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Facts
The assessee, a neurosurgeon running a multi-specialty hospital, was subjected to a survey under Section 133A of the Income Tax Act. Due to non-compliance, the assessment was completed under Section 144, leading to additions for suppressed professional receipts (Rs. 1,546,109/-), unexplained expenditure under Section 69C (Rs. 1,117,192/-), rejection of books of account, and an addition for repair and maintenance (Rs. 34,535/-). The CIT(A) partly allowed the assessee's appeal, confirming some additions while deleting others and directing telescoping, which resulted in cross-appeals by both the assessee and the Revenue before the Tribunal.
Held
The Tribunal upheld the CIT(A)'s confirmation of Rs. 1,546,109/- for suppressed professional receipts and the rejection of books of account under Section 145(3). It allowed the assessee's appeal regarding the Rs. 34,535/- addition for repair and maintenance and directed the AO to grant telescoping benefit for the Rs. 1,117,192/- unexplained expenditure under Section 69C. The Revenue's appeal against the CIT(A)'s restriction of the suppressed receipts addition to Rs. 1,546,109/- was partly allowed, and its appeal against the deletion of the Rs. 7,67,500/- addition for hospital building investment was dismissed.
Key Issues
Whether additions for suppressed professional receipts, unexplained expenditure (u/s 69C) and its telescoping, investment in hospital building, and repair and maintenance were justified, and whether the rejection of books of accounts was valid.
Sections Cited
133A, 143(2), 127, 129, 142(1), 144, 69C, 145(3), 69
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Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH
Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI KRINWANT SAHAY, AM
O R D E R Krinwant Sahay (Accountant Member) The present appeal has been filed by the revenue and cross appeal filed by the Assessee against the order of the Ld. CIT(A)-5 Ludhiana dated 07.06.2024 pertaining to assessment year 2019-20. Since, both the above appeals were heard together therefore they are being disposed off by this consolidated order. We shall take up the appeal of the Assessee i.e., Assessment Year 2019-20 as a lead case for discussion.
Appeal in this case has been filed against the order dated 17.06.2024 passed by the Ld. Commissioner of Income Tax Appeals filed, Ludhiana for Assessment Order 2019-20. Grounds of appeal
s are as under:
1. The order of the Ld. Commissioner of Income Tax (Appeals- 5), Ludhiana is bad in law and against the facts of the case.
1. 2. That Ld. Commissioner of Income Tax (Appeals-5), Ludhiana is not justified in upholding the addition of Rs. 1546109/- on account of suppressed professional receipts and confirming the theory of extrapolation. He failed to appreciate the fact the documents which the addition has been sustained in fact pertained to another firm M/s Sandeep Medicos and not to the assessee.
1. 3. That Ld. Commissioner of Income Tax (Appeals-5), Ludhiana is not justified in confirming the addition of Rs. 1117192/- made u/s 69C of the Income Tax Act. Although, the benefit of telescoping against the income has been allowed.
1. 4. That Ld. Commissioner of Income Tax (Appeals-5), Ludhiana is erred in upholding the rejection of books of accounts.
5. That Ld. Commissioner of Income Tax (Appeals-5), Ludhiana is not justified in confirming the addition of Rs. 34535/- under the head repair and maintenance.
