I.T.O WD - 55(1) ,KOLKATA., KOLKATA vs. DR .ARUN KUMAR MUKHERJI., KOLKATA

This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals) –XXXVI, Kolkata in appeal No.547/CIT(A)-XXXVI/ Kol/Range-55/11-12 dated 27.11.2012. Assessment was framed by ACIT,Ranje-55, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.12.2011 for assessment year 2009-10.

At the time of hearing, none appeared on behalf of assessee, hence, we proceed to this appeal, after hearing Mr. Amitava Bhattacharya Ld. Departmental Representative appearing on behalf of Revenue.

Briefly stated facts are that assessee is an individual and acting as medical practitioner. During the year assessee claimed of Rs.48,382/- towards audit fees and on question asked by the AO from assessee regarding the violation of Sec. 194J of the Act for non deducting TDS on the said amount. But assessee could not produce any explanation in this regard, therefore it has been added to the income of assessee. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has deleted the addition made by Assessing Officer by observing para-5 of his order, which reproduced as under:- “5. Ground No. 5: This is regarding disallowance of audit fees of Rs.48,382/- u/s. 40(a)(ia) of Income Tax Act. During appellant proceeding it was claimed by the appellant that out of total audit fees of Rs.48,382/- a sum of Rs.40,450/- has been paid and balance of Rs.7932/- is payable. He requested to allow the audit fees paid of Rs.40,450/-, keeping in view of judgement in case of Merilyn Shipping & Transport vs. Addl. CIT, ITA No.477/Viz./2008.

We have heard Ld. DR and perused the materials available on record. It is important to note that the judgment passed by ITAT Special Bench of Vishakhapatnam in the case of Merilyn Shipping & Transport vs. Addl. CIT in ITO Wd-55(1), Kol v. Dr. Arun KR. Mukherji Page 3 has been reversed by Hon'ble jurisdictional case in the case of CIT v. Crescent Exports Syndicate, wherein it was held that ground in favour of Revenue’s as under:- “The key words used in Section 40(a)(ia), according to us, are on which tax is deductible at source under Chapter XVII-B’. If the question is ‘which expenses are sought to be disallowed?’ The answer is bound to be ‘those expenses on which tax is deductible at source under Chapter XVII-B. Once this is realized nothing turns on the basis of the fact that the legislature used the word ‘payable’ and not ‘paid or credited’. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction.”

Next ground of Revenue’s appeal is as regards that Ld. CIT(A) has erred in deleting the addition of Rs.40,01,022/- made by Assessing Officer on account of unexplained cash credit. In this case, assessee has taken a loan from his non-resident doctor wife, who has settled in U.K. The AO called upon the assessee to furnish her residential address in U.K., source of income details, bank account through which the money is stated to be transferred to his account and other relevant details so as to prove the creditworthiness and genuineness of the said transactions. However, Ld. AR of assessee could not substantiate the transactions by producing evidentiary documents. Therefore, the AO added the same to the income of assessee. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Ld. AR of assessee in appellate stage stated that loan of Rs.41 lakh was accepted in the earlier year. It was further observed by Ld. CIT(A) that assessee has been regularly receiving the loan in the preceding year also and he has verified all the credit and debit entries from the bank statement of assessee and the bank statement of his wife in U.K. Therefore, Ld. CIT(A) has deleted the addition made by AO. Aggrieved, now Revenue is in appeal before us.

We have heard Ld. DR and perused the materials available on record. In this case, It was observed that order of AO is silent about the receipt of the said loan whether the loan is received in the current year or earlier year also if ITO Wd-55(1), Kol v. Dr. Arun KR. Mukherji Page 4 pertains prior to year under consideration then the question of disallowance of loan does not arise. Since the order of AO is silent on this subject, therefore we are inclined to restore the file to AO with a direction to establish the date of loan which pertains to earlier year or current year. Hence, this ground of Revenue’s appeal is allowed for statistical purpose.

Coming to next ground of Revenue’s appeal in regard to delete the addition of Rs. 10 lakh made by AO on account of difference between advance shown by assessee in his books of account and amount shown by the buyer of property. In this case, assessee has taken an advance of Rs.25 lakh from Mr.Rajiv Bhatia for the purpose to transfer of property located at Silver Spring, the assessee has shown advance of Rs.25 lakh. However, in response to notice u/s 133(6) of the Act from aforesaid buyer there he has stated that he has paid a sum of Rs.35 lakh to assessee as advance for purchase of said flat. On question by AO to assessee regarding the discrepancy of Rs.10 lakh but assessee failed to provide satisfactory reply. Therefore, AO has disallowed a sum of Rs.10 lakh and added to the income of assessee. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) has deleted the addition made by AO by observing that transactions for sale and purchase of said flat between assessee and Mr. Rajiv Bhatia has not yet been completed. The assessee showed in its books of account that he has received only Rs.25 lakh and on the other hand buyer Shri Rajiv Bhatia claimed to have paid advance of Rs.35 lakh. In this case, the sale transaction has not been taken place and it will be worked-out in the year when the transactions of sale and purchase will take place. So the addition made by AO has been deleted by Ld. CIT(A). Aggrieved, now Revenue is in appeal before us.

We have heard Ld. DR and perused the materials available on record. It is found from the order that assessee was given several opportunity to explain the difference of Rs.10 lakh but assessee failed to reconcile the same. It is ITO Wd-55(1), Kol v. Dr. Arun KR. Mukherji Page 5 also observed that in appellate stage said transaction has not taken place, therefore, addition of Rs.10 lakh cannot be taken to the hands of assessee. We also observe that assessee has not been able to substantiate his claim at the assessment proceedings. Hence, we are inclined to give one more opportunity to assessee to defend his claim before AO. Therefore, this ground of Revenue’s appeal is restored to the file of AO for fresh adjudication according to law after providing reasonable opportunity of being heard to assessee.