LIFE CARE HOSPITAL,SIROHI vs ACIT/DCIT, CIRCLE-1,, JODHPUR

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR.

Before: DR. MITHA LAL MEENA & DR. S. SEETHALAKSHMI

Hearing: 05/05/2025

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. MITHA LAL MEENA, ACCOUNTANT MEMBER & DR. S. SEETHALAKSHMI, JUDICIAL MEMBER I.T.A. No. 938/Jodh/2024 Assessment Year: 2017-18 Life Care Hospital Vs. CIT(A), Tatoili Road, Opp. Sai Baba Jaipur. Mandir, P.O. Aburoad, Dist. Sirohi. PAN No.: AAFFL2914H Appellant Respondent Appellant by Sh. Sarla Agarwal, C.A. Respondent by Sh. Karni Dan, Addl. CIT(Sr. DR)

Date of Hearing 05/05/2025 24/06/2025 Date of Pronouncement

ORDER PER: DR. S. SEETHALAKSHMI, J.M.

This is an appeal filed by the assessee against the order of learned CIT (A), Jaipur-4 dated 05.11.2024 passed under section 250 of the Income Tax Act, 1961, for the assessment year 2017-18. The assessee has raised the following grounds of appeal :-

2 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. 1. Your appellant is a partnership firm and having multispecialty hospital at Tatoli Road, Aburoad, Dist. Sirohi (Rajasthan). 2. Your appellant filed their Return of Income on 25.10.2017 declaring total income of Rs. 73,85,867/- including a sum of Rs. 63,03,975/- declared at the time of Survey conducted at premises at hospital on 23.09.2016 and paid tax thereon at the rate of 30 percentage in normal course. 3. The learned CIT (A) failed to appreciate that income tax has wrongly been levied on Rs. 63,03,975/- u/s 115BBE pursuant to section 69A of the Income Tax Act, 1961 at 60 percent and surcharge at 25 percent on income declared during survey conducted on 23.09.2016 well before demonetization period and before introduction of amendment made on 15.12.2016 by the Ministry of Law and Justice through the Taxation Laws (Second Amendment) Act, 2016 (No. 48 of 2016). 4. The learned CIT (A) failed to appreciate that selecting the case of assessee for scrutiny based on parameter at para 1(ii) of manual compulsory guideline of CBDT issued vide instruction no. 4/2018 dated 20.08.2018. 5. The learned CIT (A) failed to appreciate that income declared ofRs. 63,03,975/- as income under undisclosed source rather than treating it as income under the head BUSINESS AND PROFESSION. 6. The learned CIT (A) failed to appreciate in taxing u/s 115BBE of Income Tax Act, 1961, the income disclosed in the return of income after survey u/s 133A of the Act, rather than taxing under the normal provision of the Income Tax Act, 1961. 7. The learned AO has calculated income tax on income declared of Rs. 63,03,975/- doubly. First he has charged at 30 percent along with other income and again charged at 60 percent u/s 115BBE of the I.T. Act, 1961. The doubly tax on same income is against natural justice and against law, hence tax to be recalculated as per Act, 1961. 8. The learned AO has wrongly charged interest u/s 234A, 234B and 234C of the Income Tax Act, 1961. 9. Your appellant reserves the right to add, amend, delete or alter any or all the above ground of appeal each of which without prejudice to the order.”

The brief facts of the case are that the assessee is a multispecialty hospital. The assessee e-filed its return of income on 25.10.2017 for the assessment year

3 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. 2017-18 at a total income of Rs. 73,85,870/-. The case of the assessee was processed under section 143(1) of the Income Tax Act, 1961 accepting the returned income. The case was selected for scrutiny on the basis of parameter at para 1(ii) of the manual compulsory guidelines of CBDT issued vide Instruction No. 4/2018 dated 20.08.2018 as the survey proceeding under section 133A of the IT Act, 1961 was conducted at the business premises of M/s. Life Care Hospital on 23.09.2016. During the course of survey, documents were impounded and notice under section 143(2) was issued on 27.09.2018 through ITBA platform and duly served on the assessee’s registered e-mail. Notices under section 142(1) were issued to the assessee on 11.05.2019, 18.07.2019, 22.08.2019 and 01.10.2019 requiring the assessee to furnished information along with necessary documents. In response, the assessee submitted the requisite details and other explanations through e-filing portal on 08.08.2019. During the survey proceedings, statements of Shri Raj Kumar Bairwa, Shri Kamal Bansal and Smt. Bharti Bansal, partners of the assessee hospital were recorded. During survey, excess cash of Rs. 70,550/- was found in the premises. A diary MEFTAL-FORT containing pages 1 to 12 (Annexure-A, Exhibit-1) was also found and impounded. In this impounded diary various expenses in cash totaling Rs. 62,33,425/- on hospital building were written. Assessee was asked to explain the excess cash found and cash expenses on hospital building. As the assessee has

