THE ACIT, CIRCLE - 1(1), VISAKHAPATNAM vs. SRI K.RADHA KRISHNA, VISAKHAPATNAM

आदेश / O R D E R

PER V. DURGA RAO, Judicial Member:

This appeal filed by the revenue is directed against order of the

Commissioner of Income Tax (Appeals) {CIT(A)}, Visakhapatnam vide

ITA No.0233/13-14/ACIT,C-1(1),Vsp/2013-14 dated 30.12.2013 for the

assessment year 2011-12.

income for the assessment year 2011-12 on 22.2.2012 declaring total

income of ` 89,92,290/- and agricultural income of ` 55,620/-. The

return filed by the assessee was processed u/s 143(1) of the Income

Tax Act, 1961 (hereinafter called as 'the Act') on 4.2.2013.

Subsequently, a search operation was conducted in the assessee’s case

on 24.10.2010. In the assessment order, the A.O. has noted that during

the course of search, the undisclosed income of the assessee was filed

as follows:-

(i) Unaccounted cash found at the residence `14,46,855/- on the date of search i.e. on 24/10/2010 . (ii) Unaccounted cash found at the residence during the operation of restrictive order ` 3,00,000/- u/s 132(3) of the act on 22/02/2011. (iii) Undisclosed cash found at assessee’s chamber at M/s. R.K. Children’s Hospital during the operation of restrictive order ` 2,29,100/- `19,75,955/- u/s 132(3) of the act on 22/02/2011. (iv) Unexplained investment in gold jewellery weighing `37,30,000/- 2000gms (v) Suppressed receipts from profession as per the ` 8,16,550 seized material `21,89,650/- (vi) Assessee’s share of doctors fees received towards in-patient consultancy, not reflected in the books of M/s. R.K. Children’s Hospital & Perinatal Centre Total `87,12,155/-

The Assessing Officer after considering the explanation of the

assessee, completed the assessment u/s. 143(3) of the Act.

has noted that during the course of search, cash was found at the

residence and hospital chamber of the assessee of ` 17,76,855/- and 2 `2,29,100/- respectively aggregating to ` 19,75,955/-. The assessee

has explained that an amount of ` 9,70,000/- represents professional

receipts relating to assessment year 2010-11, an amount of ` 40,000/-

relates to assessee’s wife, the balance of ` 4,36,855/- represents

professional receipts for the period 1.4.2010 to 20.12.2010, which is a

part of professional receipt found in his seized material of ` 21 lakhs.

The same is explained as follows:-

Cash found Cash seized Explanation given `14,46,855/- `13,00,000/- An amount of ` 9,70,000/- represent professional receipts relating to A.Y. 2010-11, an amount of ` 40,000/- relate to assessee’s wife and the balance ` 4,36,855/- represent professional receipts for the period 1.4.2010 to 20.12.2010 which is part of professional receipts found in the seized material of ` 21.89 lakhs. `3,00,000/- `3,00,000/- Represent professional receipts for the period 01.04.2010 to 20.12.2010 `2,29,100/- `2,00,000/- Represent professional receipts for the period 01.04.2010 to 20.12.2010.

It was further submitted that an amount of ` 17.46 lakhs was kept 4.

in the residence to purchase the property and an amount of ` 2.29 lakhs

was kept in the hospital chamber to meet urgent expenses. The A.O.

has noted that the source for cash was not explained during the course

of search as it was not recorded in the books of accounts. During the

course of assessment proceedings, the assessee has given the following

explanation:

"(a) An amount of Rs.19,75,955/- was available with me at the time of search operations conducted on me. Out of the said cash available with me an amount of Rs.8,84,371/- was requested for 3 telescoping against the investment of gold jewellery for the assessment year 2010-11. An amount of Rs.18,54,371/- was offered as additional receipts/income during the assessment year 2010-11 as omitted receipts for the reasons explained for that year. Out of the said cash located at the time of search, un-utilized cash out of the said receipts which were already taxed during the earlier year, was also available with me to the extent of un-utilized amount of Rs.9,70,000/-. So far as I remember that at the time of recording the (b) statements on 24. 12.2012, I had explained the investigating officer that out of Rs.14,46,855/- cash found at my residence, an amount of Rs.9,70,000/- representing the consultation from patients of 2009-10 financial year which was offered by me in the return filed under section 153A for A.Y.2010-11 offering an additional income of Rs.18,54,731/-. Since, the said amount of receipts of Rs. 18,54,371/- has (c) already been included in the income of earlier year the same cannot be included again for the year under consideration as unexplained cash balance. The investigation wing has thoroughly searched my residential (d) premises, professional premises and also the lockers and finally traced out the said cash balance. Hence, the reflection of the cash available with me after meeting certain expenditure like acquisition of the jewellery.”

