2022 (10) TMI 604 - AT - Income Tax

Tribunal Rules for Assessee on Tax Referral Fees & Unsecured Loan, Accepts Revised Return

Dr. KallepalliKurmanadh, Visakhapatnam. Versus Income Tax Officer, Ward-1 (4), Visakhapatnam. And Income Tax Officer, Ward-1 (1), Visakhapatnam. Versus M/s. Vijetha Hospitals, Visakhapatnam. And (Vice-Versa)

Dr. KallepalliKurmanadh, Visakhapatnam. Versus Income Tax Officer, Ward-1 (4), Visakhapatnam. And Income Tax Officer, Ward-1 (1), Visakhapatnam. Versus ... Issues Involved:1. Year of taxability of referral fees.2. Addition of unexplained unsecured loan.3. Acceptance of revised return of income.4. Disallowance of various expenses on an ad-hoc basis.5. Violation of provisions of section 269SS.Issue-wise Detailed Analysis:1. Year of Taxability of Referral Fees:The core issue pertains to the year in which the referral fees should be taxed. The assessee, a partner in M/s. Vijetha Hospitals, received Rs. 13,78,200/- as referral fees during FY 2012-13 but did not disclose it in the original return for AY 2013-14. The assessee argued that the referral fee was received in cash during FY 2013-14 and thus declared it in AY 2014-15, following a cash system of accounting. The Tribunal upheld the assessee's method of accounting, stating that the referral fee should be taxed in the year it was received, i.e., AY 2014-15, and quashed the orders of the Revenue Authorities.2. Addition of Unexplained Unsecured Loan:For AY 2014-15, the assessee declared an unsecured loan of Rs. 10 lakhs. The Revenue Authorities demanded proof of creditworthiness and genuineness of the loan creditor, which the assessee failed to provide. The Tribunal upheld the CIT(A)'s decision to sustain the addition of Rs. 10 lakhs as unexplained unsecured loan due to the lack of sufficient evidence from the assessee.3. Acceptance of Revised Return of Income:The assessee hospital filed a revised return for AY 2014-15, correcting errors from the original return and declaring additional income admitted during a survey. The Revenue argued that the revised return was filed to accommodate the survey's findings. The Tribunal found that the revised return was filed within the due date specified under section 139(5) and before the notice under section 148. The Tribunal upheld the CIT(A)'s decision to accept the revised return, noting that the assessee provided adequate documentation to support the corrections.4. Disallowance of Various Expenses on an Ad-hoc Basis:The AO disallowed 20% of certain expenses due to unverifiability, which the CIT(A) reduced to 10%. The Tribunal found no error in the CIT(A)'s decision, noting that the assessee had already admitted additional income and that the disallowances were not based on credible material. The Tribunal upheld the CIT(A)'s reduction of the disallowance rate to 10% for certain expenses and deleted the disallowance for others.5. Violation of Provisions of Section 269SS:The Revenue argued that the assessee violated section 269SS by receiving unsecured loans in cash. The Tribunal found that the assessee provided sufficient evidence of the creditworthiness of the loan creditors and that the transactions were recorded in both the assessee's and creditors' books. The Tribunal concluded that the facts of the case did not attract the provisions of section 269SS and upheld the CIT(A)'s decision.Separate Judgments Delivered:None of the judges delivered separate judgments; the order was delivered per bench.Conclusion:In summary, the Tribunal allowed the assessee's appeal regarding the year of taxability of referral fees, partially allowed the appeal concerning the addition of unexplained unsecured loans, accepted the revised return of income, upheld the CIT(A)'s decision on the disallowance of expenses, and dismissed the Revenue's appeal regarding the violation of section 269SS. The cross-objection filed by the assessee was also dismissed.