Income Tax Appellate Tribunal - Pune
Vinay Trilokchand Karnawat,, ... vs Assessee
Author: G.S.Pannu
Bench: G.S.Pannu
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH " B", PUNE
BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER
AND SHRI G.S. PANNU, ACCOUNTANT MEMBER
S.No. ITA No. Asstt.year
1. 104/PN/2011 1997-98
2. 105/PN/2011 1998-99
3. 106/PN/2011 1999-00
4. 107/PN/2011 2000-01
5. 108/PN/2011 2001-02
6. 109/PN/2011 2002-03
7. 110/PN/2011 2003-04
Dr Vinay Trilokchand Karnawat, .. Appellant
Anand ospital, Bhokardan Road,
Sillod,Dist.Aurangabad
PAN ABGPK0213L
Vs.
Income-tax Officer,
Ward 1(2), Aurangabad .. Respndent
Appellant by : Shri M. K. Kulkarni
Respondent by : Shri H.C Leuva
ORDER
PER G.S.PANNU, A.M:
The seven captioned appeals are filed by the assessee against a common order passed by the Commissioner of Income-tax (Appeals), Aurangabad which, in turn, have arisen from orders of the Assessing Officer passed under section 143(3) read with section 147 of the Income-tax Act, 1961 (in short "the Act) dated 30.12.2004 for assessment years 1997-98, 1998-99, 1999-00, 2001-02, 2002-03, and order under section 143(3) of the Act dated 28.2.2006 for assessment years 2003-04.
2. In all these appeals, the appellant has raised common Grounds of appeal, and according to both the parties, the facts and circumstances in all the appeals are identical. The Grounds of appeal raised by the assessee read as under:
2 ITA Nos 104/PN/2011 etc. Dr Vinay T Karnawat, Aurangabad "1) On the facts and circumstances of the case and in law, the ld CIT (A) Aurangabad was not justified in holding that the action taken by the AO u/s 147 for reopening and reassessment was justified. The action taken u/s 147 was not justified and is bad in law. In view of this the assessments completed by the AO are illegal and without jurisdiction.
2) On the facts and circumstances of the case and in law the ld CIT(A) was not justified in estimating the addition @ 7.5% of the gross receipts disclosed by the assessee as against estimated by the AO @ 50%. In view of the books having maintained and confirmed by the Hon'ble High Court in Tax Appeal Nos 62 to 70 of 2005, the results disclosed e accepted and additions be deleted.
3) On the facts and circumstances of the case and in law the assessee denies his liability to pay interest u/s 234B and 234C of the Act and the same be deleted."
3. Briefly stated the facts and the background giving rise to the captioned appeals can be summarized as follows. The assessee is an individual engaged in medical profession as a practicing Surgeon. A survey action under section 133A of the Act was conducted in the case of the assessee on 20.3.2003. In the course of the survey, certain documents and papers were found which revealed certain undisclosed receipts and as per the Assessing Officer, it was also found that the assessee was not maintaining proper books of account. The Assessing Officer, therefore, issued notices u/s 148 of the Act for the assessment years 1997-98 to 2002-03 to reopen such assessments on the ground that certain incomes chargeable to tax had escaped assessment. In the ensuing assessments, the incomes declared by the assessee were rejected and additions were made only on account of professional income except for assessment year 2002-03, wherein the Assessing Officer made another addition also on account of unexplained gifts amounting to Rs 1,65,000/-. It is to be noted that assessments for the assessment years 1997-98 to 2002-03 have been framed under section 143(3) read with section 147/148 of the Act on 30.12.2004, whereas the assessment for the assessment year 2003-04 has been finalized under section 143(3) of the Act on 28.2.2006. However, the reasoning of the Assessing officer as well as the facts and circumstances in all the years are the same. The assessee carried the additions made by the Assessing officer in appeal before the Commissioner of Income-tax (Appeals) 3 ITA Nos 104/PN/2011 etc. Dr Vinay T Karnawat, Aurangabad who has granted partial relief with regard to the additions on account of professional income. The Commissioner of Income-tax (Appeals) has scaled down the additions in the captioned assessment years to the following extent:
Asstt.year Addition made by Gross receipts Addition Relief granted in the AO towards disclosed in confirmed by appeal by the suppressed return CIT(A) at 7.5% of CIT(A) professional the gross income receipts (1) (2) (3) (4) (5)=(2)-(4) 1997-98 57,327 5,33,120 39,984 17,343 1998-99 1,52,554 7,25,498 54,412 98,142 1999-00 1,75,649 6,74,251 50,569 1,25,080 2000-01 2,21,191 7,72,641 57,948 1,63,243 2001-02 2,29,651 7,81,400 58,605 1,71,046 2002-03 2,00,780 7,95,180 59,638 1,41,142 2003-04 1,23,924 8,26,160 61,962 61,962 Total 11,61,076 51,08,250 3,83,118 7,77,958
4. Further, in relation to the addition on account of unexplained gifts of Rs 1,65,000/- for assessment year 2003-04, the Commissioner of Income-tax (Appeals) upheld the stand of the Assessing Officer in principle. However, he deleted the addition on the alternative claim of the assessee that such addition is subsumed in the addition made by the Assessing Officer on account of professional income for the respective assessment year. Not being satisfied with the reliefs granted by the Commissioner of Income-tax (Appeals) in all the captioned years, assessee is in further appeal before us on the stated Grounds of appeal.