6. That the assessee craves, leave, to add, amend or delete any of the grounds of appeal before it is finally heard.
Brief facts of the case as per the assessment order are as under: Assessee is a practicing neurosurgeon who is running a multi- specialty hospital under the name and style of M/s A.P. Healthcare and Trauma centre, Chotti Baradari, Patiala. Survey u/s 133A of the Income-tax Act 1961 (hereinafter ‘the act’) was carried out on the above mentioned business premises of the assessee on 23.04.2018. subsequently, the assessee filed the ITR for the relevant period on 25.08.2020. Notice U/s 143(2) was issued and duly served on the assessee on 23.09.2020. subsequently, the case was centralized with the Central Circle, Patiala vide order no. 1349 U/s 127 dated 19.10.2020 passed by the O/o PCIT, Patiala. Opportunity to be reheard U/s 129 of the pact was afforded to the assessee vide notice dated 27.11.2020. Notice U/s 142(1) was issued to assessee on 04.02.2021 requiring him to file specific information by 19.02.2021. However, the assessee complied with the said notice on 06.07.2021 only. Thereafter, notice U/s 142(1) was issued to assessee on 17.08.2021 requiring him to make submission by 23.08.2021. However, it was only by 17.09.2021 that the assessee submitted substantial reply. Thereafter, the assessee was issued notice U/s 142(1) on 19.09.2021 to reply. Thereafter the assessee was issued notice U/s 142(1) on 20.02.2022 requiring him to furnish his reply by 26.02.2022. However, till date no compliance is made by the assessee. Accordingly, the assessee was issued showcause notice U/s 144 of the act requiring him to showcause as to why the assessment proceedings may not be completed U/s 144 of the act. However, the assessee has not replied to notice U/s 144 till date. Accordingly, the assessment proceedings in this case are hereby completed U/s 144 of the act to the best of the judgment of undersigned.
Against the order of the AO the Assessee preferred an appeal before the Ld. CIT Appeal who vide his appellate order dated 07.06.2024 allowed appeal on some of the grounds and confirmed the additions made by the AO on some other, therefore, the Assessee as well as the Revenue both are in appeal before the Tribunal.
The first grounds of appeal
is general in nature.
6. Appeal on Ground No.2 is against confirming the addition of Rs. 1546109/- on account of suppressed professional receipts and confirming the theory of extrapolation.
7. On this issue the Ld. CIT(A) has given its findings as under: On careful consideration of the fact, I am of the considered view that the reason given by the AR seems to be valid that two sets of diary were being maintained, one at Pharmacy shop and other at hospital counter to ensure and tally that any amount of any indoor patient towards the pharmacy is pending or not. Further the AR has also submitted the sale book and sample copies of bill to substantiate his claim that the amount mentioned in the left hand side of Annexure A-16 and Annexure-11 is with regard to medical receipt of sale of medicines of separate entity M/s Sandeep Medicos. However, at the same time, the AR has failed to demonstrate that why no name was written against certain figures in left hand side of Annexure A-16 and also in Annexure A-11. Neither did the appellant offered any explanation with regard to such un-named figures not did he substantiate that such figures have been accounted for in other entity M/s. Sandeep Medicos. As per the A.O. the figures written in left of Annexure A-16 are corroborated by Annexure A-11. The Annexure A-16 also have other details with regard to whole sale suppliers of medicine etc. Therefore, logical interpretation is that the figures written in Annexure A-11 against which name of no patient has been written have not been explained and therefore are to be treated as unaccounted professional receipt of the appellant. The appellant has only partially discharged his onus with regard to certain entries against which the name of patients were written by producing the sale book, sale bill of M/s. Sandeep Medicos but, he has failed to offer any explanation with regard to amount written without any name of patient. It cannot be held that such amount was written so that recovery is possible from an unknown patient or person. Therefore, it is held that the amount written without any name of patient represents unaccounted professional receipts of the appellant as the data in these annexures is spread over substantial period of time, quantification of such amount can to be made for determination of suppressed professional receipt for full year i.e. extrapolation is justified. On deeper scrutiny of Annexure, A-11 it is observed that the suppressed or un-named receipt is of Rs. 97130/- to be confirmed. No extrapolation is allowed. The disclosed professional receipt in the pre-survey period during the previous years as determined by the A.O. is Rs. 2278495/-. Therefore, the appellant has indulged in sale suppression to the tune of 4.26% (97130/2278491 X 100%) of the total disclosed professional receipt. The disclosed professional receipt of the appellant for the year under consideration is Rs. 3,79,28,954/-. Applying the rate of 4.26% the suppressed professional receipt is computed at Rs. 15,46,109/- addition to this extent is confirmed.
