K C RAJU MULTI SPECIALITY HOSPITAL,BANGALORE vs. DCIT, CENTRAL CIRCLE-2(4), BANGALORE

4. The learned CIT(A) has erred in confirming the addition made by the Assessing Officer amounting to Rs.66,56,660/- (Rs. 96,56,660 — Rs. 30,00,000) being net alleged suppressed receipts based on two draft profit and loss accounts as unexplained income of the appellant. On the facts and circumstances of the case and the law applicable, the difference between the two draft profit and loss account were duly reconciled and explained and hence there is no unexplained income at all. The addition as made/confirmed without any corroborative evidence and merely on draft profit and loss account and without appreciating the reconciliation is erroneous and same is to be deleted.

5. In any case, the authorities below have erred in not appreciating the fact that the appellant declared a sum of Rs. 30,00,000/- as additional income in the return of income filed and same should have considered as such and the addition made over and above the declaration is to be deleted.

6. In any case, the addition as made/confirmed is erroneous and excessive.

7. The appellant denies the liability to pay incremental interest levied U/s. 234B of the Act. The interest levied being erroneous is liable to be deleted.

8. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the impugned order be quashed or at least the Addition of unexplained income as made/confirmed be .

- 1056/Bang/2025 Page 3 of 31 deleted, income as returned be accepted and Incremental interest levied u/s. 234B be deleted.”

4.2 For the year under consideration, the assessee filed return of income u/s 139(1) of the Act, dated 30th October 2017 declaring total income at Rs. 23,12,680/- only. Subsequently, the assessee was subject .

- 1056/Bang/2025 Page 4 of 31 to search proceedings under section 132 of the Act, dated 29th November 2017.

4.3 During the search proceeding, there were two sets of tally data for the year under consideration found from the computer operated by the accountant namely Shri Prashant Kini. As per the first set of tally data, total receipts under different head being insurance claim, IPD, OPD, IVF, Card collection, cheque receipt are at Rs. 2,41,48,639/- and purchases of Rs. 28,45,927/-, direct expenses of 25,16,370/-, indirect expenses of Rs. 65,64,572/- and thereby net profit of Rs. 1,22,21,890/- was shown. On the other hand, as per second of tally data the receipt stand at Rs. 1,62,26,972/-, purchase at 34,35,294/-, direct expenses at 26,56,700/- and indirect expenses of 75,69,868/-, thereby net profit shown was at Rs. 25,65,230/-, leading to the difference of Rs. 96,56,660/- in the net profit in the two set of tally data. Furthermore, in the final books of accounts disclosed under the Act, the gross receipt stand at Rs. 1,67,26,972/-, purchases stand at Rs. 34,33,294/-, direct expenses at Rs. 26,67,903/- and indirect expenses at Rs. 93,96,127/-and indirect income of Rs. 7,09,273/- only. Thereby, the assessee in the final books of accounts disclosed net profit of Rs. 23,00,861/- only.

4.4 Besides two set of tally data, there were cash aggregating to Rs. 1.34 crore also found from the premises of the partners of the assessee firm.

4.5 In respect of two sets of tally data for the year under consideration, the statement of accountant Shri Prashant Kini was recorded under section 132(4) of the Act. The accountant admitted that .

- 1056/Bang/2025 Page 5 of 31 he prepared tally account based on bank statement and patient admission & fee receipts sheet maintained by the receptionist/cashier in excel spread sheet. He admitted that as per the tally prepared by him originally, the turnover for the year was at Rs. 2.41 crores for the year under consideration. However, the managing partner Shri KC Raju asked him to reduce the receipt to reduce the net profit. Hence, he prepared second set of tally data with reduced turnover and reduced profit.

4.6 The statement of the accountant was confronted to the managing partner Shri KC Raju to which he admitted that he asked the accountant to reduce the receipt and profit to maintain similarity with income reported in the previous years. Shri KC Raju also admitted that modus operandi of supressing the receipt has been followed since the last 5 years and sales has been supressed nearly 40%. Accordingly, the managing partner agreed to offer additional income at 40% of the turnover for A.Ys. 2013-14 to 2017-18 (year under dispute). The assessee for the A.Y. 2017-18 quantified the amount representing additional income at Rs. 79,21,661/- only.

