file of the assessing officer for the necessary verification on this aspect. Thus we deem it fit and proper to restore the matter to the file of the assessing officer for adjudication de novo - Decided in favour of assessee for statistical purposes. Unexplained investment addition u/s 69 - Held that - On perusal of the AO order we find that the assessee has made the payment to the GGPL 2 times in the year under consideration for the purchase of the flats. The 1st payment was of ₹ 9.86 lakh which has been duly disclosed in the balance sheet but the 2nd payment for ₹ 9.50 lakh to the same party and for the same transaction has not been shown in the name of the GGPL in the balance sheet. Non-disclosure of the 2nd payment has created suspicion in the mind of the AO and in the absence of any satisfactory reply from the assessee in this regard, the AO had resorted to treat the same as unexplained investment u/s69 of the Act. There is no dispute that the payment was made to the GGPL for ₹ 9.50 lakh though bank which was disclosed in the return of the assessee. However, the pertinent issue is that the same entry is not reflecting in the balance sheet of the assessee. Therefore, in our considered view the instant issue needs to be re-examined by the AO. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Addition due to non-deduction of TDS on payments to counsels and advocates.
2. Disallowance of unexplained investment under Section 69 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition due to Non-Deduction of TDS on Payments to Counsels and Advocates:

The primary issue raised by the assessee pertains to the addition of ?4,27,330/- for non-deduction of TDS on payments made to counsels and advocates. The Assessing Officer (AO) observed that the payments exceeded the limit of ?20,000/- and thus required TDS deduction under Section 194J of the Income Tax Act. The assessee admitted that the non-deduction was due to an inadvertent mistake by the accountant and did not object to the proposed addition.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the payments were debited to the profit and loss account, and thus, the assessee should have deducted TDS. The CIT(A) dismissed the assessee's claim that these payments were reimbursements from clients, as the relevant bills were produced for the first time during the appellate proceedings and were contrary to earlier submissions.

The assessee contended that the payments were reimbursements, and thus, no TDS was required. The Tribunal noted that the payments to senior counsel were separately charged to clients, indicating reimbursement. However, the Tribunal also recognized the need for verification of these facts and restored the matter to the AO for re-examination. The AO was directed to adjudicate de novo, giving the assessee a fair opportunity to present their case.

2. Disallowance of Unexplained Investment under Section 69 of the Income Tax Act:

The second issue involves the disallowance of ?9.50 lakh as unexplained investment under Section 69. The assessee had made payments to Gita Ganesh Promoters Ltd. (GGPL) for the purchase of flats, with one payment of ?9.86 lakh reflected in the balance sheet and another payment of ?9.50 lakh not recorded.

The AO treated the unrecorded payment as an undisclosed investment, which was confirmed by the CIT(A). The CIT(A) emphasized the discrepancy in the books of accounts, noting that the payment was made from a disclosed bank account but was not reflected in the books, rendering them unreliable.

The Tribunal acknowledged that the payment was made through a disclosed bank account but noted the absence of this entry in the balance sheet. The Tribunal found it necessary to re-examine the issue and remitted the matter back to the AO for fresh adjudication. The AO was instructed to consider the assessee's explanations and ensure a fair reassessment of the facts.

Conclusion:

The Tribunal allowed the assessee's appeal for statistical purposes, directing the AO to re-examine both issues—TDS on payments to counsels and advocates, and the unexplained investment under Section 69—providing the assessee with a fair opportunity to present their case. The order was pronounced in open court on 03/03/2017.