2024 (7) TMI 893 - AT - Income Tax

Addition as commission under the head income from other sources - whether the AO was justified in making the addition to the income of the assessee or not? - disallowing the expenses claimed by the assessee in the name of coordination settlement expenses - HELD THAT - It was not the AO who made the addition as income under the head income from other sources , but it was the assessee himself who voluntarily declared such an income in his return of income. It is also apparent that in the absence of any evidence in support of the expenses incurred, the AO only disallowed the deduction claimed by the assessee towards expenses claimed in the name of coordination and settlement expenses. It is also important to observe here that the case of the assessee was selected under CASS for the reason of claiming deduction under the head income from other sources . Therefore, it was the duty of the AO to verify the claim of deduction made by the assessee in his return of income. In the instant case the assessee failed to provide any proof in support of expenses/deduction claimed by him. It is worthwhile to mention here that legislature has provided certain procedure under the Income Tax Act the assessee cannot chose to show income or expenses according to his own choice. Undoubtedly, the assessee was in receipt of income in his hands, which was voluntarily declared by him in his return of income and the deduction towards expenses claimed by him were not supported by any vouchers. It is also found that at the time of return filing there was no civil suit pending against the assessee, it was only 3 years later, when the civil suit was filed against the assessee therefore it was an afterthought to cover his mistake in return filing in the guise of civil suit, when the case was selected for scrutiny. It is pertinent to mention here that the assessee is still fighting civil suit against the purchaser claiming that the amount is still due from the purchaser. Under the above facts in the circumstances of the case, we find that even after 8 years the assessee is not willing to refund the amount already received by him, at the same time does not want to pay the legitimate taxes to the revenue. Therefore, in our considered opinion that AO has not committed any error in disallowing the expenses claimed by the assessee in the name of coordination settlement expenses, in the absence of any supporting evidence, which consequently resulted in income in the hands of the assessee. AO has not committed any error in accepting the income disclosed by the assessee himself in his return of income under the head income from other sources for which the assessee has also claimed relevant TDS therefore considering the totality of the facts, we do not see any infirmity in the order passed by LD CIT(A)/NFAC therefore does not require any interference from this Tribunal - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs. 1,75,00,000/- as commission under the head income from other sources.
2. Deduction against income from other sources.

Detailed Analysis:

Issue 1: Addition of Rs. 1,75,00,000/- as Commission under the Head Income from Other Sources
The assessee filed a return for the assessment year 2017-18, declaring a taxable income of Rs. 14,05,860/-. The case was selected for limited scrutiny under CASS for issues related to deduction/exemption from capital gains, investment in immovable property, and deduction against income from other sources. During the assessment proceedings, the Assessing Officer (AO) made an addition of Rs. 1,75,00,000/- as commission under the head "income from other sources" due to the lack of evidence supporting the assessee's claim of deduction for the same amount.

The AO observed that the assessee received Rs. 1,75,00,000/- for removing litigation regarding reservation on the land. Despite the assessee's claim that the amount was refundable due to the transaction not materializing, the AO noted that the amount had not been refunded even after three years. Consequently, the AO concluded that the amount was taxable as income from other sources, especially since the assessee had disclosed it as such in the Income Tax Return (ITR). The AO also initiated penal proceedings under section 270A(9)(a) for misreporting of income.

Issue 2: Deduction Against Income from Other Sources
The assessee appealed against the AO's decision, arguing that the amount of Rs. 1,75,00,000/- was not income but a refundable advance, and hence, should not be taxed. The assessee also contended that the transaction was under dispute due to pending litigation, which might result in the refund of the amount. The Ld. CIT(A)/NFAC dismissed the appeal, stating that the assessee had no intention of refunding the amount, as evidenced by the lack of action over six years and ongoing litigation. The CIT(A) upheld the AO's decision to tax the amount as income from other sources, given that no supporting evidence for the claimed expenses was provided.

In the second appeal before the Tribunal, the assessee reiterated that the amount was an advance for services related to lifting EWS reservation from the property, which was not fully completed. The Tribunal noted that the assessee had shown the amount as income from other sources in the return and claimed an equal amount as expenses without any supporting evidence. The Tribunal found that the assessee had claimed TDS credit for Rs. 1,75,000/- corresponding to the Rs. 1,75,00,000/- received, while deferring the TDS credit for the remaining Rs. 3,00,000/- to the next year, as it was not received.

The Tribunal observed that the assessee had not refunded the amount even after eight years and was still contesting for the remaining Rs. 3,00,00,000/-. The Tribunal concluded that the AO was justified in disallowing the expenses claimed by the assessee due to the lack of evidence, resulting in the addition of Rs. 1,75,00,000/- as income from other sources. The Tribunal also noted that the assessee's reliance on judicial precedents was misplaced, as the facts of those cases were not analogous to the present case.

The Tribunal upheld the AO's and CIT(A)'s decisions, dismissing the appeal and confirming the addition of Rs. 1,75,00,000/- as income from other sources.

Conclusion:
The appeal filed by the assessee was dismissed, with the Tribunal affirming the addition of Rs. 1,75,00,000/- as income from other sources due to the lack of evidence supporting the claimed expenses and the assessee's failure to refund the amount despite ongoing litigation. The Tribunal found no merit in the assessee's arguments and upheld the decisions of the AO and CIT(A).