During the course of search he has observed that the contention on the

issue of unaccounted cash found during the course of search of `

19,75,955/- (`14,46,815/- + ` 3,00,000 + ` 2,29,100/-) is not

acceptable on the ground that the assessee was not in a position to

prove the genuineness of the source of cash. During the course of

search, he further observed that the assessee has made an attempt to

mislead the department by stating that he has kept the cash to meet

emergency expenditure. The A.O. further noted that the assessee was

not able to prove that an amount of ` 9,70,000/- pertains to earlier

years consultancy fees and ` 40,000/- belonging to his wife Smt.

K.Kanakadurga Devi out of ` 14,46,855/- found in his residence with a

corroborative evidence. The assessee also not maintained regular books

of accounts and accordingly, the A.O. has made an addition of `

19,75,995/-. On appeal before CIT(A), it was submitted that an amount

of ` 40 lakhs relates to his wife and an amount of ` 9,70,000/-

represents professional receipts relating to assessment year 2010-11. In

other words, the amount of ` 9,70,000/- was claimed to be available for

telescoping out of additional professional receipts offered to tax of `

18,54,781/- for assessment year 2010-11. The balance cash found

seized during the search represents cash from the professional receipts

earned during the year which is evident from the seized material and

they are considered as part of current year’s professional receipts,

separate addition is not warranted. It is further submitted that though

the professional receipts earned during the year was not recorded in the

books of accounts as the books were not maintained at that time, it

would not be unexplained income as it is part of current year’s

professional receipts and that the assessee had a time to declare them

in his return of income. It was further represented that current year

professional receipts have been offered to tax including those found in 5 the seized material and that books of accounts were prepared taking

into account the seized material, therefore, it was contended that the

cash found of ` 19.75 lakhs cannot be considered as unexplained. The

Ld. CIT(A) after considering the explanation of the assessee directed the

A.O. to allow the benefit of telescoping to the tune of ` 9,70,000/- for

the cash found during the course of search. Relevant portion of the

order of the CIT(A) is extracted as under:

“5.7 I have considered the submissions made. I find that there is no evidence to support the plea that cash amounting to Rs.40,000/- relate to the assessee's wife. I find that the AO has rightly rejected this contention. However, I find merit in the assessee's claim for telescoping of an amount of Rs.9,70,000/- towards cash found during search with reference to the additional professional receipts offered of Rs.18,54,871/- for A.Y.2010-11, as there is nothing on record to indicate that the additional income offered has been utilized for any other investment or expenditure. In such factual circumstances, I am of the view that the assessee's claim for telescoping is justified. Therefore, the AO is directed to allow the benefit of telescoping to the tune of Rs.9,70,000/- for the cash found during the search operation.”

amount of ` 9,70,000/- pertains to earlier years, therefore, the Ld.

CIT(A) is not correct giving telescoping benefit to the assessee.

order of the A.O.

on record and gone through the orders of the authorities below. There is

a search conducted in the case of the assessee. The A.O. has seized

cash of ` 19,75,955/-, so far as an amount of ` 9,70,000/- is concerned,

it was submitted before the A.O. that this amount pertains to

professional receipts of assessment year 2010-11 and therefore, it

cannot be said that ` 9,70,000/- cannot be treated as undisclosed

income. However, the A.O. has not accepted the claim of the assessee

on the ground that there is no evidence that the amount pertains to

assessment year 2010-11. However, on appeal before the CIT(A), the

CIT(A) gave a categorical finding that the assessee has offered a

professional receipt of ` 18,54,871/- for the assessment year 2010-11

and there is nothing on record to indicate that the additional income

offered has been utilized by the assessee, therefore, under those facts

and circumstances of the case, the relief of telescoping benefit granted

by the assessee to the extent of ` 9,70,000/- is justified. Thus, we find

no reason to interfere with the order passed by the CIT(A).

has taken a plea that it pertains to current year’s professional receipts

from M/s. R.K. Children’s Hospital is a part of the amount of professional

receipt of ` 21.89 lakhs found recorded in the seized material. The Ld.

CIT(A) has considered this issue and observed that it is seen that during

the search operation certain material was seized (Annx.A/RKCH/PO/36

to 43) in the hospital premises of M/s. R.K. Children’s Hospital which 7

indicate that the assessee has earned in-house consultancy receipts to

the tune of ` 2.89 lakhs from the hospital as his share. It is also evident

that these professional receipts related to the period of 1.4.2010 to

24.10.2010. The assessee has contended that the balance cash found

represent part of such professional receipts and have been granted by

him in the return of income. The A.O. has not disputed this and there is

no reference in the assessment order to indicate the contrary as the

balance cash found during the search represents current year’s

professional receipts and has been duly taken into account in the return

filed. There is no scope for making the impugned addition under the

provisions of the Act. Therefore, the A.O. is directed to delete the

addition of ` 9,65,955/-. In the result, the addition to the tune of

`40,000/- sustained against the impugned addition of ` 19,75,955/-.

We find that the Ld. CIT(A) gave a categorical finding that the cash

found during the course of search represents part of such professional

receipts have been accounted by the assessee and filed the return of

income. This fact is not disputed by the A.O. as found by the CIT(A).

Once a part of income is already disclosed in the return of income, no

separate addition can be made. Therefore, we find no infirmity in the

order passed by the CIT(A) and this ground of appeal raised by the

revenue is dismissed. 8

10. Ground No.4 relating to unexplained investment in gold jewellery.

In the assessment order, the A.O. has noted that during the course of

search, the jewellery weighted 3040 gms. (net wt.) was found in the

locker in the ING Vysya Bank and jewellery weighing 544.30 gms. was

found in the residence. After considering the assessee’s claim towards

allowance for family members, gold jewllery weighing 2000 gms. was

considered unexplained and seized. The value of the jewellery seized

was taken at ` 37,30,000/-. The A.O. has asked the assessee to explain

how the amount of ` 37,30,000/- cannot be treated as unexplained

income. The assessee has explained before the A.O. that “I belong to

Vysya community and it is our tradition to have gold jewellery from

childhood and especially in the case of lady members of our community,

it is more familiar to acquire gold jewellery since childhood so as to

enable the lady member to get married with a minimum and

comfortable quantity of gold jewellery to be carried by them to the in-

laws house representing their Stridhana. The same will depend upon

the status of the family. Our family also acquired in the same process

with a reasonable jewellery acquired from childhood of our lady

members and also the male members to some limited extent from time

to time in the past several years is available out of the said jewellery at

the time of search operation conducted on me”. The A.O. has not 9

accepted the explanation given by the assessee on the ground that

there is no supportive evidence available on record to consider the

explanation.

of 200gms. may be given taking into account of his family and

community background that each member would possess certain

quantity of jewellery and thereby the explained jewellery would be only

` 33,57,000/- and not ` 37,30,000/-. The assessee had offered

additional income of ` 1,85,437/- towards professional receipts not

accounted for A.Y. 2010-11. Out of this additional professional receipts

offered for taxation for A.Y. 2010-11, an amount of ` 8,84,371/- was

claimed as available to explanation as a part of jewellery seized. In

other words, telescoping was sought for the amount of ` 8,84,371/- but

explained the source for the jewellery with reference to additional

income offered for A.Y. 2010-11. It was further submitted that an

amount of ` 3,91,905/- was added by the A.O. towards undisclosed

income for A.Y. 2010-11 and the telescoping was requested for that

amount in record to the unexplained jewellery noted during the search.

