AO Can't Apply Sec 69 R/w/S 115BBE To Surrendered Business Income Of Assessee Which Was Duly Offered In I-T Return: Chandigarh ITAT
Finding that the nature and source of unaccounted investment in the hospital building is arising out of assessee's professional receipts, the Chandigarh ITAT ruled that there was no justifiable basis on the part of the AO in applying the provisions of Section 69 r/w Section 115BBE of the Income tax Act to the surrendered business income of the assessee which has been duly offered...
Finding that the nature and source of unaccounted investment in the hospital building is arising out of assessee's professional receipts, the Chandigarh ITAT ruled that there was no justifiable basis on the part of the AO in applying the provisions of Section 69 r/w Section 115BBE of the Income tax Act to the surrendered business income of the assessee which has been duly offered in the return of income.
The Bench of Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) observed that “the assessee has provided a reasonable and acceptable explanation about the nature and source of such unrecorded transactions as that of professional receipts and the necessary nexus with assessee's profession has been established, it cannot be said that these are unexplained transactions, thus, doesn't satisfy the second condition for invoking the deeming provisions of Section 69 of the Act”. (Para 32)
As per the brief facts of the case, the assessee is a practicing physician and a child specialist running his professional practice under the name and style of Dr. Aniljit's childcare. A survey operation under section 133A was carried out at the official premises of the assessee, wherein the assessee surrendered a sum of Rs 30 lacs for the assessment year 2015-16 and Rs. 1.75 Crores for the assessment year 2019-20. Thereafter, the assessee filed his return disclosing the income so surrendered of Rs 1.75 Crores as business income. The AO observed that the assessee has carried out construction of the hospital building situated at Patiala and the matter was referred to the Valuation Officer under Section 142A for determining the value of investment. The Valuation officer calculated the value of the investment at Rs. 1,61,66,000/-. The AO compared the said value with the value as per the balance sheet of the assessee and held that there was a short fall of Rs. 6,13,762/- in the value of investment in the building declared by the assessee, and made the addition of Rs. 6,13,762/- under Section 69 of the Act.
The AO issued another show cause to the assessee, referring to the surrender letter wherein the assessee surrendered a sum of Rs. 1,20,00,000/- on account of understated expenditure involved in construction of the said hospital building. As per the AO, the unaccounted investment carried out by the assessee came to light only as a result of survey action. It was further held by the AO that the assessee has surrendered additional business receipts amounting to Rs. 55,00,000/- during the course of survey. Hence the said surrendered business receipt cannot be deemed to be part and parcel of the income surrendered on account of investment in building amounting to Rs. 1,20,00,000/- which remain unexplained and same was treated as unexplained investment under Section 69 of the Act as against business income shown by the assessee.
The Bench noted that the limited dispute relates to applicability of Section 69 r.w.s 115BBE on the surrendered amount of Rs. 1.20 Crores in relation to investment in construction of the hospital building as against business income offered by the assessee in his return of income.
The Bench found that the construction of the hospital building was started at the beginning of the current financial year in month of April 2018 and the civil work got completed in December 2018 wherein four floors were built including basement and finishing work was in progress at the time of survey which was carried out on 28/03/2019.
As such physical structure was found at the time of survey, however the Bench observed that as far as the quantum of expenditure on construction was concerned, no material/documentation was found during the course of survey and the estimated amount of expenditure has been taken basis the statement of the assessee recorded at the time of survey.
“At the time of survey carried out on 28/03/2019, no expenditure has been booked on construction of the hospital building, however, subsequently, after the close of the financial year and as part of finalization of his accounts and the financial statements for the period 2018-19, the assessee has shown investment by way of construction of the hospital building at Rs 1,55,52,238/- as on 31/03/2019 which has been duly taken cognizance of and accepted by the AO”, added the Bench.
The Bench found from reading of the survey statement in its entirety, which has, in fact, form the basis for the action by the AO, that the assessee was engaged in running his child care medical practice and the same was the only source of his income as evident from and corroborated by the computerized books of accounts and manual records in terms of OPD register, OPD fee receipts, vaccination register, vaccination fee receipts and other related medical records maintained by him and found during the course of survey.
Hence, pointing out that there is no finding by the survey team that the assessee has any other source of income other than receipts from running his medical practice and operating the child care clinic, the ITAT allowed the assessee's appeal.
Counsel for Appellant/ Assessee: Rakesh Cajla
Counsel for Respondent/ Revenue: Amanpreet Kaur
Case Title: Aniljit Singh Arora verses DCIT
Case Number: ITA NO. 515/Chd/2023