2016 (8) TMI 993 - AT - Income Tax

Disallowance of expenditure as claimed by the assessee in the profit and loss account - treatment of the business income as income from other sources - Held that - As from the perusal of the paper book submitted before us it is seen that assessee had furnished copy of Ledger account of medical income giving date wise details and income earned along with the copy of certificate of Life Membership of IMA and Registration Certificate allotted by MCI. Thus the factum of income from Medical Profession cannot be disregarded once these facts have been brought on record and no adverse material has been brought or enquiry whatsoever has been done by AO. The AO has treated this income as income from other sources which has no basis in the wake of these evidences. Accordingly we hold that the income of Rs. 5, 56, 100/- shown by the assessee is nothing but medical income shown by the assessee which is chargeable under the head income from business and profession under section 28. Further from the nature of expenses debited it is quite evident that these expenditures are purely for the purpose of earning of business incomes shown like in the nature of audit fees bank charges interest on loan insurances payments made for professional fees telephone expenses car repairs etc. All these expenses have been incurred by way of account payee cheques barring one minor item of Rs. 11, 712/- which is in cash. Thus neither the genuineness of the expenditure is doubted nor it is the case of the revenue that these are unverifiable. Thus we do not find any reason to hold that these expenditures are to be disallowed. Accordingly we allow the expenditure claimed by the assessee which has been debited in the profit and loss account against the business income. Thus grounds raised by the assessee are treated allowed. Nature of income - Business income from real estate transaction/ commission - Held that - We find that assessee had filed all the details of income earned and expenditure incurred. Looking to the nature of expenditure and also the fact that the same has been incurred mostly through account payee cheques it cannot be held that either the expenses are unverifiable or they had not been incurred for the purposes of the earning of the income shown by the assessee. In any case the AO himself has computed the income from business which is in the form of remuneration from the firm. However he has treated the business income at Rs. 5, 78, 500/- as income from other sources which in our opinion in wake of evidences filed cannot be upheld. Accordingly like in the earlier appeal we hold that income is assessable as business income under section 28 and expenditure claimed in the profit and loss account have to be allowed as deduction which computing the income of the assessee. Thus the ground raised by the assessee is allowed..

Issues Involved:

1. Assessment of income declared by the assessee.
2. Classification of business receipts as "Income from Other Sources."
3. Disallowance of expenses claimed against business income.
4. Disallowance of specific expenses listed in the Profit and Loss (P/L) account.

Issue 1: Assessment of Income Declared by the Assessee

The assessee declared an income of Rs. 2,52,618/-, which was assessed by the Assessing Officer (AO) at Rs. 20,97,020/-. The CIT(A) confirmed the AO's assessment. The Tribunal found that the assessee had provided sufficient evidence, including ledger accounts and certificates from the Indian Medical Association and Medical Council of India, to support the claim of earning income from the medical profession. The Tribunal concluded that the income of Rs. 5,56,100/- declared by the assessee should be treated as "income from business and profession" under section 28, rather than "income from other sources."

Issue 2: Classification of Business Receipts as "Income from Other Sources"

The AO treated the medical income of Rs. 5,56,100/- as "income from other sources" due to the lack of detailed evidence. The CIT(A) upheld this decision. However, the Tribunal found that the assessee had provided adequate documentation, including ledger accounts and professional certificates, to substantiate the claim of medical income. Consequently, the Tribunal ruled that this income should be classified under "income from business and profession."

Issue 3: Disallowance of Expenses Claimed Against Business Income

The AO disallowed various expenses claimed by the assessee, except for bank interest of Rs. 13,55,724/-, on the grounds that the expenses could not be established against the business income. The CIT(A) upheld this decision. The Tribunal, however, found that the expenses were incurred for earning business income and were supported by evidence, including account payee cheques. Therefore, the Tribunal allowed the expenses claimed by the assessee.

Issue 4: Disallowance of Specific Expenses Listed in the P/L Account

The AO disallowed specific expenses such as audit fees, bank charges, conveyance, depreciation, car insurance, interest on loan, and other expenses. The CIT(A) upheld this disallowance. The Tribunal found that these expenses were genuine and incurred for business purposes. The Tribunal noted that the expenses were paid mostly through account payee cheques and were verifiable. Consequently, the Tribunal allowed the expenses listed in the P/L account.

Conclusion

The Tribunal ruled in favor of the assessee on all grounds. The income declared by the assessee was accepted as "income from business and profession," and the expenses claimed were allowed. The appeals filed by the assessees were allowed.

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