Addition, made solely on the basis of AIR information, especially in the absence of full details of parties and when the professional receipts declared by the assessee far exceeds than the amount mentioned in the AIR information, is not sustainable in the eyes of law.
Addition for Professional Fees- Merely based on AIR not sustainable
M/s. A.F. Ferguson & Co. Vs. JCIT (ITAT Mumbai), ITA No.5037/M/2012, ITA No.437/M/2013, Date of Pronouncement : 17.10.2014
The facts in brief are that the Assessing Officer (hereinafter referred to as the AO) noted that the AIR information showed professional receipts of 34,49,43,172/- by the assessee which were required to be reconciled with the books of accounts. The assessee reconciled major portion of the amount but could not reconcile the amount of Rs.2,32,75,363/-. It was stated by the assessee that these receipts were not received by the assessee. However, the AO observed that since the assessee had failed to reconcile the above stated receipts, he treated the same as concealed income of the assessee and added the same to the total income of the assessee.
During the appellate proceedings before the ld. CIT(A), the assessee filed some additional reconciliation statements as additional
evidence. The matter was remanded to the AO. The assessee further reconciled the receipts amounting to Rs.74,41 ,057/- out of total unreconciled amount of Rs.2,32,75,363/- as per AIR information. It was submitted by the assessee before the ld. CIT(A) that the AIR information did not provide full details of the parties, hence it was difficult for the assessee to reconcile the same. It was also submitted that professional receipts were received by the assessee only through banking channel and were duly recorded in the books of accounts and Offered to tax, hence there was no undisclosed income. However, the ld. CIT(A) rejected the contentions of the assessee and confirmed the addition of the remaining unreconciled professional receipts of Rs. 1,58,34,306/-.
evidence. The matter was remanded to the AO. The assessee further reconciled the receipts amounting to Rs.74,41 ,057/- out of total unreconciled amount of Rs.2,32,75,363/- as per AIR information. It was submitted by the assessee before the ld. CIT(A) that the AIR information did not provide full details of the parties, hence it was difficult for the assessee to reconcile the same. It was also submitted that professional receipts were received by the assessee only through banking channel and were duly recorded in the books of accounts and Offered to tax, hence there was no undisclosed income. However, the ld. CIT(A) rejected the contentions of the assessee and confirmed the addition of the remaining unreconciled professional receipts of Rs. 1,58,34,306/-.Before us, the ld. A.R. of the assessee has submitted that all the professional fees were received by the assessee through banking channels only and all the receipts were duly recorded in the books of accounts and there was no undisclosed income of the assessee. He has further submitted that the professional fees shown, as per AIR information, was Rs.40,02,84,680/- whereas professional fees disclosed in the P&L account and offered for tax was Rs.50,36,03,971/- which was much higher than the professional fees shown in the AIR information. He has further submitted that out of the professional receipt of Rs.40,02,84,680/- as shown in the AIR information, the assessee had reconciled the professional receipts to the extent of 37,70,09,317/- before the AO. Further, during the appellate proceedings before the ld. CIT(A), the assessee had reconciled a sum of Rs.74 lakh. In the AIR information the full details of the parties were not mentioned and as such it was not possible for the assessee to produce further reconciliation.
On the other hand, the ld. D.R. has relied upon the findings of the lower authorities.
We have considered the rival contentions of the ld. representatives of the It is an undisputed fact on the file that the professional fees shown by the assessee in its P&L account far exceeds than the amount shown in the AIR information. Even the assessee has reconciled the major portion of the receipts. It has not been denied by the Revenue Authorities that full and complete details of the parties are not mentioned in the AIR information. The addition in this case has been made by the lower authorities solely on the basis of AIR information. In our view, the addition, made solely on the basis of AIR information, especially in the absence of full details of parties and when the professional receipts declared by the assessee far exceeds than the amount mentioned in the AIR information, is not sustainable in the eyes of law. Our above view is fortified with the decision of the Bangalore Bench of the Tribunal in the case of "DCIT vs. Shree G. Selva Kumar" in ITA No.868/Bang/2009 decided on 22.10.10 and another in the case of "Aarti Raman vs. DCIT" in ITA No .245/Bang/1 2 decided on 05.10.12 wherein it has been held that the assessment order based only on the AIR information would not stand in the eyes of law. If the assessee denies that he is in receipt of income from a particular source, it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. Reliance can also be placed on the decision of Mumbai Bench of Tribunal in the case of Shri S. Ganesh vs. ACIT" in ITA No.527/M/2010 decided on 08.12.10 wherein the Tribunal has held that in the absence of any material brought by the revenue authorities that the assessee has received amount more than the professional fees which has been declared by him in the P&L account and when the professional income declared by the assessee far exceeds the professional fees shown in the AIR information, then additions solely based on the AIR information are not sustainable.
