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2021 (1) TMI 33 - AT - Income TaxNature of amount received after quitting the job - consultancy service or salary- difference in income disclosed in his return and form 26AS - expenditure incurred by the assessee towards earning income from providing consultancy services - HELD THAT - It is not in dispute that the amount received by the assessee of ₹ 35,31,392/- is from consultancy services. For rendering such services, it is obvious that the assessee would have definitely incurred expenditure. Therefore it would be appropriate and just to estimate the expenditure and thereafter determine the taxable income of the assessee. Further taking cue from the provisions of section 44ADA of the Act (though it was inserted by finance Act 2016 w.e.f. 1/4/2017). In the peculiar circumstances in the case of the assessee 50% of the gross consultancy receipts should be treated as the expenditure incurred by the assessee for earning income from consultancy services. Accordingly, we hereby direct the Ld. AO to grant deduction of ₹ 17,65,696/- ( of ₹ 35,31,392/-) towards the expenditure incurred by the assessee towards earning income from providing consultancy services while computing the income of the assessee under the head income from profession and treat the balance amount of ₹ 40,42,376/- as income under the head salary . It is ordered accordingly.
Issues:
1. Discrepancy in salary income between Form 26AS and income declared in return. 2. Lack of opportunity to rectify Form 26AS for consultancy income. 3. Misclassification of interest income as consultancy income. 4. Disallowance of deduction for interest on housing loan. 5. Non-granting of credit for Tax Deducted at Source and Self-Assessment Tax paid. Issue 1: Discrepancy in salary income: The assessee's appeal contested the addition of ?40,42,376 due to the variance between salary income in Form 26AS and the return. The CIT (A) upheld the AO's decision. The assessee explained receiving salary from Google India Pvt. Ltd. and consultancy income, but lacked evidence for consultancy expenditure. The ITAT directed 50% of consultancy receipts to be treated as expenditure, allowing a deduction of ?17,65,696 and treating the balance as salary income. Issue 2: Lack of opportunity for rectification: The AO did not provide the assessee a chance to rectify Form 26AS regarding consultancy income. The ITAT remitted the matter to the AO for reconsideration, granting the assessee an opportunity to present all relevant details and evidence. Issue 3: Misclassification of interest income: The AO incorrectly categorized interest income as consultancy income. The ITAT remitted this issue back to the AO for fresh consideration along with other grounds, allowing the assessee to submit additional evidence. Issue 4: Disallowance of deduction for interest on housing loan: The CIT (A) remitted this matter to the AO for verification, and the ITAT found it unnecessary to interfere with this decision. The ITAT directed the AO to reconsider this issue along with others, providing the assessee with an opportunity to present relevant information. Issue 5: Non-granting of credit for TDS and Self-Assessment Tax: The AO did not credit Tax Deducted at Source and Self-Assessment Tax paid. The ITAT remitted this issue back to the AO for fresh consideration, instructing the AO to admit any new evidence submitted by the assessee and decide in accordance with the law. In conclusion, the ITAT partially allowed the assessee's appeal, providing detailed directions for reconsideration of various issues by the AO, ensuring the assessee's right to be heard and present relevant evidence.
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