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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER The present appeal has been filed by the assessee against the order dated 29.07.2013 passed by the Ld. CIT(A)-VI, New Delhi for Assessment Year 2009-10.
The assessee was a director of Continental Construction Ltd. during the relevant assessment year. He had received a sum of R.s 65.00 lakh during the year from the company and it was the assessee’s contention that the amount represented advance from the company and was not taxable. It was the assessee’s contention that the remuneration from the company was fixed at I.T.A. 5339/D/2013 Assessment Year 2009-10 Rs. 2.00 lacs per month by the Company Law Board w.e.f.
01.04.2007 vide order dated 18th/24th August 2009 and the amount of Rs. 65.00 lacs was received as an advance from the company and the same was to be partly adjusted against the expenses incurred from time to time. It was submitted that out of Rs.65.00 lakh received, a sum of Rs. 55.46 lacs remained unadjusted till even 31.03.2011, i.e. two years after the end of the previous year under consideration. A confirmation from the company to the effect was also filed during assessment proceedings. However, the Assessing Officer was of the opinion that since the company had not filed any balance sheet or profit/loss account and also since the company had not been filing its Return of Income since assessment year 2002-03, the contention of the assessee was unacceptable. The Assessing Officer opined that the amount of Rs. 65.00 lacs represented arrears of salary and he accordingly added back the entire amount of Rs. 65.00 lacs to the income of the assessee.
In the first appellate proceedings, the Ld. CIT(A) was of the opinion that once the relationship of a master and servant was established between two persons, any payment received by the employer was to be taxed under the head ‘Salary’. The Ld. CIT(A)
I.T.A. 5339/D/2013 Assessment Year 2009-10 also upheld the reasoning of the Assessing Officer that since no balance sheet or profit/loss account of the employer company was filed, the assessee’s claim could not be accepted. The Ld. CIT(A) opined that the payment was not ‘Advance against salary’ but ‘Advance of Salary’ and was hence taxable. Accordingly, the appeal of the assessee was dismissed.
Now, the assessee has filed this second appeal on the issue.
The Ld. AR submitted that in support of the advance and balance outstanding, the assessee had submitted the following details before the lower authorities (now part of the paper book):- i) Copy of cheque for Rs.65.00 lacs received from ii) from Confirmation of advance Continental
Construction Ltd. with PAN and assessment particulars. iii) Copy of account in the Statement of Affairs of the assessee showing the amount received in excess of the salary as a liability. iv) Copy of account of the assessee upto 31.3.2009 in the I.T.A. 5339/D/2013 Assessment Year 2009-10 v) Reconciliation of the balance as per the assessee and vi) Copy of assessee’s return for assessment year 2008-09 to establish that salary as per the salary certificate had already been offered to tax.
It was also submitted that Continental Construction Ltd. 5. had furnished an independent confirmation u/s 133(6) of the Income Tax Act, 1961 to the Assessing Officer confirming that an amount of Rs. 55.46 lacs remained unadjusted even till 31.3.2011.
The Ld. AR also drew attention to his application dated 5.1.2016 filed before this Bench under Rule 29 of ITAT Rules which contains a copy of cheque dated 26.11.2013 for Rs. 43.00 lacs drawn in the name of M/s Continental Construction Ltd. It was submitted that the cheque represents the amount refunded to the employer company against the advance of Rs. 65.00 lacs.
He also drew our attention to copy of the pass book of the assessee wherein the above said cheque has been cleared on 31.12.2013. It was submitted that in light of the facts, the addition deserves to be deleted. He also placed reliance on the I.T.A. 5339/D/2013 Assessment Year 2009-10 judgment of Hon'ble Delhi High Court in the case of CIT vs Raghunath Murti 220 CTR 102 for the proposition that refund of salary, being neither voluntary nor for any extraneous consideration, could not form a part of chargeable salary.
The Ld. DR, on the other hand, strongly supported the orders of the authorities below and submitted that the addition had been rightly made and the same should be upheld.
We have heard the rival submissions and perused the records. It is an undisputed fact that the employer company had confirmed to the Assessing Officer in response to notice u/s 133(6) of the Income Tax Act, 1961 that an amount of Rs. 55,45,771/- was still remaining unadjusted on 31.03.2011. The Assessing Officer has reproduced the letter received on page 3 of his assessment order as well. The Ld. CIT(A) has also made a reference to it on page 4 of his order. However, both the authorities have erred in drawing a wrong conclusion from the contents of the aforesaid letter of confirmation. An advance received from the employer need not necessarily always be in the form of advance against salary. The confirmation letter from the company also shows that an amount of Rs. 76,93,878/- was also I.T.A. 5339/D/2013 Assessment Year 2009-10 adjusted against loan while arriving at the closing unadjusted balance of Rs. 55,45,771/- on 31.3.2011. The assessee has also submitted documents under Rule 29 of the ITAT Rules in support of his contejti0on that a sum of Rs. 43.00 lacs was, in fact, refunded to the company on 31.12.2013. We are of the considered opinion that an amount cannot be deemed as income of the assessee till there is evidence that it has been received as an income which has accrued to the assessee. In the circumstances we deem it fit to restore the matter to the file of the Assessing Officer with the direction to duly verify the contention of the assessee that the payment of Rs. 43.00 lacs through cheque on 31.12.2013 made to Continental Construction Ltd. is, in fact, a payment made towards the repayment of outstanding amount to the employer company. If that be so, the Assessing Officer is directed to delete the addition of Rs. 65.00 lacs made as per the assessment order passed u/s 143(3) of the Act and dated 19.12.2011 for the assessment year under consideration.
In result, the appeal of the assessee is allowed for statistical purposes.
I.T.A. 5339/D/2013 Assessment Year 2009-10 Order pronounced in the Open Court on 22nd of March, 2016.