4 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. failed to explain the same, it had surrendered the above mentioned amount as their undisclosed income. While filing the return, the assessee has included the above mentioned amount in its income and paid tax on it. The AO, during the assessment proceedings, considering that the excess cash and cash expenses on hospital building disclosed during survey as unaccounted income and unexplained investment comes under the purview of section 69A and 69 of the IT Act, 1961 respectively, issued show cause notice to the assessee on 01.10.2019 to which the assessee could not reply. The assessee during survey proceeding itself has accepted to offer this undisclosed income separately from other sources of incomeand while filing its return of income included these amounts. The AO held that since the assessee could not give a satisfactory explanation in regard to the undisclosed income which was not recorded in the books of account, clearly attracts the provisions of section 69A and section 69 read with section 115BE of the IT Act, 1961, and on the remaining total income Rs. 10,81,892/- tax will be levied as per normal slab rate. The AO assessed the total income of the assessee vide his order dated 14.11.2019 as under:- Income on which normal slab rate is applicable Rs. 10,81,892.00 Income on which tax applicable as per section 115BBE Rs. 63,03,975.00 Total Income : Rs. 73,85,870.00

5 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A), who dismissed the appeal of the assessee. Now the assessee has come in appeal before the Tribunal on the grounds reproduced herein above. 3. Before us, the ld. AR of the assessee submitted her ground-wise written submission as under :- “ Ground Nos. 1 &2 are informative. Ground No. 3 : The learned CIT (A) failed to appreciate that income tax has wrongly been levied on Rs. 63,03,975/- u/s 115BBE pursuant to section 69A of the Income Tax Act, 1961 at 60 percent and surcharge at 25 percent on income declared during survey conducted on 23/09/2016 well before demonetization period and before introduction of amendment made on 15/12/2016 by the Ministry of Law and Justice through The Taxation Laws (Second Amendment) Act, 2016 (No. 48 of 2016).

Ground No. 4 :It is stated in the first para of the assessment order u/s 143(3) of the Act dated 14.11.2019 that the case was selected for scrutiny based on parameter at para 1(ii) of the manual compulsory guidelines of CBDT issued vide Instruction no. 4/2018 dated 20.08.2018.

Since the instruction mentioned in the assessment order is for the FY 2018-19 and the case of the appellant is for the FY 2016-17, then how can on the basis of Instruction No. 4/2018 issued by CBDT the case of assessees be selected for manual scrutiny. Further para 1(ii) of instruction no. 4/2018 dated 20.08.2018 issued by CBDT is reproduced herewith for your reference.

“ Casespertaining to Survey under section 133A of the Income-tax Act, 1961 (‘Act’) excluding those cases where books of account, documents etc. were not impounded and returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year. However, where assessee has retracted from disclosure made during theSurvey, such cases will not be covered by this exclusion.”

6 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. CBDT had clearly given instruction via Instruction No. 4/2018 that the case pertaining to sec. 133A of the Act can be selected for manual scrutiny if the following conditions are satisfied i.e.

 Any books of accounts, documents etc were impounded during survey. In appellant case no books of account, documents were impounded by the income tax authority during survey. As per sec. 133A(3)(1a) of the Act if any books of account or documents is required to be impounded then there must be a recording of reason for doing so. Since, no books of account or documents were impounded there is no such recording of reasons is provided to the appellant.

Before amendment in finance act 2002 of section 133A of the Income-tax Act, the powers of an income-tax authority conducting a survey are limited to the inspection of books of account and other documents available at the place of business or profession of the assessee, placing of marks of identification thereon, taking copies or extracts therefrom, making an inventory of any cash, stock or valuable article or thing checked or verified by him and recording the statement of any person which may be useful for, or relevant to any proceedings under the Act.

With a view to prevent the destruction or misappropriation of any evidence found during survey, it is proposed to empower the income-tax authority to impound and retain in his custody books of account or other documents inspected by him during survey, after recording his reasons for doing so.

Returned income is less than the returned income of preceding assessment year.

Returned income of appellant during AY 2017-18 was Rs. 73,85,870/- and returned income of preceding AY i.e. 2016-17 was Rs. 11,65,920/-. Returned income of the AY 2017-18 is not less than the income of immediately preceding AY. Acknowledgement of Return for AY 2016-17 and 2017-18 is attached herewith as Annexure 1. From the Acknowledgement copy of return it can be

7 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. verified that the gross total income of AY 2017-18 and 2016-17 was Rs. 73,85,870/- and Rs. 11,65,920/- respectively.

