2018 (4) TMI 189 - AT - Income Tax

Addition on account of professional expenses/charges - Held that - The amount in question is paid to temporary data entry operators. It would support the explanation of assessee that small amount was paid to different data entry operators at different times, which were below the prescribed limit for deduction of TDS. So, there is nothing wrong in the explanation of assessee for not deducting TDS on the amounts in question. Nothing is mentioned in the assessment order, as to on which date, A.O. asked the assessee to produce the said data entry operators when temporary data entry operators were engaged time to time. It was not possible to assessee to produce them before the A.O. that too without giving any show cause notice in this regard. It is, therefore, clear that findings of the A.O. are merely based on doubts, surmises and conjectures without bringing any concrete material against the assessee. The professional charges have been incurred wholly and exclusively for the purpose of business of assessee. Therefore, there is nothing wrong in the order of the Ld. CIT(A) in deleting the addition - Decided against revenue

Summary

Issues:
Appeal against deletion of addition of professional expenses/charges.

Analysis:
The appeal was filed by the Revenue challenging the deletion of an addition of ?35,97,470 on account of professional expenses/charges for the assessment year 2009-2010. The Assessing Officer (A.O.) noted that the assessee had paid all professional charges in cash without deducting TDS. The A.O. raised concerns about the cash payments made in round figures to different persons for professional charges. The assessee explained that TDS was not deducted as the payments were below the tax deductible limit. The A.O. rejected the explanation and made the addition to the income. The assessee contended before the Ld. CIT(A) that payments were made to temporary staff for short durations and that professional income of ?1.62 crores could not be earned without engaging professional staff. It was also highlighted that some payments were made by cheque. The Ld. CIT(A) deleted the addition after considering the explanations and verifying the records.

The Ld. CIT(A) found that the original assessment was completed under section 143(3) and the case was reopened due to an audit observation regarding TDS on professional charges. It was observed that not all professional charges were paid in cash, with some payments made through cheques. The Ld. CIT(A) noted that only temporary data entry operators were paid professional charges and that the A.O.'s findings were based on doubts and suspicions. The Ld. CIT(A) concluded that the professional charges were incurred for the business purpose and deleted the addition.

The Revenue argued that the assessee failed to produce professionals for verification and that all payments were made in cash. However, the Ld. CIT(A)'s findings were upheld, emphasizing that the professional charges were paid to temporary data entry operators below the TDS deductible limit. The Ld. CIT(A) found no merit in the departmental appeal, highlighting that the A.O.'s conclusions were based on doubts and suspicions without concrete evidence against the assessee. The Ld. CIT(A)'s decision to delete the addition was supported by the factual findings and explanations provided by the assessee.

In conclusion, the Departmental Appeal was dismissed, affirming the Ld. CIT(A)'s decision to delete the addition of professional expenses/charges. The judgment emphasized that the professional charges were legitimately incurred for the business purpose, and the A.O.'s doubts and suspicions were not substantiated by concrete evidence.