4.7 In consequent to search, assessment proceeding under section 153A of the Act was initiated and assessee filed return of income under section 153A of the Act for the year under dispute, wherein offered additional income of Rs. 30 lakhs instead of the income admitted at the time of search.

4.8 However, the AO during the assessment proceedings observed that in the two set of tally data, the net profit difference stands at Rs. .

- 1056/Bang/2025 Page 6 of 31 96,56,660/- only. Hence, the AO proposed to make addition of Rs.96,56,660/- by issuing a show cause notice.

4.9 In response, the assessee submitted that the Profit and Loss Account and Balance Sheet initially found during the search for FY 2016– 17 were only draft statements. These drafts were prepared for review by the management and do not represent the correct or final financial position.

4.10 The assessee explained that during the relevant year, the firm had employed more than two accountants. Most of them were new and were not fully aware of the hospital’s accounting procedures. Further, there was no single person exclusively responsible for maintaining the books of accounts. Due to frequent changes in accounting staff and lack of coordination, certain bills, receipt books, and registers were not properly accounted for, resulting in accounting mistakes.

4.11 The assessee explained the hospital’s system of billing and collections. In the case of IPD, advance amounts are collected at the time of admission, and the final bill is generated at the time of discharge. In insurance cases, receipts are first accounted under insurance and later adjusted upon receipt of the insurance claim. In the case of OPD, receipts are collected at the reception and recorded in the receipt books, while doctors maintain separate patient registers for consultation and billing purposes. These records are later handed over to the accounts team for posting.

- 1056/Bang/2025 Page 7 of 31 4.12 There are separate Collection and Finance Departments in the hospital. During the year, accounting staff in these departments were changed multiple times. The new staff were not fully aware of the procedures followed in the Collection Department. As a result, outpatient receipts were sometimes accounted both on the basis of the receipt book and again on the basis of the doctor’s register, leading to duplication of entries in certain months.

4.13 Further, in many cases patients initially visit in OPD and later get admitted in IPD. The amount first paid at the reception gets recorded in OPD receipts and the same amount also gets included in the final IPD bill at the time of discharge. Due to lack of awareness, such amounts were not adjusted properly, resulting in double accounting entries.

4.14 Similarly, in IVF cases, injections given to patients were recorded under OPD injection receipts. However, IVF treatment is offered as a package, which includes the cost of injections. When the IVF bill was settled, these amounts were again accounted under IVF receipts. Due to this, small injection amounts ranging from ₹2,000 to ₹3,000 per day were recorded twice under outpatient and IVF collections.

4.15 Because of these accounting and procedural issues, the OPD reflected in the draft Profit and Loss Account were incorrect and inflated. These draft figures, without proper verification and supporting evidence, cannot be considered as actual income or as suppression of income. It is further submitted that during post-search proceedings, due to lack of time and to buy peace, the assessee offered additional income calculated at 40% of receipts. This percentage had no factual basis and .

- 1056/Bang/2025 Page 8 of 31 was offered only to conclude the proceedings. Even for years where there was no incriminating material, such declaration was made under pressure. However, the assessee has otherwise fully accounted for all receipts.

4.16 Without prejudice, the assessee has already offered a sum of ₹30,00,000/- as additional income on account of difference in IPD receipts in the return filed under section 153A for AY 2017–18. Over and above this amount, there has been no suppression of income by the assessee.

4.17 The assessee therefore submits that the draft financial statements cannot be relied upon for making further additions and requests that the explanation furnished may kindly be accepted.

5.1 During the search, a register containing details of OPD receipts for June 2015 was found and confronted to Dr. K.C. Raju Reddy, partner of the firm. On verification, it was noticed that the actual receipts as per the daily collection register were higher than the receipts recorded in the .

