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2023 (12) TMI 1116 - AT - Income TaxAddition u/s 68 - receipt was not declared in the ROI and the receipt remain unexplained - taxation of additional income u/s 115BBE - additional income disclosed during the course of Survey in the revised return - Counsel stated that assessee did not have any other source of income other than the income which is generated from the hospital owned by the assessee company - HELD THAT - In spite of offering this additional income found undisclosed during the course of Survey, the assessee returned loss in both the revised returns only because of claim of deduction u/s 35AD of the Act. Thus, if the assessee has already offered the additional income disclosed during the course of Survey in the revised return filed, there was no reason to add the same again in the assessment. AO has brought it to tax u/s 68 r.w.s 115BBE of the Act. During the course of Survey in the hospital premises, unaccounted receipts of the hospital in the name of certain doctors were found. As the receipts in question are relating to the business operations of the assessee's hospital. Therefore, such income should be brought to tax as the business income u/s 28 of the Act. Therefore, we note that additional income earned in the course of business ought to be taxed as regular income and not u/s 68. CIT(A) has rightly noted that the assessee is in the business of running of the hospital. During the course of survey u/s 133A of the Act, some loose papers were found showing unaccounted hospital receipts. Since the hospital receipts are part of the business receipts, therefore CIT(A) held that the provisions of section 68 cannot be made applicable, in view of the decision of Shilpa Dying Printing Mills Pvt. Ltd 2015 (7) TMI 691 - GUJARAT HIGH COURT . Section 68 of the Act can be invoked only if no explanation is offered by the assessee about the nature and source of income / receipts and such explanation is not found to be satisfactory in the opinion of the AO. However, in the instant case, the loose papers found during the course of Survey and the statements of the directors recorded during the course of Survey showed that the undisclosed receipts were pertaining to the undisclosed income of the hospital ran by the assessee- company. CIT(A) held that the undisclosed hospital receipts found during the course of Survey need to be taxed as income from business and are to be brought to tax as per the normal provisions of the Act. The said income is already offered in the revised return, therefore has to be taxed as income from business, and therefore the provisions of section 115BBE of the Act are not applicable with reference to the said income. Based on above reasoning, the ld CIT(A) deleted the addition made by the assessing officer - We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal Nos.1 and 2 of the Revenue are dismissed. Disallowance of deduction of capital expenditure u/s 35AD - We note that during the course of Appellate Proceedings, the assessee submitted all the details of capital expenditure. As the capital expenditure details were not furnished before the assessing officer, the details furnished during Appellate Proceedings were in the nature of additional evidence under Rule 46A and hence, were forwarded by CIT(A) to the assessing officer for verification and remand report. The assessing officer vide letter dated 05.09.2018 has submitted the remand report wherein he has stated that the assessee has only 92 beds as against 100 beds as required for eligibility u/s 35AD of the Act. The assessee submitted a rejoinder dated 10.10.2022 before ld CIT(A). In the said rejoinder, the assessee has stated that the Inspector from the assessing officer's office who visited the hospital has not counted the second beds in the twin sharing rooms under the presumption that the second bed is for the patient's attendant. The assessee has also submitted before ld CIT(A), the photographs of the twin sharing rooms with bed numbers in support of his claim. It was further submitted sharing rooms the attendants are provided small sofas and not the beds. The assessing officer during remand proceedings has recorded the statement of Mr. Kirit N Panchal, from Yogesh Surgicals, the firm which has supplied the beds and other equipments to the assessee's hospital. In the said statement, Mr. Kirit Panchal has stated that he has supplied 64 semifaller beds and 36 ICU beds and 3 hydraulic emergency trolley beds. Thus, the supplier has also confirmed that he has supplied more than 100 beds to the assessee hospital which fulfills the eligibility that the assessee has more than 100 beds to claim deduction u/s 35AD of the Act. All these beds and other capital goods to the tune of Rs. 3,16,29,353/- were purchased by the assessee before the date of commencement of the hospital and hence, was found to be eligible for deduction u/s 35AD of the Act. Whether the claim of deduction u/s 35AD of the Act, which is not made in the original return can be made in the revised return filed ? - In the assessee's case, as the assessee has filed the original return in time as per the provisions of section 139(1) of the Act, the revised return filed as per the provisions of section 139(5) of the Act, claiming the deduction u/s 35AD of the Act for the first time needs to be allowed to the assessee. Therefore, the deduction u/s 35AD being 150% of the capital expenditure incurred before the commencement of business has to be allowed to the assessee. Therefore, ld CIT(A) has allowed the deduction u/s 35AD of the Act. No valid reason to interfere with the decision and findings of the Ld.CIT(A), hence we dismiss ground Nos. 3 to 8 raised by the Revenue.
Issues Involved:
1. Applicability of Section 115BBE for unexplained income. 2. Classification of unexplained income as business income. 3. Eligibility for deduction under Section 35AD. 4. Validity of revised returns under Section 139(5). Summary: 1. Applicability of Section 115BBE for unexplained income: The Revenue contended that the addition of Rs. 1,95,00,000/- should be taxed under Section 115BBE as the receipt was not declared in the Return of Income (ROI) and remained unexplained per Section 68. The CIT(A) held that Section 115BBE was not applicable as the income was already offered in the revised return and should be taxed as business income. The Tribunal upheld the CIT(A)'s decision, noting that the additional income of Rs. 1.95 Crores was part of the business income and should not be taxed under Section 115BBE. 2. Classification of unexplained income as business income: The CIT(A) classified the Rs. 1,95,00,000/- as business income, considering it was already offered in the revised return. The Tribunal agreed, emphasizing that the income was derived from hospital operations and should be taxed as business income under Section 28, not as unexplained income under Section 68. 3. Eligibility for deduction under Section 35AD: The Revenue argued that the assessee did not file the required details and forms for claiming deduction under Section 35AD and did not claim such exemption in the original ROI. The CIT(A) allowed the deduction, stating that the revised return, filed as per Section 139(5), claimed the deduction for the first time and should be allowed. The Tribunal upheld this decision, noting that the assessee provided sufficient evidence during appellate proceedings, including supplier statements confirming the supply of more than 100 beds, fulfilling the eligibility criteria for Section 35AD. 4. Validity of revised returns under Section 139(5): The Revenue contended that the revised return was not valid as it included intentional misstatements. The CIT(A) held that the revised return was valid as it was filed within the period prescribed under Section 139(5) and claimed the deduction for the first time. The Tribunal supported this view, referencing the jurisdictional High Court's decision in PCIT Vs Babubhai Ramanbhai Patel, which allows claims made in revised returns filed within the prescribed period. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds, including the classification of income as business income and the allowance of the deduction under Section 35AD. The Tribunal found no infirmity in the CIT(A)'s order and confirmed that the revised return was valid and the additional income should be taxed as business income.
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