Income Tax Appellate Tribunal - Rajkot
Jagdish Dubal,, Gandhidham vs Assessee on 9 October, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT.
Before Shri A.L. Gehlot (AM) and Shri N.R.S. Ganesan (JM)
I.T.A. No. 1003/Rjt/2009.
(Assessment Year 2007-08.)
Dr. Jagdish Dubal, Vs. The Dy.C.I.T.
Gandhidham. Central Circler, Rajkot.
(Appellant) (Respondent)
I.T.(SS)A. Nos. 71 to 76/Rjt/2009.
(Assessment Years 2001-02 to 2006-07)
The Dy. C.I.T., Vs. Dr. Jagdish Dubal,
Central Circler, Rajkot. Gandhidham.
(Appellant) (Respondent)
Assessee by : Shri Kalpesh Doshi, C.A.
Department by : Shri J. M. Sahay, D.R.
ORDER
Per AL Gehlot, AM: Cross appeal for Assessment Year 2007-08 and
other appeals filed by revenue raised a common ground on the basis of identical set of facts. These appeals belong to one assessee, they were heard together and for the sake of convenience, all the appeals have been decided by this common order.
2. The common ground raised in cross appeal is in respect of rejection of books of accounts and estimation of professional receipts.
2 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
3. The brief facts of this ground are that the search action u/s. 132 of the Act was carried out on 11-10-2006. The assessee is a practicing doctor, a pediatrician. It was noted by the A.O. that one of the allegations against the assessee was that he was highly suppressing the professional fee to the extent of more than 50% every day. The A.O. while pointing out modus operandi stated that the assessee issued fee collection slip to the trusted staff member who in turn collects the fee from the relatives of the parties. The A.O. noted that the allegation was found correct during the course of search as during the course of search, some slips appearing at page- 169 to 263 (total 95) of a statement of loose papers prepared at the time of search were found related to dated 09-10-2008. The page Nos.125 to 268 (total 38) of the statement are the fee receipts prepared by the assessee for 09-10-2006. As per receipt book, the receipts No.3231 to 3268 pertain to 09-10-2006 (it appears that there is a typography mistake in the order of the A.O. where he stated date 09-10-2008 and 10-10-2008). The A.O. noted that the assessee has prepared professional receipts only for 38 patients aggregating to Rs.7,930/- out of total 95 outdoor patients attended on 09-10-2006, whereas actual fees collection as per slip was Rs.18,270/-. Thus, suppression of fee collection to the extent of 56% was calculated. The A.O. tabulated the details of total slips of 95 patients and receipt of professional fees issued by the assessee in his order at page No.4 & 5. On the basis of the said details, the A.O. found that all the fees collection was not accounted in the books of account. Out of 95 patients of 09-10-2006 in the forenoon session and afternoon 3 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
session, the fees receipts in respect of 38 patients only were accounted for in the books of account by preparing the fee receipts from Sr.No.3231 to 3268. The A.O. noted that out of the total fees receipts of Rs.18,270/-, the fees of Rs.7,930/- was accounted for as receipts issue found only for this amount on 09-10-2006. The A.O. issued show cause notice to the assessee asking him why the fee receipts should not be estimated for the whole year after rejecting the books of accounts. After considering the assessee's reply, the A.O. rejected the books of accounts on the ground that the assessee did not accounted for complete fees collection. The slips pertaining to the period from 2001-02 to 2007-08 were destroyed as submitted by the assessee before the A.O. The A.O. noticed that the fee receipts were not issued to the patients but the same were prepared at convenience and selective basis on the subsequent day. Therefore, the A.O. satisfied that the case is fit for invoking provisions of section 145(3) of the Act as the books of accounts maintained by the assessee did not reflect the correct affairs of the business. After rejecting the books of accounts, the A.O. estimated amount of suppression of income Rs.47,59,000/- observing as under :-
"6.11 In view of the above, the fees collection in respect of 09-10-2006 has been shown less to the extent of Rs.7,930/- out of Rs.18,270/- (being the actual OPD receipt). This does not include indoor patient. For indoor patients, separate receipt books bearing No.201 onward was in use during the relevant period. Thus, the evasion is to the extent of 56% out of OPD receipts is proved. The same strategy, rather higher than this 56%, must have been adopted by the assessee so far as indoor patients are concerned. But for the sake of justice, the ratio of 56% is being adopted for the gross receipts as per books of accounts (other than shipping and orthopedic fee receipts).
