The Chandigarh Income Tax Appellate Tribunal ( ITAT ) held that investment in construction of hospital buildings made out from the professional receipts are computed under head business income.
The Assessee Aniljit Singh Arora is a practicing physician and a child specialist running his professional practice under the name and style of Dr. Aniljit’s childcare. Consequent to the survey operation under section 133A of Income Tax Act, 1961 carried out at the official premises of the assessee, the assessee surrendered Rs 1.75 Crores as business income in the return of income. Thereafter, the return of income was selected for scrutiny.
During the assessment proceedings, the AO issued a show cause to the assessee, referring to the surrender letter dt. 28/02/2019 wherein the assessee surrendered a sum of Rs. 1,20,00,000/- on account of understated expenditure involved in construction of the aforesaid hospital building, as to why the unexplained investment in building amounting to Rs 1,20,00,000/- may not be charged to tax under section 69 r.w.s 115BBE of the Income Tax Act.
Accordingly, the assessee submitted that the source of investment is out of his unaccounted professional receipts mainly for the financial year 2018- 19.However, the AO treated the amount as unexplained investment under Section 69 of the Income Tax Act as against business income shown by the assessee.
Aggrieved by the order, the assesee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal filed by the assessee. Thereafter, the assessee filed an appeal before the tribunal.
During the adjudication Rakesh Cajlai, the counsel for assessee argued that investment in construction of building was made out of his professional receipts wherein part of withdrawal amounting to Rs. 35,52,238/- was made for construction of property from the books of accounts and the remaining amount of Rs.1.20 Crores was out of his unaccounted profession receipts for the year under consideration.
Further, the assessee counsel argued that similar matter has been decided in a number of judicial decisions wherein the amount surrendered on account of stock, advances / debtors/ investment in building has been treated as income from business and profession.
Amanpreet Kaur, the Department representatives contended that there can be no presumption to treat the value representing investment in building as application of business income in absence of any evidence of earning that income or details as to when, how and from whom such income was derived which has been invested in investment in building. Therefore, merely because an asset has been used for business purposes, it cannot be said that undisclosed investment in that asset is business income.
The tribunal observed that there is no finding by the survey team that the assessee has any other source of income other than receipts from running his medical practice and operating the child care clinic. Further, nothing has been brought on record during the course of assessment proceedings contrary to the findings of the survey team during the course of survey.
Thus, the bench confirmed that the assessee has provided a reasonable and acceptable explanation about the nature and source of such unrecorded transactions as that of professional receipts and the necessary nexus with assessee’s profession has been established, it cannot be said that these are unexplained transactions, thus, doesn’t satisfy the second condition for invoking the deeming provisions of Section 69 of the Income Tax Act.
After analyzing the submission of both parties the bench comprising Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) held that investment in construction of hospital buildings made out from the professional receipts are computed under head business income.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
