TaxTMI 
TaxTMI 
2009 (4) TMI 208
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....ad unexplained investment. 4. For that, other ground may be urged at the time of hearing." 2. The facts, in brief, giving rise to this second appeal are that the assessee is a technical consultant in the field of shipping industries and derives income from rendering professional services mainly to M/s Garware Shipping Corporation Ltd. and imparted training and consultancy in the field of shipping at his Kolkata office. He was an ex-employee of M/s Shipping Corporation of India Ltd. and retired from service on and from 30th Aug., 2001. He claimed consultancy income from shipping and others and also income from other sources like interest from bank, MIS and NSC. The AO made some disallowances and altered some heads of income on which the assessee went in first appeal before the CIT(A). The CIT(A) gave part relief to the assessee. Against the said order of the CIT(A), now the assessee is in second appeal before the Tribunal. 3. The assessee's learned Authorised Representative' has filed a paper book containing 28 pages which was filed before the lower authorities except item No. 6 in the paper book i.e. copy of the trade licence of the assessee. In the paper book, he has file....
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....e difference of professional income being received from M/s Garware Shipping Corporation: As regard the above it is humbly submitted that the assessee during the above period received professional fees of Rs. 7,24,554 from M/s Garware Shipping Corporation and to that effect tax has been deducted to the tune of Rs. 38,04l. Your attention in this regard is drawn that the assessee in his return of income disclosed the entire gross amount of Rs. 7,24,554 and not the net amount of Rs. (7,24,554 - 38,041) 6,86,513. The objection of the AO in this regard is that as from the bank statement of IOB, Mumbai branch it transpired that the assessee had received an amount of Rs. 7,06,680 from M/s Garware Shipping Corporation but as per TDS certificate the assessee had received an amount of Rs. 6,86,513 and the difference amount i.e., Rs. (7,06,680 - 6,86,513) 20,167 should have offered for taxation. It is humbly stated that in that case the assessee should have been offered tax for an amount of Rs. (6,86,513 + 20,167) i.e., on 7,06,680 but to avoid unnecessary litigation the assessee had disclosed the gross amount of Rs. 7,24,554 in place of Rs. 7,06,680 and as a result of th....
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....p; Rs. 6,500 (iii) Telephone Rs. 8,000 (iv) Books and periodicals Rs. 10,000 (v) Conveyance (air fare to Mumbai) Rs. 85,000 (vi) Stationery Rs. 12,000 (vii) Entertainment Rs. 20,000 (viii) Office expenses Rs. 25,000 (ix) Uniform expenses Rs. 30,000 (x) Medical expenses  ....
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....2 Rs. 95,000 9. 15-01-2003 Rs. 45,968 ------------ Total Rs. 7,24,554 ------------ 5. As regards the consultancy from others amounting to Rs. 30,000 and consultancy and training receipts Rs. 20,000 the assessee could not give names and addresses of the parties from whom the said amounts were received. He also could not give details of consultancy service on account of which the said sum was received and the mode of receipt of such amount. The AO, therefore, considered Rs. 50,000 as income from other sources and not income fr....
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.... the AO opined that the assessee was required to render the services in Bombay and as the TDS certificate revealed that the assessee could have gone to Bombay only twice during the period when he was rendering services to the GSC Ltd., the AO allowed expenses for two returns air fares from Kolkata to Bombay amounting to Rs. 26,620. He also allowed uniform expenses of Rs. 30,000 and expenses on books and periodicals amounting to Rs. 10,000. Thus, the total expenses of Rs. 66,620 was allowed by him. The AO held that rest of the expenses totalling Rs. 3,20,380 was not related to professional income shown by the assessee and the same was not supposed by bills and vouchers. Therefore, he disallowed this amount as bogus expenses claimed by the assessee. 8. The AO also noted the following credits in the assessee's bank account: Sl.No. Bank Account Amount 1. SBI (5525) Rs. 2,000 (Cleared on 13-2-2003) 2. UBI (30198) &nb....
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....rovert and after distinguishing the Tribunal's decision in the case of Bijan Guha Choudhury, upheld the disallowance of expenditure of Rs. 3,20,380. It was noted by him that in the case of Bijan Guha Choudhury TDS was deducted as a sub-contractor at 1 per cent of gross payment whereas in the assessee's case the TDS was deducted at 5 per cent on account of professional payment. The assessee was engaged as a second engineer on contract basis, which was almost like being in the employment of Garware Shipping Corporation Ltd. The assessee was required to serve on offshore supply vessel and was also liable to be transferred from one ship to another. The agreement provided for termination of his service by giving the assessee 15 days notice in writing. The terms of agreement provided that only cost of uniform expense would be borne by the appellant. The assessee claimed medical expenses whereas as per the terms of contract/agreement such expenses were to be borne/paid by M/s GSC Ltd. The assessee also did not offer any comments on Inspector's report or statements of the persons shown as employees recorded by the AO. Thus, the learned CIT(A) held that the case of the assessee was altogeth....
