2017 (5) TMI 779 - AT - Income Tax

Income determined by the AO on the basis of the statement furnished by the assessee u/s. 131 at the time of survey operation - Rejection of books of accounts u/s 145(3) - estimating the professional income - Held that - The assessee has produced the audited financial statements and no reference has been made to such books of accounts and accordingly no defect in books of accounts was pointed out. We also find that the ld. CIT(A) has clearly recorded his finding in his order that the AO has not specified manner of quantification of professional fees of ₹ 44 lakhs only. Addition has been made merely on the basis of statement/presumptive basis and no corroborative material has been brought on record. Presumption cannot take the shape of evidence, however, strong it may be. See D.S. AGENCIES AND ASSOCIATES & USHA DISTRIBUTORS Versus ACIT 2015 (12) TMI 1459 - ITAT MUMBAI . Thus it can be concluded that the impugned addition was purely based on the statement recorded u/s 131of the Act. Thus the statement of the assessee cannot be the sole basis addition. The provisions of the law require the Revenue is to tax the real income of the assessee which should be based on the documents. AO is directed to delete the same. - Decided in favour of assessee. Disallowance of foreign travel expenses - assessee claimed the cost of foreign trips was sponsored by the company - Held that - The assessee before the lower authorities has furnished the confirmation from the party ERIS in respect of Canada tour. Therefore it can be concluded that the assessee has not incurred Canada tour expenses outside the books. In this regard we also find that the lower authorities should have confirmed the same from the company whether the Canada tour was sponsored by it under section 133(6) of the Act. But we find that the AO failed to exercise his power given under the Statute. However the assessee before us failed to furnish the details in respect to the tour expenses to Thailand. Therefore, we are inclined to confirm the same to the extent of ₹ 1.08 lakh in respect of Thailand tour. Thus, in view of above we delete the addition made by the lower authorities in respect of Canada tour for ₹ 1.16 lakh only. Thus this ground of the appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Rejection of books of accounts under section 145(3) of the Income Tax Act.
2. Estimation of professional income at ?39 lakh.
3. Disallowance of foreign travel expenses.
4. Levy of interest under section 234D.

Issue-Wise Detailed Analysis:

1. Rejection of Books of Accounts under Section 145(3):
The assessee, a professionally qualified doctor, faced a survey operation under section 133A, during which he admitted to not maintaining necessary books of account as required under section 44AA. Consequently, the Assessing Officer (AO) rejected the books of account and estimated the taxable income at ?44 lakh based on the average number of patients per day. The assessee argued that the income was admitted under pressure and that the books of account were audited and should not have been rejected without pointing out specific defects. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the AO's order but reduced the estimated income to ?39 lakh, considering the assessee's affidavit and the lack of valid retraction. The Tribunal, however, found that the AO did not point out any defects in the audited books and that the statement made during the survey could be retracted. The Tribunal relied on various judgments and CBDT guidelines, concluding that the addition based solely on the survey statement was not justified. The Tribunal directed the AO to delete the addition, allowing the assessee's ground.

2. Estimation of Professional Income at ?39 Lakh:
The AO estimated the professional income at ?44 lakh based on the number of patients seen per day, which the assessee admitted during the survey. The CIT(A) reduced this estimate to ?39 lakh, considering the assessee's subsequent statement and the deduction under Chapter VI-A. The Tribunal noted that the AO's estimation was purely based on the survey statement without any corroborative evidence. The Tribunal emphasized that real income should be taxed based on documents and not merely on statements made during the survey. Therefore, the Tribunal directed the AO to delete the addition, allowing the assessee's appeal on this ground.

3. Disallowance of Foreign Travel Expenses:
The AO disallowed ?8 lakh as foreign travel expenses, assuming the trips were not sponsored and incurred out of undisclosed income. The CIT(A) reduced this disallowance to ?2.24 lakh, estimating the expenses for trips to Thailand and Canada. The Tribunal found that the assessee provided confirmation for the Canada trip being sponsored by a company, but no details were furnished for the Thailand trips. The Tribunal directed the deletion of the disallowance related to the Canada trip (?1.16 lakh) and upheld the disallowance for the Thailand trips (?1.08 lakh), thus partly allowing the assessee's appeal on this ground.

4. Levy of Interest under Section 234D:
The levy of interest under section 234D was deemed consequential and was dismissed by the Tribunal.

Conclusion:
The Tribunal allowed the assessee's appeal partly, directing the deletion of the addition based on the survey statement and partially upholding the disallowance of foreign travel expenses. The levy of interest under section 234D was dismissed as consequential. The Tribunal emphasized the importance of corroborative evidence and the proper procedure for retraction of statements made during surveys.