- 1056/Bang/2025 Page 9 of 31 Tally data and the return of income. In his statement recorded under section 132(4) of the Act, Dr. K.C. Raju Reddy admitted that receipts were suppressed to reduce the tax liability and confirmed that there was a difference between actual collections and what was disclosed for tax purposes.

5.2 The AO further noted that the partner Dr. K.C. Raju Reddy admitted suppression of receipts for the past several years. He stated that the extent of suppression was around 35% to 40% of the total turnover reflected in the profit and loss account for various assessment years. Based on this admission, year-wise details of total receipts and 40% of such receipts were furnished by the assessee during the search proceedings, and the assessee agreed to offer the suppressed portion as additional income.

5.3 It was also observed that during the search, unaccounted cash of ₹1.34 crore was found at the residence of the partner. The partner admitted that this cash was out of hospital receipts and was utilized by him and his family members. This clearly indicated that the assessee was in possession of unaccounted receipts on the date of search.

5.4 The AO further relied on the statement of the accountant, Shri Prashanth Kini, recorded under section 132(4) of the Act, wherein he admitted that two sets of Tally data were maintained to suppress hospital receipts. The AO noted that neither the accountant nor the partner retracted their statements at the earliest point of time. Even during post-search proceedings and subsequent statements, no allegation of coercion or pressure was made.

- 1056/Bang/2025 Page 10 of 31 5.5 The AO rejected the assessee’s claim that the disclosure was made under stress or without proper verification. According to the AO, the assessee had sufficient time after the search to verify facts and retract the statement, but no valid retraction supported by evidence was made. The AO held that the statements recorded under section 132(4) of the Act have strong evidentiary value and are binding unless proved otherwise with cogent evidence.

5.6 Relying on judicial precedents, the AO concluded that admission made during search is an important piece of evidence and the burden lies on the assessee to prove it as incorrect. Since the assessee failed to do so, the AO treated the difference in two sets of tally profit for Rs. 96,56,660/- as suppressed income and, after adjusting the amount already offered (Rs. 30 lakh), Rs. 66,56,660/- was brought to tax as undisclosed income of the assessee.

6. The aggrieved assessee preferred an appeal before the learned CIT(A).

7. Before the learned CIT(A), the assessee submitted that the AO erred in placing complete reliance on the oath statement recorded under section 132(4) of the Act, ignoring the subsequent explanation and retraction made by the assessee. The statement was obtained under stressful conditions, late at night (3 AM), when the partner, an elderly (70 year) person, was not in a proper physical and mental state. Therefore, such a statement cannot be treated as conclusive or binding evidence.

- 1056/Bang/2025 Page 11 of 31 7.1 It is further submitted that the alleged suppression of receipts was never supported by complete and reliable corroborative material. The AO relied selectively on one register and extrapolated the figures to multiple years without examining the regular books of account, accounting procedures, or reconciling the differences. The profit and loss accounts relied upon by the AO were draft in nature and suffered from several accounting and clerical errors due to frequent change of accounting staff and lack of a permanent accountant.

7.2 The assessee also submits that the disclosure of income was made only to buy peace and to conclude the search proceedings. The amount of ₹30,00,000 offered in the return filed under section 153A of the Act was a voluntary disclosure to resolve the matter amicably and should not be treated as unexplained income. There was no independent evidence to justify treating the balance amount of ₹96,56,660 as undisclosed income.

7.3 It is a settled position of law that an admission is an important piece of evidence, but it is not conclusive. The person making the admission has a right to explain or retract the same by showing the correct state of affairs. Judicial precedents and CBDT instructions clearly state that additions should not be made merely on the basis of forced or uncorroborated confessions during search.

7.4 The learned CIT(A) after considering the facts in totality observed that the search and seizure operation clearly brought out incriminating materials in the form of two parallel sets of Tally data for the same period. One set reflected lower receipts as per the return of income, .

- 1056/Bang/2025 Page 12 of 31 while the other showed higher receipts. During the search, both the partner, Dr. K.C. Raju Reddy, and the accountant, Mr. Prashanth Kini, admitted that receipts of the hospital were deliberately reduced to lower the taxable income.