4 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
The gross OPD fee receipt shown by the assessee is Rs.37,39,320/- for the year under consideration. Following the above ratio, this receipt works out to 44% of the actual receipt. I am determining the suppression at the rate of 56% and 63% as computed at para 6.6 to give benefit to the assessee. Hence, the same has to be enhanced by 56% to arrive at the actual gross fee receipts. However, for the sake of justice, an addition of Rs.47,59,000/- is made to the total income, thus treating the suppression to the extent of 56% (of gross receipt as per seized record). The seized books of accounts have been duly scrutinized and nothing indicating any unexplained expenditure relating to profession was found. In the circumstances, the prima facie conclusion that can be drawn is that, all the expenses pertaining to profession have been duly debited to the books of accounts and the only and the main modus operandi of the assessee's case is suppression of fee receipts.
6.12 This working of suppressed receipts from seized records, finds supports from the decision of the Hon. C.I.T.(A)-IV, Ahmedabad's order in the case of D.R. Kamlesh P. Domadia of Rajkot ( for AY 2006-07 passed vide order No.CIT(A)- IV/47R/CC-2/07/08 dated 5-3-2008) wherein similar addition was confirmed".
4. The C.I.T.(A) after considering assessee's submission, confirmed the order of the A.O. in respect of rejection of books of accounts. He has also confirmed the income estimated by the A.O. observing as under:-
"5.1 I have carefully considered the contentions of Learned Counsel as well as gone through the records. On perusal of assessment order, it has been noticed that the Appellant had admitted that some irregularity viz. in issuing the receipts for 9th October,2006 and completion of Patient Register was found pending for two days at the time of conduct of search. But, patients' slips for two days were found at the time 5 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
of search. This information was having a direct nexus with the patients examined by the Appellant in the Hospital, therefore, in order to drive at the correct taxable income in case of the Appellant because of which the books of accounts were rejected by the Assessing Officer u/s.145 due to the defects found in them. Hence, the books of accounts cannot be treated as reliable since these books were not maintained in the regular course of the business/profession. Keeping in view of above facts and circumstances of the cases, the rejection of books of account u/s.145 is hereby confirmed. Further, it was admitted by the Appellant that on 9.10.06 (Monday) when he returned to the clinic from foreign visit, numbers of patients examined by him were 95 and on the next day, i.e.10.10.06, it was only 38 patients. Hence, the Appellant had been getting patients 38 to 95 per day is proved by the seized slips by the Department during Search & Seizer action. The foreign visit is also evident by the passport. In the absence of the appellant, his assistant pediatrician Dr. Manish P. Chudasama was attending to the outdoor as well as indoor patients. This factum of employment of Dr. Chudasama is evident from the Page Nos.2 & 3 of the Annexure-A-5 seized from the premises of the appellant. Moreover, in this connection, the statement of the appellant was also obtained by the Department. In answer to question No.20 in the statement recorded by the ADIT(Inv.) on 11th October,2006, the appellant had explained that he had been to U.A.E. in October, 2006 in connection with business work relating to "Kalrav Exim". The Appellant is admittedly maintaining the "Patient Register" maintained in Form 3C of Rule 6F(3) of the Income Tax Rules, 1962 r.w.s.44A of the Income Tax Act, 1961. After making the entries in the "Patient Register", the total of daily connection of professional receipts is entered in the cash book maintained in computer. But, the entry for two days was not made in the books of accounts. The slips of 2 days of 9th and 10th October seized by the Department show that number of patients examined by him varies from day to day. The fluctuation can be to the extent of 216%. The accounts maintained by him also show this fluctuation. But, the Assessing Officer had to estimate professional receipts on the basis of patient slips of 9th October, 2006 and 10th October, 6 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
2006 found during the course of search at the Hospital premises on 11th October, 2006. The work of posting in the "Patient Register" and issuing of the receipts for 9th October, 2006 could not be completed because of the appellant was out of Gandhidham for a week from 1st October, 2006 to 7th October, 2006. Therefore, work of issuing the receipts for 9th October, 2006 and 10th October, 2006 and consequential entries in the Patient Register and Cash Book remained to be completed. Keeping in view of above, the Assessing Officer was justified for estimating the professional receipts for whole year as per the decision of Hon'ble Supreme Court in case of H.M. Esufali H.M. Abdul Ali 90 ITR 271 (S.C.) which was also followed by the undersigned in case of Dr. Kamlesh Domadia, Rajkot vide order No.CIT(A)-IV/47R/CC-2/07-08 dated 5th March, 2008. The cases relied upon by Ld. Counsel are not applicable to the facts of the present case, since facts of the present case are different from the facts of the cases relied upon by Ld. Counsel. Therefore, the contentions of Ld. Counsel cannot be accepted to which are hereby rejected. Keeping in view of above facts and circumstances of the case as well as respectfully following the judgments (supra) relied upon by the Assessing Officer, the addition on account of suppression of professional receipts is hereby confirmed since the appellant had admitted that there were irregularities noticed at the time of search reflecting that the books of accounts were not maintained in the regular course of profession. Hence, the Fifth, Sixth & Seventh grounds of appeal are dismissed".