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....icate being an additional evidence and not relating to assessment year involved in the appeal is not accepted as relevant material and hence the same is not considered by me. 15. It is further noted that the undated and unsigned letter purported to have been furnished to the AO, placed at page Nos. 16-18 of the assessee's paper book, was not available in the assessment record as noted by the learned CIT(A) in para 5 of his order. It could be seen that the learned CIT(A) has not accepted the same as an additional evidence. It is also seen that the impugned letter is undated and unsigned. In the above circumstances, the same is not taken into consideration for deciding the present appeal. 16. First, I take up ground No. 2, wherein the assessee is disputing the change of head of income relating to Rs. 50,000. The assessee disclosed the same as professional income whereas the AO treated it as income under the head other sources. The learned CIT(A) has confirmed the view taken by the AO. The facts and circumstances, in which the impugned income was considered to be income under the head 'Other sources' by the AO and confirmation of the same by the learned CIT(A) has been narrated ....
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....o been mentioned earlier. One of the employees categorically denied having been in the employment of the assessee. Some amounts were shown to have been paid to sweeper and washerman. The other three parties did not even know that the assessee was running any professional services. Under the above circumstances, I am of the considered opinion that the impugned expenditure of Rs. 3,20,380 cannot be allowed as a deduction from professional income received from M/s GSC Ltd. Thus, ground No. 1 of the assessee is rejected. 18. In ground No. 3 the appellant is disputing the addition of Rs. 22,293 confirmed by the learned CIT(A) as 'unexplained investment'. The facts in which the above amount was confirmed by the learned CIT(A) has been narrated in the earlier part of this order. The amount of Rs. 20,167 was confirmed by the learned CIT(A) as total deposit made by the assessee in IOB, Mumbai (SB account No. 98808) was Rs. 7,06,680 whereas the total amount received by the assessee from M/s GSC Ltd. as per TDS certificates (gross receipts Rs. 7,24,554) was Rs. 6,86,513. The assessee was not able to explain as to how the excess amount was deposited in the impugned bank account. Before us a....
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....red some heads of income on which the assessee went in first appeal before the CIT(A). The CIT(A) gave part relief to the assessee. Against the said order of the CIT(A), now the assessee is in second appeal before the Tribunal. G.D. AGRAWAL, VICE PRESIDENT (AS THIRD MEMBER): 9th April, 2009 Since there was a difference of opinion between the learned Members constituting "A" Bench of Tribunal, Kolkata in respect of the aforesaid appeal, I was nominated as Third Member by the Hon'ble President, Tribunal under s. 255(4) of IT Act, 1961. The question referred to me reads as under: "Whether under the facts and in the circumstances of the case, the decision taken by the learned JM for allowing the appeal of the assessee partly for statistical purposes is justified or the order of dismissal passed by the learned AM is justified?" 2. The brief facts of the case as found by the learned Members are that the assessee is a technical consultant in the field of shipping industries and derives income from rendering ....
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....5,000, entertainment Rs. 20,000, etc. Against the said disallowance of expenses and addition thereof to the total income, the assessee came in second appeal before the Tribunal. 4. Before the Tribunal, the assessee filed a paper book containing the evidences which were as well filed before the authorities below. He has also filed a copy of the order of the Tribunal, "C" Bench, Kolkata in the case of Bijan Guha Chowdhury vide ITA No. 2246/Kol/2005 in support the contention that in the said case the Tribunal on similar circumstances has adopted profit rate of 31 per cent whereas in the case of the assessee, he has declared 50 per cent profit and due to disallowance of expenses, the same rose to 85 per cent, which was abnormally high and beyond any ethics. 5. The learned JM set aside the matter relating to disallowance of expenditure of Rs. 3,20,380 back to the file of the AO with some directions as under, as according to him assessee was not given opportunity to cross-examine the persons from whom the Inspector had recorded statements under s. 131 and whose statements were utilized against the assessee: "We heard the rival submissions from both the sides and on an analysis o....
