2018 (9) TMI 1299 - AT - Income Tax

Addition on concealed consultancy fees - excess receipts - Held that - It is observed that the explanation now offered on behalf of the assessee before the Tribunal was offered by the assessee even during the course of assessment proceedings but the Assessing Officer could not appreciate the same and proceeded to treat the excess receipts as concealed consultancy fees of the assessee without properly verifying the explanation of the assessee from the relevant documentary evidence. Similarly CIT(A) also failed to appreciate the submissions of the assessee as regards the alleged excess receipts in the right perspective and proceeded to confirm the addition made by the A.O. by treating the said receipts as concealed consideration fees of the assessee on irrelevant consultancy. Keeping in view all these facts of the case we are of the view that the revenue cannot be given the second innings especially when a period of more than 15 years has already lapsed and the fault for the same does not lie with the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 34,56,797/- made by the A.O. on account of alleged concealed consultancy fees.
2. Confirmation of the addition by the Ld. CIT(A).
3. Tribunal's decision on the appeal filed by the assessee.

Issue-wise Detailed Analysis:

1. Addition of Rs. 34,56,797/- by the A.O. on Alleged Concealed Consultancy Fees:
The assessee, a company engaged in consultancy services related to export-import ores, filed its return of income declaring a total income of Rs. 72,03,329/-. During the assessment proceedings, the A.O. found discrepancies in the Foreign Inward Remittance Certificates (FIRCs) issued by HSBC, indicating excess payments received against invoices. The A.O. treated the excess amount of US$ 73237.23 (equivalent to Rs. 34,56,797/-) as concealed consultancy fees, leading to an addition to the total income of the assessee.

2. Confirmation of the Addition by the Ld. CIT(A):
The Ld. CIT(A) confirmed the addition made by the A.O., stating that the assessee had under-reported its income by suppressing the gross amount received from Sudamin Metal GmBH. The CIT(A) rejected the assessee's explanation that the excess amount was adjusted in the subsequent year and found the claim of credit note issuance to be unsubstantiated. The CIT(A) upheld the A.O.'s decision, concluding that there was under-reporting of income by the assessee.

3. Tribunal's Decision on the Appeal Filed by the Assessee:
The Tribunal examined the arguments and evidence presented by both sides. The assessee's counsel argued that the excess amounts received were against multiple invoices, not just the ones mentioned in the FIRCs. The counsel provided documentary evidence, including copies of invoices and bank statements, to support the claim that there was no concealment of income.

The Tribunal found merit in the assessee's submissions and noted that the A.O. and CIT(A) had failed to properly verify the explanations and documentary evidence provided by the assessee. The Tribunal emphasized that the revenue authorities could not be given a second chance for verification, especially after a lapse of more than 15 years. Consequently, the Tribunal deleted the addition of Rs. 34,56,797/- and allowed the appeal of the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the addition of Rs. 34,56,797/- made by the A.O. and confirmed by the Ld. CIT(A), based on the detailed examination of documentary evidence and the failure of the revenue authorities to properly verify the assessee's explanations.