In view of our above observations and in the facts and circumstances of the case, the additions made by the Revenue solely based on the AIR information are not sustainable and the same are hereby ordered to be deleted.
PFA
Tribunal held that in the absence of any material brought by the revenue authorities that the assessee has received amount more than the professional fees which has been declared by him in the P&L account and when the professional income declared by the assessee far exceeds the professional fees shown in the AIR information, then additions solely based on the AIR information are not sustainable.
PFA
Addition based on mere AIR not justified when income declared far exceeds the income shown in AIR
Shri S. Ganesh vs. ACIT (ITAT Mumbai), ITA No.3565/Mum/2012, Date of pronouncement: 16.11.2012
Tribunal held that in the absence of any material brought by the revenue authorities that the assessee has received amount more than the professional fees which has been declared by him in the P&L account and when the professional income declared by the assessee far exceeds the professional fees shown in the AIR information, then additions solely based on the AIR information are not sustainable.
AO has stated that as per AIR information, assessee has received total fees amounting to Rs.59,28,900. AO has made the addition of Rs.59,28,900 on the ground that assessee has neither filed the break up of his paty-wise professional fees, nor has given a statement as to reconcile the professional fees alongwith the bank statements to show that all entries in the AIR have been offered to tax. Being aggrieved, assessee filed appeal before ld CIT(A).
Ld CIT(A) has confirmed part addition stating that assessee could not reconcile all entries, details of which are given by him at page 8 of the impugned order and has confirmed the addition relating to 8 entries. It is relevant to state that on the basis of entries of details stated to be reconciled aggregate to Rs.36,8 1,000 out of 59,28,900. Therefore, addition confirmed by ld CIT(A) on account of not able to reconcile the entries of AIR information aggregates to Rs.22,47,900.
During the course of hearing, assessee submitted that professional fees returned by assessee for the assessment year under consideration is of Rs.5,64,91,441, which is far more than the details reflected in the AIR information of Rs.59,28,900. He submitted that all his professional receipts were deposited in one bank account and all fees are received by cheques which came from the client directly or from the instructing advocates, in case they have collected the amounts from the clients. He submitted that identical issue of non-reconciliation of professional fees with AIR information has been decided by the Tribunal in his own case for assessment year 2006-07 in I.T.A. No.527/M/2010 vide order dated 8.12.2010 and furnished a copy of the said order to substantiate his submission. He submitted that the basis on which the said entry has been made in the assessment year under consideration is identical to assessment year 2006-07. He submitted that the addition made in the facts and circumstances of the case is not justified.
On the other hand, ld D.R. did not dispute above submission of the assess save and except relying on the order of ld CIT(A).
