Income-tax Act, 1961 — In the absence of any contrary
material brought by the Revenue Authorities that the assessee has received
professional fees more than what has been declared by him, no addition should
have been made by the AO on account of non-furnishing of partywise details of
professional fees received during the year and non-reconciliation of
professional fees received with AIR information.
Addition on account of unexplained investment cannot be made
in the hands of the assessee, on the basis of AIR information, when the assessee
was only the second owner of the units of mutual funds and the identity of the
first owner was established and they are assessed to income-tax.
Facts:
The Assessing Officer asked the assessee to furnish partywise
details of professional fees received during the year and also to reconcile the
professional fees received by him with AIR information. The assessee in his
reply stated that all professional fees are received by way of cheques and all
such cheques received are deposited in one bank account only; professional
receipts disclosed by the assessee are more than the receipts shown in AIR
information and accordingly, there is no discrepancy. He also expressed his
inability to furnish partywise details of professional fees received during the
year under consideration. The AO added a sum of Rs.47,37,000 to the total income
of the assessee. This sum represented 40 items of receipts which, in the opinion
of the AO, were not disclosed by the assessee.
Aggrieved the assessee preferred an appeal to the CIT(A) who
sustained the addition of Rs.47,37,000 made by the AO on account of
non-reconciliation of professional fees with AIR information. He decided this
ground against the assessee.
Aggrieved the assessee preferred an appeal to the Tribunal.
Held:
The Tribunal noted that the submissions of the assessee were
not controverted by the AO and that the professional income declared by the
assessee far exceeded the professional fees as per AIR information. The Tribunal
held that in the absence of any contrary material brought by the Revenue
Authorities that the assessee has received amount more than the professional
fees than what has been declared by him, no addition should have been made. It
observed that there may be so many reasons such as low deduction of tax,
non-deduction of tax, deduction on account of reimbursement of expenses, etc.,
for which the figure of AIR may not tally with the income declared by the
assessee on account of professional fees from various clients. It also noted
that the categorical statement of the assessee viz. that it was not practically
possible to give detailed party-wise break-up of fees received was accepted in
the past in scrutiny assessment and no addition made. It deleted the addition
made by the AO and sustained by the CIT(A).
The appeal filed by the assessee on this ground was allowed.
Facts II:
The AO asked the assessee to reconcile the source of
investments in mutual funds and reconcile the same with AIR information as well
as co-relate the payments with the assessee’s bank account. The AO held that the
assessee failed to explain the source of investment in units of mutual funds
totalling Rs.4.75 crores. He added this amount to the total income of the
assessee as unexplained investment.
Aggrieved the assessee filed an appeal to the CIT(A) where he
filed additional evidence in the form of further statements got by him from
mutual funds. The AO in the remand report accepted Rs.4 crores as explained and
submitted that the two amounts aggregating to Rs.75 lakh remained unexplained.
The CIT(A) reduced the addition of unexplained investment from Rs.4.75 crores to
Rs.75 lakh.
Aggrieved the assessee preferred an appeal to the Tribunal.
Held II:
In respect of the two amounts of Rs.50 lakh and Rs.25 lakh
regarded as unexplained investment of the assessee, the Tribunal noted that the
investment of Rs.50 lakh was in the name of the father of the assessee as the
first holder and assessee was the second holder. Similarly the investment of
Rs.25 lakh was in the name of the mother of the assessee as the first holder and
the assessee was the second holder. The Tribunal also noted that both these
persons were assessed to tax and the AO had written to the AO having
jurisdiction over these persons to take necessary action at their end. The
Tribunal was of the view that since the identity of these persons is established
and they are assessed to income-tax, therefore, addition, if any, could have
been made in their hands only on account of unexplained investment and not in
the hands of the assessee. The Tribunal set aside the order of the CIT(A) on
this ground and directed the AO to delete the addition of Rs.75 lakh.
The appeal filed by the assessee on this ground was allowed.
