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Facts
The assessee's appeal before the tribunal was delayed by 148 days. The delay was attributed to confusion regarding the rectification of assessment mistakes and the appropriate remedy. The assessee had income from two streams: salary and professional receipts. The AO treated the entire amount from Father Muller as salary, while the CIT(A) treated a portion as professional income and applied section 44ADA.
Held
The Tribunal condoned the delay in filing the appeal. The Tribunal noted that the CIT(A) had bifurcated the income into salary and professional receipts and applied section 44ADA to the latter. However, it was contended that treating the amount received from Father Muller as professional income and then making a further addition would amount to double addition. The Tribunal found that it needed verification at the AO's level whether the income was taxed twice.
Key Issues
Whether the CIT(A) erred in confirming the addition by sustaining the treatment of a portion of income as professional income, potentially leading to double taxation. Whether the delay in filing the appeal should be condoned.
Sections Cited
154, 44ADA, 192, 194J
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi vide order dated 27/09/2024 in DIN No. ITBA/NFAC/S/250/2024-25/1069170321(1) for the assessment year 2020-21.
We heard the learned Authorised Representative (AR) and the learned Departmental Representative (DR). We perused the record. We also considered the affidavit and the condonation application explain the reasons for the delay.
The appeal is late by 148 days before us. The assessee explained the reasons. The assessment involved mixed questions on income classification. There were mistakes apparent from record in the processing and in the later discussion on heads of income. The assessee spent time examining if rectification under section 154 of the Act before the ld. CIT-A would cure the mistake or whether an appeal was the proper remedy. This caused confusion. It led to the delay.
The assessee acted in good faith. There is no mala fide. Once advised, the assessee filed the appeal without further delay. Dismissal on limitation will cause hardship. No prejudice will be caused to the Revenue by hearing the matter on merits.
The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji has held that substantial justice must prevail over technicalities. Respectfully following the law, we hold that sufficient cause is shown.
The delay of 148 days is condoned. The appeal is admitted and accordingly, we proceed to adjudicate the same on merit.
The only issue raised by the assessee is that the ld. CIT-A erred in confirming the order of the AO by sustaining the addition of Rs.23,58,817.00, an income declared under section 44ADA of the Act.
The Assessing Officer (AO) noticed receipts from Father Muller Charitable Institutions and other hospitals. The AO treated the amount of ₹23,58,817 from Father Muller as salary which was claimed by the assessee as professional income. The AO relied on the employer’s letter stating there was an employer–employee relationship and that Form 16 was issued. The AO rejected the assessee’s stand that it was professional income. The AO further observed that the assessee, in the revised return, showed professional income and also claimed expenses while also seeking benefit of section 44ADA of the Act. The AO held that once 44ADA is applied, further deductions are not allowed. Accordingly, the AO treated the sum of ₹ 23,58,817 as income under the head salary. The aggrieved assessee preferred an appeal to the learned CIT-A. The CIT(A) held that the assessee had two streams of income. One is salary under the employment agreement dated 02.08.2017 with TDS u/s 192 of the Act. The other is professional receipts linked to private patients and variable in nature with TDS u/s 194J of the Act. To that extent, the CIT(A) deleted the AO’s action of treating the entire amount as salary. On computation, the ld. CIT(A) noted gross professional receipts of ₹41,49,137.00 only. The ld. CIT(A) applied section 44ADA of the Act. The ld. CIT(A) held that 50% of those receipts i.e. ₹20,74,569 is deemed income and no further expenses can be allowed. Accordingly, the learned CIT-A directed to make the addition of the impugned deemed income to the total income of the assessee. The claim of further expenses claimed against the income declared under the provisions of section 44 ADA of the Act was disallowed.
Being aggrieved by the order of learned CIT-A, the assessee is in appeal before us.
On merits, the ld. AR supported the bifurcation accepted by the ld. CIT(A). The ld. AR submitted that the variable, patient-wise receipts are professional fees. It was the contention of the learned AR that the addition confirmed by the learned CIT-A will amount to double addition which is not desirable under the provisions of law. According to the Ld. AR the professional receipt shown by the assessee under section 44ADA of the Act was already offered to tax and therefore the learned CIT-A wrongly directed to make the addition which will amount to double addition of the income. Thus, the Ld. AR prayed to set aside the issue to the file of the AO for necessary verification and fresh adjudication as per the provisions of law and assured to submit the necessary details during the proceedings before the AO.
On the other hand, the ld. DR submitted that the order of the CIT(A) is fair. No interference is called for. The learned DR vehemently supported the order of the authorities below.
Being aggrieved by the order of learned CIT-A, the assessee is in appeal before us.
We have considered the rival contentions and perused the materials available on record. The finding of the ld. CIT(A) that there are two streams—salary with fixed pay and perquisites, and separate professional receipts tied to patients and subject to TDS u/s 194J of the Act. The limited issue before us is whether the authorities below have made double addition in the hands of the assessee for the amount received from Father Muller. The authorities below have already accepted that the receipts of ₹23,58,817 from Father Muller, to the . extent they are patient-linked, are professional income. The total professional gross receipts are ₹41,49,137.00 and therefore making further addition i.e. ₹23,58,817 will amount to double addition to the total income of the assessee. However, we are of the view that whether the income of the assessee has been taxed twice needs verification at the level of the AO. Accordingly, we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law, ensuring that there should not be any double addition which is prohibited under the provisions of law. Hence, the ground of appeal of the assessee is hereby allowed for statistical purposes.