UDAY SHANKAR ARUN,GAYA vs. ACIT CENTRAL CIRCLE-2, PATNA

As the issues involved in all these appeals are identical, they were heard together and are being disposed off by way of this common order.

Facts in brief are that Dr. Sunita Kumari along with her husband Dr. Uday Shankar Arun, run a nursing home and medical diagnostic centre by the name of Jeevan Rekha Diagnostic and Nursing Home in the district of Gaya, Bihar. Search and survey action was carried out under section 132/133A of the Act on 28/09/2018 at the business premises Jeevan Rekha Diagnostic and Nursing Home as well as at the residence of Dr. Sunita Kumari and Dr. Uday Shankar Arun. Thereafter, notice under section 153A of the Act were issued for AY 2013-14 to 2018-19 being six years preceding the year of search and assessment proceedings were carried out during which the concerned assessee(s) filed their income tax returns. Assessment proceedings I.T.A. Nos. 17 to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 3 were also carried out for the year of search i.e., for Assessment Year 2019-20 and various additions were made in the hands of the three assessee(s). However, in the present bunch of appeals, the appeal by the assessee Dr. Sunita Kumari are for Assessment Year 2013-14 to 2019-20, appeal by Dr. Uday Shankar Arun are for Assessment Year 2016-17, 2018-19 and 2019-20 and appeal of the partnership form i.e., Jeevan Rekha Diagnostic and Nursing Home is for Assessment Year 2019-20. The respective assessee’s have raised pounds on merits and also raised legal issues by filing additional grounds in the case of Dr. Sunita Kumari as well as Dr. Uday Shankar Arun.

We will first take up the appeals of the assessee, namely, Dr. Sunita Kumari in I.T.A. Nos. 17 to 23/Pat/2023 for Assessment Years: 2013-14 to 2019-20.

At the outset, the ld. Counsel for the assessee referring to the judgement of the Hon’ble Supreme Court in the case of of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. reported in [2023] 149 taxmann.com 399 (SC), submitted that the additions made for Assessment Year 2013-14 to 2018-19, deserves to be deleted as they are not based on any incriminating material seized during the course of search. On the other hand, the ld. D/R vehemently argued supporting the orders of the lower authorities.

Now, examining the facts of the instant case in the light of the ratio laid down by the Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra), we notice that for Assessment Year 2013-14 and 2015-16, the return of income under section 139(1) of the Act was filed on 10/05/2014 and 09/03/2017 and no notice under section 143(2) of the Act, was issued for selecting the case of the assessee for scrutiny and as on the date of search assessment proceedings were not pending and, therefore, AY 2013-14 and 2015-16, are non-abated and completed assessments. Further we notice that the additions made in the assessment order are only based on some observations of the bank statement as well as expenditure claimed in the profit and loss account which are already on record and thus no addition has been made on any incriminating material found during the course of search. Therefore, we are inclined to hold that the assessment proceedings carried out under section 153A/143(3) of the Act for AY 2013-14 and 2015-16 deserve to be quashed and the additions made therein are hereby deleted in the light of the judgement of the Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra). Thus, appeal for to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 6 Dr. Sunita Kumari Assessment Year 2013-14 and Assessment Year 2015-16 are allowed.

So far as the remaining assessment years are concerned i.e., AY 2014-15, 2016-17, 2017-18 and 2018-19, we notice that for AY 2014-15, the return of income filed by the assessee was defective and being invalid return, the assessee cannot claim immunity from being assessed under section 153A of the Act and as far as the remaining Assessment Years i.e., 2016-17, 2017-18 and 2018-19 are concerned, the time limit for issuing notice for selecting the case for scrutiny u/s. 143(2) of the Act, has either not expired or the returns have been filed after the date of search and, therefore, they are not completed or non- abated assessments and, therefore, merged the proceedings under section 153A of the Act. Therefore, the additional legal ground raised

We have heard rival contentions and perused the material placed before us. So far as the issue relating addition of Rs.2,10,592/- is concerned, we notice that the Id. AO has referred to the deposits made in the bank account held with HDFC Bank and compared the same with the gross professional receipt and for the excess amount of Rs.7,75,730/-, assessee was asked to explain the source thereto. To the said query, the Id. AO was satisfied except for the source of deposit from opening balance at Rs.2,10,592/-. We notice that the assessee is a medical professional and is regularly filing return of income for last many years. Being a regular income tax assessee, possibility of having accumulated savings of Rs.2,10,592/-, cannot be doubted. Even the assessee has filed copy of the balance sheet and income and expenditure account for the year and there is positive cash in hand available with the assessee. Therefore, we fail to find any merit in the finding of the Id. CIT(A) and thus allow Ground No. 2 raised by the assessee and delete the addition of Rs.2,10,592/-.

