2019 (8) TMI 182 - AT - Income Tax

Undisclosed professional receipt u/s 69A - Year of assessment - Assessee denied to have maintained cash system of accounting, therefore, there was no justification to make addition of the impugned amount in assessment year under appeal - HELD THAT - Assessee has paid advance tax on the amount in question in AY 2020-21 and undertaken to declare the amount for taxation, Revenue is not going to lose anything. It is merely a tax neutral exercise. Therefore, do not find any justification to doubt the explanation of the assessee. In this view of the matter, set aside the orders of the authorities below and delete the addition of ₹ 8,70,000/-.

Summary

Issues:
Challenge against addition of undisclosed professional receipt under section 69A of the Income Tax Act for Assessment Year 2014-15.
Condonation of delay in filing appeal.
Dispute regarding method of accounting employed by the assessee.
Validity of addition of undisclosed professional receipt by the Assessing Officer.

Analysis:
1. Condonation of Delay: The appeal was reported as time-barred by 45 days. The assessee filed an application for condonation of delay citing reasons for the delay. The explanation provided was deemed sufficient by the tribunal, and the delay was condoned based on the circumstances presented, allowing the appeal to be considered on its merits.

2. Undisclosed Professional Receipt: The case involved an advocate who received advance consultation fees deposited in the bank account. The Assessing Officer (AO) added the amount as an undisclosed professional receipt under section 69A of the Act due to discrepancies in the balance sheet and the method of accounting employed by the assessee. The AO noted that the consultancy charges should have been disclosed in the return of income for the relevant assessment year.

3. Method of Accounting: The assessee contended that they followed the mercantile system of accounting, contrary to the AO's assertion of cash basis accounting. The assessee provided a statement of affairs showing the advance fees received and stated that the matters were settled in the current financial year. The assessee affirmed their intention to declare the amount for taxation in the subsequent assessment year, along with paying advance tax on the same amount.

4. Judgment and Ruling: The tribunal considered the submissions of both parties and accepted the assessee's explanation. It was observed that the amount in question was received as an advance, and the assessee's actions ensured that the revenue would not incur any loss. Citing relevant case laws, the tribunal concluded that the dispute was essentially academic or for minor tax effect. Consequently, the tribunal set aside the orders of the lower authorities and deleted the addition of the undisclosed professional receipt, amounting to ?8,70,000.

In conclusion, the tribunal allowed the appeal of the assessee, emphasizing the tax-neutral nature of the exercise and the absence of revenue loss, thereby ruling in favor of the assessee based on the presented facts and explanations.