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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Yogesh Thar & Fenil Bhatt Department by: Shri Kamal Mangal सुनवाई क" तार"ख / Date of Hearing: 26.04.2016 घोषणा क" तार"ख /Date of Pronouncement:10.08.2015 आदेश / O R D E R PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 30.10.2012 passed by the Commissioner of Income Tax (Appeals) 2, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2007-08. 2. The assessee has raised the following grounds:-
A.Y. 2007-08 “1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the addition of Rs.50 lakhs made by the AO on the basis of the statement of the assessee recorded during the course of survey u/s.133A.
2. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer restored.
3. The brief facts of the case are that the assessee filed the return of income on 22.05.2007 declaring total income to the tune of Rs.27,63,342/-. The return of income was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). The case was selected for scrutiny. Therefore, notice u/s.143(2) of the Act was issued on 12.09.2009 and served upon the assessee. The assessee is a hospital for women and children. The assessee’s source of income consists of ‘Income from profession’ and Income from other sources’. The survey action u/s.133A of the Act took place on 13.12.2006. The statement of assessee was recorded wherein assessee admitted his income to the tune of Rs.50,00,000/- for the A.Y.2007-08. The Assessing Officer dealt this income as additional income and assessed the income to the tune of Rs.77,63,940/-. Feeling aggrieved the assessee filed an appeal before the CIT(A) who deleted the said addition, therefore the revenue has filed the present appeal before us.
ISSUE NO.1 &2:- A.Y. 2007-08
Issue no.1 and 2 are interconnected, therefore are being taken up together for adjudication. Under these issues the revenue has challenged the deletion of Rs.50,00,000/- by the CIT(A) which was added by the Assessing Officer in view of the statement of one of the partner. The learned representative of the revenue has argued that CIT(A) has wrongly deleted the said addition, hence the order dated 30.10.2012 under challenged is wrong against law and facts and is liable to be set aside. On the other hand the learned representative of the assessee has argued that the statement of partner reveals about the total income of the assessee for the A.Y.2007-08 to the tune of Rs.50,00,000/- approximate whereas the Assessing Officer treated the said income as additional income wrongly and illegally hence the CIT(A) has rightly deleted the addition in accordance with law.
Keeping in view of the argument advanced by the learned representative of the parties and perused the record carefully, it is observed that the Assessing Officer added the additional income of Rs.50,00,000/- on the basis of the statement recorded on 13.12.2006. However to make more crystal clear the question and answer of the assessee as well as the authority is hereby produced below:-
Q.No.12. As per the registers maintained it is seen you have collected Rs.49,88,625/- from IPD. What will be your approximate receipts for the year and what will be your net income. A.Y. 2007-08 Ans. Considering the upward trend in business the IPD collection will be approximately Rs.80 to 85 lacs. After deducting all the outgoing depn etc. the income will be Rs.30 lacs approximately. Thus the total income for the year 2007-08 will be Rs.50 lacs of the firm.
The above said question and answer nowhere speaks about the additional income of the assessee to the tune of Rs.50,00,000/- as additional income. Anyhow, how the CIT(A) has dealt this matter is also require to be seen. The finding of the CIT(A) in this regard is hereby reproduced below:-
2.9 I have gone through the facts of the issue. In this case, survey u/s.133A was conducted on 13.12.2006. In the answer to question no.10, the partner has stated that the collections from OPD for the entire amounting year will be around Rs.30 to 35 lacs. In the answer to question no.12, the partner has replied that IPD collections for the entire accounting year will be around Rs.80 to 85 lacs. It is seen from the P&L for the Y.E. on 31.3.07, it is seen that total earning from the patients is Rs.1,13,51,170/- which is almost tallying with the estimate made by the partner doing the survey. Further, the appellant in the answer to question no.12 has estimated the income at A.Y. 2007-08 Rs.50 lacs. It is seen from the P&L account that the net profit is Rs.54,83,851/- (i.e. the income before debiting partner’s salary and interest to partners). From this even the estimate made by the appellant during the survey is almost reflected in the actual business results. Further, from the statement recorded and from the assessment order, it is seen that there was no discrepancy found in the accounts maintained by the appellant either during the survey u/s.133A of the I.T.Act or during the assessment proceedings.
