Tribunal affirms CIT (A) decision on professional and rental receipts, rejects AO's accounting approach.

The tribunal upheld the CIT (A)'s decision to delete additions of Rs. 3,57,87,719/- on professional receipts and Rs. 18,09,631/- on rental receipts. The tribunal found the AO's approach unjustified as the appellant followed a cash system of accounting, leading to no infirmity in the CIT (A)'s order. The tribunal dismissed the revenue's appeal, emphasizing correct application of accounting principles and tax provisions.

---

---

Issues Involved:
1. Deletion of addition of Rs. 3,57,87,719/- on account of professional receipts.
2. Deletion of addition of Rs. 18,09,631/- on account of rental receipts under the head income from House Property.

Detailed Analysis:

1. Deletion of Addition of Rs. 3,57,87,719/- on Account of Professional Receipts:

The primary contention raised by the revenue was whether the CIT (Appeals) correctly deleted the addition of Rs. 3,57,87,719/- due to the discrepancy between professional receipts as per TDS certificates and those shown in the books of accounts. The appellant, a senior advocate, filed a return of income showing professional receipts of Rs. 14,76,70,759/-. However, the Assessing Officer (AO) noted discrepancies in the TDS certificates, leading to an addition of Rs. 3,57,87,719/-.

The CIT (A) deleted the addition, noting the appellant follows a cash system of accounting, and the AO's approach of computing income based on TDS claims was not justified. The CIT (A) emphasized that the appellant's books of accounts were not rejected under section 145, and the AO had accepted the cash system of accounting in preceding and subsequent years. The CIT (A) also highlighted that the appellant had offered the income for tax on a cash basis and any alteration would lead to double taxation.

The tribunal upheld the CIT (A)’s decision, agreeing that the AO misunderstood the accounting treatment and incorrectly added Rs. 3.78 crores. The tribunal found no infirmity in the CIT (A)’s order and dismissed the revenue’s grounds of appeal.

2. Deletion of Addition of Rs. 18,09,631/- on Account of Rental Receipts:

The second issue was the addition of Rs. 18,09,631/- made by the AO on account of rental receipts. The appellant had leased a property to ICICI Prudential Life Insurance Co. Ltd. and received rental income. The AO added Rs. 18,09,631/- based on discrepancies between the rental income shown by the appellant and the amount reflected in Form 26AS.

The CIT (A) deleted the addition, noting that the difference was due to service tax and rent refunded to the tenant. The CIT (A) accepted the appellant’s explanation that the property was unfit for occupation for a month, leading to a refund of Rs. 24,54,545/- to the tenant. The CIT (A) also noted that service tax should not be included in the annual letting value of the property.

The tribunal upheld the CIT (A)’s decision, agreeing that the rent refund and service tax were valid reasons for the discrepancy. The tribunal found no infirmity in the CIT (A)’s order and dismissed the revenue’s grounds of appeal related to the rental receipts.

Conclusion:

The tribunal dismissed the revenue’s appeal, upholding the CIT (A)’s deletion of additions on both professional and rental receipts. The tribunal found the CIT (A)’s reasoning and application of accounting principles and tax provisions to be correct. The order was pronounced in the open court on 26.03.2018.

---