SAROJ GUPTA, NALAGARH,HIMACHAL PRADESH V. ACIT (CENTRAL CIRCLE), SHIMLA, HIMACHAL PRADESH

ITA 367/CHANDI/2025

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The case involves Smt. Saroj Gupta, operating under M/s Aakash Hospital and Diagnostic, who appealed against the additions made by the Assessing Officer (AO) following a survey under section 133A(1) of the Income Tax Act. The AO had made additions based on discrepancies between patient registers and bill books, alleging sales suppression, and on unaccounted commission payments to referral doctors. The Commissioner of Income Tax (Appeals) upheld these additions for the Assessment Year 2019-20, leading to the current appeal. The Tribunal examined the evidentiary value of the materials and statements used by the AO and found them insufficient to uphold the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780497 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Appeal Filed On: 12-03-2025
• Other Referred Cases: S. KhaderKhan Son (300 ITR 157), V.M. Spinning Mills vs. CIT (16 Taxmann.com 199), M/s L.M. Fabrication (ITA No.366/Chd/2025)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR LD.
• Assessee Lawyers: SUDHIR SEH GAL LD
• Section: 143(3); 133A; 37(1)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.367/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2019-20) Smt. Saroj Gupta M/s Aakash Hospital and Diagnostic Main Bazar, Nalagarh (HP) -174101 बनाम/ Vs. ACIT (Central Circle) Railway Board Building The Mall, Shimla (HP) 171003 ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. AHVPG-9358-F (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri Sudhir Sehgal (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Dr. Ranjit Kaur (Addl.CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 25-09-2025 घोषणाकीतारीख /Date of Pronouncement : 07/10/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2019-20 arises out of an order of learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] dated 27-01-2025 in the matter of an assessment framed by Ld. AssessingOfficer [AO] u/s. 143(3) of the Act on 26-09-2021. The sole grievance of the assessee is confirmation of twin additions of Rs.41.94 Lacs & addition of Rs.50 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Printed from counselvise.com 2 Proceedings before lower authorities 2.1 The impugned assessment stem from survey action by the department u/s 133A(1) on 22-02-2019 at assessee’s premises situated at Nalagarh, Baddi wherein the assessee carried on a medical diagnostic center under the name and style of M/s Akash Ultra Sound. Subsequently, the assessee filed return of income u/s 139(1) on 24-02- 2020 declaring income of Rs.12.99 Lacs which was subjected to scrutiny. 2.2 The impugned addition stem from the fact that certain incriminating documents were impounded and confronted to the employee of the assessee during survey. On the basis of the same, allegation of sales suppression by the assessee was made by Ld. AO. These documents were mainly patient registers and bill books relating to ultrasound and x-ray diagnostics being carried out at the center. Most of the entries as noted in patient registers were found to be missing in the bill books. On sample basis, Ld. AO noted that percentage of regular sales as disclosed by the assessee was roughly in the range of 18%. 2.3 Shri Gurmeet Singh (responsible for maintaining ultrasound records) admitted the discrepancy and stated that bills were issued only to those patients who specifically requested for it. The number of such patient was only 10% to 15%. In other words, only 10% to 15% of the sales were recorded in regular books of accounts. His statement was confirmed by Shri Om Dogra, another employee of the assessee. The assessee had disclosed regular sales of Rs.0.30 Crores whereas Printed from counselvise.com 3 Ld. AO estimated the same at Rs.2 Crores and computed alleged unaccounted sales for Rs.1.77 Crores. Against the same, Ld. AO applied average gross profit Rate of 23.7% as reflected by one comparable entity viz. Dr. Path Laps for FYs 2014-15 to 2019-20. The same resulted into an addition of Rs.41.94 Lacs in the hands of the assessee. 