7.5 The learned CIT(A) noted that the statement of Dr. K.C. Raju Reddy was recorded under section 132(4) of the Act and that he had clearly admitted suppression of receipts. He also confirmed the accountant’s statement that cash vouchers relating to OPD and IPD were deleted. The learned CIT(A) held that these statements were voluntary and were not retracted at the earliest opportunity. The plea of stress or pressure was rejected, as the assessee had sufficient time during post- search proceedings and assessment proceedings to retract the statements with supporting evidence, which was not done.

7.6 The ld. CIT(A) further observed that the assessee’s explanation that the difference between the two Profit and Loss Accounts arose due to accounting errors, duplication, and reconciliation issues was not supported by any documentary evidence. No OPD registers, IPD records, Excel sheets, or reconciliation statements were produced either during the search, assessment proceedings, or appellate proceedings to substantiate the claim of double counting or accounting mistakes. On the contrary, the statement of the accountant supported the finding that receipts were intentionally reduced.

7.7 The learned CIT(A) also took note of the fact that substantial cash was found at the residence of the partner and that the partner himself admitted that cash collections of the hospital were periodically taken .

- 1056/Bang/2025 Page 13 of 31 home and deposited into the bank as and when required. According to the learned CIT(A), this conduct clearly established that proper reconciliation and accounting of receipts was not being followed.

7.8 The ld. CIT(A) further observed that the pattern of net profit declared by the assessee in earlier years remained consistently low and that there was a sudden and abnormal increase in profits (200% surges) only in the year following the search, when the seized cash was included in the gross receipts. This supported the conclusion that receipts were being systematically suppressed in earlier years. In view of the above facts, the learned CIT(A) held that the addition made by the AO was not based solely on the statement recorded during the search but was supported by seized material, parallel books of account, cash found during search, and consistent admissions by the assessee. The explanation offered by the assessee was found to be unsatisfactory and unsubstantiated. Accordingly, the learned CIT(A) confirmed the action of the AO in bringing to tax the difference between the two Profit and Loss Accounts amounting to ₹66,56,660/- and dismissed the relevant grounds of appeal.

- 1056/Bang/2025 Page 14 of 31 corroborative material in support of the draft profit and loss account. Likewise, the assessee has filed audited financial statements which were accepted by the revenue without pointing out any defect therein. Similarly, an explanation was furnished showing the analysis of 2 profit and loss account along with the audited financial statements. But the revenue has not pointed out any defect therein. The ld. AR reiterated the contentions raised before the authorities below.

11.1 At the outset, it is important to note that there are three different Profit & Loss accounts on record, namely (i) first set of Tally data extracted during search, (ii) second set of Tally data extracted during search, and (iii) the final audited Profit & Loss account filed along with the return of income. On comparison, we find that while the difference in net profit between the first and second Tally data is ₹96.56 lakh, the difference between the first Tally data and the final audited accounts is ₹99.21 lakh. This itself shows that the final audited accounts do not fully tally with either of the two draft Tally extracts found during the search.

- 1056/Bang/2025 Page 15 of 31 We further find considerable force in the assessee’s contention that the receipts through banking channels, namely card receipts, cheque receipts and IVF facility receipts, are identical in all three sets of accounts. There is no variation whatsoever in receipts routed through banks. The variation is confined only to cash receipts from OPD and IPD, which are the areas where manual recording, multiple registers, Excel sheets, and subsequent posting into Tally were involved. This factual consistency in bank receipts materially weakens the allegation of overall suppression of turnover.

11.2 On the expense side also, we notice that major expenses which are normally incurred and paid through banking channels—such as audit fees, equipment insurance, equipment maintenance, hospital rent, partner salary, staff welfare expenses, telephone charges, and license fees—remain unchanged across all three versions of the accounts. The changes are noticed only in the expenses such as purchases, driver salary, and other routine expenses, which involve cash payments. This pattern strongly supports the assessee’s explanation that the variations arose due to cash-related accounting errors and adjustments, and not due to deliberate inflation or suppression across the board.