5. The ld. A.R. submitted that the assessee maintained his account on actual receipts basis. The ld. A.R. submitted that a detailed description regarding accounting of professional receipts were submitted before the A.O. as well as before the C.I.T.(A). The said procedure pointed out by the ld. A.R. from the order of the C.I.T.(A) is reproduced as below:-
"Whenever a parent or guardian of a patient seeks an appointment either personally or through telephone, basic 7 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
details viz. name, age, address etc. of patient are written in an appointment sheet by the receptionist. A copy of the appointment sheet is also provided to the Doctor. When the patient turns up in the hospital at scheduled time, a slip containing the basic details of the patient is handed over by the receptionist to the parent or guardian of the patient, to be carried in the consulting room. After the examination of the patient, the Doctor used to give instruction, on the slip brought by the patient, regarding treatment, medicines, investigation, if any, and also the amount of fee to be charged. After consultation, this slip is required to be produced at the counter by the patient, so that the receptionist would read the instructions and advise the patient accordingly. The amount of fee noted in the slip is also collected at the counter. If a parent or guardian asks for a receipt, the receptionist used to prepare and issue numbered receipt to such person immediately. Otherwise, the receipts are prepared as and when the receptionist gets free time at the end of the day. Simultaneously, the date relating to patients are also entered in the relevant columns of "Patient Register" maintained in Form 3C of Rule 6F(3) of the Income Tax Rules, 1962 r.w.s.44A of the Income Tax Act, 1961. After making the entries in the "Patient Register", the total of daily collection of professional receipts is entered in the cash book maintained in computer. The rough records such as appointment sheets and instruction slips are destroyed thereafter. Moreover, the receipts are preserved for few days, in anticipation that a patient or guardian of a patient may come and ask for the receipt. Uncollected receipts are also destroyed later on as duplicate copies of those receipts are preserved permanently for supporting. The primary and basic record prescribed for a medical practitioner is "Patient Register" as provided under the Income Tax Act and Rules was duly maintained by the appellant and therefore there was no need to preserve rough papers such as daily appointment sheets and patient slips".
6. The ld. A.R. submitted that above procedure of accounting professional receipts have been confirmed by assessee at the time of 8 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
search itself. Chief Accountant, Shri G.M. Chandashekhar in his statement recorded u/s.132(4)/131 on 11-10-2006. The ld. A.R. submitted that the A.O. has made the allegation that the assessee was suppressing the fees to the extent of more than 50% every day on the basis of presumption. The ld. A.R. submitted that during the course of search, statement of Shri G.M. Chandrashekhar, Accountant of the assessee was recorded on 11-10-2006 but nothing could be brought out in support of the allegation. No other staff members were examined in this regard. The ld. A.R. submitted that the A.O. admitted to make out a case of extrapolation of professional receipts merely on the basis of patient slips of 9th October,2006 and 10th October,2006 found during the course of search at the hospital premises on 11th October,2006. The ld. A.R. submitted that the work of posting in the Patient Register and issuing of the receipts for 9th and 10th October, 2006 could not be completed because the number of patient examined by the assessee on 9th October, 2006 was exceptionally large i.e. 95 patients because the assessee was out of Gandhidham for a week from 1st October, 2006 to 7th October,2006. Accordingly, most of the patients turned up on Monday i.e. on 9th October, 2006 after ascertaining from the receptionist the details of return of assessee. The work of preparing of fees could not be completed by the receptionist on 9th October, 2006 itself because of the volume of the work. The ld. A.R. submitted that on 10th October, 2006 one of the patient had insisted for receipt immediately and therefore, the receptionist had inadvertently issued the receipt in continuity of same receipts already issued for 9th October,2006.