The second issue for consideration is disallowance of expenditure at Rs.2,38,705/-. We observe that the assessee has declared professional income of Rs.21,90,890/-and after claiming the expenditure has shown that income at Rs.8,56,740/-. However, the Id. AO has applied the provisions of section 44ADA of the Act, observing that assessee needs to declare 50% of the professional receipts is to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 8 taxable income. We, however, fail to find any merit in the said observation of the Id. CIT(A) as well as the Id. AO because Section 44ADA of the Act, has come into force from AY 2017-18. Prior to the said provision come into force, Id. AO ought to have examined the correctness of the expenditure and if any discrepancy had been noticed the same should have been subjected to addition. But in the absence of any such finding by the Id. AO, we are inclined to hold in favour of the assessee. Accordingly the finding of the Id. CIT(A) is set aside and disallowance of expenditure of Rs.2,38,705/- is hereby deleted. Ground No. 3 raised by the assessee is allowed.

Other grounds raised

The second issue for our consideration is regarding disallowance of expenditure of Rs.5,611/-. The Id. Assessing Officer has made the addition applying provisions of section 44ADA of the Act holding that 50% of the professional receipts is required to be included as taxable income. As discussed earlier, provisions of section 44ADA of the Act has come into force from Assessment Year 2017-18 and hence the same cannot be applied in the year under consideration and in absence of any other discrepancy noticed by the Id. Assessing Officer, the addition deserves to be deleted. Accordingly, we set aside the finding of the Id. CIT(A), delete the addition of Rs.5,611/- and allow Ground No. 3 raised by the assessee.

All the other grounds are general in nature and need no education.

Now, we take up assessee's appeal in 2023 for Assessment Year 2017-18.

The sole issue for our consideration is regarding the unexplained cash deposit of Rs.65,195/-claimed by the assessee to be made from the opening cash on hand. We notice that the assessee has explain the I.T.A. Nos. 17 to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 10 source of deposit in the bank account but Id. Assessing Officer was not satisfied with the explanation of deposit of opening cash on hand at Rs.65,195/-. Considering the income declared by the assessee and also considering the withdrawals made in the past and the balance sheet and income and expenditure account filed before us, the source of cash deposit of Rs.65,195/-, cannot be doubted. We, therefore, set-aside the finding of the Id. CIT(A) and delete the addition.

All other grounds raised

24.1. Before us, the Id. Counsel for the assessee has placed of the partner of Dr. Sunita Kumar in the books of Jeevan Rekha Diagostic & Nursing Home. A perusal of the same shows that in the preceding financial year i.e., FY 2017-18 cash amounting to Rs.26,50,000/- was withdrawn from the partnership firm. The Id. Counsel for the assessee also placed a copy of the income tax return, balance sheet and profit and loss account of the partnership firm. It is also stated before us that the said partnership firm has also been subjected to scrutiny for Assessment Year 2018-19. Considering these facts we are satisfied that the assessee has sufficient cash in hand to explain the source of deposit at Rs. Rs.9,65,122/- and the said source is from the withdrawal from partnership firm the preceding financial year. We accordingly set- aside the finding of the Id. CIT(A) and delete the addition of Rs.9,65,122/-and allow Ground No. 2 raised by the assessee. 25. Next issue for our consideration is disallowance of expenditure at Rs.28,317/-. We find that the disallowance has been made by the Id. Assessing Officer apply and provisions of section 44ADA of the Act. Since the facts of the assessee are identical as has been dealt by us for Assessment Year 2018-19 and assessee did not get the books of account audited u/s 44AB of the Act, provisions of section 44ADA of the Act will apply and since the assessee has declared income less than 50% of the gross professional receipt, we fail to find any infirmity in the order to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 13 of the Id. CIT(A) and confirm the disallowance of Rs.28,317/-. Thus, Ground No. 3 raised by the assessee is dismissed. Other Grounds, being general and consequential in nature need no adjudication.

In the result, appeals of the assessee, Dr. Sunita Kumar, for AY 2013-14 and 2015-16 are allowed and appeal for Assessment Year 2014-15, 2016-17, 2017-18 and 2019-20 are partly allowed and appeal for Assessment Year 2018-19 is dismissed.

Now, we take up the appeal in Dr. Uday Shankar Arun for Assessment Year 2016-17.