5. In the above background, the rival Counsels have made their submissions. As per the appellant, there are no justifiable reasons for making the impugned additions. It has been pointed out that the reasons for rejecting the incomes declared in the returns of income filed are not cogent. In any case, it has been contended that the estimation of professional income made in all the captioned years is excessive and unreasonable. It has been submitted, on the basis of the judgment of the Hon'ble Andhra Pradesh High Court in the case of G.K. Padmaraju v CIT 37 ITR 365 (AP) that where an income is liable to be estimated, regard must be made to assessee's accretion to wealth starting from 4 ITA Nos 104/PN/2011 etc. Dr Vinay T Karnawat, Aurangabad the beginning of the relevant year and upto the end of the year. In this case, as per the learned Counsel, the manner of estimating the income is not justified, apart from the same being excessive and unreasonable.
6. On the other hand, the learned Departmental representative appearing for the Revenue has vehemently submitted that the Assessing Officer as well as the Commissioner of Income-tax (Appeals) have given cogent reasons to justify the unreliability of the incomes declared by the assessee in the returns of income for the captioned assessment years. It was also pointed out that the material found during the course of survey and also the inability of the assessee to substantiate the income returned as per the returns of income on the basis of supporting vouchers, documents etc. clearly justified the estimation of income made. In sum and substance, the learned Departmental Representative has relied upon the reasons contained in the orders of the authorities below in support of the case of the Revenue.
7. We have carefully considered the rival submissions and have also perused the orders of the authorities below. In this case, in so far as Ground No. 1 challenging the initiation of proceedings under section 147/148 of the Act for the assessment years 1997-98 to 2002-03 is concerned, the same is dismissed since the said Ground has not been pressed by the appellant before us at the time of hearing in all such assessment years. Thus, the only substantive grievance remaining in the captioned appeals is manifested by way of Ground No. 2 stated above, which relates to the incomes estimated by the Revenue over and above the incomes declared by the assessee in his respective returns of income. On this aspect, the first and foremost plea of the assessee is that the Assessing Officer was not justified in rejecting the book results by invoking the provisions of section 145 of the Act. This action of the Assessing Officer has since been upheld by the Commissioner of Income-tax (Appeals). On this aspect of the matter, the Commissioner of Income-tax (Appeals) has enumerated the 5 ITA Nos 104/PN/2011 etc. Dr Vinay T Karnawat, Aurangabad following reasons in para 7.2 of his order in order to justify the rejection of book results by the Assessing Officer.
"i) the appellant has produced the books of accounts after 386 days from the date of survey action and has never produced receipt books and vouchers/bills for the expenses claimed. (The AO has therefore held that the books of accounts maintained are not reliable);
ii) the appellant had made investment in construction of the hospital building and the details of construction and source of the investment has not been submitted by the appellant;
iii) the gross receipts shown by the appellant in return of income never tallied with the receipts appearing in the impounded material and the same was also not reconciled or tallied by the appellant;
iv) the appellant has not issued receipts to all the patients. No separate registers are maintained for patients of the appellant and his spouse;
v) the appellant has stated that he has estimated his daily receipts at around Rs 2,000/- per day and disclosed the same in the return of income;
vi) the appellant has shown loans from various friends and relatives which are not proved by the appellant by filing confirmation letters, affidavits, bank extracts, income-tax details and copies of income-tax returns etc. of the lenders;
vii) the appellant has shown the household withdrawals at Rs 36,000/- for the A.Ys 1997-98 to 1999-2000 and Rs 42,000/-for the A.Ys 2000-2001 and 2001-02 and Rs 45,038/- for A.Y 2002-3. The AO has held that the household expenses shown are on lower side;
viii) the details in the form of documents or registers in respect of X-ray, Sonography, other doctors charges etc. have not been maintained by the appellant;
ix) the biils or receipts have not been issued in respect of most of the patients admitted in the hospital;
x) the only bill book found is book No. 10 having about 30 receipts for the years under appeal, wherein the appellant has issued bills in respect of professional charges of himself as well as his spouse, though separate returns of income have been filed by the appellant and his spouse in individual capacity;
xi) various opportunities have been given to the appellant to produce documents, receipts, vouchers etc. in support of the professional income and expenses claimed in the books of accounts, however, the appellant has never produced the same."
