2006 (5) TMI 130 - AT - Income Tax

Summary

Issues:
1. Whether a private limited company engaged in the business of running a nursing home is required to maintain a daily case register as per statutory provisions.
2. Whether a private limited company engaged in the profession of medicine is subject to the same requirements as individuals in the medical profession.
3. Whether the addition made by the Assessing Officer (AO) based on the absence of a daily case register in Form 3C is justified.

Analysis:
Issue 1:
The Assessing Officer (AO) contended that maintaining a daily case register in Form 3C is a statutory requirement under section 44AA of the Income Tax Act, read with rule 6F(3) of the IT Rules. The AO added an amount to the declared gross receipts of the assessee due to the absence of the daily case register, leading to a dispute regarding the correctness and completeness of the accounts.

Issue 2:
The appellant argued that as a limited company, it cannot be considered as carrying on a profession since personal skill is a requirement for a profession, and a company, being an artificial person, lacks personal skill. Case laws and guidance notes were cited to support the argument that running a nursing home can be classified as a business activity rather than a professional activity.

Issue 3:
The CIT(A) deleted the addition made by the AO, stating that the requirement of maintaining a daily case register in Form 3C is specifically for persons carrying on a medical profession, and since the assessee-company is not engaged in a profession, the addition was deemed unjustified. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO did not provide a valid basis for rejecting the books of account, and a private limited company cannot be expected to possess personal skills necessary for a profession.

In conclusion, the Tribunal dismissed the Revenue's appeal, stating that a private limited company, being an artificial person, cannot be considered as carrying on a profession and is not required to maintain a daily case register as mandated for individuals in medical professions. The Tribunal also highlighted the lack of specific defects in the books of account to justify the addition made by the AO, affirming the CIT(A)'s decision to delete the addition.