9 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
Because of this mistake, she could not complete this work on 10th October, 2006. The ld. A.R. submitted that in this connection, an affidavit of Miss Neelam R. Mulchandani, Receptionist, executed on 07th May, 2009 was submitted. The ld. A.R. submitted that the A.O. without appreciating the fact that the Patient Register for only two days was incomplete because of the good reason as stated above. The A.O. simply jumped to the conclusion that the assessee would not have recorded 56% of the professional receipts for the whole year. The ld. A.R. submitted that except the patient slip, no other incriminating evidence or material was found during the course of search to support the allegation of the A.O. regarding suppression of professional receipts. The ld. A.R. submitted that the A.O. has failed to appreciate the accounting system followed by the assessee. The assessee maintained the books of accounts in accordance with the Income Tax Rules including prescribed Patient Register. The ld. A.R. submitted that since the assessee maintained the Patient Register which is required to be maintained under the provisions of the Income Tax Act and same was found completed up to 8th October, 2006 and therefore, no patient slips for 8th October, 2006 and earlier period was found. The ld. A.R. submitted that the patient slips for 9th October, 2006 and 10th October, 2006 were found as for these two days the Patient Register could not be completed. Therefore, these slips were preserved in order to enter the same in Patient Register. The ld. A.R. submitted that the collection of fee for 9th October, 2006 was higher amount because of the reasons that the assessee was out of India for about a week and his first working day after his return to India was 10 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
09th October, 2006. The ld. A.R. submitted that the other reason was also explained that period 9th October, 2006 after immediately rainy season and due to change in climate, the number of patient increased during the October. The ld. A.R. submitted that the above reasons supported by the fact that on the next day on 10th October, 2006 the patient was only 38. The ld. A.R. submitted that under these circumstances, the A.O. has taken the advantage of the situation and estimated professional receipts for whole year after adopting the ratio of 56 : 100. The exception has been transformed into rule of making high estimates based on presumptions and assumptions along which is not in accordance with section 145(3) of the Act. The ld. A.R. submitted that there was no intention on the part of the assessee either to suppress or understate the professional receipts as complete details of all patients were found entered in the Patient Register till 8th October, 2006. The ld. A.R. submitted that the A.O. did not point out any specific defects in method of accounting followed by the assessee and maintenance of books of accounts. The ld. A.R. submitted that that the reason for destroying the patient slips apart from the other explanation, the other explanation was that such slips were not required to be produced before the Chartered Accountant and during the course of audit of books of account as the assessee maintained Patient Register and other records as required by the Act. The A.O. did not find any discrepancy in the books of account in respect of indoor patient receipts and this fact has been admitted by the A.O. in para 6.11 in his assessment order. The ld. A.R. submitted that when the paper slips were found during 11 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
the search and it was also noticed that out of 95 slips, receipts were issued only in respect of 38 patients, the Search Officer examined the assessee and his Accountant was supposed to put this discrepancy to the assessee or his Accountant for explanation by way of a specific question while recording their statement u/s.132(4) of the Act. It is a fact that no query was raised either during the search or even during the assessment proceedings, calling upon the assessee to explain the circumstances under which the fee receipts could not be issued. The affidavit of Miss Neelam R. Mulchandani was filed before the C.I.T.(A) and requested that the same may be admitted as per the provisions of Rule 46A of the Income Tax Rules,1962. The ld. A.R. submitted that if the department has sufficient proof regarding suppression of the receipts then the concerned Officers to have examined the staff members on this aspect during the search but nothing was done on this account. The ld. A.R. submitted that during the course of search, no such doubt or allegation was raised by the search party but subsequently, the A.O. doubted about the correctness of the fees shown in the regular books of accounts. The ld. A.R. submitted that normally on an average, a Child Specialist would examine eight patients in one hour. So, for examining 95 patients on 9th October,2006, the doctor and his staff members would have worked fore more than 12 hours on that day. Therefore, it was quite natural that some office work for 9th October, 2006 remained incomplete at the end of that day due to heavy work pressure on particular date. The ld. A.R. also pointed out that the suppression of professional receipts estimated by the A.O. prima facie, is excessive 12 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
and unreasonable because a specialist cannot work beyond a limited period. As per the estimation of the A.O., the assessee-doctor has to work about 18-20 hours a day on regular basis, which is humanly impossible. The ld. A.R. submitted that the decisions on which the A.O. relied upon are distinguishable on facts as per the details submitted before the C.I.T.(A). The C.I.T.(A) relied upon in the case of H.M. Esufali H.M. Abdul Ali 90 ITR 271 (SC). The ld. A.R. submitted that in that case, the assessee has admitted the fact of concealment of turnover and therefore, the Supreme Court had concluded that the unaccounted turnover may be estimated. But in the case under consideration, no such admission was there. The ld. A.R. submitted that even after thorough searches of business premises and residential premises, nothing incriminating indicating suppression of professional receipts are found by the department except mere irregularity in respect of incomplete Patient Register for two days which is not the facts of the case in the case of H.M. Esufali H.M. Abdul Ali 90 ITR 271 (supra). The ld. A.R. referring page-78 of assessee's paper book submitted that the total amount of fees Rs.31,866/- on 9th October,2006 was for in cash book. The relevant copy of the cash book has been placed at page-63 of the paper book. It is also submission of the ld. A.R. that when no incriminating material was found during the course of search, estimation cannot be made. In support of his contention, the ld. A.R. relied upon the following decisions:-
(1) Ambica Food Industries 110 TTJ 680 (Hyd.),
(2) Chetandas Lachman Das 36 SOT 417 (Del.),
13 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
(3) D.C.I.T. vs. Royal Marwar Tobacco Product(P) Ltd.