11.3 Another important fact which cannot be ignored is that certain statutory and necessary expenses like depreciation of ₹18.89 lakh were claimed only in the final audited accounts, and such depreciation was not claimed in either of the two sets of Tally data extracted during search. This clearly establishes that the Tally data found during search were incomplete and draft in nature and could not have been the final .

- 1056/Bang/2025 Page 16 of 31 accounts of the assessee. No prudent assessee would deliberately omit depreciation in final accounts if the intention was to suppress income. When we examine the assessee’s explanation of duplication of entries, we find the same to be plausible and supported by the accounting structure of the hospital. The hospital was maintaining OPD records manually, IPD records through HMS software, and daily collections through Excel sheets. In cases where OPD patients were later admitted as IPD patients, or where IVF injections were first recorded under OPD and later included in IVF package billing, there existed a genuine possibility of double recording of the same receipts, especially in the absence of a permanent and experienced accounting staff. The fact that only cash-based OPD/IPD receipts are affected lends further credibility to this explanation.

11.4 We also find merit in the assessee’s submission that the two sets of Tally data were only draft working files, prepared at different points of time for internal review and reconciliation. Merely because two draft versions exist, it cannot be conclusively held that one represents “true income” and the other represents “suppressed income”, particularly when the final audited accounts differ from both drafts and include additional legitimate expenses like depreciation.

11.5 Coming to the reliance placed by the lower authorities on statements recorded under section 132(4) of the Act, it is a settled position of law that a statement, though relevant, is not conclusive and must be supported by corroborative material. In the present case, the addition is substantially founded on statements of the partner and the accountant, without a corresponding scientific reconciliation of receipts, .

- 1056/Bang/2025 Page 17 of 31 duplication entries, patient records, or cash-flow analysis. The seized Tally data, when examined in totality along with the audited accounts, do not conclusively establish suppression to the extent alleged.

11.6 We also note that the assessee has already offered ₹30 lakh as additional income in the return filed under section 153A of the Act. Beyond this, the Assessing Officer has merely adopted the arithmetical difference between two draft Tally profit figures, without examining whether such difference survives after removing duplication, accounting errors, and considering legitimate expenses missing in draft accounts. Such an approach, in our view, is not sustainable.

11.7 Importantly, the addition made is not based on rejection of books of accounts under section 145 of the Act, nor is there any estimation of income based on comparable cases or profit ratios. The books of account as finally audited have not been rejected. Once the audited books are accepted, a mechanical addition based on draft working files cannot be sustained.

11.8 In these facts and circumstances, we are of the considered view that the assessee has successfully demonstrated that the two sets of Tally data were draft and incomplete, that the variations arose mainly due to duplication of cash receipts and accounting inconsistencies, and that the addition made by the Assessing Officer is largely based on statements without adequate corroboration. The explanation offered by the assessee appears reasonable and supported by surrounding facts. Accordingly, we hold that the addition of ₹66,56,660/- sustained by the learned CIT(A) is not justified. The same is directed to be deleted.

ITA Nos.1055 - 1056/Bang/2025

“1. The learned Commissioner of Income-tax (Appeals)-15 has erred in confirming the assessment order passed u/s143(3) of the Act. The orders passed are bad in law, Against the principles of natural justice and such orders are liable to be quashed.

