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2022 (10) TMI 604 - AT - Income TaxTaxability of the referral fees - underreporting of referral fee from Vijetha Hospitals - appellant has been following cash system of accounting consistently and admitted the referral fee to tax in the AY 2014-15 i.e., in the year in which the appellant received the amount - HELD THAT:- As the referral fee received by the assessee has been offered to taxation in the FY 2013-14 relevant to the AY 2014-15. It is well settled principle that the assessee can chose his method of accounting either cash or mercantile basis which cannot be disputed by the Revenue. Accordingly, the assessee has declared the amount received from M/s. Vijetha Hospitals during the FY 2013-14 while filing his return of income for the AY 2014-15. Merely based on the fact that M/s. Vijetha Hospitals who has accrued the expenses in their books of account cannot be the criteria to tax the income during the AY 2013-14 in the hands of the assessee who is maintaining the books of account on cash basis. DR has also conceded that there is no difference in the tax rates for the AY 2013-14 and AY 2014-15. In view of the above discussions, we are of the considered view that since the assessee is maintaining the books of account on cash basis, the assessee has rightly disclosed his income when the Referral fee is received from M/s. Vijetha Hospitals during the FY 2013-14 and hence has rightly filed his return of income disclosing the same in the AY 2014-15. We therefore quash the orders of the Ld. Revenue Authorities and allow the appeal of the assessee. Unexplained unsecured loan - appellant was unable to furnish confirmation letter in this case - though the appellant had established the identity, creditworthiness and genuineness was not established, in the case of loan creditors, the appellant needs to establish all the three ingredients. Failure to establish any ingredient will render the loan / credit non-genuine - HELD THAT:- CIT(A) has rightly considered the issue and has sustained the addition made by the Ld. AO. We therefore find no error in the order of the Ld. CIT(A) and hence no interference is required on this issue. Thus, the Ground raised by the assessee is dismissed. Reopening of assessment u/s 147 - unsecured loans, confirmation from the loan creditors and also the income tax returns and the bank statements of the loan creditors - HELD THAT:- Admittedly the assessee in order to correct the errors while filing the original return has filed the revised return of income on 2/12/2015. The contention of the DR could not be accepted that the revised return is filed subsequent to the date of search of 12/5/2015. We find force in the argument of the Ld. AR that the revised return was filed before the due date specified u/s. 139(5) of the Act and before the issue of notice U/s. 148 of the Act on 24/2/2016. As observed that the assessee has corrected the accounting errors while filing the revised return of income. Further, we also find from the paper book that the assessee has submitted the details of unsecured loans, confirmation from the loan creditors and also the income tax returns and the bank statements of the loan creditors. Further, we find that the assessee and also its partners are assessed by the same Assessing Officer viz., ITO, Ward-1(4). The Ld. AO if not relying on the documents produced by the assessee, could have verified the creditworthiness based on the filing of returns of the partners available in his records. CIT(A) has rightly verified the loans and the sources of loans of the creditors and rightly deleted the addition made by the AO. We therefore find no error in the order of the Ld. CIT(A) on this ground and therefore no interference is required. Violation of the provisions of section 269SS - HELD THAT:- We find that the assessee has proved the creditworthiness of the loan creditors which is recorded in the books of accounts of the assessee as well as loan creditors. As relying on case of ADA Investigation vs. Kumar A B Shanti [2002 (5) TMI 4 - SUPREME COURT]. We are of the considered view that the facts of the present case does not attract the provisions of section 269SS of the Act. We therefore find no error in order of the Ld. CIT(A) and hence no interference is required in the order of the Ld. CIT(A) and dismiss the grounds raised by the Revenue. Accordingly, we are of the considered view that there is no merit on this ground and therefore this ground raised by the Revenue is dismissed. Disallowance of various expenses - HELD THAT:- We find that voluminous documentary evidences have been produced before the Ld. AO for verification however, the Ld. AO not relying on the self-made vouchers and other documents, estimated the disallowance @ 20% of certain expenses as detailed in the order of the Ld. AO. We also find no fresh evidence has been produced before the CIT(A) to provide one more opportunity to the Ld. AO to verify the same. We therefore find no error in the order of the Ld. CIT(A) who was estimated 10% as against 20% of the disallowances made by the Ld. AO. We are therefore of the considered view that the there is no need to interfere with the order of the Ld. CIT(A) on this issue. Assessee has not retracted the sworn in statement who has accepted the disclosure made during the survey operations by offering Rs. 1,09,54,885/- to tax. The assessee has only corrected the hospital receipts which were wrongly accounted as income instead of unsecured loans from partners. We therefore dismiss this ground raised by the Revenue.
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