Books of accounts can not be rejected for mere non compliance of Rule 6F – ITAT

Books of accounts regularly maintained can not be rejected for mere non compliance of Rule 6F – ITAT

In a recent judgment, ITAT Chennai has held that merely quoting non compliance of Rule 6F and section 145(3) of the Act, the AO cannot reject books of accounts regularly maintained by the assessee and which had undergone auditing u/s 44AB of the Act. 

ABCAUS Case Law Citation:
4303 (2024) (11) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) / National Faceless Appeal Centre (NFAC) in confirming addition made by the Assessing Officer (AO) after rejecting the books of accounts of the assesse.

The appellant assessee was a doctor by profession. The AO, he got information that assessee had received unaccounted income i.e. out-patient consultation done at M/s. Appollo Hospitals. Therefore, he re-opened the assessment by issuing notice u/s 148 of the Income Tax Act, 1961 (the Act) to ascertain if the receipts on account of ibid out-patient consultations done by the assessee while in M/s.Apollo Hospitals Ltd., were accounted for in the books of accounts and accordingly, called for relevant documents in this regard.

However, the AO noted that the assessee didn’t produce the document as mandated by Rule 6F of Income Tax Rules, 1962 (the Rules) and therefore, he asked him to produce the same. In this regard, the assessee produced a hard copy of a note books (i.e., log note book). However, the AO disbelieved the veracity of the log book, which according to him, looked fresh (as if prepared recently) though the log book was supposed to be eight years old. Therefore, he was of the opinion that the assessee didn’t maintain the requisite record of the patients who consulted him; and in the absence of furnishing any material in consonance with Rule 6F of the Rules, the AO didn’t accept the gross receipt figures shown by the assessee in the return of income.

Accordingly, taking recourse to the section 145(3) of the Act, the AO rejected the books of account and completed the assessment u/s.144 of the Act by determining total income by inter alia adding undisclosed outpatient fees.

The Tribunal observed that assessee had produced the log-book maintained by him in accordance to Rule 6F of the Rules and other books which have undergone audit. The AO had not alleged any violation of Rule 6F of the Rules in respect of maintaining the log-book in question. The AO neither pointed out any deficiencies/infirmity in the log-book nor violation of Rule 6F of the Rules, and so, he ought not to have rejected the audited books merely on suspicion that log-book appears new and recently prepared.

The Tribunal further noted that the AO had nowhere given a finding that the assessee had not regularly followed the method of accounting as specified u/s.145(1) of the Act. It was also not the case of the AO that the assessee had not computed the income in accordance with the accounting standard notified u/s 145(2) of the Act. Thus, according to us, the condition for invoking section 145(3) of the Act was not satisfied in the facts of the case. And merely based on suspicion, conjectures and surmises, the action of the AO to express his dissatisfaction about the correctness or completeness of the accounts, when assessee’s books were audited cannot be accepted.

The Tribunal accepted the log-book maintained by assessee in accordance to Rule 6F of the Rules and noted that there was no other material referred to in assessment order or impugned order to support the addition.

The Tribunal held that by merely copying/reproducing Rule 6F of the Rules, and sec.145(3) of the Act, the AO cannot justify his action of rejecting the books of accounts which was regularly maintained by the assessee and which had undergone auditing u/s 44AB of the Act. Accordingly, the addition was deleted.

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