2021 (10) TMI 494 - AT - Income Tax

Appeal allowed for professional fees claimed by builder and developer firm against unaccounted income.

Anjani Infra Versus Dy. Commissioner of income Tax, Central Circle-2, Surat

Anjani Infra Versus Dy. Commissioner of income Tax, Central Circle-2, Surat - TMI Issues:Disallowance of professional fees as unexplained cash credit.Detailed Analysis:1. The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The Assessing Officer disallowed professional fees of Rs. 8,00,000 as the income disclosed during a survey was treated as unexplained cash credit.2. The assessee, a builder and developer firm, disclosed additional unaccounted income during a survey. The Assessing Officer disallowed the professional fees of Rs. 8.00 lakh claimed as an expense from the disclosed income. The firm explained that the income disclosure was related to on-money receipts in the real estate business and the professional fees were paid to a legal consultant.3. The Authorized Representative of the assessee argued that the professional fees were paid after deducting TDS and were supported by documentary evidence. The firm had also paid fees to a professional firm in other financial years. The AR contended that the expenses were deductible and cited precedents where similar expenses were allowed.4. The Departmental Representative supported the lower authorities' orders, stating that the income was declared over and above the regular income, and hence, the expenses were not allowable. The DR requested the dismissal of the appeal.5. The Tribunal considered whether the assessee could claim expenses of professional fees against the additional unaccounted income disclosed during the survey. The partners' statements during the survey did not preclude the claim for expenses. The lower authorities disallowed the expenses based on the disclosure being treated as additional income, but the Tribunal found no justification for disallowance.6. Referring to similar cases, the Tribunal noted that expenses were allowed against on-money receipts in comparable business activities. Considering the payment of professional fees to a consultant firm after deducting TDS, the Tribunal held that there was no justification for disallowing the expenses.7. Consequently, the appeal of the assessee was allowed, overturning the lower authorities' decision to disallow the professional fees as an expense against the disclosed income.This detailed analysis highlights the key arguments, precedents, and the Tribunal's reasoning leading to the decision to allow the appeal.