The Ld. CIT(A) after considering the explanation of the assessee, he has

directed the A.O. to give a benefit of telescoping of an amount of ` 8,84,371/- and also an amount of ` 3,91,675/-. For the sake of

convenience, relevant portion of the order is extracted as under:

“4.5 I have considered the submissions. I find that the AO has correctly ascertained the unexplained jewellery at Rs.37,30,000/- after considering the various claims made by the assessee for allowance in the hands of family members. The rejection of additional claim of allowance for 200 gms jewellery is justified. However, I find merit in the assessee's request for telescoping of an amount of Rs.8,84,371/- with reference to additional income offered for A.Y.2010-11 and an amount of Rs.3,91,675/- with reference to addition made towards undisclosed income for A.Y.2010-11. There is no reference to any material to indicate that the above amount were utilized for any other investment or expenditure. Hence the AO is directed to give the benefit of telescoping for an amount of Rs.8,84,371/- with reference to the additional income offered and Rs.3,vith reference to the additions made in A.Y.2010-11,) Thus this ground is partly allowed.”

evidence that an amount of ` 8,84,371/- pertains to earlier years and

also there is no evidence in respect of ` 3,91,675/- and the Ld. CIT(A)

simply deleted the addition made by the A.O. without any evidence and

strongly supported the order passed by the A.O.

order passed by the A.O.

on record and gone through the orders of the authorities below. The

only addition in this case is towards unexplained jewellery weighing

2000gms. valued at ` 37,30,000/-. During the course of search,

3040.00 gms gold jewellery was found in the locker and also 544.30 11

gms. in the residence with total weight of 3584.30 gms. The A.O. has

given a benefit of 1550gms. according to the Board circular taking into

consideration of their family and ultimately found that the excess weight

of gold jewellery works out to 2034 gms. i.e. 3584.30 (-) 1550 gms.

The assessee was not able to explain the genuineness of the source for

investment in the gold jewelery. The gold jewellery was valued by the

A.O. of ` 37,30,000/- and addition was made. Even before the A.O.,

further 200 gms. deduction was claimed by the assessee. The same

was rejected on the ground that there is no basis. Before the A.O., the

assessee has claimed deduction of ` 8,84,371/- as a telescoping benefit

towards the amount offered in the assessment year 2010-11 as

undisclosed income. The A.O. has not accepted the claim made by the

assessee on the ground that there is no evidence to prove that the

investment in gold jewellery to the tune of ` 8,84,371/- made out of his

undisclosed receipts for the assessment year 2010-11, accordingly, claim

made by the assessee was rejected.

case and he has rejected the additional claim of 200gms. made by the

assessee before the A.O. In so far as telescoping of an amount of `

8,84,371/-, which pertains to income offered for A.Y. 2010-11 and also

an amount of ` 3,91,675/- with reference to addition made undisclosed 12

income for A.Y. 2010-11 telescoping benefit was given by the CIT(A) on

the ground that there is no evidence on record to show that the above

amounts are utilized for any other investment or expenditure. Even

before us, the department is not able to produce any evidence that the

above amounts offered for taxation in the assessment year 2010-11,

which are used for any other investment or expenditure. So under

these facts and circumstances of the case, the telescoping benefit given

by the CIT(A) to the extent of ` 8,84,371/- and also ` 3,91,675/- is

justified and no interference is called for. Accordingly, this ground of

appeal filed by the revenue is dismissed.

patient receipts of ` 18,16,550/-. During the course of search, it was

noticed that the assessee had earned out-patient professional receipts of

` 23,16,530/- as per the seized material. The receipts are earned from

the period 1.4.2010 to 24.10.2010. The A.O. has noted that the

assessee only paid advance tax of ` 2 lakhs taking into account an

amount of advance tax paid. The A.O. was of the view that the

assessee had intended to disclose only ` 15 lakhs as a professional

receipt for this period but for the search operation, the assessee would

not have declared additional income would have suppressed balance

receipts. Hence, A.O. felt that the assessee’s intention to suppress 13 income from profession by an amount of ` 8,16,550/- {` 53,16,550- (-)

