2000 (10) TMI 183 - AT - Income Tax

Summary

Issues:
1. Whether the AO had the authority to include professional remuneration in the order passed under s. 155.
2. Whether the professional remuneration received by the assessee should be taxed in the assessment year involved.

Detailed Analysis:
1. The appeal was against an order passed by the CIT(A)-I, Hyderabad, and was filed by the Revenue. The case involved the assessee, a partner in a firm, receiving remuneration as a cine actor. The AO disallowed this remuneration under s. 40(b) in the assessment of the firm. Subsequently, the share income of the assessee was revised due to an appellate order in the firm's case. The AO, under s. 155, passed an order including the remuneration in the assessee's income, which was contested by the assessee. The CIT(A) deleted this addition, stating that s. 155 did not allow for the inclusion of new income not covered in the original assessment order.

2. The Revenue appealed against the CIT(A)'s decision, arguing that the remuneration should be taxed as it was not included in the firm's or the assessee's hands for the relevant assessment year. The AO's action was defended by invoking s. 67 of the IT Act, emphasizing the need to tax the income to prevent it from going untaxed. The assessee, on the other hand, relied on the cash basis of accounting for professional income and cited a High Court decision to support their case.

3. The Tribunal analyzed the provisions of s. 155(1) and concluded that the AO exceeded his jurisdiction by including the professional remuneration in the order under s. 155. Citing a High Court decision, the Tribunal held that s. 155 only allowed for rectification related to the partner's share income from the firm, not additional income like professional remuneration. Furthermore, considering the cash method of accounting followed by the assessee for professional income, the Tribunal upheld the CIT(A)'s decision to delete the addition of the remuneration in the total income for the assessment year.

4. Ultimately, the Tribunal dismissed the Revenue's appeal, confirming the decision of the CIT(A) to delete the inclusion of the professional remuneration in the assessee's total income for the assessment year involved.