We have considered submissions of ld representatives of parties and perused orders of authorities below as also the copy of remand report placed at pages 6-8 of PB. We have also gone through earlier order of the Tribunal dt.8.12.2010 (supra). We observe that AO made the addition of Rs.59,28,900 on the ground that assessee could not furnish party-wise details of professional fees receipts and non-reconciliation of professional fees receipts with AIR information. However, ld CIT(A) sustained the addition in part on the ground that some of the entries of AIR information could not be reconciled as per remand report of AO. However, we find sufficient force in the submission of assessee that assessee received total professional fees of Rs.5,64,91,441 in the assessment year under consideration, which is far more than the details reflected in the AIR information at Rs.59,28,900. Assessee admitted before the authorities below that reconciliation of professional receipts is not possible. The department has not disputed the fact that amounts deposited in the bank account are accounted for in the accounts of the assessee as professional fees and books of account of assessee are duly audited. We observe that similar issue came up for consideration in assessee's own case for assessment year 2006-07 and the Tribunal on similar facts and circumstances has deleted the addition as sustained by ld CIT(A) vide para 8.2 of the said order which reads as under:
"8.2, We find sufficient force in the above submissions of the assessee. Admittedly, the revenue has not controverted the submissions of the assessee before the Assessing Officer during the assessment proceedings as well as remand proceedings that all professional fees received are by way of cheques and all such cheques have been deposited in his Oriental Bank of Commerce Account, South Extension Branch, New Delhi (vide letter addressed to Assessing Officer on 8. 10.208). Therefore, in absence of any contrary material brought by the revenue authorities that the assessee has received amount more than the professional fees than what has been declared by him, no addition should have been made. It is also a fact that the professional income declared by the assessee far exceeds the professional fees as per AIR information. There may be so many reasons such as low deduction of tax, non-deduction of tax, deduction on account of reimbursement of expenses etc., for which the figure as per the AIR may not tally with the income declared by the assessee on account of professional fees from various clients. Further, it has categorically been explained by the assessee that it is not practically possible to give detailed party use breakup of fees receipts since the assessee received his fees either from the clients or from the instructing advocates or CAs, if they have collected the amounts from the clients. Similar explanation have been accepted the past in scrutiny assessment and no addition has been made, a fact already brought on record. In this view of the matter, we find sufficient force in the submissions made by the assessee that no addition is called for on this account. Accordingly, we set aside the order of the CIT(A) and direct the AO to delete the addition."
Since facts and the basis for making the addition in assessment year under consideration are identical to assessment year 2006-07, we, following the reasoning as given by the Tribunal in preceding assessment year in the case of assessee viz 2006-07, hold that the addition sustained by ld CIT(A) is not justified and same is deleted.
Gujarat HC order on 97th amendment to India's Constitution of 2012 vs MCS (Amendment) Ordinance, 2013
Gujarat HC has recently held that 97th amendment to India's Constitution of 2012 is unconstitutional. Post this order we have discussed the implication of the order on MCS (Amendment) Ordinance, 2013.
Gujarat HC order vs MCS (Amendment) Ordinance, 2013
01. Constitutional (97th Amendment) Act 2011, incorporated definition-articles namely 243-ZH to 243-ZT, on 12-01-2012. The Parliament gave the States one full year to make appropriate amendments to its Cooperative Acts.
02. MCS (Amendment) Ordinance, 2013, was promulgated on 14-02-2013, and is BASED on the Constitutional (97th Amendment) articles namely 243-ZH to 243-ZT. The Maharashtra State Govt., could not amend the MCS Act of 1960 within this one full year, hence the Maharashtra Governor had to issue the aforesaid ordinance, keeping in line with the directions of the Parliament.
03. The MCS (Amendment) Ordinance, 2013, amended certain sections of the MCS Act, based and in-line with the definition-article namely 243-ZH to 243-ZT (as per the Constitutional – 97th Amendment)
THE BUMPER SPOILER:
04. Gujarat High Court, in Writ Petition (PIL) no. 166 of 2012, vide its order dated 22-04-2013, has declared the Constitution [97th amendment] Act, 2011 as ultra vires of the Constitution of India. SPECIFICALLY & SPECIALLY DECLARING THAT "Articles 243ZH to 243ZT is ultra vires".
a) Ultra-Vires means a "law-debilitating-virus" that declares something as "Null & Void"
b) Ultra-Vires, in context also means that the MCS (Amendment) Ordinance, 2013, of 15-02-2013 is also "Null & Void", since the Maharashtra ordinance was based on Constitution [97th amendment] Act, 2011 (more specifically on definition-articles namely 243-ZH to 243-ZT)
c) The Hon. Judges have REFUSED to grant "STAY on the OPERATION of the its Judgment", which means that the judgment is effective with immediate effect and would continue to be effective TILL the Supreme Court decides otherwise.
d) EFFECTIVELY, the above means that the Gujarat High Court judgment, is effective for entire India (all States), unless & until the Supreme Court decides otherwise.
