ASHISH PANDEY,RAIPUR vs. DCIT, CIRCLE, HARIDWAR

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ITA 4891/DEL/2018Status: DisposedITAT Dehradun31 July 2023AY 2014-152 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that while failure to conduct a tax audit has separate implications, it does not negate the possibility of incurred expenses. It considered 25% of consultancy income to be a reasonable expense for earning the remaining profit.

What were the facts?

The assessee, a professor, received consultancy income and claimed 25% of it as expenses. The AO disallowed the expenses for lack of documentary evidence, and the CIT(A) upheld this, citing failure to maintain books of account and conduct a tax audit.

What were the issues?

Whether expenses incurred for earning consultancy income can be disallowed solely due to failure to maintain books of account or conduct a tax audit.

Which sections of the Income-tax Act were involved?

Section 44AA(5),Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DEHRADUN BENCH, “DB”, NEW DELHI

Before: Sh. Saktijit DeyDr. B. R. R. Kumar

For Respondent: Smt. Poonam Sharma, Addl. CIT
Hearing: 25.07.2023Pronounced: 31.07.2023

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of ld. CIT(A), Dehradun dated 12.04.2018.

2.

The limited issue in this appeal is that whether the assessee can be allowed 25% as expenses out of consultancy fee received. The assessee is a professor in IIT, Roorkee, derives income from salary and also from share of consultancy income on technical projects. The projects are being procured from various clients and allotted to different professors and a part receipt is retained by the IIT and the remaining is passed on as consultancy fee to the professor who undertakes the technical projects on behalf of the institution. During the year, the assessee received an amount of Rs. 66,08,843/- on account of consultancy receipts and claimed expenses of Rs. 16,52,211/- being 25% of the receipts from the consultancy. The AO disallowed the expenditure holding that the assessee failed to furnish any documentary evidence regarding expenses claimed. The ld. CIT(A) held that the expenditure cannot be allowed as the assessee failed to maintain books of account u/s 44AA(5) and failed to follow the provisions of section 44AB. Failure to undertake tax audit and claim of expenses operate on two different arenas. While failure of the tax audit attracts different provision of the Act, it cannot be said that there are no expenses incurred by the assessee in doing the consultancy work. Hence, on going through the entire facts, we hold that 25% expenses can be held to be reasonable for earning of 75% of taxable profit on the consultancy income.

3.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 31/07/2023.

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