2019 (4) TMI 626 - HC - Income Tax

Addition u/s 69C - unexplained expenditure - consolidated amount received from insurance company including doctor fee - Doctor fee just routed though appellant account - not debited in the profit and loss account - inadvertently TDS deducted u/s 194J - HELD THAT - The facts as emerging from the record reveal that the payment of ₹ 10,32,200/- made to Shri Abhay Vasavada was by the Insurance Company towards doctor s fees and such amount was merely routed through the assessee. The Tribunal was, therefore, wholly justified in holding that such amount was not in the nature of unexplained expenditure so as to attract the provisions of section 69C. Since the amount of ₹ 10,32,200/- had not been expended by the assessee but was merely routed through the assessee, the question of debiting such amount to the profit and loss account did not arise. No infirmity can be found in the impugned order of the Tribunal so as to give rise to a question of law, much less a substantial question of law, so as to warrant interference. - Decided against revenue

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding addition of deemed income on account of expenses not debited in Profit and Loss account.

Analysis:
The appellant challenged the Income Tax Appellate Tribunal's order dated 10.7.2018, questioning the deletion of deemed income addition on account of expenses not debited in the Profit and Loss account. The respondent-assessee initially declared total income of ?61,09,800/- for the assessment year 2009-10, which was accepted upon assessment. However, a major audit objection led to the assessment being reopened, resulting in the total income being determined at ?83,94,700/-. An addition of ?22,84,900/- was made due to unexplained expenditure.

The Assessing Officer noted a payment of ?22,84,900/- to a professional but not debited in the profit and loss account. This led to deeming the amount as income of the assessee, resulting in the addition. The Commissioner (Appeals) partially allowed the appeal, confirming an addition of ?10,32,200/- and deleting ?14,19,450/-. The Income Tax Appellate Tribunal further deleted the remaining addition of ?10,32,200/-, as it was a pass-through payment received from the Insurance Company, not constituting unexplained expenditure under section 69C of the Act.

The Tribunal found that the amount paid to the professional was received directly from the Insurance Company and was not an actual expense incurred by the assessee. Since the amount was merely routed through the assessee, it was not considered unexplained expenditure. The Tribunal's decision was based on the fact that the payment was not an actual expense incurred by the assessee, just a pass-through payment. Consequently, the Tribunal's order was upheld, dismissing the appeal challenging the addition of deemed income.

In conclusion, the Tribunal's decision was deemed justified as the payment in question was not an actual expense incurred by the assessee but a pass-through payment received from the Insurance Company. Therefore, the addition of deemed income was not warranted, and the appeal was summarily dismissed.