120 TTJ (Ahd.) 387,
(4) Evergreen Bar and Restaurant vs. ACIT 6DTR
(Mum.)(Trib.)56 and
(5) D.R. R.M.L. Mehrotra vs. A.C.I.T. 64 TTJ(All) 259.
7. The ld. A.R. while concluding his argument submitted that the professional receipts estimated by the A.O. for other years have been deleted by the C.I.T.(A). He has also relied upon the order of C.I.T.(A) for other years.
8. The relevant finding pointed by the ld. A.R. from A.Y. 2001-02 are as reproduced as under :-
"4.1 I have carefully considered the contentions of Learned Counsel as well as gone through the records. On perusal of assessment order, it has been noticed that the addition of Rs.11,41,131/- was made on the bases of the slips found for only 2 days in the month of October, 2006 relevant to Assessment Year 2007-08. However, the Assessing Officer has not pointed out any suppression of professional receipts from the seized material relevant to the present assessment year. But the Assessing Officer has not brought anything on records that the appellant was not maintaining "Patient Register" as prescribed under the provisions of Income Tax Act, 1961 read with Income Tax Rules, 1962. Therefore, the appointment slips and loose sheets were not required to be preserved. Also, the reasoning given by the Assessing Officer for making addition of Rs.11,41,131/- on account of suppression of professional receipts after rejecting books of account was on the basis of reasoning given in the assessment order for the A.Yr.2007-08. Further, on the basis of some irregularity in the form of incomplete records for only two days in the year 2006 the income of the appellant cannot be estimated in the year under consideration, particularly when no 14 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
defect has been pointed out in the accounts for this year. It was held by jurisdictional and binding Hon'ble ITAT Ahmedabad Bench in case of D.C.I.T. v/s. Royal Marwar Tobacco Products (P) Ltd. (2008) 16 DTR (Ahd) (Trib) 129 that no evidence or material indicating any suppressed sales in A.Yrs.2000-01 to 2003-04 having been found during search, and no defect in the books having also been found. A.O. was not justified, on the basis of material seized relating to A.Yr.2004-05 indicating suppressed sales, in assuming suppressed sales for earlier assessment years, estimating the same on the basis of consumption of electricity and making additions. The facts of the present case are similar to the facts of the case of D.C.I.T. v/s. royal Marwar Tobacco Products(P) Ltd. (2008) 16DTR (Ahd) (Trib) 129 since in the present case irregularity in the form of patients slips for two days was found during October 2006 which is relevant to the Assessment Year 2007-08 cannot be made basis for estimating the professional receipts during the year under consideration u/s.153A as was also held in case (supra) relied upon by Ld. Counsel. Keeping in view of above facts and circumstances of the case as well as respectfully relying upon the judgment of Hon'ble Ahmedabad ITAT, the addition made is hereby deleted. Hence, the Fifth, Sixth & Seventh grounds of appeal are Allowed".
9. The ld. D.R. on the other hand, submitted that the C.I.T.(A) in A.Y. 2007-08 has elaborately discussed the issue and found that the A.O. has rightly estimated the income for all the years. The ld. D.R. submitted that the patient slips were found only for some days during the course of search and such slips were not available for other period before the A.O. on the ground that these slips have been destroyed. The ld. D.R. submitted that when such primary evidence has been destroyed, the A.O. is fully justified in estimating the professional receipts.
15 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
10. We have heard the learned representatives of the parties, record perused and gone through the decisions cited. The first effective ground is in respect of rejection of books of accounts. A search u/s.132 of the Act was carried out on 11-10-2006. During the course of search, incomplete books of account was found for 9th & 10th October,2006. Cash of Rs.3,50,000/- was also found which was subject to verification. Professional receipt for two days 9th & 10th October,2006 was not found entered in the books of account. It was also found that the assessee did not issued professional receipts for these two days 9th & 10th October,2006. These are the such facts basis on which it can be held that the A.O. has rightly rejected the books of account and same is confirmed by the C.I.T.(A). Thus, on this issue, the order of C.I.T.(A) is confirmed.
