The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has held that excess share of profit claimed can’t be treated as ‘Income from other sources’.
The assessee filed an original returndeclaring total income at Rs.9,66,360/-, which was revised on 31-07-2016 with total income at Rs.11,66,360/- in which the assessee claimed exempt income of his 10% share in the profit of the partnership firm, namely, M/s. Nirman Reality at Rs.49,97,480/-. The Assessing Officer (AO) held that the excess share of profit claimed by the assessee to the tune of Rs.4,12,074/- was like ‘Income from other sources’.
It was observed that the change in the share in the profit of the partnership firm took placewith a corresponding increase in the assessee’s salary at Rs.3.00 lakh which was raised to Rs.5.00 lakh. The assessee increased his taxable income by the additional salary of Rs.2.00 lakh but omitted to give effect to the figure of exempt share in the partnership firm which got reduced to Rs.45,85,406/- from the original share declared in the return.
It was observed that all relevant financial statements of the partnership firm indicate the assessee’s share in the profit at Rs.45,85,406/- was submitted. Mere mistake in not lowering the share in the profit of the firm cannot lead to the treatment of the differential amount as ‘Income from other sources.
The Coram consists of Shri R SSyal, vice president and ShriS S Viswanethra Ravi, Judicial Member observed no reason to treat the difference in the share of profit of the firm as ‘Income from other sources’ and directed to delete the addition made by AO. The appeal filed by the assessee was allowed. The appellant was represented by Shri Krishna Gujarathi and the revenue was represented by Shri M.G. Jasnani.
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