2022 (8) TMI 188 - AT - Income Tax

Receipt of contractual amount - undisclosed business receipts - part amount claimed as an expense by the assessee - CIT- treated it as Unexplained expenditure as documentary evidence in support of such expenses and therefore the same cannot be allowed as deduction under the provisions of section 37 - assessee has not deducted the TDS on such expenses under the provisions of section 40(a)(ia) thus, the learned CIT-A confirmed the addition - HELD THAT - As the entire amount cannot be added to the total income of the assessee. In our considered view only a percentage of profit embedded in such amount of contractual receipts can be brought to tax. In this regard we find support and guidance from the order of the Hon ble Gujarat High Court in the case of CIT vs. President Industries 1999 (4) TMI 8 - GUJARAT HIGH COURT where it was directed to make the addition only to the extent of gross profit of undisclosed business receipts. We note that the assessee has already offered an income of Rs.8,90,000 against such contract receipt of Rs.20,91,760 which constitute 42% approximately. Accordingly, we are of the view that no further addition can be made under the provisions of section 37 of the Act despite the fact that the assessee failed to furnish the supporting evidences. Before reaching to the conclusion that the assessee failed to deduct the TDS under the provisions of section 194C of the Actr.w.s. 40(a)(ia) it is pertinent to see whether the provisions of TDS are applicable to the assessee being an individual. In other words the provisions of TDS shall be applicable in case of an individual if its books of accounts are subject to audit in pursuance to the provisions of section 44AB - But there is no such finding qua to this provision of law. Until, it is brought on record that the assessee was subject to the provisions of section 194C we are of the view that no disallowance can be made of the expenses claimed by the assessee under the provisions of section 194C read with section 40(a)(ia) of the Act on account of non-deduction of TDS. In view of the above, we disagree with the finding of the learned CIT-A and direct the AO to delete the addition made by him. Receipt of commission from the Bajaj Allianz life insurance company Ltd - AO is of the view that the assessee has already claimed expenses on account of maintaining his office at Wankaner - there cannot be allowed any other deduction against such income in the name of the expenses. Accordingly the AO was pleased to confirm the addition . We note that the learned counsel for the assessee has not advanced any argument in the written submission filed by him. In the absence of any written submission on this issue from the side of the assessee, we do not want to disturb the finding of the authorities below. Hence, we confirm the addition made by the authorities below. Decided partly in favour of assessee.

Summary

Issues:
1. Confirmation of addition made by AO in part instead of deleting it in entirety.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT Rajkot involved the confirmation of an addition made by the Assessing Officer (AO) in part instead of deleting it entirely. The issue at hand was related to the addition of Rs.12,01,860.00 and Rs.80,259.00 to the total income of the assessee. The AO found that certain receipts/income were not shown by the assessee despite TDS deductions by various parties. The assessee contended that the income had been duly accounted for in the books of accounts. However, the AO made the additions due to lack of supporting evidence and non-deduction of TDS.

2. Treatment of contractual receipts and expenses:
Regarding the contractual receipts, the AO alleged non-disclosure of an amount received from a company and added it to the total income. The CIT-A confirmed the addition partially, considering that a portion of the amount had already been accounted for by the assessee. The remaining amount claimed as expenses by the assessee was disputed due to lack of supporting evidence and non-deduction of TDS. The CIT-A upheld the addition of Rs.12,01,860.00 after giving partial relief.

3. Application of TDS provisions:
The Tribunal analyzed the applicability of TDS provisions in the case of the assessee, an individual. It was noted that the provisions of TDS would apply if the books of accounts were subject to audit under section 44AB of the Act. Since there was no finding regarding the applicability of TDS provisions to the assessee, the Tribunal directed the AO to delete the addition made due to non-deduction of TDS.

4. Confirmation of addition of commission:
The Tribunal confirmed the addition of Rs.80,259.00 made by the authorities below as the assessee did not provide any arguments in the written submission. The lack of submission led to the confirmation of this addition by the Tribunal.

In conclusion, the appeal was partly allowed by the Tribunal, directing the AO to delete the addition related to non-deduction of TDS. However, the addition of Rs.80,259.00 was confirmed due to the absence of arguments from the assessee.