8. We have considered the findings given by the AO in the assessment order and by the Ld. CIT(A) in the appellate order. We find that the Assessing Officer extrapolated the suppressed professional receipts of the Assessee and made the addition. But the Ld. CIT(A) in his appellate order has clearly and categorically given his findings that no extrapolation is to be allowed and accordingly he has confirmed that the surpassed unnamed receipts of Rs. 97,130/- (on the basis of Annexure 11) is to be confirmed. The Ld. CIT(A) has further given his findings that the professional receipts during pre-survey period of the previous year were determined by the Assessing Officer at Rs. 22,78,495/-. It means that there is a suppression to the tune of 4.26% . The disclosed profession receipts of the Assessee for the year under consideration is Rs. 3,79,28,954/-. The ld. CIT(A) has confirmed the addition of Rs. 15,46,109 by applying the ratio of 4.26% as calculated by the Assessing Officer on the basis of pre-survey receipts / previous year receipts of the Assessee.
9. On this basis, we find that the calculation given by the Assessing Officer and on the basis of that, the confirmation of the Ld. Commissioner of Income Tax (Appeals) of the suppressed professional receipts of Rs. 15,46,109/- is very much based on calculation derived from Assessee’s pre-survey previous year receipts. We d\o not find any reason to make any interference on this issue. Accordingly, Assessee’s appeal on ground No.2 is dismissed.
10. Appeal on Ground No. 3 is against confirmation of addition of Rs. 1117192/- the AO has given its findings in the assessment order on this issue as under: Summary of the facts highlighted by the AO in assessment order The assessee was also required to furnish the details of his household and other routine expenditure vide notice dated 22.02.2022. However, the requisite information has not been supplied by the assessee till date. The evidence of such expenditure impounded during the survey points to the application of the unaccounted professional income generated by the assessee and corroborates the finding that the assessee is indeed engaged in the suppression of professional receipts as discussed above. Nonetheless, till date no response has been furnished by the assessee to show-cause notice dated 22.02.2022. Accordingly, an addition of Rs. 11,17,812 is hereby made to the income of the assessee for the relevant period as unexplained expenditure and hence deemed u/s 69C of the act.
The Ld. CIT(A) has confirmed it. During proceedings before us, the Ld. counsel of the Assessee has argued that the alleged cash generation from the suppressed professional receipts in transactions as noted in Annexure A-11/A-16 was available for making expenditure by the assessee, therefore making further addition of Rs. 1117192/- under Section 69C is uncalled for. The AR has further argued that the benefit of telescoping should also have been given by the revenue.
On the other hand, the Ld. DR relied on the order of the authorities below.
We have considered the findings given by the Assessing Officer and the Ld. CIT(A) on this issue. We are of this considered view that all the figures of suppressed professional receipts are with the Assessing Officer. We find that the arguments put forward by the Counsel of the Assessee that benefit of telescoping should have been given by the Revenue on this issue. We are of this view that as all the figures of suppressed professional receipts are available with Revenue, therefore, the benefit of telescoping should have been given to the Assessee. Accordingly, AO is directed to give the benefit of telescoping and calculate the addition made u/s 69C of the Act.
The appeal on ground No. 4 is against the rejection of books of account. On this account, the Ld. CIT(A) has given a very detailed and speaking order in the appellate order: 6.5.3 I have considered the reasoning given by the AO in assessment order, submissions & documents submitted by the appellant, facts of the case and legal position. (i) The AR has questioned the rejection of books of accounts u/s 145(3) by the AO. The AO has rejected the books of accounts on following grounds: (1) Suppression of professional receipts to the tune of Rs. 2.43,90,856/- (2) Unaccounted investment in hospital building detected during the survey. (3) Unaccounted expenditure towards payments made to ambulances detected during the year. (4) Unaccounted expenditure towards referrals paid to various persons detected during the survey. (5) No bills/vouchers of investment in building produced during the survey. (6) No books of account produced during the survey. It has been held by the Hon'ble Andhra Pradesh High Court in the case of CIT vs. Margadarsi Chit Funds Pvt. Ltd. [1985] 155 ITR 442 that "the AO must refer to inherent defect in the books and record a clear finding." The AO in this case has clearly recorded the findings for rejection of books of accounts.
