2017 (2) TMI 548 - AT - Income Tax

Tribunal Partially Allows Appeal, Remits Issues for Fresh Adjudication

Dr. Pal lab Ghosh Versus ITO Ward-55 (1), Kolkata

Dr. Pal lab Ghosh Versus ITO Ward-55 (1), Kolkata - TMI Issues Involved:1. Disallowance under Section 69A for capitalization of past savings.2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on professional fees.3. Addition under Section 41(1) for cessation of liability.4. Addition under Section 23(4)(b) for notional rent.5. Disallowance of municipal taxes and other rates.6. Disallowance of various heads of expenditure.7. Disallowance of accrued interest on taxable HDFC Bond.8. Disallowance of foreign travel expenses.9. Interest charged under Sections 234B and 234C.Detailed Analysis:1. Disallowance under Section 69A for Capitalization of Past Savings:The assessee introduced capital in cash amounting to Rs. 3,89,550/- on 01.04.2007, claiming it was from past savings over 22 years. The AO disallowed this under Section 69A due to inconsistencies in the balance sheet and the improbability of keeping such a large amount in cash. The CIT(A) upheld this disallowance, citing the lack of evidence and the improbability of not using modern banking facilities. The Tribunal found that the assessee failed to substantiate the source of cash, confirming the disallowance.2. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:The assessee paid Rs. 4,39,560/- to doctors without deducting TDS, claiming gross receipts in the previous year were below the threshold for TDS applicability. The AO found the gross receipts exceeded the limit, making TDS applicable. The CIT(A) upheld this, referencing a stayed Special Bench judgment. The Tribunal confirmed the applicability of TDS provisions due to combined gross receipts exceeding the threshold, sustaining the disallowance.3. Addition under Section 41(1) for Cessation of Liability:The AO added Rs. 6,56,835/- as cessation of liability under Section 41(1), considering the sundry creditors as non-genuine. The CIT(A) upheld this, noting the creditors were unexplained. The Tribunal found the liabilities still reflected in the balance sheet and not written off, thus not ceased, and deleted the addition.4. Addition under Section 23(4)(b) for Notional Rent:The AO added notional rent of Rs. 84,000/- for a flat at Highland Park, considering it not used for residential purposes, based on an Inspector's report. The CIT(A) upheld this addition. The Tribunal found no evidence provided by the assessee to demonstrate residential use, confirming the addition.5. Disallowance of Municipal Taxes and Other Rates:The AO disallowed Rs. 38,940/- for lack of supporting evidence. The CIT(A) upheld this, noting the absence of relevant bills. The Tribunal agreed with the lower authorities, as no supporting documents were presented, confirming the disallowance.6. Disallowance of Various Heads of Expenditure:The AO disallowed 20% of Rs. 1,14,978/- claimed under various heads due to lack of proper bills. The CIT(A) found the disallowance reasonable. The Tribunal, considering the absence of evidence but aiming for fairness, reduced the disallowance to 10%.7. Disallowance of Accrued Interest on Taxable HDFC Bond:The AO added Rs. 28,000/- for accrued interest on HDFC bonds, following the mercantile system of accounting. The CIT(A) upheld this, noting the inconsistency in accounting methods. The Tribunal remitted the issue back to the AO to verify if the interest was offered in a subsequent year, to avoid double taxation.8. Disallowance of Foreign Travel Expenses:The AO added Rs. 3,26,345/- for foreign travel expenses, assuming it was from undisclosed income. The CIT(A) did not adjudicate the additional ground. The Tribunal found the expenses were from a disclosed bank account and remitted the issue back to the CIT(A) for fresh consideration.9. Interest Charged under Sections 234B and 234C:The interest charged under Sections 234B and 234C was deemed consequential and dismissed by the Tribunal.Conclusion:The appeal was partly allowed for statistical purposes, with specific issues remitted back for fresh adjudication and others confirmed or adjusted as per the Tribunal's findings.