3. In any case, the learned CIT(A) has erred in confirming the assessment made by the Assessing officer based on the statements which were retracted later on the ground that the statements were not retracted before the Investigation wing but later during the course of assessment proceedings. The action of the CIT(A) being wholly erroneous both on facts and law applicable is to be negated and the assessment as made/confirmed is to be quashed. 4.1 The learned CIT(A) has erred in confirming the addition made by the Assessing Officer amounting to Rs. 1,20,00,000/- being cash found as unexplained income of the appellant without appreciating the fact that i. Out of the above, a sum of Rs. 3,49,610/- belonged to the family members. ii. A sum of Rs. 9,40,000/- being personal cash of Dr. Bharath and Dr. Darshana were duly accounted in their personal books iii. The cash found amounting to Rs. 1,08,00,000/- were actual collections of the year which were included while preparing the profit and loss account and computing the taxable income of the appellant. On proper appreciation of facts and the law applicable, addition as made /confirmed over and above the normal income is erroneous and same is to be deleted. 4.2 In any case, adding the cash found over and above the normal income which was computed considering the actual collections amounts to double addition and same is to be deleted. 4.3 In any case, the addition as made/confirmed is erroneous and excessive.

ITA Nos.1055 - 1056/Bang/2025

5. The learned CIT(A) has erred in confirming the action of the assessing officer in invoking the provisions of section 115BBE and taxing the additions made u/s 69A of the Act at special rate of 60%. On proper appreciation of facts and the law applicable, the provisions of section 115BBE being, not applicable calculating tax at special rate is bad in law and is to be deleted.

- 1056/Bang/2025 Page 20 of 31 15.1 Dr. KC Raju Reddy and Dr, Mangladevi in their respective statement admitted that cash amounting to Rs. 44,46,820/- and 66,46,820/- found from their possession belong to assessee firm (KC Raju Multi Speciality Hospital) and represent daily cash collection from the patient. On further question to corroborate their statement, they stated that the books of the assessee firm were not updated for the year to corroborate the same.

15.2 Likewise, Dr. Bharath Kumar Reddy was asked to explain the sources of cash found to which he stated that out of total cash of Rs. 24,27,200/- an amount of Rs. 14 Lakh belong to Shishuka Children’s Hospital which meant to be deposited in bank. Similarly, an amount of Rs. 6 Lakh was given by DR KC Raju Reddy to Dr. Darshana.

15.3 Finally, DR. KC Raju Reddy admitted that out of total cash an amount aggregating to Rs. 1.2 crore belong the assessee firm representing daily cash collection which will be offered to tax as additional income.

15.4 However, the additional income of Rs. 1.2 as admitted during the search was not offered to tax in the return field for the year in dispute. Accordingly, the AO issued show cause notice proposing to make addition of Rs, 1.2 crores.

- 1056/Bang/2025 Page 21 of 31 statement given stating that no books of account were updated for the year under consideration was wrong as the statement was given under stress. The assessee claimed that without maintaining books of account it not possible to get books audited and file return as per audited books. The AO examined the explanation of the assessee regarding cash of ₹1,20,00,000 found during the search. The AO did not accept these explanations. He noted that the amounts allegedly returned to family members were for household and emergency expenses and therefore the source was not proved. He also observed inconsistencies in the statements of the doctors and admissions made during search, including admission by Dr. K. C. Raju Reddy under oath for cash of ₹1,20,00,000. Hence, the AO held that the claim that only ₹1,08,00,000 belonged to the assessee was not acceptable.

17.1 The AO further held that the assessee’s retraction of the statement made under section 132(4) was not valid, as it was made after a long delay and not at the earliest opportunity. Relying on various .

- 1056/Bang/2025 Page 22 of 31 judicial decisions, the AO held that statements recorded under section 132(4) of the Act have strong evidentiary value and retraction without cogent evidence is not acceptable. In view of these facts, the AO concluded that the assessee failed to satisfactorily explain the source of cash of ₹1,20,00,000. Accordingly, the said amount was treated as unexplained money under section 69A of the Income-tax Act and added to the income of the assessee.

20.1 Without prejudice, the assessee submits that the cash of ₹1,20,00,000 found during the search is fully explained. Out of the said .

- 1056/Bang/2025 Page 23 of 31 amount, ₹3,49,610 belonged to family members and was their personal cash. The said amount was not even seized during the search. The AO himself has stated that this cash was returned to family members for household expenses and emergencies. Once the ownership of cash by family members is accepted, the same cannot be treated as unexplained income in the hands of the assessee. Copies of cash ledgers of the family members were also furnished to establish the source, but the AO ignored the same.