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.... assessee and held that such expenditure on staff salary was not relatable to earning of professional income has been stated in the earlier part of this order. The learned CIT(A)'s finding on the same has also been mentioned earlier. One of the employees categorically denied having been in the employment of the assessee. Some amounts were shown to have been paid to sweeper and washerman. The other three parties did not even know that the assessee was running any professional services. Under the above circumstances, I am of the considered opinion that the impugned expenditure of Rs. 3,20,380 cannot be allowed as a deduction from professional income received from M/s GSC Ltd." 7. Before me, the learned counsel for the assessee submitted that the assessee did not maintain any books of account. Therefore, as per s. 44AD of the Act, the profit @ 8 per cent is deemed to be the profits and gains of such activities chargeable to tax under the head 'Profits and gains of business or profession'. Whereas, the assessee in this case has declared net profit at 50 per cent which is far more than the minimum rate prescribed in the Act. He further submitted that due to disallowance of expenditur....
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.... filed along with the return of income, nor were they filed during course of assessment proceeding despite adequate opportunities were given. Income and expenditure shown by the assessee are based on estimate basis. He further submitted that as per agreement, the relevant portion of which is quoted on p. 5 of the assessment order, the payment received by the assessee from Garware Shipping Corpn. Ltd. was for working on ship itself. The assessee's claim that he is maintaining his office at Kolkata is not supported by any evidence. The place of business at Kolkata shown by the assessee was his residential house. Further, in response to notice under s. 131, one of the so-called employees produced by the assessee has denied having ever been under the employment of the assessee. The other employees produced by the assessee were also not conversant with the assessee's line of business. He further submitted that there was no relevance of the expenditure at Kolkata in as much as the assessee was working on ship only at Mumbai and there was no nexus between the expenditure and the professional services. According to the learned Departmental Representative, the finding recorded by the learne....
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....sessee is given one more opportunity to establish before the AO with evidence that he maintains an office at Kolkata for his professional need and expenditure claimed was incurred for the purpose of his said profession. In view of the above, I concur with the finding of the learned JM on this issue, though on different reasoning. 10. The next point of difference between the learned Members is With regard to treatment of Rs. 50,000 claimed by the assessee as income from consultancy and training, i.e., business income and held by the authorities below as income from other sources. The learned, JM has held the income as professional income, whereas the learned AM upheld the orders of the authorities below in holding the said income under the head 'Income from other sources'. 11. The learned counsel submitted that apart from consultancy at Garware Shipping Corpn. Ltd., the assessee had also earned professional fees of Rs. 50,000 for rendering consultancy services to some private parties. He further submitted that the assessee had produced the names and addresses of those parties before the AO, the details of which are as under and placed on p. 18 of the assessee's paper book: (1....
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....d to have received the professional fee of Rs. 50,000 from three parties. It was mentioned by the AO that the assessee has not furnished even the names and addresses of the parties to whom the services were rendered. He, therefore, assessed the same under the head 'Income from other sources'. While it is contended by the learned counsel that the details of names and addresses of the parties were furnished before the AO and copy of the same is also placed on p. 18 of the assessee's paper book, which is also reproduced by us in para 11 above. The assessee did not have other source of income except some interest income. Considering the entirety of the facts and weighing the same on the preponderance of probabilities, in our opinion, the assessee having the professional income is more probable than any other source of income. The Revenue also has not brought on record any iota of evidence that the assessee had any other source of income than professional income. As we have already mentioned that the assessee has a technical skill for rendering the professional service and he is also rendering the professional service to M/s Garware Shipping Corpn. Ltd., therefore, in our opinion, it wo....
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....m M/s Garware Shipping Corpn. Ltd. is Rs. 7,24,554. After reducing the TDS therefrom, the net receipt amounted to Rs. 6,86,513. However, there is credit in the assessee's bank account amounting to Rs. 7,06,680 from M/s Garware Shipping Corpn. Ltd. Thus, there is an excess credit of Rs. 20,167 than the professional receipt disclosed from M/s Garware Shipping Corpn. The learned counsel for the assessee could not give any satisfactory explanation for such excess credit in the assessee's bank account. In view of the above. I agree with the learned AM that the addition of Rs. 20,167 on this account is liable to be sustained. 15. To sum up, I agree with the conclusion arrived at by the learned JM on ground Nos. 1 and 2 raised in the appeal before the Tribunal. In regard to ground No. 3, I agree with the conclusion arrived at by the learned AM. The matter will now go to the regular Bench for passing the order as per the majority view. B.K. HALDAR, A.M.: 19th June, 2009 The above appeal was referred under s. 255(4) of the IT Act, 1961 to the Hon'ble President of the Tribunal on the following point of difference in opinion....