It has further been held by the Hon'ble Supreme Court in the case of CIT vs. British Paints India Ltd., reported in [1991] 188 ITR 44 that "it is duty of the AO to consider whether or not the books disclose the true state of accounts and correct income of the assessee." (ii) As the AO has duly followed the legal precedents brought out specific defects, the books of accounts have rightly been rejected. Accordingly, this ground of appeal is dismissed.
15. We find that the details brought on record and different case laws on the issue discussed by the Ld. CIT(A) in his order are very clear and need no inference. Accordingly, in our considered view, the appeal of the Assessee on this issue deserves to be dismissed. Thus, appeal on this ground is dismissed.
The next ground of appeal is against the confirmation on addition of Rs. 34535/- under the head Repair and Maintenance. The total addition of expenditure under the head repairs and maintenance was Rs. 118185/- made by the AO. Later on, when the Assessee found the same receipts for maintenance and repairs, it was produced before the Ld. CIT (A) and the Ld. CIT (A) has allowed Assessee’s appeal to the expense of Rs. 83650/- and confirmed the suppressed amount of Rs. 34,535/- during proceedings before us. The Ld. counsel for the Assessee has argued that each and every bill of a small expenditure and expenses for maintenance are although required to be preserved by the Accounts Department, however, during the year under consideration bills of small amounts amounting to Rs. 34,535/- could not be located therefore, it should be allowed keeping in view the nature and magnitude of the profession of the Assessee. The Ld. AR relied on the orders of authorities below.
17. We have considered the findings given by the AO and the Ld. CIT(A) on this issue and we find that the Ld. CIT(A) has already deleted Rs. 83650/- for which the receipts were located by the Assessee and which were produced before the Ld. CIT(A) however, it cannot be ruled out that receipts of some smaller amount could not be preserved by the accountant of the Assessee. Therefore, keeping in view, the nature and magnitude of the assessee profession/business, there is a possibility that Rs. 34,535/- could have been spent on maintenance and repairs. Accordingly, Assessee Appeal on this issue is allowed.
In the result, Assessee’s Appeal is partly allowed.
We shall take up the appeal of the Assessee i.e., for Assessment Year 2019-20 for discussion.
Grounds of appeal
are as under: Whether on facts and circumstances of the case, Ld.
1. CIT(A) was justified in restricting additional of Rs. 2,43,90,856/- on account of suppressed professional receipts based on impounded document A-16 to Rs. 15,46,109/- by accepting the assesses’s plea that the impounded document A-11 pertains to M/s Sandeep Medicos, a partnership firm of the assessee and hence, entries in impounded document A-16 which match with document A-11 pertains medicines sold to patients by M/s Sandeep Medicos and are hence, explained? 2. Whether on facts and circumstances of the case, Ld. CIT(A) was justified in restricting additional of Rs. 2,43,90,856/- on account of suppressed professional receipts to Rs. 15,46,109/-, by accepting the assesses’s plea that the impounded document A-11 pertains to M/s Sandeep Medicos, a partnership firm of the assessee ignoring the fact that the assessee had failed to file any reply to showcause notice issued by AO on 22.02.2022 and thus, the claim of the assessee that the impounded document pertains to M/s Sandeep Medicos is an afterthought and made before Ld. CIT(A)? 3. Whether on facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 7,67,500/- made by the AO based on the report of DVO and in the absence of any corroborating evidence given by assessee to A.O. and DVO during the assessment proceedings of source of investment in hospital building? 4. Whether on facts and circumstances of the case, Ld. CIT(A) was justified in directing the AO to allow benefit of telescoping on addition of Rs. 11,17,812/- made u/s 69C on account of unaccounted expenditure from unaccounted professional receipts without appreciating that the assessee has failed to provide cash flow and complete details like name, address to whom the payments have been made? 5. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.