 The assessee has retracted from disclosure made during the Survey.

The assessee had not retracted from its disclosure made during the survey and the same can be verified from the assessment order itself wherein in page No. 3 of the assessment order the relevant portion of the statement of Dr. Kamal Bansal one of the partners of M/s. Life Care Hospital is reproduced. From that statement the appellant had surrendered an income of Rs. 63,03,975/- (62,33,425 + 70,550) over and above his regular income in the year under appeal and the income of Rs.63,03,975/- has been disclosed under the head income from other sources (inadvertently on the advice of its Tax Consultant) in its return filed u/s 139 of the Act for AY 2017-18.

Since the assessee is not fulfilling any of the conditions mentioned in the Instruction No. 4/2018 dated 20.08.2018 at para 1(ii) for manual selection for scrutiny and further that the same instruction is applicable for FY 2018-19 so the scrutiny and the assessment order u/s 143(3) is null and void ab initio. The same view is supported by the decision of Allahabad Tribunal in the case of “Girdhar Gopal Rastogi vs. CIT (2022) 142 Taxmann.com 142” wherein it was held that “Where there is no impounding of books of account during survey under section 133A and returned income of assessee for year under consideration is not less than returned income of immediately preceding year then case would not fall in category of compulsory scrutiny”.

Ground No. 5 :The ld. AO erred in treating the income of Rs. 63,03,975/- as income under undisclosed source rather than treating it as income under the head Business and Profession :

The appellant is a multispecialty hospital led by four notable doctors who specialize in their respective fields. All the partners are doctors, and they have little experience of accounting and taxation. They have not recruited any Chartered Accountant on their payroll to handle their day-to-day activities. Only a simple accountant who did not have any specialized knowledge of taxation is hired for making day to day accounting entries.

During survey the partners of the hospital fully co-operated with the department to conclude their survey proceedings and to buy peace of mind

8 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. and avoid unnecessary litigation surrendered various expenses on the building noted in a diary MEFTAL FORTE page 1 to 12 i.e. Rs. 62,33,425/- and cash of Rs. 70,550/- as their income for the AY 2017-18.

But while filing the return of income for the AY 2017-18 the accountant who is not the expert in taxation declared the surrendered income under the head income from other sources of Rs. 63,03,975/- rather than showing the same under the head Income from business and profession.

There was no material/documentation on record which even remotely demonstrated that assessee had expended certain sum of money on hospital building over and above amount which had been recorded in its books of account. The only source of income of the appellant is its income from medical profession.

The revenue was not able to advance any evidence during assessment proceeding that the said income is not connected with the business income of the assessee, hence all the income earned by the assessee relate to professional income only.

Further, 5 heads of income are in a sense exclusive of one another, and income which falls within one head cannot be assigned to, or taxed under, another head. Our view is also supported by the judgement of Honourable Supreme Court in the case of Karanpura Development Co. Pvt. Ltd. [1962] 44 ITR 362 (SC), relevant para of the case law for your referfence is extracted herein below :

“ The Income-tax Act puts the tax on income, profits and gains irrespective of the source from which they are derived. Section 3 of the Act provides, inter alia, that income-tax shall be charged on the total income of every company. Under section 4(1), total income includes all income, profits or gains from whatever source derived, subject to certain conditions about residence, etc., with which we are not concerned. Section 6 then enumerates six heads of income chargeable to income-tax. Two of these heads are (a) income from property and (b) profits and gains of business, etc. The several heads into which income is divided under the Income-tax Act do not make different kinds of taxes. The tax is always one; but it may arise from different sources to which the different rules of computation have to be applied. The manner of this computation is

9 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. indicated in the sections that follow. Before income, profits or gains can be brought to computation, they must be assigned to one or more heads.”

Further, by following the principle of natural justice as well as CBDT Circular No. 14(XL-35) dated 11/04/1955- Department must not take advantage of ignorance of assessee to collect more tax than what is legitimately due. It is requested that kindly consider that income of Rs. 63,03,975/- as income under the head Business and Profession rather than treating it as Income under the head Income from other sources.

Power of the ld. CIT (A) is conterminous with the power of AO and as it is held by The Honorable Supreme Court in the case of Jute Corporation of India that “The Inspecting Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to what he has failed to do.”

It was also held in the above case that the ld. CIT (A) has the power for admitting additional plea of the assessee which was not taken by the assessee at the time of assessment and even the return filed by the assessee himself had made a mistake while filing the return of income, the relevant para of the case law has been extracted here for your reference.

“Raising an additional ground before the AAC if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the AAC is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects.”

