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TMI Blog2014 (7) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore the addition made by AO was only on the basis of suspicion or bare guess which is not sustainable in law – there was no infirmity in the finding of the CIT(A) – Decided against Revenue. Addition of Business & Profession - Net income returned is less than the disclosure amount – Held that:- CIT(A) was of the view that the amount as income from business and profession - assesseee has already shown the total of both the amounts as business income in the return of income and has also paid tax on it, there is no justification on the part of the AO for making an addition while computing the income of the assessee and the has rightly deleted by CIT(A) – thus, the order of CIT(A) is upheld – Decided against Revenue. - ITA No. 2447/Ahd/2012 - - - Dated:- 30-6-2014 - Sri D. K. Tyagi And Shri N. S. Saini,JJ. For the Petitioner : Sri J. P. Jhangid, Sr. D. R. For the Respondent : Sri Tushar Hemani, A.R. ORDER Per : D. K. Tyagi, Judicial Member:- This is the revenue's appeal against the order of Ld. CIT(A)-II, Surat dated 16-08-2012. 2. The revenue has taken following grounds of appeal:- 1. On the facts and circumstance of the case and in law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d net profit of ₹ 24,52,906/- was offered for taxation. AO however disallowed this remuneration of ₹ 13 lacs to partners after treating sum of ₹ 3,93,537/- (i.e. cash ₹ 1,48,063/- + Stock ₹ 2,45,474) as income from business and profession and ₹ 36,03,000/- as income from other sources on the ground that source of income dislscosed during survey remains undisclosed and hence it would be treated under the head income from other sources and not under the head income form business and profession . While doing so, AO relied on the decision of Hon'ble ITAT Ahmedabad Bench in the case of M/s. Whiteline Chemical and on the decision of Hon'ble Gujarat High Court in the case of Fakir Mohammed vs. CIT and concluded that the disclosure made by assessee being deemed income, it will be covered under the head income from other sources and corresponding deductions which were applicable to the income from business and profession will not be allowed. He therefore disallowed the claim of partners salary amounting to ₹ 13 lacs u/s. 40(b) against the income disclosed during the survey. 5. Aggrieved by this order of AO assessee went in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill discharge tax thereon accordingly. 3.3.1 The specific disclosure made by partner that in the course of business of sale of wood and job work the appellant has earned undisclosed income, clearly explains the source and method of earning undisclosed income by the appellant during the year under consideration. This income has been admitted by the appellant and shown in the return of income and paid the taxes on that. This fact is not controverted by AO also. The AO has failed to identify any source of income other than this business activity which remains unexplained. Moreover, the deeming provisions under Chapter-VI, to consider any income as other sources income, is attracted only when any sum credited in the books of account or any investment remain unexplained. Here in the case of appellant, it has explained the source of undisclosed income i.e. the business activity of trading of woods and job work, which clearly falls under the head 'income from business and profession'. The Hon'bie jurisdictional Ahmedabad bench of the Tribunal in the case of Choksi Hiralal Maganlal v. DCIT (2011) 141 TTJ (Ahd) (UO) 1; has held as follows: Since in the present case exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant has not carried out any other business and has no other source of income. Therefore, whatever income arising to the appellant, is business income and all eligible deductions, including remuneration to partners, are to be allowed. In the case of appellant, it is fulfilling all the conditions prescribed under section 40(b) of I.T. Act for claiming the deduction. Therefore, the AO is not justified in disallowing the deduction of ₹ 13,00,000/- on account of remuneration to partners. Therefore, addition made AO is deleted. 7. Aggrieved by this order of Ld. CIT(A), the revenue is in appeal before us. 8. At the time of hearing Ld. DR vehemently supported the order passed by AO. It was also submitted that since income from job work was not shown by the assessee in the earlier years i.e. assessment year 2008- 09 and was only declared at the time of survey, the same has rightly been treated by the AO as income from other sources and claim of assessee for partner's remuneration u/s. 40(b) of the Act has rightly been denied by the AO. He therefore submitted that order passed by Ld. CIT(A) may kindly be set aside and that of AO be restored. Learned counsel of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years 2008-09 and 2010-11 respectively. The finding of AO being on wrong facts is not sustainable. We also agree with the contention of the assessee that if statement of the partner at the time of survey was to be relied for making this addition/disallowance, the statement should not be relied in part and should have been relied in full. Since at the time of survey, assessee disclosed the entire income as business income, the AO was not justified in bifurcating the same into income from other sources and income from business or profession. In view of this, the order passed by Ld. CIT(A) treating the disclosed income of the assessee as business income and allowing the partner's remuneration amounting into ₹ 13 lacs u/s. 40(b) of the Act is hereby upheld. Ground No. 1 2 of revenue's appeal are dismissed. 10. Ground No. 3 relates to addition of ₹ 18,01,500/- made on account of unexplained expenditure u/s. 69C. 11. During the assessment proceedings, AO observed that amount of ₹ 36,03,000/- disclosed by assessee towards job work receivable was net job work receivable for the year under appeal and for earning this net job work receipt no expenditure wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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