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TMI Blog2009 (4) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... nical 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 filed copy of one order of the Tribunal in ITA No. 2246/Kol/2005 in the case of Bijan Guha Chowdhury where "C" Bench of the Tribunal, Kolkata in a case of contractual work has adopted at 31 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional 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 that the assessee had disclosed an excess amount of Rs. (7,24,554 - 7,06,680) 17,874 in his return of income and from the above explanation it is evident the assessee had not suppressed any income in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts 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 from professional service. 6. The AO required the assessee to furnish details of expenses of Rs. 3,87,000 together with supporting bills/vouchers. The assessee, however, could not produce any evidence other than one air fare ticket to Mumbai and copies of electricity and telephone bills pertaining to his residential house in Kolkata. The assessee was, therefore, required to justify the above expenses. It was submitted by the assessee that he was running an office establishment at 44/6 Raja Ram Mohan Roy Road, Kolkata-8 and the above expenses were incurred for earning the professional receipts shown by him. Four persons claimed to be the employees of the assessee were also produced before the AO. The AO recorded their statements under s. 131 of the Act. The observation of the AO on the above was that Smt. Anjali Ghosh denied having any empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Amount 1. SBI (5525) Rs. 2,000 (Cleared on 13-2-2003) 2. UBI (30198) Rs. 10,000 (Deposited on 29-1-2003) IOB, Mumbai (SB 98808) Rs. 126 (Being undisclosed interest income) (Deposit as per bank Rs. 7,06,680 + Rs. 20,167 - Rs. 6,86,513 as per TDS) The assessee was required to explain the above. As the assessee could not explain the same this amount of Rs. 32,293 was added by the AO. 9. Aggrieved by the above, the assessee filed appeal before the learned CIT(A). Before him the assessee disputed the disallowance of expenses amounting to Rs. 3,20,380. In addition to the submissions made before the AO, it was argued by the assessee that the AO has improperly disallowed almost 83 per cent of expenditure claimed by the assessee. Because of this, net profit of the assessee had increased to 85.5 per cent, which was unrealistic and highly unreasonable. It was contended that the Hon'ble Tribunal in the case of Bijan Guha Choudhury in ITA No. 2246/Kol/2005 had held that the net profit rate of 31 per cent was reasonable. The assessee's case being similar, it was contended that the net profit rate of 50 per cent shown by the assessee should be accepted. 10. The learned CIT(A) taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not under the head 'Business and profession'. 12. As regards the addition of Rs. 32,293 on account of unexplained deposit in the bank accounts the learned CIT(A) upheld the addition of Rs. 20,167 being an amount deposited in IOB, Mumbai and bank deposit in SBI (account No. 5525) amounting to Rs. 2,000 and the undisclosed interest income of Rs. 126. With reference to addition of Rs. 20,167 the submission of the assessee before the learned CIT(A) was the same as that before the AO. However, the learned CIT(A) noted that the gross receipt from GSC Ltd. on account of professional services was Rs. 7,24,555 on which TDS of Rs. 38,041 was deducted by the company. Thus, net amount paid to the assessee was Rs. 6,86,514. However, total deposit in IOB, Mumbai amounted to Rs. 7,06,680. Thus, the difference of Rs. 21, 167 not disclosed by the assessee as his income: The learned CIT(A), therefore, confirmed the above additions. 13. Aggrieved, the assessee filed appeal before the Tribunal. 14. Before us the learned Authorised Representative for the assessee has made the same submissions as made before the authorities below. He, however, has furnished a copy of trade licence (assessee paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed by the learned CIT(A) has been noted in earlier para of this order. It is observed that the assessee did not take the opportunity to cross-examine the employees during the assessment proceedings. The Inspector's report was furnished to the assessee and the assessee was required to give his comment on the same. But the assessee did not avail such opportunity. It is also not disputed that the assessee was required to render professional services in Bombay and not in Kolkata. In para 16, I have held that the assessee did not have any professional income in Kolkata. It has also not been controverted by the assessee by producing any evidence that during the relevant previous year there was any office maintained by the assessee at 44/6 Raja Ram Mohan Roy Road, Kolkata-8. The expenses to the tune of Rs. 3,20,380 were not relatable to earning of professional income from M/s GSC Ltd. Even otherwise the assessee has failed to produce any evidence of incurring such expenditure other than that on staff salary amounting to Rs. 1,45,000. As to why the AO disbelieved the claim of the assessee and held that such expenditure on staff salary was not relatable to earning of professional income h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing point of difference and refer the same to the Hon'ble President of the Tribunal. The point of difference is 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?" In this connection, the facts of the case, in brief are given below: 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000; and (iii) conveyance Rs. 26,620 (out of claim of air fare to Mumbai of Rs. 85,000). The disallowance, inter alia, includes the entire expenditure claimed to have been incurred on staff salary of Rs. 1,45,000, computer hiring and printing Rs. 30,000, medical expenses Rs. 15,000, office expenses Rs. 25,000, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses to the tune of Rs. 3,20,380 were not relatable to earning of professional income from M/s GSC Ltd. Even otherwise the assessee has failed to produce any evidence of incurring such expenditure other than that on staff salary amounting to Rs. 1,45,000. As to why the AO disbelieved the claim of the 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 ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on the proposed order of learned AM. He submitted that the assessee was working with Shipping Corpn. of India and later on rendering services as consultant with Garware Shipping Corpn. Ltd. The assessee did not maintain any books of account. No details of income and expenditure incurred were 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 furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o conveyance, i.e., air fare, expenditure was partially allowed for two trips to Mumbai for lack of evidence. Considering the totality of the facts and circumstances of the case and the proposed orders of the learned Members, in my considered opinion, it would meet the ends of justice, if the assessee 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shipping Corpn. Ltd. from whom substantial professional receipts have been received which are assessed by the AO also under the head 'Income from profession'. However, in addition to the above, the assessee also claimed 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee. In view of the above, the contention of the learned counsel that the receipt shown by the assessee is more cannot be accepted. The gross professional receipt disclosed by the assessee from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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