21. Appeal on the ground No. 2 is against the CIT (A) action of restriction addition of Rs. 24390856/-, on account of suppressed professional receipts passed on impounded documents A-16 to Rs. 15,46,109/-. Assessee’s appeal on appeal ground No. 2 in was on the same issue and we have given our finding on this issue in detail that will apply mutatis and mutandis on appeal of ground Nos. 1 & 2 herein this appeal. As a result, Revenue appeal on these grounds are partly allowed.
22. Appeal on ground No. 3 is against the deletion of Rs. 767500/- by the CIT(A). It was made by the AO based on the report of the DVO. During the proceedings before us, the Ld. DR relied on the orders of AO on this issue and the Ld. counsel for the Assessee relied on the order of the Ld. CIT (A) we find that the Ld. CIT(A) has given a very detailed finding on this issue which is reproduced as under: The first contention of the appellant was that entire amount of estimated investments to the tune of Rs.767500/- was added to the returned income of the assessee u/s 69 of the Income Tax Act 1961. As per the AR, the A.O. did not give even benefit of Rs. 5,72,932/- being categorically declared on account of investment in the balance sheet of the assessee in Schedule-A. Another contention of the assessee is that the entire valuation report is derived or made on the basis of CPWD schedule of rates. The AR has placed reliance upon certain judgements to put forth his contention that PWD rates for the state are more scientific and to be relied upon for making any estimation of investment by the valuation cell. One such decision is the decision passed by the Hon'ble ITAT Amritsar in the case of Dr. Ramesh Kumar Anand vs. ITO decided on 9 March 2007, in which it was held that -
“12.2 The next aspect of the case that requires consideration is the objection of the assessee to estimate the cost as per PWD rates instead of CPWD rates. If it is settled position that while estimating the cost of construction, the local PWD rates should be preferred over the CPWD rates. This is so because the rates prevailing at the place where the property has been constructed are more realistic and scientific. The various decisions referred to above including the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT v. Harchand Palace (supra) supports this view.” The AR has also stated that the difference in valuation as assessed by the DVO and as declared by the appellant is 15% which is on account of incorrect rates adopted by the DVO. Further, the issue of investment in hospital is not limited to the year under consideration but also arose in the preceding years. The case of assessee was also taken up in proceedings u/s 148A/148 A.Y. 2018-19 on ground of variation of Rs. 27,27,776/- between the valuation made by the DVO and shown by the assessee. The difference was 34% on the basis of cost declared by the appellant and 25.3% on the basis of cost declared by the DVO. However, in that case assessment was completed at returned income by making no addition or variation. The AR has submitted the copy of notices, the copy of submissions made and the copy of assessment order for the AY 2018-19. Thus, as per the principles of consistency, also no addition is sustainable for the current year. Considering the above factual and legal position addition of Rs. 7,67,500/- has no merits and is therefore deleted. Accordingly, this ground of appeal is allowed.”
23. We find that the Ld. CIT Appeal has given a speaking order on this issue and it needs no interference accordingly, Revenue appeal on this issue is dismissed.
24. Appeal on Ground No.4 is against the direction of the Ld. CIT (A) to allow the benefit of telescoping and addition of Rs. 1117812/-, under Section 69C on account of unaccounted expenditure from unaccounted professional receipts. The Ld. DR relied on the orders of the A.O. on this issue while the Ld. Counsel of the Assessee has argued this case as per his written submission filed. We have already given finding on this issue in our order in on Ground No. 3 which applies mutatis and mutandis here.
25. Appeal on ground no. 5 is general in nature. Accordingly, Revenue appeal is partly allowed. 26. In the result, both the appeals filed by the Assessee and Revenue are partly allowed. Order pronounced on 7th January, 2026.