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Issues involved: Cross appeals against common order passed by CIT(A)-III, Hyderabad for assessment years 2005-06 and 2006-07.
Assessee's grievance: Addition of Rs. 14,10,565 sustained. Revenue's grievance: Relief granted to assessee at Rs. 21,56,512 out of total addition of Rs. 35,67,077. The assessee, a partnership firm running a hospital, filed return declaring income at Rs. 3,15,250 for assessment year 2006-07. A survey u/s 133A revealed gross receipts of around Rs. 28.30 lakhs for six months, leading to an estimated total receipt of Rs. 56,58,408 for the year. The assessing officer added Rs. 35,65,077 as undisclosed income, which was later reduced by CIT(A) to Rs. 14,10,565 after considering disclosed income and gross turnover. Both parties appealed. The AR cited a Tribunal order for a 15% income estimation rate. The DR argued for sustaining the estimated income based on business premises location and competition. The Tribunal noted income estimation varies for hospitals based on factors like location, competition, and service quality. Declined to apply 15% rate without uniformity proof. Regarding expenses, the D.R. contended that all expenses were already claimed, disallowing further deductions. Tribunal differentiated fixed and variable expenses, stating fixed expenses are already covered in regular business, while variable expenses related to undisclosed receipts should be allowed proportionately. Directed assessing officer to bifurcate and ascertain variable expenses for deduction. Both appeals were partly allowed, and the issue of expenses was remanded to the assessing officer for fresh adjudication. Decision: Both appeals allowed partly. Expenses issue remanded for fresh adjudication.
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