11. Now coming to the merit of the case, we find that the A.O. has estimated professional receipts after rejection of books of account on the basis of fees calculation for two days and on allegation against the assessee that the fees receipts to the extent of more than 50% everyday has been suppressed. The A.O. heavily relied upon on a presumptions that professional receipts No.3231 to 3268 amounting to Rs.7,930/- for 38 patients only were issued on 9th October,2006 as against collection from 95 patients total fees of Rs.18,270/-. Since the receipt No.3269 is date 10th October,2006 (there is a typography error in the order of the A.O. as he has stated as 10th October,2008) the presumption of the A.O. that the assessee could not disclose the professional receipts for balance amount. The A.O. applied a 16 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
mathematical formula that out of the total professional fees of Rs.18,270/-, the assessee has issued professional receipts only for Rs.7,930/- which is going to account for books of account, thus, the assessee adopted modus operandi for suppressing the receipts for Rs.10,340/- out of Rs.18,270/- the calculation of which in percentage comes to 56%. The A.O. accordingly applied this formula for all the years covered under the search and estimated suppression fees. The A.O. while applying the formula for all the years heavily relied upon a judgment of Supreme Court in the case of H.M. Esufali H.M. Abdul Ali 90 ITR 271 (SC). That was a that case in which unreported sales were detected for a period of 19 days in a year. The A.O. estimated the turnover for the entire period of one year on the basis of the unreported sales for the period of 19 days. The question that arose before the Supreme Court is as to whether the A.O. was right in doing so. It was held by the apex court that in a matter involved in unreported sales, the A.O. has to proceed on the basis of estimation which involves some amount on guess work. The apex court, accordingly, upheld the order of the Assessing Officer in estimating the turnover on the basis of unreported sales for a shorter period. However, in the present case under consideration, we are concerned with a search matter carried out u/s.132 for six years. Ultimately, the said judgment of the apex court must be seen in the context of the facts of each case. In the case under consideration, the assessee explained the circumstances for issuing receipt No.3269 dated 10th October,2006 that some of the receipts were issuing at the instance request of the patient/his relatives and others fees receipts were 17 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
issued at the end of the day. This was prevailing accounting practice of the assessee which has been accepted by the department in the past years. Though, at the time of search, the books of account of the assessee was incomplete but later on subsequent to the search, the assessee has accounted for entire professional receipts Rs.31,866/- in the cash book which includes indoor patient Rs.7,490/- and outdoor patient Rs.24,376/-, a copy of cash book dated 9th October,2006 has been furnished before the revenue authorities has been placed in the paper book at page No. 78. The assessee has also filed individual patientwise receipts on 9th October,2006 of which detailed filed before the revenue authorities have been placed at page Nos. 71 to 74 of assessee's paper book. In the books of account, the OPD receipt has been shown Rs.24,620/-, whereas the A.O. has calculated these receipts for Rs.18,270/-. It has been also explained by the assessee that why the books of account was not complete on 9th October,2006, that the assessee was out of station from 1st October,2006 to 6th October,2006. The 9th October,2006 was the first working day after his return to India. The assessee at the beginning stage, explained the accounting procedure adopted by the assessee, the relevant portion has been produced in para-5 of this order. The assessee has maintained the books of account in accordance with the provision of the Income Tax Act as held by the C.I.T.(A) himself in A.Y. 2001-02 and subsequent years that the A.O. did not bring anything on record that the assessee was not maintaining patient register as prescribed under the provisions of the Income Tax Act, 1961 read with Income Tax Rules, 1962. One of the 18 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
allegations of the A.O. that the assessee did not preserve the slips issued to the patient, the explanation of the assessee that the patient slips are just approval memo in case of trading and other businessmen and not necessary of the approval memo derived into income or professional receipts, whatever finally professional receipts accrued and received, the assessee issued professional receipts and same have been accounted in his books of account. This fact supported by the material and details filed by the assessee. If we see this approval memo like patient slips, we find that the assessee himself shown certain patient slips against which no fees receipts e.g. on 9th October, 2006 such slip Nos.176, 192, 210 and others. Similarly, in earlier period such slips were noticed for 7th October & 6th October,2006 though, the name of the patient is there in the patient register. But since the fees were not received, therefore in amount column those are shown as NIL. The A.O. did not deny this practice followed by the assessee. It is true that only the income which is accrued to the assessee is subject to tax and no such artificial or hypothetical or arbitrary income is subject to tax. We find that the sole basis of mathematical estimation of income by the A.O. is based on presumptions that since the assessee issued professional receipt No.3269 on 10th October,2006 and receipts No.3231 to 3268 were found issued on 9th October,2006. Therefore, the assessee was not going to account for the remaining professional receipts whereas the fact is this that the assessee has accounted for all the receipts as discussed above though, after the search is over. The assessee has accounted for the professional receipts on the basis of the materials 19 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
and documents which he was adopting for accounting his professional receipts as per the past practice. It is acceptable view that if the assessee has prepared the books of accounts on the basis of material found at the time of search and the A.O. failed to point out any defects in that accounting of the income. The A.O. cannot make further arbitrary addition. The assessee could not issue receipt properly for few days 9th October to 11th October,2006 as the relevant receipt books etc. were seized by the department.
