2015 (10) TMI 1487 - AT - Income Tax

Business receipt - Held that - Merely because a payment is reflected in AS-26 and is shown to have been made to the assessee, it cannot be brought to tax in his hands when the said money is not received by the assessee. We have noted that the stand of the assessee is that these payments made by BPCL, AIR and IOC were never received by the assessee, and the monies, received fraudulently in the name of and on behalf of the assessee, were received by some other person. Neither this aspect of the matter is examined on merits, nor any effort is made to find out through appropriate inquiries through related banks, the actual beneficiary of these payments. It is only elementary that income tax proceedings are not adversarial proceedings and the powers vested in the income tax authorities are to be used when circumstances so warrant or justify. It is a fit case in which the Assessing Officer ought to have established the trail of money and find out actual beneficiary of the payments which were admittedly made through banking channels. As a matter of fact assessee has given ample evidence that some other person had opened a bank account in assessee s name and appropriated the funds on his own, in such account. All these facts require to be properly investigated. In this view of the matter, we delete the additions in respect of monies said to have been paid by BPCL, AIR and IOC and restore the matter to the file of the AO with the direction that the same can be brought to tax in the hands of the assessee only when, a result of proper inquiries to be carried out in the light of our above observations and after confronting the assessee, it can be established that assessee was actual beneficiary of these payments. In any other case, the appropriate action is to be taken in the hands of the actual beneficiary of these payments. As far as the variation in BHEL receipts (Rs. 24,89,710), we direct the Assessing Officer to examine the explanation of the assessee on merits and in the event of these receipts having been included in the receipts disclosed for the subsequent year on account of late receipts, exclude the same for double taxation in this year as well.

Summary

Issues:
1. Correctness of CIT(A)'s order on assessment under section 144 r.w.s. 148 for the assessment year 2009-10.
2. Treatment of business receipts and addition of receipts from B.H.E.L., Bhopal.
3. Estimation of net profit on receipts.
4. Unexplained contractual receipts and expenses.
5. Treatment of unexplained expenses as income under section 69C.

Analysis:
1. The appellant challenged the CIT(A)'s order on assessment for the year 2009-10. The appellant disputed the treatment of business receipts and the addition of receipts from B.H.E.L., Bhopal. Additionally, the appellant contested the estimation of net profit on the receipts.

2. The appellant, a retired soldier, received security contracts post-retirement. The Assessing Officer noted undisclosed contractual receipts from BPCL, All India Radio, and Indian Oil Corporation. The AO also identified a discrepancy in B.H.E.L. receipts, treating them as unaccounted income. Further, unexplained service tax expenses were considered as income under section 69C.

3. The CIT(A) upheld the AO's decision but limited the addition to 40% of unaccounted receipts. The appellant contended that the receipts from BPCL, AIR, and IOC were fraudulently obtained by another person. The CIT(A) accepted explanations for certain expenses but upheld the main additions. The appellant appealed against these decisions.

4. The ITAT observed that payments reflected in AS-26 should not be taxed if not received by the assessee. The tribunal emphasized the need for proper investigation to establish the actual beneficiary of payments made through banking channels. The ITAT deleted the additions related to payments from BPCL, AIR, and IOC, directing further inquiry.

5. Regarding the B.H.E.L. receipts, the ITAT directed the AO to examine the appellant's explanation and exclude any double taxation due to late receipts. The matter was restored to the AO for appropriate action based on the tribunal's observations.

6. Ultimately, the ITAT allowed the appeal for statistical purposes, indicating the specific terms and directions for the AO to follow in reassessing the issues raised by the appellant.