CONSOLATION-in-CHIEF:
AFTER-EFFECTS (i.e. spiking a spanner in the wheel)
a) The BAN of Govt. Administrator, in Housing / General Societies is not applicable any more, hence power of Registrar u/s 78 stands restored by default and Administrator can be now appointed. (due to article no. 243-ZL, now declared as null & void)
b) AGM has to be held on 14th Aug (or by 14 Nov), instead of 30th September (due to article no. 243-ZN, now declared as null & void)
c) Reservations for SC / ST / other categories, is gone (article no. 243-ZJ)
d) Concept of Active /Passive member, is gone (due to article no. 243-ZO)
e) Election that was mandatorily to be held by State Co-operative Election Authority, is null & Void (due to article no. 243-ZK)
f) Auditors special & specific powers, is gone (article no. 243-ZM)
g) Co-operative education & training for members, is gone (article no. 243-ZN)
h) Concept of Expert and Functional Directors, is gone (article no. 243-ZJ)
i) Much hyped new Bye-Laws, as formulated by the Coop. Registrars, need not be adopted since such new bye-laws were based on MCS (Amendment) Ordinance, 2013, which in turn was based on definition-articles namely 243-ZH to 243-ZT (Constitution [97th amendment] Act, 2011), which is now declared as "Ultra Vires". Therefore any adopted bye-law based on the said Constitution [97th amendment] Act, 2011, is also "Null & Void".
IF you pay various taxes, THEN INTROSPECT on this:
a) WHEN the Maharashtra Govt., takes more than one year to make simple amendments in the MCS Act as per the Constitutional (97th Amendment) Act 2011, THEN how the Govt. expects the scores of Society Mg. Committee's to function with vigour and as per the MCS Act, leave aside the reluctances in signing of the erstwhile M-20 Bonds .OR. holding AGM on time .OR. conducting Accounts & Audit on time .OR. resisting from Misappropriation of members funds, besides scores of burning issues like Dictatorial Functioning, Harassment's of ordinary members and so on…., which is evident from the consistent scores of litigation before the Registrar's office and in the Coop. Courts.
b) Apathy, Ignorance, Arrogance, Ego are the bane of Cooperative Society's.
—————-
Hemant Agarwal (Legal Consultants)
Email: ha21@rediffmail.com
- See more at: http://taxguru.in/corporate-law/gujarat-hc-order-97th-amendment-indias-constitution-2012-mcs-amendment-ordinance-2013.html#sthash.N9kengt4.dpuf
The 97th amendment to the Constitution passed in January this year grants citizens the fundamental right to form cooperative societies. The amendment has added the term cooperative societies along with the right to form unions. It has fulfilled a long-standing demand
97th Amendment of the Constitution-A Look Through
V Swaminathan B.Sc., B.L., FCA
Prologue
To share own reactions / view points for the common good; incidentally, by way of focussing on and stressing independent line of approach:
The law experts in the group, as is observed, have, in a manner of saying, gone to town, to try, support and stress their respective but mutually contradicting viewpoints in the write-ups in public domain on the topic of 97th Constitutional Amendment AND the HC's reported verdict declaring it ultra vires.
- Just as the several previous ones, to be precise 96 of them, besides the later ones, the 97th amendment has come to be made and is in place. May be, lawyers at large, left to their own line of independent thinking, will have, as always, scope for finding loopholes and fault the amendment on technical grounds. But in one's longstanding conviction, it could be validly and righteously queried, – why at all the subject amendment needs to be made so serious an issue as to be faulted, also litigated, on such technical grounds, more so if it were just for the heck/fancy of it ? And, especially, should any such challenge have the potentials to jeopardise and frightfully harm /impair the very rights and interests of "the PEOPLE" (or the section of the people directly concerned/having vested interests).
- As for a fact, the amendment has, by and large, been acclaimed to be for the common good of the people in general; and has been so reported and widely canvassed, besides in the media, in unbiased legal circles as well.
For ready reference, read the following selected extracts, from a leading business daily The Hindu:
The 97th amendment to the Constitution passed in January this year grants citizens the fundamental right to form cooperative societies. The amendment has added the term cooperative societies along with the right to form unions. It has fulfilled a long-standing demand," vice-president of the cooperatives Gurunath Jantikar has said.
The amendment needs to be ratified by the State governments before February 14, 2013. "However, even if the States don't do it before the deadline, it will be deemed as ratified," he said.