12. In the light of above discussion, we find that the A.O. has estimated the professional receipts by applying a mathematical formula without appreciating the procedure of accounting followed by the assessee. The A.O. has failed to point out any single instance that the assessee has suppressed any professional receipts. Whatever the A.O. pointed out are some irregularities in accounts. The C.I.T.(A) himself has appreciated the facts of the case and he deleted the addition for subsequent year 2001-02 to 2007-08. The C.I.T.(A) confirmed the order of the A.O. in A.Y.2007-08 heavily relying upon the judgment of the Supreme Court in the case of H.M. Esufali H.M. Abdul Ali 90 ITR 271 (SC) which is distinguishable on facts as discussed above. In the light of the above discussion, we find that the addition of Rs.47,59,000/- made by the A.O. and sustained by C.I.T.(A) applying mathematical formula is not warranted. Therefore, the same is deleted.
20 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
13. One more ground raised in assessee's appeal is in respect of addition of Rs.70,680/- on account of foreign tour expenses. On verification of said material, the A.O. noticed that the assessee has incurred expenditure of Rs.36,550/- and 13,950/ which was not found recorded in the books of account. Similarly, some bills issued by M/s. Air Wings Holidays for Rs.20,180/- was found not recorded. The A.O. did not accept the assessee's explanation that the said expenditure was made out of withdrawal for household expenses and agricultural income of his father. The A.O. made addition of Rs.70,680/- which has been confirmed by the C.I.T.(A).
14. We have heard the learned representatives of the parties, record perused. We find that during the course of search, some material which was treated as page No.120 to 121 and 179 to 180 pertaining to this expenditure was found. The assessee failed to furnish satisfactory explanation. We therefore, do not find any infirmity in the order of the C.I.T.(A). In sustaining the said addition, the order of the C.I.T.(A) on this issue is confirmed.
15. Now we take up the appeals filed by the revenue for other years.
Assessment Year 2001-02.
16. The first ground raised by the revenue in its appeal is pertaining to deletion of addition of Rs.1,77,835/- on account of purchase of bungalow. During the assessment proceedings, the A.O. noticed that the assessee has debited Rs.5,50,000/- towards the purchase of 21 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
bungalow. The equivalent amount has been debited in the books of accounts of Smt. Varsha J. Dubal. The property was purchase in joint name. The total cost of the property appearing in balance sheets of joint holders work out to Rs.11,00,000/-. On verification of books of account, the A.O. noticed that the document price of bungalow as per page 1 to 11 of Annexure AS was Rs.11,11,111/-. Thus, the assessee deducted less by Rs.11,111/- in the books of account. The A.O. has also noticed some of the expenses on account of stamp duty Rs.1,22,300/-, registration fees Rs.16,845/- and additional stamp duty Rs.38,690/- which was also not found accounted for in the books of account. The total amount including difference of Rs.11,111/- comes to Rs.1,88,946/-. The A.O. after considering the assessee's submission, noticed that the matter was referred to the Departmental Valuation Officer and addition of Rs.19,16,714/- was made but same was deleted and the deletion was confirmed by the ITAT. However, the A.O. made addition of Rs.1,88,946/-. Similarly, in A.Y.2002-03, the A.O. made addition of Rs.21,810/- in respect of stamp duty, in A.Y. 2005-06 such addition made by the A.O. is Rs.6,645/- and in A.Y.2006-07, Rs.21,810/-. The C.I.T.(A) deleted the said addition on the ground that the father of the assessee was an Officer in Food Corporation of India and after retirement he has invested his saving in agricultural land admeasuring about 20 acres and deriving agricultural income to the extent of about Rs.70,000/- to Rs.80,000/- per year. The C.I.T.(A) accepted the contention of the assessee that the expenditure was incurred out of the said income. However, the addition to the extent 22 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
of Rs.11,111/- has been confirmed by The C.I.T.(A) as fact is clear that the assessee has debited the cost of the bungalow less by Rs.11,111/-. Therefore, we also confirm the addition to the extent of Rs.11,111/- and confirm the order of C.I.T.(A) in deducting the balance amount of the addition of Rs.1,77,835/-. The C.I.T.(A) has also deleted addition of other years accepting the assessee's contention that such expenses were out of household withdrawal and out of agricultural income of his father.
17. We have heard the learned representatives of the parties, record perused. We find that in regular assessments, no such additions were made. However, some papers related to this addition were found but the contention of the assessee that this expenditure was incurred out of the household withdrawal and agricultural income of the assessee's father. The C.I.T.(A) after considering the assessee's contention, found that the agricultural income of assessee's father and withdrawal of assessee and assessee's wife were sufficient to cover these expenses. Contrary to that fact, there is no material on records. We therefore, do not find any infirmity in the order of the C.I.T.(A) in deleting such addition. The order of the C.I.T.(A) on this issue is confirmed.
Assessment Year 2004-05.
