KC Raju Multi Speciality Hospital Vs DCIT (ITAT Bangalore)
No Incriminating Material, No Addition – ITAT Bangalore Deletes Suppression Additions in KC Raju Hospital Case
Bangalore Tribunal has categorically held that no addition can be made in an unabated assessment year in the absence of incriminating material. Additions made merely on the basis of a partner’s statement & extrapolation from later years were struck down.
A search u/s 132 was carried out on 29.11.2017 at the premises of Assessee firm. During the search, a draft profit & loss account for FY 2016-17 was found showing higher receipts than the final accounts. Dr. K.C. Raju, partner of the firm, admitted that around 40% of gross receipts were suppressed & further stated that this practice was followed in earlier years also. Based on this, AO extrapolated & estimated suppressed profit of ₹48 lakh being 40% of gross receipts of ₹1.20 crore for A.Y. 2013-14. CIT(A) confirmed the addition, treating the seized tally data & the admission as incriminating material.
Before Tribunal, Assessee argued that the only seized document pertained to A.Y. 2017-18 & not to the year under dispute. Hence, no incriminating material existed for A.Y. 2013-14, which was an unabated assessment year. Reliance was placed on the Supreme Court judgment in PCIT v. Abhisar Buildwell Pvt. Ltd. (2023) 149 taxmann.com 399 which held that no addition can be made in unabated years unless incriminating material is found. Assessee also pointed out CBDT Circulars (2003 & 2014) that confessions during search cannot be the sole basis for addition.