20.2 Further, cash of ₹9,40,000/- belonged to Dr. Bharath Kumar Reddy and Dr. Darshana, which was found in their respective rooms. The said cash was earned by them from their own professional sources and was duly reflected in their books of account. Though their books were not updated on the exact date of search, the income was offered to tax by them in AY 2018-19. Copies of their cash ledgers were furnished, but the AO wrongly treated this cash as income of the assessee-firm without any basis.

20.3 After excluding the above amounts, only ₹1,08,00,000 pertained to the assessee. The assessee submitted that this cash was generated from regular business receipts of the hospital during the period April 2017 to November 2017. The hospital is in existence for several years and has regular cash and card collections. The cash collections were recorded day-to-day in receipt books and collection registers. Due to non-availability of permanent accounting staff, the tally software was not updated on a real-time basis. However, the books of account were duly completed before filing the return of income and the cash balance as on the date of search was reflected therein.

- 1056/Bang/2025 Page 24 of 31 20.4 It is further submitted that merely because the cash was not deposited immediately in the bank, it cannot be concluded that the cash is unexplained. There is no prohibition in law to hold cash in hand. The assessee is free to manage his affairs in the manner he considers appropriate. The AO cannot sit over the business decisions of the assessee. Increase in gross collections, by itself, cannot be a ground for making addition when such collections are duly recorded in the books and offered to tax.

20.5 The assessee further submits that section 69A of the Act can be applied only when all the conditions prescribed therein are cumulatively satisfied. The AO must first establish that the assessee is the owner of the money, that such money is not recorded in the books of account, and that the assessee has failed to explain the nature and source of such money. In the present case, though the assessee is the owner of the cash, the same is duly recorded in the books of account and properly explained. Therefore, the basic conditions for invoking section 69A of the Act are not satisfied.

20.6 The AO has also accepted the books of account and has not rejected them. The gross receipts shown in the income and expenditure account have been accepted while computing the total income. Once the receipts are accepted as business income, the same amount cannot again be taxed as unexplained money. This results in double taxation of the same income, which is impermissible in law.

- 1056/Bang/2025 Page 25 of 31 20.7 The assessee also submitted that the entire addition is based on suspicion, conjectures, and assumptions, such as holding of high cash balance and increase in gross receipts. It is a settled position of law that additions cannot be made merely on suspicion without bringing any material evidence on record. Documentary evidence produced by the assessee cannot be brushed aside as sham without any investigation or contrary material.

20.8 In view of the above facts and legal position, the assessee respectfully submitted that the addition of ₹1,20,00,000/- made under section 69A of the Act is unsustainable in law and on facts. The cash found during search is fully explained and already offered to tax as part of regular business income. Therefore, the assessee prays that the learned CIT(A) may kindly delete the addition in full and grant appropriate relief.

- 1056/Bang/2025 Page 26 of 31 accounts. The seized cash of ₹1.20 crores was directly linked to such suppressed receipts. 21.1 The learned CIT(A) further observed that the statement of Dr. K.C. Raju Reddy was recorded not once but on multiple occasions over a period of time after the search. The assessee had sufficient opportunity to correct or clarify the statement or to produce updated books of account during post-search proceedings. However, no such effort was made. The retraction and explanation given at a later stage were therefore treated as an afterthought and not acceptable.

21.2 The claim of the assessee that cash collections were recorded in receipt books and registers on a day-to-day basis was also rejected. The learned CIT(A) noted that none of these basic records, such as receipt registers, bill books, vouchers, or supporting documents, were found during the search or produced during post-search proceedings. In the absence of these primary records, the explanation that the cash was already accounted for could not be accepted.

21.3 The learned CIT(A) also rejected the explanation that delay in updating the Tally data was due to temporary staff and accounting difficulties. It was observed that even after the search, when ample time was available, the assessee failed to reconcile the cash found with the books of account. This conduct indicated that the cash was not part of the regularly accounted business income.