18. One more ground raised by the revenue in its appeal in A.Y. 2004-05 is in respect of deleting of addition of Rs.16,21,645/- on account of unaccounted investment.
23 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
19. The brief facts of this issue are that during the course of search, some loose papers were found which has been reproduced by the A.O. in his order at page-2 and 3. On the basis of noting of those loose papers, the A.O. linked the noting with the plot purchasing in the joint names of assessee and his wife. The noting on the loose paper has been converted in the amount by the A.O. and addition of Rs.16,21,655/- was made. The C.I.T.(A) deleted the said addition observing that it cannot be so readily inferred, unless such inference can be positively made after due verification of the loose papers. Figures therein could not be lightly inferred to represent unaccounted investment/income, unless there is something more to it. The C.I.T.(A) relied upon the order of the ITAT, Third Member Bombay Bench in the case of S.P. Goyal v/s. Dy.CIT 269 ITR 59 (AT). The C.I.T.(A) has further noted that the similar view was taken by a Third Member of ITAT, Ahmedabad Bench in the case of Babros Machinery Manufacturers Pvt. Ltd. v/s. Dy. C.I.T. 269 ITR 36 (AT). The C.I.T.(A) has also relied upon one more decision of ITAT Bombay Bench in the case of Embee Clearing & Shipping Services (Pvt) Ltd. v/s. A.C.I.T. 12 SOT 227 wherein it was held that A.O. had not linked the contents of seized paper with actual expenditure of renovation carried out at office premises. Therefore, the said addition was not justified and the same was deleted. The C.I.T.(A) noted that in the case under consideration, the A.O. did not make any further inquiry in respect of the noting of loose papers. The statement of Shri Nemichand Jain was recorded. The assessee has discharged his 24 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
onus by way informing the Assessing Officer as to whom these loose papers belong. But the A.O. did not make any further inquiry. It has also been noted by the C.I.T.(A) that A.O. should have made inquiry from the seller of the property in order to substantiate the entries mad in the loose papers but no such inquiry was made by the A.O. In the light of the facts, the C.I.T.(A) held that the addition cannot be sustained as no addition can be made in absence of any evidence or material to show that the consideration had actual passed from the purchaser to seller of the property.
20. We have heard the learned representatives of the parties, record perused. We find that the loose papers were in the hand written of Shri Nemichand Jain who had brokered the deal relating to purchase of plot No.123. It was also brought to notice of the A.O. that ADIT (Investigation) had recorded the statement of Shri Nemichand Jain in this connection with these papers. However, the copies of the statement were not provided to the assessee. The A.O. also did not make any discussion regarding the statement of Shri Nemichand Jain. It was also submission of the assessee before the C.I.T.(A) that even on the basis of the stamp duty valuation, the market value of the property cannot exceed to Rs.4,48,950/- on the date of transfer because the Stamp Duty Authorities had determined the market value of the property and accordingly charged the additional stamp duty of Rs.6,395/-. The assessee in support of his contention that the loose papers were nothing but some rough jotting and to support their contention, a comparable chart of cases of transfer of land in the same locality between December,2003 and 25 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
May,2004 was filed before the A.O. basis on which it was claimed that the assessee has correctly accounted the purchasing cost of the plot. The loose paper itself does not show that the assessee has paid any extra amount. We find that the C.I.T.(A) after considering the relevant facts and findings of the A.O. relying upon the various decisions of the ITAT, found that merely on the basis of rough jotting or anything on paper, addition cannot be made unless it is co-related with the facts that the same income was investment has been borne. The C.I.T.(A) has also considered the assessee's contention that the amount of the property recorded in the books of account was the actual amount paid by the assessee. In support of that contention of the assessee, comparable cases and valuation Stamp Duty Authorities have been accepted by the C.I.T.(A). The revenue failed to point out any contrary material to the findings of the C.I.T.(A). In the light of fact, we are not disturbing the findings of the C.I.T.(A) . the order of C.I.T.(A) on the issue is confirmed.
21. In the result, the appeal of the assessee is partly allowed and appeals by revenue are dismissed.
Order pronounced in the open Court on 29-07-2011.
Sd/- Sd/-
(N.R.S. GANESAN) ( A. L. GEHLOT )
JUDICIAL MEMBER. ACCOUNTANT MEMBER.
Rajkot,
Dt : 29-07-2011.
26 ITA.1003 & 71 to 76-2009.
A.Ys.2001-02 to 2007-08.
Nva/-
Copy to:
1. Dr. Jagdish Dubal, Gandhidham.
2. The Dy. C.I.T., Central Circle-1, Rajkot.
3. The CIT(A)- Rajkot.
4. The C.I.T.
5. The D.R., I.T.A.T., Rajkot.
True Copy.
By order
Asstt.Registrar, ITAT, Rajkot.