Bharat Vipan Garg Vs PCIT (ITAT Chandigarh)
Introduction: The Income Tax Appellate Tribunal (ITAT) Chandigarh delivered an essential judgment in the case of Bharat Vipan Garg Vs PCIT. The crux of the issue was how to treat surrendered income, specifically whether it can be treated as income from a medical profession without clear evidence to the contrary.
Background and Facts: Bharat Vipan Garg, a medical professional, appealed against an order from the Pr. Commissioner of Income Tax, Patiala, from March 21, 2022. A survey by the Income Tax Department revealed unaccounted incomes and investments totaling Rs. 70,00,000 by the assessee, which were subsequently surrendered by him.
PCIT’s Observations and Actions: The ld. PCIT pointed out the Assessing Officer’s (AO) oversight in failing to demand necessary documentary proofs that verified the nature of the surrendered income. PCIT suggested that without clear evidence of its source, the surrendered amount could be from an unexplained source, thus warranting a higher tax rate under Section 115BBE.
Assessee’s Defense
The counsel for Bharat Vipan Garg contended that all necessary inquiries were, in fact, made by the AO. They emphasized that there was no evidence suggesting that the assessee had any other income sources besides his medical profession. Notably, the assessee had confirmed to the survey team in writing that the surrendered income derived from his medical profession.
LD. DR’s Counter-Argument
The ld. DR referred to the statement taken during the survey, where the assessee, while offering the Rs.70 lakhs for taxation, admitted his inability at that moment to explain certain sources. Hence, the ld. DR argued that the PCIT was right in noting the AO’s shortcomings in the assessment.
ITAT’s Verdict: After a careful evaluation, ITAT Chandigarh observed that both the statement and surrender letter from the assessee were dated the same day. By reading them together, it was evident that the assessee had offered the Rs.70 lakhs as additional professional income. Given that the Department had no evidence of any other income source for the assessee, and the AO had made sufficient inquiries, ITAT concluded that the PCIT was unjustified in labeling the assessment order as erroneous. Consequently, the revision order under Section 263 of the Act was quashed.
Conclusion: The ITAT Chandigarh’s decision in Bharat Vipan Garg Vs PCIT provides a significant precedent on how surrendered incomes should be treated for taxation purposes. It emphasizes the importance of thorough investigation and the consistency of documentary evidence in making tax-related decisions.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been preferred by the assessee against the order dated 21.03.2022 of the ld. Pr. Commissioner of Income Tax, Patiala [in short ‘ld. PCIT’] pertaining to 2017-18 assessment year.
2. The assessee in this appeal has agitated the invocation of the revised jurisdiction by the ld. PCIT u/s 263 of the Income Tax Act, 1961 (in short ‘the Act’) whereby he has set aside the assessment order passed by the Assessing Officer (in short ‘the AO’) holding the same as erroneous and prejudicial to the interests of the Revenue and has further directed the AO to pass a fresh assessment order.
3. The brief facts of the case are that the assessee is a Doctor/Medical Practitioner by profession and has been returning his income from medical profession. A survey action was carried out by the Income Tax Department on the premises of the assessee u/s 133A of the Act on 26.09.2016. During the survey action, the Survey Party noted that certain income of the assessee was not accounted, the detail of which is as under :
