By TIOL News Service

AHMEDABAD, APR 12, 2019: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether the amount not expended by the taxpayer but merely routed by banking channel through him, does not merits to be debited to his P&L Account. YES IS THE VERDICT.

Facts of the case:

The assessee, an individual, filed his return for the relevant year declaring total income of Rs.61,09,800/- and the assessment was finalized u/s 143(3) accepting the returned income. Subsequently, the AO observed that during the year under consideration, the assessee had paid Rs.22,84,900/- to Dr. Abhay R. Vasavada on account of fees for professional services but the same was not debited in the P&L A/c. Since the asessee had not debited the same, it was considered as deemed income and the addition of Rs.22,84,900/- was made. Accordingly, on account of major audit objection raised by the revenue audit, the assessment was reopened and finallized u/s 143(3) r/w/s 147 determining the total income at Rs.83,94,700/-.

On appeal, the CIT(A) held that additions made by AO were justified but, during the year under consideration, only Rs.10,32,200/- was paid and Rs.14,19,450/- was the opening balance. He accordingly confirmed addition of Rs.10,32,200/- and deleted addition of Rs.14,19,450/-. On further appeal, the ITAT deleted the remaining addition of Rs.10,32,200/- paid to Abhay Vasavada, as the same was already recorded in the ledger as received from the insurance company and did not fall under the criteria of section 69C.

On appeal, the High Court held:

Whether the amount not expended by the taxpayer but merely routed by banking channel through him, does not merits to be debited to his P&L A/c - YES: HC

++ a perusal of the order reveals that insofar as the addition of Rs.10,32,200/- confirmed by the CIT(A) is concerned, the Tribunal, upon appreciating the material on record, has found that the assessee had inadvertently deducted tax u/s 194J despite the fact that the same was not applicable in the case of assessee. The Tribunal noticed that an amount of Rs.10,33,200/- was received directly from the Insurance Company was doctor's fee and the entire amount received by the assessee from the Insurance Company was through banking channel. Out of the consolidated amount paid by the Insurance Company to the assessee and amount of Rs.10,32,200/- was paid to Abhay Vasavada in his account which was merely a pass through payment made to Dr. Abhay Vasavada and as such the provisions of section 69C were not applicable; and accordingly deleted the addition;

++ the facts as emerging from the record reveal that the payment of Rs.10,32,200/- made to Abhay Vasavada was by the Insurance Company towards doctor's fees and such amount was merely routed through the assessee. The Tribunal was, therefore, wholly justified in holding that such amount was not in the nature of unexplained expenditure so as to attract the provisions of section 69C. Since the amount of Rs.10,32,200/- had not been expended by the assessee but was merely routed through the assessee, the question of debiting such amount to the profit and loss account did not arise. No infirmity can be found in the impugned order of the Tribunal so as to give rise to a question of law, much less a substantial question of law, so as to warrant interference.

(See 2019-TIOL-800-HC-AHM-IT)