ANAND KAKARLA ,BENGALURU vs. INCOME TAX OFFICER, WARD-5(3)(2), BANGALORE

ITA 2302/BANG/2025Status: DisposedITAT Bangalore09 October 2026AY 2020-2112 pages
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What did the Tribunal hold?

The Tribunal held that the issue regarding the validity of the notice under Section 148 was not pressed by the assessee and therefore dismissed as withdrawn. Regarding the salary income, the Tribunal noted that the assessee had not pressed for admission of additional evidence (bank statements) and had failed to discharge the onus of proof by not producing corroborative evidence. The CIT(A)'s finding that the claim of Rs. 3,20,000 as salary remained unsubstantiated was upheld. Consequently, the addition of Rs. 10,26,000 as salary income was sustained. On the issue of remuneration from Ernst & Young LLP, the Tribunal clarified that salary or remuneration received by a partner from a firm/LLP is chargeable to tax under Section 28(v) of the Act, not under the head 'Salaries'. It reasoned that such income is not the partner's own turnover or gross receipt, and the presumptive scheme under Section 44ADA applies to persons carrying on their own profession. Therefore, the entire remuneration of Rs. 24,00,000 received from the LLP is chargeable to tax under Section 28(v). However, the Tribunal observed that Ernst & Young LLP's confirmation letter mentioned an exempt/non-taxable amount of Rs. 23,85,000 towards discretionary additional remuneration, which was claimed as non-taxable in terms of the proviso to Section 28(v). This aspect required further verification by the AO. Accordingly, the Tribunal remitted this issue to the AO for re-computation of the correct income, granting the assessee a reasonable opportunity of being heard. The appeal was partly allowed for statistical purposes.

What were the facts?

The assessee, Anand Kakarla, a Chartered Accountant, filed his return for AY 2020-21 declaring a total income of Rs. 9,76,000, comprising salary of Rs. 10,26,000 less standard deduction. Information received under the high-risk e-verification scheme indicated the assessee received Rs. 24,00,000 in remuneration, which was not disclosed. The Assessing Officer (AO) reopened the case under Section 147 and issued a notice under Section 148. The assessee initially declared salary of Rs. 10,26,000 but later claimed it was Rs. 3,20,000, stating the higher amount was an inadvertent error. The AO, disbelieving the assessee, treated Rs. 10,26,000 as salary income. Additionally, the AO added Rs. 12,00,000 (50% of Rs. 24,00,000) as business income, representing undisclosed remuneration from Ernst & Young LLP. The assessment was completed under Section 144 r.w.s. 147 for a total assessed income of Rs. 22,26,000. The CIT(A)/NFAC partly allowed the appeal, sustaining the additions but directing TDS credit. The assessee appealed to the ITAT.

What were the issues?

1. Whether the notice under Section 148 of the Income-tax Act, 1961, is bad in law as it was not issued by the prescribed authority, rendering the assessment null and void? The assessee argued this point. The revenue did not record any specific arguments on this point. 2. Whether the Commissioner of Income Tax (Appeals) erred in not considering the Form 16 submitted by the appellant while determining income from salary? The assessee contended that Form 16 should have been considered. The revenue did not record any specific arguments on this point. 3. Whether the Commissioner of Income Tax (Appeals) erred in not considering Rs. 3,20,000 as salary, even after the appellant stated that Rs. 10,26,000 was shown inadvertently? The assessee argued for the lower salary figure. The revenue did not record any specific arguments on this point. 4. Whether the Commissioner of Income Tax (Appeals) erred in not considering salary income as per Form 26AS? The assessee relied on Form 26AS. The revenue did not record any specific arguments on this point. 5. Whether the Commissioner of Income Tax (Appeals) erred in not providing the appellant with a sufficient opportunity of being heard, having issued only a single hearing notice? The assessee claimed insufficient opportunity. The revenue did not record any specific arguments on this point. 6. Whether the Commissioner of Income Tax (Appeals) erred in not giving TDS credit as per Form 26AS though the corresponding income is disclosed? The assessee sought TDS credit. The revenue did not record any specific arguments on this point. 7. Whether the entire remuneration of Rs. 24,00,000 received from Ernst & Young LLP is chargeable to tax under the head 'Profits and Gains of Business or Profession' (PGBP) under Section 28(v) of the Act, or if it falls under Section 44ADA?

Which sections of the Income-tax Act were involved?

Section 148,Section 250,Section 144,Section 147,Section 133(6),Section 28(v),Section 40(b),Section 44ADA,Section 10(2A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

For Appellant: CA Shreesha N. Ganesh, A.R
Hearing: 13.07.2026Pronounced: 09.10.2026

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC, Delhi dated 02.09.2025vide DIN& Order No. ITBA/NFAC/S/250/2025-26/1080255530(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2020-21. 2. The assessee has raised the following grounds of appeal: -

1.

That the order of the Commissioner of Income Tax (Appeals) in so far is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case.

2.

That the notice u/s. 148 of Income-tax Ac

The order continues below.

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