As per the additional ground raised

We have perused the above reconciliation statement and notice that the Id. AO has only considered the gross professional receipt but did not consider that the assessee used to purchase the medical goods on behalf of the patients and such transactions were also carried out through banking channels. During the year, total of such sum received by the assessee for the supply of medical goods amounted to Rs.25,31,756/-. Along with this there are inter-bank transfers also. If all these gross receipts are considered the assessee had Rs.42,66,220/- of the available funds for deposit against the total deposit of Rs.37,33,853/- in the bank account. Under these given facts and circumstances, since both the lower authorities failed to consider the amount received by the assessee from the patients towards supply of medical goods and thereafter used for purchase of medical goods and these transactions being carried out through proper banking channel, therefore, we are inclined to decide the issue in favour of the assessee being satisfied with the explanation given regarding the source of alleged deposit. Accordingly, the findings of the Id. CIT(A) has set aside in the impugned addition of Rs.l2,02,097/-is hereby deleted. Ground No. 2, is allowed. Other Grounds, being general and consequential in nature need no adjudication.

Now, we take up AY 2018-19. to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016-17 I.T.A. No. 26/Pat/2023 Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 16 The sole issue for our consideration is disallowance of indirect expenditure at Rs.84,035/-. We notice that the gross professional receipt for the year under consideration is Rs .4,92,509/-and the assessee has claimed indirect expenditure at Rs.3,30,289/- and declared professional income at Rs.1,62,220/- which is less than 50% of the professional receipt which the assessee was required to declare as per the provisions of section 44ADA of the Act as discussed in the preceding paragraphs. Since the books of accounts have not been audited under section 44AB of the Act, the impugned disallowance of Rs.84,035/- deserves to be confirmed. Thus, no interference is called for in the finding of the Id. CIT(A). The sole effective ground raised

Ground No. 3, is regarding indirect expenditure of 1,42,589/-. Facts of this issue remains the same has held various in the preceding year for Assessment Year 2018-19 and the application of section 44ADA of the Act on the professional receipts earned by the assessee during the year. In absence of the books of accounts being audited under section 44AB of the Act, provisions of section 44ADA of the Act to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 18 have rightly been applied by the revenue authorities. Thus, no interference is called the finding of the Id. CIT(A), the disallowance is confirmed and Ground No. 3 raised by the assessee is dismissed.

Ground No. 4, is raised against the addition for undisclosed money u/s 69A of the Act. We notice that the cash amounting to Rs.99,95,700/-, was seized from the business premises of Jeevan Rekha Diagnostic & Nursing Home. During the course of assessment proceedings of the partnership from when the source of the cash found during the course of search at Rs. 99,95,700/-, was called for, it was stated that out of the said sum of Rs. 25,65,000/-, belongs to Dr. Uday Shankar Arun and in the verification given by Dr. Uday Shankar Arun, Rs.18,50,000/- was withdrawal from partnership firm and Rs.7,16,000/- was from old savings. The dispute before us only relates to the explanation given by the assessee about Rs.7,16,000/-from old savings. As discussed earlier that assessee has been filing ITR four last 10 years and has offered approximately Rs.1.15 Crores has total taxable income. Our attention was further drawn to the profit and loss account and balance sheet of Dr. Uday Shankar Arun for the past six years. Perusal of the same indicates that to some extent there is merit in the contention of the Id. Counsel for the assessee about the position of old savings by Dr. Uday Shankar Arun. However, considering the facts of the case as well as the benefit of opening balance given while to 23/Pat/2023 Assessment Years: 2013-14 to 2019-20 Sunita Kumari I.T.A. No. 25/Pat/2023 Assessment Year: 2016- Assessment Year: 2018-19 I.T.A. No. 27/Pat/2023 Assessment Year: 2019-20 Uday Shankar Arun I.T.A. No. 28/Pat/2023 Assessment Year: 2019-20 Jeevan Rekha Diagnostic & Nursing Home 19 dealing with Ground No. 2 of the assessee's appeal, we give relief of Rs.6,00,000/- to the assessee and confirmed the addition at Rs.1,16,000/-. Thus, Ground No. 4, raised by the assessee is partly allowed. Other Grounds, being general and consequential in nature need no adjudication.

Now, we take up ITA No. 28/Pat/ 2023 for Assessment Year 2019-20 in the case of Jeevan Rekha Diagnostic & Nursing Home. The only issue for our consideration is the protective addition of Rs.7,16,000/- made in the hands of the partnership firm, we find that since the issue of substantive addition has already been dealt by us in the case of Dr. Uday Shankar Arun, in ITA No. 27/Pat/2023 and part relief granted, the protective addition made in the hands of the partnership firm is not warranted. Thus, the finding of the Id. CIT(A) is set aside and the sole effective ground raised