Suraj Vijay Kulkarni Vs ITO (ITAT Mumbai)
Suraj Vijay Kulkarni vs. ITO: ITAT Provides Partial Relief by Restricting Disallowance of Unverifiable Business Expenses and Oaverturning Section 69 Addition
The case of Suraj Vijay Kulkarni vs. ITO pertains to the Assessment Year 2010-11 and focuses on the taxability of income from a one-time business venture,.
Background and Dispute
The assessee, primarily a salaried professional, undertook a one-time liaisoning and coordination assignment for Slum Rehabilitation Authority (SRA) Redevelopment Projects in Mumbai. He received total consultancy fees of Rs. 1,03,90,000 from four different projects,. In his tax return, he declared a net profit of Rs. 58,69,500, after claiming Rs. 45,20,500 in business expenses,,.
The Assessing Officer (AO) challenged this, treating the entire gross receipt of Rs. 1,03,90,000 as unexplained investment under Section 69 of the Income Tax Act. The AO argued that the assessee failed to provide verifiable evidence for the expenses and noted that the source of the receipts was not clearly proved,. The CIT(A) upheld this decision, rejecting new evidence (self-made vouchers) presented during the first appeal as an “afterthought”,.
Facts of the case
The brief facts of the case are that the assessee is an individual and was employed as a salary professional during the impugned assessment year. In addition to his employment the assessee undertook a one time liasioning and coordination assignment relating to Slum Rehabilitation Authority (SRA) Redevelopment Project in Mumbai. The assessee filed the return on 30.11.2017 declaring total income Rs.86,33,920/-. The assessee’s case was reopened u/sec. 148 of the Act by a notice dated 20.03.2017. Out of salary income the assessee declared the net profit from business and profession amount to Rs.58,69,500/- related to his liasoning and coordination business.The assessee claimed the income from his new adventure in the Return of Income
(ROI) under head of “Income from Other Sources” and claimed deduction u/sec 57 of the Act related to payment of expenses amount to Rs. 45,20,500/-. During the reassessment the Ld. AO treated the entire receipt Rs.1,03,90,000/- as unexplained investment u/sec. 69 of the Act. The assessee claimed that that he already declared the profit amount to Rs.58,69,500/- in the ROI filed by pursuing notice u/sec. 148 of the Act. Only the assessee claimed expenses related to the alleged transaction amount to Rs.45,20,500/-. So the entire expenses was disallowed by the Ld. AO. Being aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) had adjudicated the issue and rejected the appeal of the assessee.
ITAT Ruling
The Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal based on the following findings:
Credibility of Business Activity: The Tribunal found that the existence of the business activity could not be entirely disregarded because the assessee provided Memoranda of Understanding (MoUs) and showed that a portion of the receipts had been routed through banking channels.
Rejection of Section 69 Addition: The ITAT ruled that treating the entire gross receipts as “unexplained” was not sustainable, as the assessee had already offered the net income for taxation and provided prima facie evidence of the transactions.
Resolution of Disputed Expenses: Regarding the claimed expenses of Rs. 45,20,500, the ITAT noted that the assessee had indeed failed to produce cogent evidence at the assessment stage. However, the assessee’s representative conceded to a lump-sum disallowance of Rs. 10,00,000 for unverifiable expenses.
Final Outcome: The ITAT accepted this concession, restricting the disallowance to Rs. 10,00,000 and directing the deletion of the remaining addition of Rs. 35,20,500
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Regards
Prahlad Rajesh & Co
(Chartered Accountants)
Proprietor CA Prahlad (ACA, M.Com, B.Com, AICA Level 1 Certified, GOI Cyber Security Certified (Ministry of Home), NISM Municipal Financing Certified)
Cell: 8054-706-020
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FULL TEXT OF THE ORDER OF ITAT MUMBAI