8. Before us, no credible reasoning has been brought out to negate any of the aforesaid points made out by the Assessing Officer in order to disregard the book results declared. The plea of the learned Counsel is that the account books have been maintained and, therefore, the book results declared be accepted. In our considered opinion, mere maintenance of account books, as claimed by the assessee, cannot be construed as enough to justify its reliability. Both the authorities below have inferred that the account books produced by the assessee during the assessment proceedings are not duly supported by the relevant records, such as receipts issued on account of professional fees, expense vouchers, bills, etc. It has also been noted by the lower authorities, without controversion by the assessee, that the above-said record was neither found during the course of survey action and nor was produced before the Assessing 6 ITA Nos 104/PN/2011 etc. Dr Vinay T Karnawat, Aurangabad Officer during the assessment proceedings. In our considered opinion, having regard to the factual findings of the authorities below on this aspect, we find enough justification for the action of the Assessing Officer in rejecting the book results by invoking the provisions of section 145 of the Act.
9. Now, the only issue remaining is with regard to the estimation of income made by the Assessing officer after rejecting the book results declared by the assessee. In this regard, it is seen that the income has been estimated by the Assessing Officer in the following manner. For assessment years 1997-98 to 2002-03, Assessing Officer estimated 50% of the recorded receipts as undisclosed receipts and reduced a percentage of expenditure out of such undisclosed receipts to arrive at the net professional income of the assessee. However, for the assessment year 2003-04, the Assessing Officer assessed the total income by making addition of 15% of the professional receipts declared by the assessee in the return of income. In order to appreciate the manner and the amount assessed by the Assessing Officer as professional income, the following tabulation is worthy of notice:
AY Gross Deprn. Other N.P Gross Other N.P
receipts and rent expenses shown by receipts expenses assessed
disclosed claimed claimed the estimated estimated by the AO
in return by by the assessee by AO by by the AO (8) = (6)-
of income assessee assessee adding at % of (7)-(3)
and % of 50% to gross except
the same receipts receipts AY 03-04
to shown by
receipts the
disclosed assessee
except AY
03-04
(1) (2) (3) (4) (5) (6) (7) (8)
1997-98 533120 70142 1394026 68952 799680 597761 131777
74.75% (+50%) 74.75%
1998-99 725498 183944 420445 121109 1088247 630639 273664
57.95% (+50%) 57.95%
1999-00 674251 226955 322970 124323 1011377 484450 299972
47.90% (+50%) 47.90%
2000-01 772641 263579 330326 178326 1158962 495456 399927
42.75% (+50%) 42.75%
2001-02 781400 225754 322208 233438 1172100 483257 463089
41.23% (+50%) 41.23%
2002-03 795180 187408 395450 213322 1194270 593194 413668
49.67% (+50%) 49.67%
2003-04 826160 - - 242890 950084 - 366284
(+15%)
7 ITA Nos 104/PN/2011 etc.
Dr Vinay T Karnawat, Aurangabad
10. Now, the Commissioner of Income-tax (Appeals) has primarily confirmed the addition at 7.5% of the gross receipts in all the years by adopting the methodology taken by the Assessing Officer for the assessment year 2003-04. Quite evidently, in any estimation certain amount of subjectivity and guess work is inherently involved. Unless it is demonstrated that the estimation is irrational or is arbitrary, it would not justify interference by the appellate authority. In this case, the scaling down of estimation by the Commissioner of Income-tax (Appeals) and the resultant additions, in our view, cannot be said to be arbitrary or unreasonable. It is also evident from the discussion in the assessment order that in certain cases the undisclosed receipts have been found to be in high proportion than the recorded receipts. For instance, the Commissioner of Income-tax (Appeals) in para 5(xi) notes with reference to Annexure 1 of the assessment order that as the impounded bill book No. 10 showed total receipts of Rs 1,70,619/- as against recorded receipts in the cash book at Rs 51,505/- only. The proportion of unrecorded receipts is quite high and keeping this and also other aspects brought out in the assessment order, we are not inclined to accept the proposition of the assessee that the additions sustained by the Commissioner of Income-tax (Appeals) are arbitrary or unreasonable. At this point, we may also notice that none of the parties have brought to our notice as to whether the Revenue has filed any appeal against the scaling down of the estimation by the Commissioner of Income-tax (Appeals). Be that as it may, our observations with regard to the estimation made by the Commissioner of Income- tax (Appeals) is qua the grievance projected by the assessee-appellant alone byway of the captioned Grounds of Appeal. Thus, we hereby find no merit in the plea of the assessee. Accordingly, Ground of appeal No. 2 raised by the assessee is dismissed for all the captioned years.
11. The Ground No. 3 relating to levy of interest under section 234B and 234C of the Act is of consequential in nature and needs no adjudication.
8 ITA Nos 104/PN/2011 etc. Dr Vinay T Karnawat, Aurangabad In the result, captioned appeals of the assessee are dismissed. Decision pronounced in the open Court on this 30th day of March, 2011.
Sd/- Sd/-
(I.C. SUDHIR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune: Dated: 30th March, 2011
B
Copy of the order is forwarded to :
1. Dr Vinay T Karnawat, Aurangabad
2. The ITO Ward 1(2) Aurangabad
3. The CIT(A) Aurangabad
4. The CIT, Aurangabad
5. The D.R, 'B' Bench, Pune
"True copy"
By order
Assistant Registrar
ITAT, Pne Benches, Pune
Pune