Mere TDS deduction not decisive factor to treat payment received as income

Mere TDS deduction not decisive factor to treat payment received as income of the assessee

ABCAUS Case Law Citation:
ABCAUS 3347 (2020) (07) ITAT

Important case law relied upon by the parties:
CIT vs. Panbari Tea Company Ltd. (1965) 57 ITR 422(SC)
Win Chadha vs CIT (International Taxation)
Sumati Dayal vs. CIT (1995) 80 Taxman 89 (SC)

In the instant appeal, the assessee had challenged the order of CIT(A) in confirming the addition under section 68 of the Income Tax Act, 1961 (the Act).

The assessee was an NRI. The assessee had not filed any return of income for the relevant AY and later on from the Form 26AS, the Assessing Officer (AO) found that  the assessee had received a sum from a resident payer.

In view of the above, the reason for reopening the assessment u/s 147 was recorded by the AO for the Income escaping assessment and notice u/s 148 of the Act was issued to the assessee.

The AO issued notice u/s 131 to the payer enquiring the details of the transaction. 

The payer appeared and his statement was recorded wherein he stated that the payments were on account of professional services rendered by the appellant to him for film production. However, in the balance sheet and profit and loss account submitted by him there was no details of such payment. Further he did not submit any bill/invoices, agreement or TDS certificate substantiating the genuineness of the transaction.

Whereas the submission of the assessee was that the amount received was towards repayment of loan given to the payer in earlier years for production of some Television Serials.

The assessee however could not produce any loan agreement or the details of interest accrued on the said loan to substantiate the loan transaction. Assessee also could not explain why TD5 was deducted on loan repayment.

Accordingly, the AO taxed the sum received under the head Income from Other sources u/s 68 of the Income Tax Act, 1961 (the Act).

The CIT(A) observed that the Hon’ble Supreme Court had laid down guidelines on how to deal with suspicious and dubious trasanction and observed that the tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct,  preponderance  of  probabilities and nature of incriminating information/evidence available with the AO.

The CIT(A) also considered the admissibility and use of circumstantial evidence In Income tax proceedings as laid down by the Apex Court.

The CIT(A) also agreed with the view taken by the AO that It  could only  be concluded that that sums received represented income from other  sources.

Mere TDS deduction not decisive factor to treat payment received as income

The Tribunal noted that it was an admitted fact that the Assessing Officer had invoked section 68 of the Act to conclude that the payment after deducting TDS did not prove the exact nature of transaction.

The Tribunal noted that the Revenue had failed to rebut the clinching fact that the assessee (NRI) had very well proved during the course of scrutiny itself to have remitted the impugned sum from foreign through her NRI Account.

Though the payer stated it as a professional fee and deducted TDS., there was no material to show that the assessee had rendered any such professional service since she had received only the original remittance amount.

Following the judgment of the Hon’ble Supreme Court, the Tribunal held that the mere fact of the payer having made TDS ought not to be taken as the sole decisive factor to treat the corresponding amount as assessee’s taxable income.

The Tribunal opined that the lower authorities had erred in treating the same as an instance of payment of professional services.

 Accordingly, the Tribunal deleted the impugned addition u/s 68 of the Act.

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