2006 (11) TMI 269 - AT - Income Tax

Summary

Issues:
1. Sustained addition of Rs. 95,000 based on estimation of income from patients and consultation charges.
2. Addition of undisclosed salary paid to employees.
3. Addition of salary paid to the wife of the assessee.
4. Addition on account of rental income.
5. Credit of Rs. 1,35,000 surrendered by the assessee.

Analysis:

Issue 1: Sustained addition of Rs. 95,000
- The assessee, a Registered Medical Practitioner, surrendered Rs. 1,35,000 during a survey for the assessment year 2001-02.
- The Assessing Officer (AO) rejected the books of the assessee and estimated income based on patient receipts and consultation charges.
- The CIT(A) reduced the addition to Rs. 95,967 considering 45 patients per day and profit on medicines.
- The ITAT upheld the rejection of books but deleted the addition, citing the certificate from the Ayurvedic Chikitsak Sangh and lack of concrete evidence supporting the AO's estimation.

Issue 2: Undisclosed salary paid to employees
- The AO added Rs. 15,000 as undisclosed income due to discrepancies in recorded and stated salaries of employees.
- The ITAT deleted this addition, noting the genuine payment of salaries and obtaining signatures of employees on payment vouchers.

Issue 3: Salary paid to the wife of the assessee
- The AO considered the salary of Rs. 2,500 per month paid to the wife of the assessee as unreasonable.
- The ITAT allowed the salary, emphasizing that the wife confirmed receiving the salary for work done.

Issue 4: Addition on account of rental income
- The ITAT allowed a 1/3rd deduction from the rental income of Rs. 8,400 towards maintenance, sustaining the remaining amount.

Issue 5: Credit of Rs. 1,35,000 surrendered by the assessee
- The ITAT directed the credit of the surrendered amount of Rs. 1,35,000, considering the circumstances and the assessee's inability to prove additional income.

In conclusion, the ITAT partly allowed the appeal, deleting the sustained addition of Rs. 95,000, undisclosed salary addition, and confirming the rental income deduction. The ITAT also directed the credit of the surrendered amount of Rs. 1,35,000.