Makarand Manikrao Kanjalkar Vs. Income Tax Officer

Parties Involved

Facts Summary

The appellant is a qualified practicing medical professional deriving his primary income from services rendered to Manik Hospital & Research Centre. For the Assessment Year 2016-17, the appellant filed his Return of Income declaring a total income of 26,99,490/-. The assessment was completed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961, rejecting the books of account under Section 145(3) and making an addition of 15,10,750/- due to an alleged improper change in the accounting method from mercantile to cash basis. On first appeal, the Joint Commissioner of Income Tax (Appeals) upheld the rejection of the accounting method but directed the Assessing Officer to restrict the additions to the reconciled figure of 14,76,689/-. The appellant argued that due to liquidity crises at the hospital, an amount of 14,76,689/- was left unrealized and accounted for income on an actual realization basis to avoid paying tax on hypothetical income.…

Legal Issues

• 1. Whether the Assessing Officer was justified in rejecting the books of account and making an addition under Section 145(1) of the Income Tax Act, 1961?

Judgment Outcome

Decided in favour of Assessee.

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