AO Relies on Erroneous Software Data for Addition, Ignored Submissions on OPD/IPD Classification: ITAT directs Fresh Adjudication [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chandigarh bench has remanded a case involving additions made on account of alleged undisclosed hospital receipts, directing the Assessing Officer (AO) to re-examine the impounded data and undertake a fresh assessment.

The appellant, M/s Sibia Healthcare Pvt. Ltd., Bhatinda, filed an appeal against the order of the Commissioner of Income Tax (Appeals)-5, Ludhiana [CIT(A)], relating to Assessment Year 2017-18. The case originated from a survey action under Section 133A of the Income Tax Act, 1961, conducted on 06 October 2017, during which Annexure-26 containing monthly sheets of outpatient (OPD) and inpatient (IPD) data was impounded.

Based on this data, the AO compared the patient numbers with the figures in the company’s books and held that receipts were understated. Consequently, books were rejected under Section 145(3), and undisclosed receipts of Rs. 391.47 lakhs were added to the assessee’s income.

The CIT(A), however, re-estimated receipts at Rs. 200.51 lakhs and confirmed an addition of Rs. 33.47 lakhs, leading to cross-appeals by both the assessee and the Revenue.

Chartered Accountant Shri Vinay Bahl, representing the appellant, argued that the impounded sheets were unreliable and not reflective of actual receipts. It was contended that the documents were only estimates prepared for empanelment purposes with government departments and that the software used to generate them had technical issues when reports spanned more than one month.

The assessee submitted that out of the 50,538 OPD visits shown, only 12,642 were chargeable, with many being follow-up or empanelled patients not generating revenue. It was further explained that OPD patients later admitted as IPD patients were counted twice, leading to duplication. A detailed analysis of the software was furnished in electronic form to substantiate these claims.

The Revenue being represented by Commissioner of Income Tax Shri Rajat Kumar Kureel submitted that the assessee had failed to rebut the presumption arising from the seized documents. It was argued that the AO rightly rejected the books under Section 145(3) and based the assessment on the patient data retrieved during the survey.

The Revenue defended the additions, maintaining that the impounded sheets clearly reflected undisclosed receipts.

The Bench comprising Judicial Member Laliet Kumar and Accountant Member Manoj Kumar Aggarwal held that the entire addition was based on data generated from the hospital’s software, which prima facie did not provide correct information.

The Tribunal noted that the AO had failed to consider the assessee’s detailed analysis, including distinctions between chargeable and non-chargeable visits, duplication of OPD and IPD patients, and the technical limitations of the software.

Observing that these factors had a direct bearing on the quantum of receipts, the Tribunal set aside the orders of the lower authorities.

Thus, the Tribunal allowed cross-appeals for statistical purposes.

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