In the light of the above discussion and for giving a fair justice to the assessee it is requested to kindly consider the income of Rs. 63,03,975/- as income under the head Business and Profession rather than treating it as Income under the head Income from other sources.

10 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. Ground No. 6 :The ld. AO erred in taxing u/s 115BBE of Income Tax Act, the income disclosed in the return of income after survey u/s 133A of the Act, rather than taxing under the normal provision of the Income Tax Act :

In the case of assessee survey was carried out u/s 133A of the Act on 23.09.2016 in the premises of hospital. The assessee was asked to explain about Rs. 62,33,425/- which was mentioned in the diary of the assessee for several expenditure incurred for hospital building and cash of Rs. 70,550/- was found. The team of doctors those who are expert in their respective fields but have a little knowledge of accounting and finance couldn’t be able to explain the above mentioned transactions. To avoid unnecessary litigation and for peace they surrendered the income. Nowhere in the statement written by Dr. Kamal Bansal it is mentioned that this income was earned from any other source. The expenses on the building were from their professional income to proof that the same copy of return of last two AYs are attached herewith as Annexure-II for your reference from which one can see that the assessee doesn’t have any income under the head Income from other sources.

But the assessing officer without giving any opportunity of being heard to the assessee that on what basis he treated the expenses of Rs. 62,33,425/- u/s 69 of the Act and cash of Rs. 70,550/- u/s 69A of the Act.

To attract deeming provision of sections 69 and 69A of the Act the foremost requirements that is to be followed is that the income should be from any other source rather than from its regular source of earning.

What is relevant before invoking the deeming provisions is not just the factum of survey action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey proceedings and which has not been recorded in the books of account and the same is the essence of the statutory provisions as duly recognized by the Hon’ble Courts and various Benches of the Hon’ble Tribunal and which has been reiterated from time to time. The statement of the assessee must be read as a whole and not in piecemeal especially where the revenue is relying on the same statement and in such circumstances, the defence available to the assessee in terms of part of the statement having not been considered by the revenue cannot be ignored.

11 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi.

There mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn’t mandate the Assessing officer to automatically invoke the deeming provisions and before invoking the deeming provisions, he must call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions.

There are several judicial pronouncements wherein it was held that “Where miscellaneous business income of certain amount surrendered by assessee was taken as Income from undisclosed source under section 69A of the Act and tax was calculated on it under section 115BBE of the Act, since revenue was not able to submit any evidence to effect that said income was not connected with business income of assessee or was accumulated from non-recognising source, entire addition was certainly without forming proper basis and thus impugned application of section 69A of the Act upon income disclosed by assessee and taxing same at special rate as per section 115BBE of the Act was improper”.

 [2023] 155 taxmann.com 293 (Amritsar-Trib.)/[2023] 106 ITR(T) 125 (Amritsar-Trib.)[17.07.2023]

 [2023] 157 taxmann.com 817 (Chandigarh-Trib.)[29.11.2023]

It was held by the hon’ble Tribunal that : Where during course of survey assessee surrendered certain amount on account of addition made to hospital building, since source of investment in said building was stated to be out of business income which was duly honoured by assessee while filing return of income wherein amount was offered to tax under head “business income” and tax was paid on same at normal rate, provisions of section 69B read with section 115BBE could not be invoked so as to make addition on account of said surrendered amount treating it as unexplained investment.

 [2024] 158 taxmann.com 679 (Amritsar-Trib.)[06.12.2023]: it was held that

Where assessee claimed that entire amount of excess cash found from business premises was generated from undisclosed sale of medicine, since

12 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. revenue was unable to show any other sources related to excess cash, excess cash was from business of assessee and, thus, application of section 115BBE on amount of excess cash was bad in law.

 [2024] 160 taxmann.com 239 (Surat-Trib.)[21.12.2023]

Where Competent Authority carried out survey under section 133A at hospital of assessee and found certain unaccounted receipts in name of doctors and assessee as unaccounted receipts were relating to business operations of assessee’s hospital, they were taxable as business income under section 28; section 68 was not applicable.

 [2024] 158 taxmann.com 655(Chandigarh-Trib.) [23.01.2024]

Where during course of survey, assessee surrendered excess stock, cash and receivables and offered same to tax as business income, however, AO treated said surrendered amount as unexplained investment under sections 69 and 69A, since it emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey could not be brought to tax under deeming provisions of sections 69 and 69A of Income Tax Act, 1961.

 [2023] 152 taxmann.com 595 (Chennai-Trib.)/[2023] 107 ITR

INCOME TAX: Where assessee had admitted certain sum towards excess cash found during course of survey, since excess cash found during course of survey did not have any independent identity as asset was a mixed part of overall stock found in business premises of assessee, which represented business income and moreover, assessee had explained source for excess cash i.e., out of income earned from current year business, Assessing Officer was not justified in treating additional income admitted towards excess cash as unexplained investment under section 69 and levying tax as per section 115BBE.

 [2024] 161 taxmann.com 44 (Madhya Pradesh)[19.03.2024]

13 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. Where undisclosed income surrendered during search and seizure proceedings is derived from regular business activities, it is liable to be taxed at normal rate instead of tax rate stipulated under section 115BBE.

 [2023] 157 taxmann.com 5148 (Rajkot-Trib.)[30-11-2023]

Where assessee, a medical practitioner, voluntarily surrendered certain amount during survey as their unaccounted professional receipts and taxed said receipts at normal rate, since assessee had no other source of income, other than business income and AO had conducted inquiry and perused details submitted, and taken a decision to accept explanation provided by assessee after proper application of mind, provision of section 115BBE could not be invoked to tax income as deemed income.

 [2023] 154 taxmann.com 347 (Chandigarh-Trib.)[24.07.2023]

Mere fact that survey/search proceedings have been initiated at business premises of assessee doesn’t mandate Assessing Officer to automatically invoke deeming provisions of sections 69 and 69A; said provisions can be invoked only where explanation offered by assessee is not found satisfactory; where from explanation offered by assessee it clearly emerged that source of income offered during survey was from his business operations, such income could not be taxed under sections 69 and 69A.

Ground No. 7 :The learned AO has calculated income tax on income declared of Rs. 63,03,975/- doubly. First he has charged at 30 percent along with other income and again charged at 60 percent u/s 115BBE of lthe IT Act, 1961. The doubly tax on same income is against natural justice and against law, hence tax to be recalculated as per Act, 1961 (Computation sheet is attached with assessment order for kind perusal).

Ground No. 8 :The learned AO has wrongly charged interest u/s 234A, 234B and 234C of the Income Tax Act, 1961.

Ground No.9 : Your appellant reserves the right to add, amend, delete or alter any or all the above ground of appeal each of which without prejudice to the other.

14 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. Conclusion and Prayer : The powers of survey under section 133A of the Act have been clarified by the CBDT from time to time. By its Circular No. 7-D(LXIII-7 of 1967), dated May 3, 1967, it is clarified that the place of survey must be one where business or profession of an assessee is carried on, although it is not necessary that it should be the principal place of business or profession. The place where entry can be made under the section must not be a place where the assessee does not carry on business. Business or residential premises of third parties, including a chartered accountant, a pleader or income-tax practitioner, of whom the assessee may be a client, are not places which could be entered into for the purpose of section 133A of the Act. It would be improper for an ITO (now Assessing Officer) or an Inspector, authorized in this behalf, to enter the office of a chartered accountant for the purpose of inspecting the books of his client. It is also necessary that the place entered should be the business premises and not residential premises of the assessee and the entry should be made during business or office hours.

By an Explanation to section 133A(1) of the Act, it is clarified that a place where business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept. Based on above, the primary objects of the survey may be categorized as under :

Broaden the country’s tax base by discovering new taxpayers. Gather information for checking whether the existing taxpayers are discharging their tax obligations correctly and truthfully and to get information for detecting evasion of tax by the existing taxpayers. To do spot checking to find out whether the books of account and records are being maintained on day-to-day basis and not manipulated later. To check the correctness of the cash and stocks shown in the books of account maintained in the ordinary course of business/trading.

In nutshell, the proceedings u/s 133A of the Act introduced in the statute to have a check and balance on the business/professional behavior of the assessee. The survey conducted u/s 133A of the Act is there in the statute just to verify the business affairs of the assessee. If found correct, no consequences. If something is missing out of business affairs, alarm the assessee to incorporate the same in his books of account and rectify their statutory computation of total income.

15 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. No where in the scheme it is ever anticipated or desired to change the head of income. Rather, undisclosed income if any discovered during the survey proceedings, there is a compulsion to treat the same as income under the head business and profession. As the department surveyed business premises only and interacted and verified with business employees and documents only, hence the income is liable to be taxed at normal rate instead of tax rate stipulated under section 115BBE.”