2.4 Another addition was on account of alleged payment to referral doctors. Shri Om Dogra admitted that the referrals doctors were paid commission which stood corroborated from the statement of Dr. Neelam Gupta who was related to the assessee and working as a Radiologist at the center. The Ld. AO applied commission rate of 25% on sales of Rs.2 Crores and computed unaccounted commission payment by the assessee for Rs.50 Lacs. The same would not be allowed as deduction u/s 37(1) being violative of provision of Indian Medical Council Rules. The statement of the assessee was also recorded but she expressed inability to explain the discrepancies owing to the fact that she was not attending the center actively. 2.5 The assessee, in its reply, opposed estimation of sales on the ground that sample as taken by Ld. AO was not reliable and accurate. There was high degree of biasness in the same. It was further submitted that Nalagarh was small town and it was not possible to carry out diagnostic for value of Rs.2 Crores. However, Ld. AO rejected the explanation of the assessee and made impugned twin additions in the hands of the assessee. Printed from counselvise.com 4 2.6 The first appellate order is common order for AYs 2013-14 to 2019-20. During appellate proceedings, the assessee relied on judicial precedents to contend that statement during survey would not hold any evidentiary value. The Ld. CIT(A) concurred that there was no incriminating material for AYs 2013-14 to 2018-19 and therefore, deleted similar additions as made by Ld. AO for these years. However, there was material for AY 2019-20 coupled with the statements of the employees of the assessee. The incriminating material was found for the period from 02-04-2018 to 28-04-2018 and for the period from 22- 11-2018 to 13-12-2018. The center provides services on a consistent basis throughout the year. Therefore, it was reasonable to conclude that similar pattern of suppressed income would have been persisted for the remaining period of the financial year as well. Therefore, the twin additions as made by Ld. AO for this year was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 3. From the facts, it emerges that incriminating material has been found during survey only for the period from 02-04-2018 to 28-04-2018 and for the period from 22-11-2018 to 13-12-2018. Based on this data, Ld. AO has computed that roughly 18% of the sales were recorded by the assessee in its regular books of accounts. Apart from, there is no incriminating material for sales suppression except for the statement of employees of the assessee. This data has been extrapolated by Ld. AO to arrive at sales suppression for whole of the year. For payment of alleged referral commission, there is no incriminating material but the Printed from counselvise.com 5 same is merely on the basis of statements alone. As per settled legal position by case law of Hon’ble Madras High Court in S. KhaderKhan Son (300 ITR 157)as confirmed by Hon'ble Apex Court (reported as 352 ITR 480), such statements u/s 133A would not carry much evidentiary value. If the recorded statements are ignored then in such a case, except for incriminating material for only a small part of the year, there is no evidence of sales suppression or alleged unaccounted referral commission payments. The Ld. AR has tabulated that sale amount as per patient register, for the aforesaid period, is Rs.3,29,650/- which is found to be recorded for Rs.61,600/- in the bill book and there is incriminating material only to the extent of Rs.2,68,050/-. The Ld. AR has also quoted the decision of jurisdictional High Court in the case of V.M. Spinning Mills vs. CIT (16 Taxmann.com 199) rejecting extrapolation of incriminating material. This decision has subsequently been followed by Chandigarh Tribunal in various decisions which are placed on record. In fact, in the case of similarly placed assessee M/s L.M. Fabrication (ITA No.366/Chd/2025 dated 23-07-2025), it was held by the bench that no addition could be made merely on the basis of statement of the employees unless opportunity to cross-examine the same has been provided to the assessee. 4. Considering entire facts and circumstances of the case and keeping in mind the fact that incriminating material was found for part of the year, we would hold that a lump sum addition of Rs.5 Lacs on account of profit element in alleged sales suppression would meet the Printed from counselvise.com 6 end of the justice. The addition of Rs.41.94 Lacs stand restricted to Rs.5 Lacs. The separate addition of Rs.50 Lacs, being not substantiated by any incriminating material on record, stand deleted. No other ground has been urged in the appeal. 5. The appeal stands partly allowed. Order pronounced on Sd/- Sd/- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/10/2025 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "