2021 (10) TMI 494 - AT - Income Tax

Disallowance of professing fees - AO after treating the income disclosed by the appellant firm as unexplained cash credit - whether the assessee can claim expenses of professional fees against the additional unaccounted income disclose during the survey - HELD THAT - There is no dispute that during the survey, the statement of partners of assessee was recorded. During the statement the partners of the assessee declared unaccounted income of ₹ 8.00 crores. However, while filing return of income, the assessee-firm claimed expenses of ₹ 8 lakhs on account of professional fees. As perused the statement of partners recorded by survey party. On perusal of the statements, we find that while making disclosure of ₹ 8.00 crores, the partners gave the bifurcation of disclosed income. From carefully perusal of answer to the Q.No.5 we find that there is no such averment that the assessee would not claim any expense is made. As disallowed the expenses by treating the disclosure at admission of assessee over and above the regular income and disallowed the legal expenses - assessee has not undertaken any other activities except the development of flat construction of various housing projects. We find that on similar facts of the case of DCIT vs. Suyog Corporation 2015 (8) TMI 1484 - ITAT AHMEDABAD while affirming the order of Lt. CIT(A) in that case allowed expenses against the on-money to the assessee which were also engaged similar business activities. Similar view was taken in DCIT vs. Jamnadas Muljibhai 2005 (1) TMI 366 - ITAT RAJKOT by treating the on-money as business receipt of the assessee. Considering the decisions of co-ordinate benches and the fact that professional fees was paid to the firm of consultant after deducting the TDS. Therefore, we do not find any justification in disallowing such expenses. - Decided in favour of assessee.

Summary

Issues:
Disallowance of professional fees as unexplained cash credit.

Detailed Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The Assessing Officer disallowed professional fees of ?8,00,000 as the income disclosed during a survey was treated as unexplained cash credit.

2. The assessee, a builder and developer firm, disclosed additional unaccounted income during a survey. The Assessing Officer disallowed the professional fees of ?8.00 lakh claimed as an expense from the disclosed income. The firm explained that the income disclosure was related to on-money receipts in the real estate business and the professional fees were paid to a legal consultant.

3. The Authorized Representative of the assessee argued that the professional fees were paid after deducting TDS and were supported by documentary evidence. The firm had also paid fees to a professional firm in other financial years. The AR contended that the expenses were deductible and cited precedents where similar expenses were allowed.

4. The Departmental Representative supported the lower authorities' orders, stating that the income was declared over and above the regular income, and hence, the expenses were not allowable. The DR requested the dismissal of the appeal.

5. The Tribunal considered whether the assessee could claim expenses of professional fees against the additional unaccounted income disclosed during the survey. The partners' statements during the survey did not preclude the claim for expenses. The lower authorities disallowed the expenses based on the disclosure being treated as additional income, but the Tribunal found no justification for disallowance.

6. Referring to similar cases, the Tribunal noted that expenses were allowed against on-money receipts in comparable business activities. Considering the payment of professional fees to a consultant firm after deducting TDS, the Tribunal held that there was no justification for disallowing the expenses.

7. Consequently, the appeal of the assessee was allowed, overturning the lower authorities' decision to disallow the professional fees as an expense against the disclosed income.

This detailed analysis highlights the key arguments, precedents, and the Tribunal's reasoning leading to the decision to allow the appeal.