On the other hand, the ld. DR supported the order of the ld. CIT (A) and submitted that the same be sustained. For the sake of sake of convenience, we first adjudicate Ground Nos. 3 to 6 together. 5. We have considered the rival submissions, perused the material on record and gone through the orders of the lower authorities.The issue involved in this case is applicability of section 69A read with section 115BBE of the IT Act, 1961 on the total income of Rs. 63,03,975/- (Rs. 62,33,425/- + 70,550) surrendered by the assessee during the survey under section 133A of the IT Act, 1961. During the survey, statement of Shri Kamal Kumar Bansal one of the partners of M/s. Life Care Hospital was recorded wherein an amount of Rs. 62,33,425/- as per entries made in diary and Rs. 70,550/- excess cash found were surrendered as undisclosed income for regular taxation. The assessee filed the return of income under section 139 of the IT Act on 25.10.2017 for the AY 2017-18 declaring total income at Rs. 73,85,870/- including the surrendered amount of Rs. 63,03,975/-. The moot question involved is whether the income declared during the survey can be taxed

16 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. under section69A of the Act read with section 115BBE of the Act or not, thus copy of section 133A of the Act has to be analyzed along with guidelines of the CBDT applicable to the search cases. 5.1 The case was selected for scrutiny based on parameters prescribed at para 1 of the manual compulsory guidelines of CBDT issued vide Instruction no. 4/2018 dated 20.08. 2018. The CBDT had clearly given instruction via Instruction No. 4/2018 that the case pertaining to sec. 133A of the Act can be selected for manual scrutiny if the following conditions are satisfied i.e. Any books of accounts, documents etc were impounded during survey. In appellant case no books of account, documents were impounded by the income tax authority during survey. As per sec. 133A(3)(1a) of the Act if any books of account or documents is required to be impounded then there must be a recording of reason for doing so. Since, no books of account or documents were impounded there is no such recording of reasons is provided to the appellant.

17 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi.

As also held by Honourable Supreme Court in the case of Rumena Rahman vs. Union of India [2004] 265 ITR 0016 that there must be an order with recording reason for impounding any books of account and documents before impounding any books of account and document during survey. As no books of account and documents are impounded therefore no such recording of reason for impounding ws provided to the appellant during survey. Returned income is less than the returned income of preceding assessment year. Returned income of appellant during AY 2017-18 was Rs. 73,85,870/- and returned income of preceding AY i.e. 2016-17 was Rs. 11,65,920/-. Returned income of the AY 2017-18 is not less than the income of immediately preceding AY. Acknowledgement of Return for AY 2016-17 and 2017-18 is attached herewith as Annexure 1. From the Acknowledgement copy of return it can be verified that the gross total income of AY 2017-18 and 2016-17 was Rs. 73,85,870/- and Rs. 11,65,920/- respectively.

The assessee has retracted from disclosure made during the Survey. The assessee had not retracted from its disclosure made during the survey and the same can be verified from the assessment order itself wherein in page No. 3 of the assessment order the relevant portion of the statement of Dr. Kamal Bansal one of the partners of M/s. Life Care Hospital is reproduced. From that statement the appellant had surrendered an income of Rs. 63,03,975/- (62,33,425 + 70,550) over and above his regular income in the year under appeal and the income of Rs.63,03,975/- has been disclosed under the head income from other sources (inadvertently on the advice of its Tax Consultant) in its return filed u/s 139 of the Act for AY 2017-18.

18 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. scrutiny and the assessment order u/s 143(3) is null and void ab initio. The same view is supported by the decision of Allahabad Tribunal in the case of “Girdhar Gopal Rastogi vs. CIT (2022) 142 Taxmann.com 142” wherein it was held that “Where there is no impounding of books of account during survey under section 133A and returned income of assessee for year under consideration is not less than returned income of immediately preceding year then case would not fall in category of compulsory scrutiny”.

5.2 There was no material/documentation on record which even remotely demonstrated that assessee had any other source of income except running of hospital wherefrom it had expended certain sum of money on hospital building over and above amount which had been recorded in its books of account and hencethe only source of income of the appellant is its income from medical profession.The revenue was not able to advance any evidence during assessment proceeding that the said income is not connected with the business income of the assessee, hence all the income earned by the assessee relate to professional income only.

5.3 Further, 5 heads of income are in a sense exclusive of one another, and income which falls within one head cannot be assigned to, or taxed under, another head. Our view is also supported by the judgment of Honourable Supreme Court in the case of Karanpura Development Co. Pvt. Ltd. [1962] 44 ITR 362 (SC), relevant para of the case law for your reference is extracted herein below :

19 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi.

5.4 Further, by following the principle of natural justice as well as CBDT Circular No. 14(XL-35) dated 11/04/1955- Department must not take advantage of ignorance of assessee to collect more tax than what is legitimately due.To attract deeming provision of sections 69 and 69A of the Act the foremost requirements that is to be followed is that the income should be from any other source rather than from its regular source of earning.What is relevant before invoking the deeming provisions is not just the factum of survey action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey proceedings and which has not been recorded in the books of account and the same is the essence of

20 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. the statutory provisions as duly recognized by the Hon’ble Courts and various Benches of the Hon’ble Tribunal and which has been reiterated from time to time. The statement of the assessee must be read as a whole and not in piecemeal especially where the revenue is relying on the same statement and in such circumstances, the defence available to the assessee in terms of part of the statement having not been considered by the revenue cannot be ignored.There mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn’t mandate the Assessing officer to automatically invoke the deeming provisions and before invoking the deeming provisions, he must call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions. 5.5 There are several judicial pronouncements wherein it was held that -

“Where miscellaneous business income of certain amount surrendered by assessee was taken as Income from undisclosed source under section 69A of the Act and tax was calculated on it under section 115BBE of the Act, since revenue was not able to submit any evidence to effect that said income was not connected with business income of assessee or was accumulated from non-recognising source, entire addition was certainly without forming proper basis and thus impugned application of section 69A of the Act upon income disclosed by assessee and taxing same at special rate as per section 115BBE of the Act was improper”.

[2023] 155 taxmann.com 293 (Amritsar-Trib.)/[2023] 106 ITR(T) 125 (Amritsar-Trib.)[17.07.2023] [2023] 157 taxmann.com 817 (Chandigarh-Trib.)[29.11.2023]

21 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi.

5.6 It was held by the hon’ble Tribunal that : Where during course of survey assessee surrendered certain amount on account of addition made to hospital building, since source of investment in said building was stated to be out of business income which was duly honoured by assessee while filing return of income wherein amount was offered to tax under head “business income” and tax was paid on same at normal rate, provisions of section 69B read with section 115BBE could not be invoked so as to make addition on account of said surrendered amount treating it as unexplained investment. [2024] 158 taxmann.com 679 (Amritsar-Trib.)[06.12.2023]: it was held that Where assessee claimed that entire amount of excess cash found from business premises was generated from undisclosed sale of medicine, since revenue was unable to show any other sources related to excess cash, excess cash was from business of assessee and, thus, application of section 115BBE on amount of excess cash was bad in law. [2024] 160 taxmann.com 239 (Surat-Trib.)[21.12.2023] Where Competent Authority carried out survey under section 133A at hospital of assessee and found certain unaccounted receipts in name of doctors and assessee as unaccounted receipts were relating to business operations of assessee’s hospital, they were taxable as business income under section 28; section 68 was not applicable. [2024] 158 taxmann.com 655(Chandigarh-Trib.) [23.01.2024] Where during course of survey, assessee surrendered excess stock, cash and receivables and offered same to tax as business income, however, AO treated said surrendered amount as unexplained investment under sections 69 and 69A, since it emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey could not be brought to tax under deeming provisions of sections 69 and 69A of Income Tax Act, 1961.

[2023] 152 taxmann.com 595 (Chennai-Trib.)/[2023] 107 ITR INCOME TAX: Where assessee had admitted certain sum towards excess cash found during course of survey, since excess cash found during course of survey did not have any independent identity as asset was a mixed part of overall stock found in business premises of assessee, which represented business income and moreover, assessee had explained source for excess cash i.e., out of income earned from current year business, Assessing Officer was not justified in treating

22 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. additional income admitted towards excess cash as unexplained investment under section 69 and levying tax as per section 115BBE of the Act.

[2024] 161 taxmann.com 44 (Madhya Pradesh)[19.03.2024] Where undisclosed income surrendered during search and seizure proceedings is derived from regular business activities, it is liable to be taxed at normal rate instead of tax rate stipulated under section 115BBE. [2023] 157 taxmann.com 5148 (Rajkot-Trib.)[30-11-2023] Where assessee, a medical practitioner, voluntarily surrendered certain amount during survey as their unaccounted professional receipts and taxed said receipts at normal rate, since assessee had no other source of income, other than business income and AO had conducted inquiry and perused details submitted, and taken a decision to accept explanation provided by assessee after proper application of mind, provision of section 115BBE could not be invoked to tax income as deemed income.

[2023] 154 taxmann.com 347 (Chandigarh-Trib.)[24.07.2023] Mere fact that survey/search proceedings have been initiated at business premises of assessee doesn’t mandate Assessing Officer to automatically invoke deeming provisions of sections 69 and 69A; said provisions can be invoked only where explanation offered by assessee is not found satisfactory; where from explanation offered by assessee it clearly emerged that source of income offered during survey was from his business operations, such income could not be taxed under sections 69 and 69A of the Act.

