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2022 (9) TMI 584 - Income Tax
Unaccounted cash payments / expenditure - unaccounted cash receipts from patients - Addition u/s 69C - levy of tax u/s 115BBE at higher rate of tax - proof of source of income - set off the current year loss against the additional income offered to tax as business income - test of reasonableness - AO treated the additional income as a separate item of income and taxed the same as per the provisions of section 115BBE and therefore recomputed the business loss to be carried forward without adjusting the additional income - CIT(Appeals) while upholding the order of the AO observed that the source for unaccounted cash payments is unaccounted cash receipts and that the assessee has not provided the details of patients from whom cash receipts were received - HELD THAT:- When an assessee offers no explanation or the explanation offered is not satisfactory in the opinion of the AO, then the amount of such expenditure is to be taxed as income u/s. 69C of the Act. The satisfaction to be recorded by the AO should not be objective satisfaction exercised at his discretion, but a subjective satisfaction based on the facts of the case. It would then mean that justification for exercise of the power has to be found by the authority by making a subjective satisfaction on the basis of objective material and such satisfaction must be reflected in the reasons recorded in writing while exercising the power. (Vide: Dee Vee Projects Ltd. v/s. Union of India & Ors. [2022 (2) TMI 569 - BOMBAY HIGH COURT]
In the present case, the assessee is in the business of running a diagnostic centre and the only source of income is the receipts from patients which is stated to be the source for unexplained expenditure. That being the case the AO has not brought any contrary material on record to state that the source for the expenditure was other than from business income and has formed the opinion based on conjectures and surmises. While exercising the quasi-judicial functions, the administrative authorities have to reach satisfaction on the basis of material available and not on conjectures and surmises. The test of reasonableness has to be satisfied which in our view failed in the case under consideration. Therefore, we are of the view that the additional income offered cannot be taxed u/s. 115BBE and the impugned addition is hereby deleted. Accordingly the assessee is allowed to set off the current year loss against the additional income offered to tax as business income.Appeal by the assessee is allowed.