` 15,00,000/-} is clearly evident from the advance tax paid, therefore,

the A.O. made the impugned addition of ` 8,16,550/-. Before the

CIT(A), it was submitted by the assessee that the amount of `

23,16,550/- seized during the course of search pertains to current year

and therefore, it cannot be treated as undisclosed income. The

assessee is having a time to file a return of income. The Ld. CIT(A) has

considered the submissions made by the assessee and deleted the

addition made by the A.O. by following the judgement of the Hon’ble

Supreme Court in the case of ACIT Vs. A.R. Enterprises (CTR Vol.256

Issue No.6). The relevant portion of CIT(A) order is extracted as under:

“7.3 I have considered the submissions. It is not in dispute that the amount of Rs.23,16,550/- was part of current year professional receipts and has been taken into account while filing the return of income of the year. The sole reason for the addition appears to be that the advance-tax computation was inadequate and has not taken into account the entire professional receipts for the period upto date of search, and the intention not to disclose part of the professional receipts was evident. In this regard it is relevant to note the observation made by the Hon'ble Supreme Court in the case of ACIT Vs. A. R. Enterprises, as follows:

"- On the other hand, if the search is conducted prior to the due date for filing return, the opportunity to file return and disclose income still persists- In such case, payment of advance tax may be a material fact for construing whether the assessee intended to disclose the income since the assessee is entitled to make a legitimate claim that he has an opportunity to declare the total income in the return which he would file by the due date- Thus, there can be no generic rule as to the significance of payment of advance tax in construing the intention of disclosure of income - Hence, payment of advance tax by the assessee per se does not tantamount to disclosure of total income for the relevant assessment year - Further, the payment of advance tax is based on an estimation of the total income that is chargeable to tax and not on total income itself - Total income is distinct from the estimated income, upon the basis of which advance tax is paid by an assessee - payment of advance tax does 14

not absolve an assessee from an obligation to file return disclosing total income for the relevant assessment year -

7.4 In view of the principle laid down by the Hon'ble Supreme Court, I am of the view that there is no justification for the impugned addition of Rs.8,16,550/-. Accordingly the AO is directed to delete the same. This ground of appeal is allowed.”

order passed by the CIT(A).

on record and gone through the orders of the authorities below. In this

case, during the course of search, the A.O. has found that an amount of

` 23,16,530/- relates to out-patient professional receipts from 1.4.2010

to 24.10.2010. When the A.O. has asked the assessee, it is submitted

before the A.O. that these receipts pertaining to current year and the

same will be offered for taxation. The A.O. has not accepted the

explanation given by the assessee on the ground that the assessee has

only paid advance tax of ` 2 lakhs, therefore, the assessee will offer the

professional receipts for taxation only ` 15 lakhs and he is of the opinion

that the balance of {` 23,16,550 (-) 15 lakhs = `8,16,550/-} is treated

as undisclosed income. When the assessee himself accepted that he will

file a return of income and same will be considered for the taxation, the

A.O. without considering the explanation given by the assessee on the 15

ground that advance tax paid and addition was made in our opinion,

which is baseless, unreasonable and unjustified. On the contrary, the

Ld. CIT(A) considered the explanation of the assessee and deleted the

addition made by the A.O. by observing that the amount which is found

during the course of search has taken into account by filing the return of

income. No addition is warranted. We find no infirmity in the order

passed by the CIT(A) and this ground of appeal raised by the revenue is

dismissed. The 6th ground of appeal relating to unaccounted professional 20.

receipts. During the course of search, it was found that the assessee

earned professional receipts from in-house patients from M/s. R.K.

Children’s Hospital. The assessee’s share out of such receipts of `

59,91,108/- as per the material seized from the hospital premises was `

21,89,650/-. Before the A.O., it was contended that it is a part of

current year’s receipts and has been taken into account while computing

the income from professional receipts of ` 28,30,481/- offered to tax.