21.4 Another important factor noted by the learned CIT(A) was that the cash was not found at the hospital premises, where daily cash collections are normally kept, but at the residence of the partner.

- 1056/Bang/2025 Page 27 of 31 According to the learned CIT(A), it was not believable that such a large amount of cash could be accumulated and kept at the residence without regular verification and accounting. This fact supported the conclusion that the cash represented concealed income.

21.5 With regard to the claim that part of the cash belonged to family members and doctors, the learned CIT(A) observed that the books of account or contemporaneous records supporting such claims were not found during the search. These explanations were raised only during appellate proceedings and were therefore treated as fresh claims without evidentiary support.

21.6 The learned CIT(A) further noted that mere filing of cash books or reconstructed records at a later stage does not discharge the burden placed on the assessee, especially when such records were neither available nor produced during search or post-search proceedings. The increase in gross receipts without a corresponding increase in income offered to tax also strengthened the findings of the AO.

21.7 In view of the above facts, the learned CIT(A) held that the AO was justified in treating the cash of ₹1,20,00,000 as unaccounted receipts of the hospital. The reliance placed by the assessee on judicial decisions was found to be distinguishable on facts. Accordingly, the learned CIT(A) confirmed the addition made by the Assessing Officer and rejected the grounds raised by the assessee.

- 1056/Bang/2025 Page 28 of 31

25.1 The undisputed fact is that the cash was found during the search conducted on 29th November 2017 at the residence of the partners of the assessee firm. Out of the total cash found, different amounts were found from the possession of different family members and doctors. Statements were recorded during the search, wherein it was stated that the cash represented daily collections of the hospital. It is also a matter of record that the assessee firm is a running hospital having substantial cash collections from OPD and IPD patients.

- 1056/Bang/2025 Page 29 of 31 25.2 We find merit in the contention of the assessee that an admission made during the course of search, though relevant, is not conclusive and can be explained by placing correct facts on record. The Hon’ble Courts have consistently held that an admission is an important piece of evidence, but it is open to the person making the admission to show that it is incorrect. In the present case, the assessee has explained the circumstances under which the statement was recorded and has supported its explanation by books of account and other materials.

25.3 On facts, we note that the AO has not rejected the books of account of the assessee. The gross receipts disclosed in the income and expenditure account have been accepted. Once the books of account are accepted and the receipts are treated as business receipts, the same amount cannot again be brought to tax as unexplained money under section 69A of the Act. Such an approach would result in taxing the same income twice, which is not permissible in law.

25.4 We also find force in the argument that section 69A can be invoked only when the money found is not recorded in the books of account and the assessee fails to explain the nature and source of such money. In the present case, the assessee has consistently claimed that the cash belonged to the hospital and was generated from regular business activity. The cash book produced shows availability of sufficient cash balance. Merely because the cash was not deposited in the bank immediately or was kept at the residence of the partner cannot, by itself, lead to the conclusion that the cash is unexplained.

- 1056/Bang/2025 Page 30 of 31 25.5 As regards the reliance placed by the lower authorities on the existence of two sets of Tally data, we observe that the addition has not been made by rejecting the books of account or by making any estimation of suppressed income. The entire addition is only based on the cash found during search. When the cash is explained as part of business receipts and the same receipts are already reflected in the books and offered to tax, no separate addition under section 69A is warranted.

25.6 We also note that part of the cash was found from the possession of other family members and doctors. The AO has not brought any material on record to conclusively prove that such cash belonged to the assessee firm. Mere suspicion or inference cannot take the place of proof.

25.7 The approach of the AO and the learned CIT(A) is largely based on assumptions, such as high cash holding and increase in gross receipts. It is a settled principle that additions cannot be made on the basis of suspicion, conjectures, or surmises, without bringing cogent material on record.

- 1056/Bang/2025 Page 31 of 31 Since the addition itself is deleted, the consequential levy of tax under section 115BBE and initiation of penalty proceedings under section 271AAC do not survive and are directed to be deleted. 27. In the result, the appeal of the assessee is allowed