2015 (9) TMI 1241 - AT - Income Tax

Assessments u/s 153A - Held that - In cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the Assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the Assessee including the undisclosed income, notwithstanding the Assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act.Keeping the principles laid down on the subject and the provisions of law, we are of the opinion that there is no merit in assessee s contentions raised in the above grounds. - Decided against assessee. Un-explained Loans - Held that - As far as the credit is concerned, assessee has filed necessary confirmations, statement of return of income for respective assessment years together with statement of facts. It is also a contention that a further loan of ₹ 5 Lakhs advanced by the same person in the subsequent year has been accepted by the AO as genuine credit. Considering these facts, we are of the opinion that the credit received long back has to be accepted as genuine one. Like-wise, in the case of D Venumadhav also there is no dispute with reference to the identity of the person and employment with M/s. Aditya Hospital. AO cannot base his satisfaction why assessee has to borrow from one of the employees in Financial Year 2003-04. AO has to examine whether the credit is genuine or not. The fact that said person has confirmed the advance and is a genuine person has to be considered in verifying the creditworthiness of the person. Considering the facts of the case and amount involved, we are of the opinion that credit from Shri D. Venu Madhav also has to be considered as genuine one. AO also did not make any enquiries with the said persons nor having any incriminating material in the course of search proceedings. In view of this, AO is directed to delete the additions so made. Assessee s grounds on this issue in AY. 2004-05 are allowed. - Decided in favour of assessee. Disallowance of Expenditure - Held that - There is no need to disallow any expenditure claimed in the course of assessee s profession. Considering that assessee is a consultant surgeon and the hospital also certified that assessee is employing his own para-medical staff, which factor is also agreed by the Ld. CIT(A) we are of the opinion that there is no need to disallow any expenditure which was claimed in the original returns of income. There is no incriminating material found and assessee cannot be expected to produce the vouchers and persons after lapse of sufficient time when assessee s returns originally filed were accepted without any scrutiny. In view of this, we are of the opinion that no expenditure can be disallowed out of the salary claimed and accordingly, assessee s grounds are allowed. AO is directed to delete the disallowance so made in all the impugned assessment years.- Decided in favour of assessee. Disallowance of vehicle maintenance and depreciation - Held that - As far as depreciation in AY. 2006-07 is concerned, since the date of purchase is required to be examined for allowing depreciation in that year as directed by the CIT(A), AO is directed to examine the date of purchase and allow depreciation as per law either at 100% of the claim or 50% of the claim if it is purchased and used for less than 180 days in that year. To that extent, CIT(A) direction is upheld. However, with reference to disallowance of 50% of depreciation claim in respective assessment years, the same cannot be upheld. As far as depreciation is concerned, even if vehicle is used for one single day, the entire depreciation as per the rules has to be allowed. Since assessee s vehicles are used for the profession on which there is no dispute, disallowance of depreciation U/s. 32 cannot be considered except on the basis of usage in the year whether use of full year or part of the year as per the provisions of Section 32. Since depreciation is allowable U/s. 32, the general provision of 37(1) cannot be invoked. In view of this, disallowance of 50% of depreciation for personal use cannot be done as per the provisions of the Act. - Decided in favour of assessee. Disallowance of 50% of the vehicle maintenance - Held that - Assessee is a doctor and also a public figure some use of vehicles for personal use cannot be ruled out. Consistent with the view taken by co-ordinate Benches in number of cases, we are of the opinion that the disallowance for personal use can be restricted to 10% of the vehicle maintenance claimed in respective assessment years. Even though we are aware that these are re-assessments, we are of the opinion that AO can re-examine the issues which are not examined in the original assessment and in this case, there seems to be no assessments U/s. 143(3) earlier. Following the principles laid down by the Hon ble Allahabad High Court in the case of Rajkumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT we are of the opinion that AO can examine the vehicle maintenance claimed in the re-assessment. Accordingly, we restrict the expenditure disallowance to 10% being personal in nature U/s. 37(1). Balance of the expenditure is allowable - Decided partly in favour of assessee. Additions made on the basis of Hospital Management System package - Held that - only because some of the doctors have admitted of receiving the payments mentioned in the seized material or the fact that the hospital s application before the Settlement Commission has been admitted, in no way proves that the assessee has actually received the amount mentioned in the seized document, unless there are other corroborative material to prove such fact. Suspicion however strong cannot be a substitute for evidence. No addition can be made only on the basis of presumptions and surmises. In the facts of the present case, we are of the view that adequate evidence or material have not been brought on record to conclusively prove the fact that the assessee has received cash payments as mentioned in the seized material. Accordingly, addition cannot be sustained. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of AO under Section 153A.
2. Unexplained loans.
3. Disallowance of expenditure.
4. Disallowance of vehicle maintenance and depreciation.
5. Additions based on Hospital Management System (HMS) package.

Issue-wise Detailed Analysis:

1. Jurisdiction of AO under Section 153A:
The assessee contested that the AO erred in making various additions when no incriminating material was found during the search, and the assessments were not pending. The Tribunal noted that the search yielded incriminating materials, cash, and jewelry, making proceedings under Section 153A mandatory. The Tribunal upheld the jurisdiction of the AO, referencing the Allahabad High Court's decision in Rajkumar Arora, which stated that no incriminating material is necessary for completing assessments under Section 153A. Consequently, the Tribunal rejected the assessee's grounds on this issue.

2. Unexplained Loans:
For AY 2004-05, the AO added loans from Tandu Srinivas and D. Venu Madhav as unexplained cash credits. The CIT(A) confirmed the addition. The Tribunal found that the loans were genuine, supported by confirmations and returns of income from the creditors. It directed the AO to delete the additions, allowing the assessee's grounds.

3. Disallowance of Expenditure:
The AO disallowed 50% of salaries paid by the assessee in various years, considering them unreasonable. The CIT(A) reduced the disallowance to 20%. The Tribunal found no need to disallow any expenditure, as the assessee is a consultant surgeon requiring a team. The Tribunal stated that no incriminating material was found, and the original returns were accepted without scrutiny. It directed the AO to delete the disallowances, allowing the assessee's grounds.

4. Disallowance of Vehicle Maintenance and Depreciation:
The AO disallowed 50% of depreciation and vehicle maintenance, considering the expenses high and partly personal. The CIT(A) upheld this. The Tribunal directed the AO to examine the purchase dates for depreciation but found no basis for disallowing 50% of depreciation for personal use. It allowed the depreciation claims and restricted the disallowance of vehicle maintenance to 10% for personal use, partially allowing the assessee's grounds.

5. Additions Based on HMS Package:
The AO added substantial amounts based on the HMS package from Aditya Hospital, which showed higher payments than those accounted for by the assessee. The CIT(A) confirmed these additions. The Tribunal found that the HMS package entries were not verifiable, and the amounts received by the assessee were consistent with TDS certificates and bank statements. It noted that no corroborative evidence supported the HMS package entries. The Tribunal directed the AO to delete the additions, allowing the assessee's grounds.

Conclusion:
The appeals were partly allowed, with the Tribunal directing the AO to delete the additions related to unexplained loans, disallowed expenditures, and HMS package-based additions, while partially allowing the disallowance of vehicle maintenance expenses. The Tribunal upheld the jurisdiction of the AO under Section 153A.