Tribunal upholds CIT(A)'s dismissal of Revenue's appeal, citing arithmetical error and justified expense set-off

The Tribunal upheld the CIT(A)'s decisions in dismissing the Revenue's appeal. The deletion of the addition of Rs. 2,30,53,039/- was supported by evidence showing an arithmetical error in the undisclosed income calculation. Additionally, the allowance of the set-off of expenses amounting to Rs. 19,70,923/- was justified as they were directly related to the primary business activity. The Tribunal found both decisions to be legally sound and aligned with the facts presented in the case.

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Issues Involved:

1. Deletion of addition of Rs. 2,30,53,039/- based on the statement recorded during the survey.
2. Disallowance of set-off of expenses amounting to Rs. 19,70,923/- under Section 115BBE.

Issue 1: Deletion of Addition of Rs. 2,30,53,039/-

The Revenue challenged the deletion of the addition of Rs. 2,30,53,039/- by the CIT(A), arguing that the CIT(A) ignored the statement of Shri Sunil Jain recorded during the survey, which admitted undisclosed income of Rs. 4,41,88,232/-. The CIT(A) observed that the statement by Shri Sunil Jain, Director of the assessee, included an arithmetical error where expenses were inadvertently added to the gross receipts instead of being deducted. The CIT(A) found that the actual undisclosed income was Rs. 2,11,29,807/- after deducting the expenses from the gross receipts. The CIT(A) held that the documents found during the survey should be considered in their entirety, supporting the assessee's claim that the gross receipts were Rs. 3,26,00,730/- and not Rs. 4,41,88,232/-. The Tribunal agreed with the CIT(A), noting that the statement was later modified to reflect the correct income, and upheld the deletion of the addition as the right amount of undisclosed income was subjected to tax.

Issue 2: Disallowance of Set-off of Expenses of Rs. 19,70,923/-

The Revenue also contested the CIT(A)’s decision to allow the set-off of expenses amounting to Rs. 19,70,923/- against the unaccounted income. The CIT(A) found that the expenses were directly related to the income from organizing health camps, which was the primary business activity of the assessee. The CIT(A) noted that the expenses, including salaries paid to staff and the director, were duly recorded and reflected in the respective income tax returns. The CIT(A) concluded that the provisions of Section 115BBE were not applicable as the income was not unexplained but related to the business activity. The Tribunal agreed with the CIT(A), confirming that the expenses were thoroughly explained and directly related to the income from health camps, and thus, the set-off was justified.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)’s decisions on both issues. The deletion of the addition of Rs. 2,30,53,039/- and the allowance of the set-off of expenses of Rs. 19,70,923/- were confirmed as being in accordance with the law and supported by the facts of the case. The order was pronounced in the open court on 02.01.2019.

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