2.9Further, it is seen that the appellant has written a letter dated 15.01.2007 (which is received by the A.O. on 29.01.2007) and it is extracted below:
“Please refer to the survey conducted u/s.133A at our premises on 13.12.2006. At the time of survey, our Partner, Dr. Venkateshwar Moorthy, had, on behalf of the firm, administered a statement on oath. In the statement, it was indicated that the total income of the firm for the A.Y.2006-07 relevant to the A.Y.2007-08 would be approximately Rs.50 lacs. Since we are to pay advance tax bases on the said estimated income, the following two cheques for the advance tax payable have been submitted: A.Y. 2007-08
1. Cheque no.05723 dated 15.12.2006 for Rs.10 lacs drawn on New India Co-operative Bank Ltd.
2. Cheque no.052724 dated 15.03.2007 for Rs.5 lacs drawn on New India Co-operative Bank Ltd. May we submit that, while estimating the tax on the said income and accordingly, the advance tax, the deduction for the remuneration which the partners would be entitled to on the entire income was not considered. It would be appreciated that in terms of section 40(b) of the I.T. Act, the remuneration to the partners is deductible expenses in the hands of the partnership firm and is to be taxed as income of the partners.
As per Clause 7(A) of the Partnership Deed dated 01.04.1998, for the book profit above Rs.1,50,000/-, 40% of the book profits would have to be distributed to the partners as remuneration. Thus, of the estimated income of Rs.50 lacs, about Rs.20 lacs would be paid to the partners as remuneration, resulting in reduction in the taxable income to that extent. Hence, it is our contention that, 40% of the tax paid Rs.10 lacs, about Rs.4 lacs would be the tax on account of the remuneration. The partners who are entitled to such remuneration (equally, as per Clause 7(A) of the Partnership Deed), namely, A.Y. 2007-08 Dr.Venkateshwar M. Moorthy and Dr.(Mrs.) Smitha V. Moorthy, have considered the same for their estimated income for the year under question and the tax liability so computed has been paid by way of advance tax as under:
Cheque no.201119 dated 15.12.2006 for Rs.2 lacs drawn on ICICI Bank Ltd.
Cheque no.202137 dated 15.12.2006 for Rs.2.10 In view of the above, the firm’s tax liability would be restricted to Rs.6 lacs with respect to the second installment of advance tax and Rs.3 lacs for the third installment due in March 2007 and not Rs.10 lacs and Rs.5 lacs, respectively, for which the cheques have been submitted. Therefore, out of Rs.10 lacs of the second installment, we request you to consider the balance of Rs.4 lacs (the amount in excess of the advance tax liability of Rs.6 lacs) as towards the third installment would not be required to be paid by the firm.
We bring to your attention that this change would be translate into any loss to the Department as mentioned earlier the said amount of Rs.4 lacs has already been considered for the advance tax paid by the partners. A.Y. 2007-08 Further, as you are aware that, we have handed over to the Department a post dated cheque of Rs.5 lacs for the third installment of advance tax payable in March 2007 and as explained herein, since we would not be required to pay the third installment, we request you that the post dated cheque no.052724 for Rs.5 lacs, drawn on New India Cooperative Bank Limited, be returned so as to make sure that even inadvertently, on March 15, 2007, the same is not encashed.
We request you to consider and record the above proposal and give effect to the Statement made on oath accordingly, for which act of kindness, we shall forever remain grateful.
2.10 This letter also makes it clear that the admitted estimated income during the survey is the net income before considering the salary and interest payable to partners. It is also pertinent to note that the A.O. has not encahsed the cheque for Rs.5 lacs.
All these facts shows that the actual income shown by the appellant in the P&L account is almost tallying with the estimate made during the survey. Further, there was no discrepancy noticed in the books of accounts or the A.O. A.Y. 2007-08 has found any unaccounted income either during the survey u/s.133A of the I.T.Act or during the assessment proceedings. In view of this, I hold that the addition of Rs.50 lacs made in the assessment is purely on the basis of surmise and suspicion and not based on any valid evidence. The addition made which is not supported by valid evidence cannot be sustained. In view of this I direct the A.O. to delete the addition of Rs.50 lacs.
On appraisal of the finding of the CIT(A), it is quite clear that the assessee declared his approximate income for the A.Y.2007-08 to the tune of Rs.50,00,000/-. The P & L Account of the assessee speaks about the profit to the tune of Rs.54,83,851/- which is quite near to the assessment assessed by the assessee while making his statement. No discrepancies of any kind was found in the account maintained by the assessee either during the survey action u/s.133A of the Act and during the assessment proceedings. The submission made by the assessee vide his letter dated 15.01.2007 was found correct. The addition made by the Assessing Officer is based on surmises and conjectures and is not based upon any cogent and convincing evidence on record. No distinguishable facts of any kind have been placed on record before us. Therefore in view of the said circumstances we of the view that the CIT(A) has passed the order in question correctly A.Y. 2007-08 and judiciously which does not require to be interfere with at this appellate stage.
In the result the appeal filed by the revenue is hereby dismissed.
Order pronounced in the open court on 10th August, 2016. (AMARJIT SINGH) (D.KARUNAKARA RAO) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 10th August,2016 MP MP MP MP