The amendment has also added a directive principle of State policy, asking the State "to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies'. This would go a long way in developing the cooperative sector,
4. To illustrate why the amendment has a laudable objective, hence ought not to be desirably subjected to a controversy, consider the instance of so commonly called "housing societies". No doubt, in most of the States forming part of the Union of India, there are special enactments. Those are intended/ objectively aim at governing the housing societies to be constituted by/ comprising buyers of units as its members (Flats/Apartments). Those are of two types, – e.g. in Karnataka, formed under Karnataka Ownership Flats Act and Karnataka Apartment Ownership Act (KOFA and KAOA- corresponding to MOFA and MAOA of Maharashtra). Nonetheless, as is common knowledge, because of the stark laxity/astounding failure in having the enactment implemented/enforced, the rights and interests of the gullible buyers' community have been virtually set at naught, and tragically jeopardised. In fact, for several reasons, mainly because of promoters / sellers failure to comply, impudently or otherwise, with the mandated requirements, the buyers are left in a state of 'trishanku', with no housing society formed and registered , with all its attendant repercussions / mind numbing problems.
Now, the point of grave poser requiring everyone concerned to address self, is, as to why, at all, the 'vires' (legal validity) of the amendment could be sanely or righteously questioned, – or even been subjected to any controversy, remotely or otherwise.
5. The other connected matter covered in the topic of discussion by law experts group is on the rationale behind the Model Bye-laws of 2013 framed by the State of Maharashtra; and the shortcomings/ problems in store. That, of course, needs a separate study, on the lines indicated elsewhere. Attention may be invited to the following comment on a write-up in public domain, canvassing the view that, – Residential Premises could be used for Professional Purposes.
As viewed with a different stroke, however, there can be no doubt or denying that the observations / view points of its writer brought to bear/ aired are based on, as a professional, his own study and personal, independent understanding of, among others, the "bye-laws", the last one referred being of 2001 .
Be that as it could not have been expected to be otherwise, it may be noted that, the latest Model Bye-Laws brought in, in 2013, since effected, – though, as understood, stalled for the time being/ and yet to be given effect, -would ostensibly have every relevance. Hence, it might be worthwhile making an insightful study. That should help in an incisive understanding and getting a true grip of what is in store, if and when the 2013 Model of Bye-laws is announced and made effective. Even so, in one's mind, there is a very vital and predominant doubt of all, of a grievous nature, having quite possibly far reaching repercussions and consequences, impinging the common interests of one and all concerned. That, in short, is , – as to what extent/ which of the new provisions, IF AT ALL, sought to be brought in, could/ are intended to be applicable / adopted and followed retroactively; so as to impact, adversely or otherwise, the functioning/conduct of the affairs of the extant housing societies already registered and in place. To put it differently, each of those societies will be obliged to have a detailed exercise carried out, may be not without the help of a law expert, for identifying and deciding how best all or any of those bye-laws should be fitted into the already adopted bye-laws, with the least impediment or messing up. As this is a very intricate aspect, seemingly riddled with potentials for controversies galore, one strongly feels that the State government/its concerned authorities ought to , if not already done, even now/beforehand, mindfully consider and as far as feasible, make the 'intention' clear on the indicated and other related worrisome aspects.
KEY NOTE: On a tentative perusal of the new Bye-laws (2013), as is noted, there are quite many of its contents, which warrant a deep study/application of mind by one and all concerned . For that matter, one keeps wondering as to why at all the new bye-laws, -not an amendment of the erstwhile bye-laws as seem to have been wrongly construed-, should apply or could be imposed, in particular on the housing societies already registered and functioning in accordance with the erstwhile rules/regulations. Apart from the governmental experts, the advising experts at large, in the interests of selves or own clientele, need to study this aspect, and come out with a comprehensive unbiased/impartial opinion /viewpoints; also share with the rest openly, the earliest, the better.
Epilogue:
Left open/ welcome to share own thoughts, if anyone holds a materially varying view (s) but to do so with a public -centric outlook as earnestly expected. For useful hints, invited to look up the personal blogs on the related topics @swamilook. Googleblogs.
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97th Amendment of the Constitution-A Look Through The 97th amendment to the Constitution passed in January this year grants citizens the fundamental right to form cooperative societies. The amendment h... | |||||||
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