BIPIN BIHARI MOHANTY,BHUBANESWAR vs. ACIT CIRCLE -5(1), BHUBANESWAR

It was submitted by the ld. AR that the assessee is a Doctor and Cardiothoracic Surgeon. It was submitted that as the return for the assessment year had not been filed, there was a survey on the premises of the assessee on 05.03.2019. It was the submission that in the course of survey, a statement came to be recorded u/s.131 of the Act on 27.03.2019 wherein though no evidence were specifically found still the income of the assessee had been computed as follows :-

It was the submission that notice u/s.148 of the Act had been issued on the assessee and the assessee had filed his return of income wherein for the assessment year 2012-2013, the assessee had shown a gross receipt of Rs.57,93,315/- and in the assessment year 2013-2014, a gross receipt of Rs.75,47,248/-. The assessee admittedly was not maintaining his books of accounts and consequently the assessee had 3 estimated his income from profession at 50% and offered the income to tax being an amount of Rs.28,96,658/- for the assessment year 2012- 2013 and Rs.37,73,624/- for the assessment year 2013-2014. The assessee had also shown income under the head income from other sources representing the bank interest. It was the submission that in the course of assessment, the AO in para 4.2 of his order in the assessment year 2012-2013 and 2013-2014 invoked the provisions of Section 145(3) of the Act and rejected the books of accounts if any maintained by the assessee. It was the submission that after rejecting the books of accounts the AO while computing the total income of the assessee adopted the returned income and made addition representing the difference between the returned income from profession and the income estimated in the statement recorded u/s.131 of the Act in the course of survey. He further added the differential between income offered by the assessee under the head income from other sources and the income estimated in the statement recorded u/s.131 of the Act. Further the ld. AO disallowed the entire expenses relating to profession claimed by the assessee in his return of income holding that the assessee had failed to produce any admissible evidence in support of the claim of expenses. It was the submission that at the outset, the books of accounts of the assessee having been rejected and the provisions of Section145(3) of the Act having been invoked, the disallowance of the expenditure could not be done insofar as once the books have rejected it is only the income that can be estimated. It was the further submission that in respect of the 4 income from other sources representing the bank interest, the Form 26AS of the assessee for the assessment year 2012-2013 showed the income from fixed deposit at Rs.37,975.89, wherein including the interest from the savings bank account and income accrued on other fixed deposits, the assessee itself had disclosed Rs.61,643/- and there was no evidence whatsoever to arrive at the income from other sources as recorded in the statement u/s.131 of the Act at Rs.1,01,560/- for the assessment year 2012-2013. For the assessment year 2013-2014 the interest income of Rs.2,31,959/- and Rs.51,405.89 has been reflected in 26AS whereas in the computation of total income the interest was shown at Rs.2,84,182/- which included interest from the savings bank account whereas in the statement recorded u/s.131 of the Act, the figure was Rs.3,35,634/-. It was, thus, the submission that the statement recorded u/s.131 of the Act had no foundation and was not supported by any evidence. It was the further submission that the difference of the income from the profession which has also been added by the AO was on the basis of the statement recorded u/s.131 of the Act which was not supported by any evidence more so any corroborative evidence. It was the submission that the additions as made by the AO may be deleted in the interest of justice.

In reply, ld. Sr.DR submitted that a statement has been recorded u/s.131 of the Act in the course of survey and in the statement the assessee himself has offered the said turnovers and incomes and the assessee should not be permitted to retract from such statement given. It was the submission that the assessee was unable to produce proper bills 5 ITA No.50&51/CTK/2023 and vouchers and books of accounts and consequently the AO was right in disallowing the expenses claimed by the assessee. It was the submission that the orders of the AO and CIT(A) are liable to be upheld.

We have considered the rival submissions. At the outset, a perusal of the statement recorded u/s.131 of the Act from the assessee allegedly on 27.03.2019 shows that the date of survey is 05.03.2019 whereas the same seems to have been signed on 27.03.2019, copy of which is being scanned and made part of this order as follows :-

This itself puts into question the veracity of the statement allegedly to have been recorded in the course of survey. A perusal of the statement recorded shows that there is nothing incriminating which has been found in the course of survey. However, the computation for the assessment years shows various figures. For example for the assessment year 2012- 2013, the total receipts taken in the statement is Rs.53,23,100/- whereas in the computation of income the assessee has shown much higher amount of Rs.57,93,315/-. The expenditure admittedly is on estimated basis. In respect of the income from other sources, the amount as shown as Rs.1,01,560/-, whereas the actual interest income received and accrued to the assessee is only Rs.61,643/-. From where these figures mentioned in the statement recorded u/s.131 of the Act have been arrived at, remained unsubstantiated. The same is the case for the assessment year 2013-2014. The 26AS for both the assessment years tally with the figures shown by the assessee and does not tally in any way with the incomes adopted in the statement allegedly to have been recorded u/s.131 of the Act. The AO in his assessment order mentions that the assessee has not made any compliance to the notice issued, however a perusal of the paper book of the assessee at page 23 shows that the assessee has filed written statements and explanations, income tax computation details, balance sheet as on 05.12.2019. A perusal of the assessment order at para 3.1 shows that the AO recognized that the statement is recorded u/s.131 of the Act on 05.03.2019 and the notice u/s.148 of the Act had been issued on 25.03.2019 but the statement 7 u/s.131 of the Act alleged to have been taken on 05.03.2019 is signed on 27.03.2019. No reconciliation of these datas has been placed. In any case, without going much into the technicalities it is noticed that the ld. AO has invoked the provisions of Section 145(3) of the Act and has rejected the books. The Hon’ble Kolkata High Court in the case of Dabros Industrial Co. (P.) Ltd., reported in [1977] 108 ITR 424 (Cal.) has, following the decision of the Hon’ble Supreme Court in the case of S.N.Namasivayam Chettiar, reported in [1960] 38 ITR 579(SC), categorically held that once the books of accounts are rejected then the profit should be estimated. Once the income of the assessee is estimated then no further additions by disallowance of expenditure or reference to unsubstantiated statements recorded can be made. Consequently, the addition representing the difference between the income offered by the assessee and income estimated in the alleged statement recorded u/s.131 of the Act, stands deleted, so also the disallowance of the expenditure as claimed by the assessee on estimate basis.

In respect of addition representing the difference between the income under the head income from other sources as disclosed by the assessee and as estimated in the alleged statement recorded u/s.131 of the Act, since the income offered by the assessee is supported by 26AS and as it is noticed that the income estimated in the alleged statement u/s.131 of the Act is unsupported by any evidence, the addition as made by the AO and confirmed by the ld. CIT(A) stands deleted. Consequently,