2016 (10) TMI 809 - AT - Income Tax

Genuineness of expenditure against professional receipts - 1/6th disallowance out of expenses claimed against professional receipt - Held that - assessee has not maintained books of accounts and bills and vouchers in respect of the expenses claimed - the claim of the assessee that books of account in respect of expenses claimed against professional receipt were produced before the Assessing Officer is not tenable - the estimate of disallowance of 1/6th of the expenses by the Assessing Officer is reasonable irrespective of the fact whether the same was accepted by the assessee or not. Taking help from new section 44ADA - even after incorporating the disallowances made by the Assessing Officer the profit from profession arrives at around 40.35% of the professional receipt and which is even much below the 50% threshold adopted by the legislature for computing income in case of professional on presumptive basis, therefore, in the facts and circumstances of the case, according to us the disallowance of 1/6th of expenses made by the Assessing Officer is reasonable and no interference on our side is required - Decided against the assessee.

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Disallowance of expenses claimed against professional receipts.
3. Addition for unexplained cash deposits in ABN Amro bank accounts.
4. Addition for unexplained cash deposits in Standard Chartered Bank account.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The appellant contended that the assessment order was passed by an officer without proper jurisdiction, as the appellant resided and worked in Noida. However, this ground was not pressed by the appellant's representative and was dismissed as infructuous.

2. Disallowance of Expenses Claimed Against Professional Receipts:
The assessee, a medical doctor, declared professional receipts of ?9,31,780 and claimed expenses of ?6,66,880, resulting in a profit ratio of 28.42%. The Assessing Officer disallowed 1/6th of the expenses (?1,33,376) due to lack of supporting bills/vouchers. The Commissioner of Income-tax (Appeals) upheld this disallowance. The Tribunal found that the assessee did not maintain books of accounts or bills/vouchers for the expenses, making the disallowance reasonable. However, it corrected the disallowance amount to ?1,11,147, being 1/6th of the claimed expenses, and partially allowed the appeal.

3. Addition for Unexplained Cash Deposits in ABN Amro Bank Accounts:
The Assessing Officer added ?5,14,548 as unexplained deposits in two ABN Amro bank accounts, which were not declared in the return of income. The assessee claimed these were reimbursements from tenants for mess expenses. The Tribunal noted that this explanation was not provided to the lower authorities and lacked documentary evidence. It remanded the issue to the Assessing Officer for re-examination, directing the assessee to produce evidence supporting the claim.

4. Addition for Unexplained Cash Deposits in Standard Chartered Bank Account:
The Assessing Officer added ?8,90,090 as unexplained deposits in a Standard Chartered Bank account, not satisfactorily explained by the assessee. The assessee claimed these were security deposits and reimbursements from tenants. The Tribunal found that this explanation was not considered by the Assessing Officer due to lack of evidence. It remanded the issue for re-examination, directing the assessee to provide necessary evidence.

Conclusion:
The Tribunal dismissed the jurisdiction issue, partially allowed the appeal on the disallowance of expenses by correcting the disallowance amount, and remanded the issues of unexplained cash deposits in bank accounts for re-examination. The appeal was allowed partly for statistical purposes.

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