Tax appeal outcome: expenses disallowed, income reclassified, unexplained investment upheld

Bimal Kumar Roy. Versus Income-Tax Officer, Ward 53(4), Calcutta.

Bimal Kumar Roy. Versus Income-Tax Officer, Ward 53(4), Calcutta. - [2009] 319 ITR (A. T) 1, TTJ 124, 865, Issues Involved:
1. Disallowance of expenses amounting to Rs. 3,20,380.
2. Alteration of heads of income, specifically Rs. 50,000 treated as income from other sources.
3. Addition of Rs. 22,293 under the head unexplained investment.

Detailed Analysis:

1. Disallowance of Expenses (Rs. 3,20,380):
The assessee, a technical consultant in the shipping industry, claimed various expenses totaling Rs. 3,87,000. The AO disallowed Rs. 3,20,380, allowing only Rs. 66,620 for uniform expenses, books, and partial air fare. The AO's disallowance was based on the lack of evidence and the irrelevance of expenses to professional income. The CIT(A) upheld this disallowance, noting discrepancies in employee statements and the absence of a professional office in Kolkata. The Tribunal was divided on this issue. One member argued for remanding the case to allow cross-examination of witnesses, while another upheld the disallowance due to the assessee's failure to provide evidence and cross-examine during the assessment. The Third Member concurred with remanding the issue for further verification, giving the assessee another opportunity to establish the legitimacy of the claimed expenses.

2. Alteration of Heads of Income (Rs. 50,000):
The AO treated Rs. 50,000 claimed as professional income as income from other sources due to the lack of details about the consultancy services rendered. The CIT(A) upheld this treatment, finding no evidence in the assessment record to support the assessee's claim. The Tribunal was again divided. One member accepted the assessee's claim based on the provided names and addresses of clients, while another upheld the AO's decision due to insufficient evidence. The Third Member agreed with treating the amount as professional income, emphasizing the assessee's technical skills and the improbability of other income sources. Consequently, the income was directed to be treated as professional income.

3. Addition of Unexplained Investment (Rs. 22,293):
The AO added Rs. 22,293 as unexplained investment, noting discrepancies between bank deposits and TDS certificates. The CIT(A) confirmed this addition, highlighting the unexplained excess deposits. The Tribunal's members were split, with one member suggesting remanding for verification and another confirming the addition due to the assessee's failure to explain the discrepancies. The Third Member upheld the addition, agreeing with the AO and CIT(A) that the excess deposits were unexplained. Thus, the addition was sustained.

Conclusion:
- Disallowance of Expenses (Rs. 3,20,380): Remanded to AO for further verification, allowing the assessee an opportunity to provide evidence.
- Alteration of Heads of Income (Rs. 50,000): Treated as professional income.
- Addition of Unexplained Investment (Rs. 22,293): Sustained as unexplained investment.

The appeal was partly allowed, with specific directions for further proceedings on the disallowed expenses.