5.7 The powers of survey under section 133A of the Act have been clarified by the CBDT from time to time. By its Circular No. 7-D(LXIII-7 of 1967), dated May 3, 1967, it is clarified that the place of survey must be one where business or profession of an assessee is carried on, although it is not necessary that it should be the principal place of business or profession. The place where entry can be made under the section must not be a place where the assessee does not carry on

23 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. business. Business or residential premises of third parties, including a chartered accountant, a pleader or income-tax practitioner, of whom the assessee may be a client, are not places which could be entered into for the purpose of section 133A of the Act. It would be improper for an ITO (now Assessing Officer) or an Inspector, authorized in this behalf, to enter the office of a chartered accountant for the purpose of inspecting the books of his client. It is also necessary that the place entered should be the business premises and not residential premises of the assessee and the entry should be made during business or office hours. 5.8 By an Explanation to section 133A(1) of the Act, it is clarified that a place where business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept. Based on above, the primary objects of the survey may be categorized as under : Broaden the country’s tax base by discovering new taxpayers. Gather information for checking whether the existing taxpayers are discharging their tax obligations correctly and truthfully and to get information for detecting evasion of tax by the existing taxpayers. To do spot checking to find out whether the books of account and records are being maintained on day-to-day basis and not manipulated later.

24 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. To check the correctness of the cash and stocks shown in the books of account maintained in the ordinary course of business/trading.

5.9 In, nutshell, the proceedings u/s 133A of the Act introduced in the statute to have a check and balance on the business/professional behavior of the assessee. The survey conducted u/s 133A of the Act is there in the statute just to verify the business affairs of the assessee. If found correct, no consequences. If something is missing out of business affairs, alarm the assessee to incorporate the same in his books of account and rectify their statutory computation of total income. Nowhere in the scheme it is ever anticipated or desired to change the head of income. Rather, undisclosed income if any discovered during the survey proceedings, there is a compulsion to treat the same as income under the head business and profession. As the department surveyed business premises only and interacted and verified with business employees and documents only. 5.10 We find that recently the Coordinate Bench of the Tribunal, Jaipur in the case of Nikhar Fashions in ITA No. 1020/JP/2024 dated 21.11.2024 has dealt the similar issue, wherein the Coordinate Bench has decided the appeal of the assessee by observing in para 15 to 17, as under :-

“15. We have thoroughly examined the judicial pronouncements relied upon by the Ld. CIT (A) and found the same as not tenable and applicable on the facts of the matter under consideration, as the same pertains to the matter where additions were made in the regular assessment and not in the case where a survey has been conducted. It is absolutely misinterpretation of the law and forceful imposition of

25 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. judicial pronouncements. The Ld. CIT (A) totally ignored the judicial pronouncements relied upon by the assessee and that is too when they are relevant and applicable to the facts of the case.

16.

Moreover, as far as the authenticity of the statement recorded during the survey proceedings are concerned, Section 133A does not empower the authorities to record the statements. This is a settle position of law that the statement obtained under section133A would not automatically bind upon the assessee. However, an admission is extremely an important piece of evidence but it cannot be said that it is conclusive; and it is open to the person who made the admission to show that it is incorrect. The burden lies on the assessee to establish that the admission made in the statement at the time of survey was wrong and that there was no additional income. Judgement in CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad.) is very important as Supreme Court also affirmed this judgement S. Khader Khan Son's case (supra) where it has been held that the statement, obtained under section133A would not automatically bind upon the assessee.

17.

In view of the above discussion on facts and law and further relying on the judicial pronouncements, the order of the authorities below is set aside and the AO is directed to calculate the tax without applying section 69B r.w.s. 115BBE of the Act, as the income of the assessee is chargeable to tax as normal business income u/s. 28 of the Act. In the light of above, Ground No. 1 raised by the assessee is allowed.”

In view of the above facts and respectfully following the decision of the Coordinate Bench of the Tribunal, Jaipur, supra, we are of the view that the additional income declared by the assessee in ITR filed incorporating the income offered during survey proceedings are liable to be taxed as per normal provisions and not as undisclosed income liable for taxation u/s 115BBE. The assessee deserves to succeed. Hence, we set aside the order of the ld. CIT (A). In the light of above, ground nos. 3 to 6 are allowed.

26 ITA No. 938/Jodh/2024 Life Care Hospital, Abu Road, Sirohi. 6. Since we have allowed effective ground nos. 3 to 6, the remaining ground nos. 7 & 8 have become academic only, and we are not adjudicating the same. Ground no. 9 is general in nature and needs no adjudication. 7. In the result, appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.

Sd/- Sd/- (Dr. Mitha Lal Meena) (DR. S. Seethalakshmi) Accountant Member Judicial Member Dated 24/06/2025 Santosh- Sr. P.S Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order

LIFE CARE HOSPITAL,SIROHI vs. ACIT/DCIT, CIRCLE-1,, JODHPUR