However, the A.O. has noted that these professional receipts were not

recorded in the books of the hospital. Further, it was noted that the

assessee had not maintained the books of accounts as required by the

statute, hence, it was not accounted for. Therefore, an amount of `

21,89,650/- was held as undisclosed income was added back to the total 16 income of the assessee. On appeal, the Ld. CIT(A) deleted the addition

made by the A.O. on the ground that admittedly these receipts of `

21,89,650/- found during the course of search are part of professional

receipts relating to current year though these receipts were not recorded

in the regular books of accounts of the hospital or of the assessee and

they have included and considered as a part of current year’s receipts,

while filing the return. The relevant portion of the order is extracted as

under:

“6.4 I have considered the submissions made. It is not in dispute that the amount of Rs.21,89,650/- represent the assessee's share of in-patient consultancy receipts (i.e. Doctor's fee) from the hospital R.K.Hospital for the year 01.04.2010 to till the date of search. It is also not in dispute that this amount is not recorded in the regular books of the hospital, and was also not recorded in the assessee's books of account, as the assessee had not maintained books of account. But it is seen that these receipts are part of regular income admitted by the assessee in the return of income filed for this year and a copy of the ledger extract admitting these receipts as part of professional receipts were filed. The reasoning for the addition as seen from the assessment order appears to be that as the receipts were not recorded in the regular books of account of the hospital, or the appellant it would amount to unaccounted income of the assessee and should be added to the total income. I am of the view that such a reasoning is not in accordance with law. Admittedly these amounts are part of professional receipts relating to the current year. Though these receipts were not recorded in the regular books of account of the hospital or of the assessee, they have been included and considered as part of current year receipts while filing the return of income. These receipts being part of current year professional receipts, the time for declaring them in the return of income had not lapsed. Subsequent to the search the assessee had compiled these receipts in his books of account and offered them for tax in the return of income filed. There is no element of illegality in such action of the assessee. As the receipts have been admitted in the return of income filed for the year, the element of unaccounted income ceased to exist. Further the concept of 'undisclosed income' as defined in section 15813(b) of I.T.Act does not apply to searches 17

conducted after 31" May, 2003 in view of insertion of section 153A of the I.T.Act by way of amendment to the I.T.Act vide Finance Act, 2003.

6.5 As a result of the amended law there is no element of unaccounted income in regard to the current year's receipts not recorded in the books of account but offered for taxation in the return filed. In the light of the above factual and legal position, I am of the view that the AO is not justified in making the impugned addition of Rs.21,89,650/-. Accordingly the AO is directed to delete the addition of Rs.21,89,650/-“.

the order passed by the A.O.

order passed by the CIT(A).

assessee has earned professional receipts from M/s. R.K. Hospital of `

29,89,650/-. It is submitted before the A.O. that these receipts are

advance to current year and same is offered for taxation in the year

under consideration. However, the A.O. has not accepted the

explanation given by the assessee on the ground that neither the

hospital has maintained the books of accounts nor assessee has

maintained the books, therefore, addition is made. On appeal, the

CIT(A) has gave a categorical finding that these amounts found during

the course of search pertains to current year, though these receipts

were not recorded in the regular books of accounts of the hospital or of 18

the assessee they have included and considered as a part of current

year’s receipts while filing the return of income. Subsequent to the

search, the assessee has complied these receipts in his books of

accounts and offered them for tax in the return of income filed. In view

of the above specific finding of the Ld. CIT(A), when the amount is

found during the course of search pertains to current year, the same is

offered for taxation by filing the return of income, it cannot be said that

it is undisclosed income, when the time is available for the assessee to

file a return of income. Under these facts and circumstances of the

case, we find no infirmity in the order passed by the CIT(A) and this

ground of appeal filed by the revenue is dismissed.

income of ` 50 lakhs u/s 132(4) of the Act and declaration of income in

the return of ` 24,72,629/-. The A.O. is of the view that the assessee

had admitted the income of ` 24,72,629/- against the declaration of

income of ` 50 lakhs in the statement recorded u/s 132(4) of the Act.

The above issue is neither emanated from the assessment order nor

from the Ld. CIT(A)’s order and has no impact on assessment made u/s

143(3) of the Act. The Ld. D.R. during the appeal hearing could not

relate to the addition made in the assessment order. However, on

verification of the assessment order, it is noted that the assessee had 19

admitted income of ` 89,92,920/- against the declared income of ` 50

lakhs u/s 132(4) of the Act and consequential order resulted in total

income of ` 1,35,00,044/-. Hence, ground No.7 is infructuous and

accordingly dismissed.

Sd/- Sd/- ( ड.एस. . . . सु�दर "संह) (वी. दुगा�राव) (D.S. SUNDER SINGH) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 18.05.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-