The Travancore Diagnostics P.Ltd, Kollam V. The ACIT, Kollam

CO 31/COCH/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0336 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: D S SREEKUMARAN
• Keywords: Invalid notice; Income from undisclosed sources; Search and seizure; Principle of natural justice; Block assessment; Revised return; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NOS. 289 & 290/COCH/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1,KOLLAM. VS. THE TRAVANCORE DIAGNOSTICS PVT. LTD., KAILAS ARCADE, DIST. HOSPITAL ROAD, KOLLAM. [PAN:AACFT 1116C] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) C.O. NOS. 31&32/COCH/2014 (ARSG. OUT OF I.T.A. NOS. 289 & 290/COCH/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 THE TRAVANCORE DIAGNOSTICS PVT. LTD., KAILAS ARCADE, DIST. HOSPITAL ROAD, KOLLAM. [PAN:AACFT 1116C] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1,KOLLAM. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) REVENUE BY SHRI K.K. JOHN, SR. DR ASSESSEE BY SHRI D.S. SREEKUMARAN, CA DATE OF HEARING 22/12/2014 DATE OF PRONOUNCEMENT 12/02/2015 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE REVENUE AND THE CROSS O BJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS DATED 25-03-2014 PASSED BY THE CIT(A)-TRIVANDRUM, (CAMP. KOCHI) FOR THE ASSESS MENT YEARS 2009-10 & 2010-11. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 2 2. THE REVENUE HAS RAISED THE GROUND IN BOTH THE APPEALS WITH REGARD TO DELETION OF PORTION OF ADDITION MADE TOWARDS SUPPRE SSION OF COLLECTIONS. 3. THE ASSESSEE HAS RAISED THE GROUND IN C.O. NO. 3 1/COCH/2014 FOR SUSTAINING THE PORTION OF ADDITION MADE TOWARDS SUP PRESSION OF COLLECTIONS FOR BOTH THE YEARS. 4. THE ASSESSEE HAS ALSO RAISED THE GROUND IN C.O. NO. 31/COCH/2014 WITH REGARD TO NON SERVICE OF NOTICE U/S. 142(1) AND 143 (2) AS REQUIRED BY THE ACT TO CALL FOR RECORDS FOR VERIFICATION. ACCORDING TO TH E ASSESSEE, THE NOTICE U/S. 148 OF THE ACT DID NOT CONTAIN THE REASONS FOR RE-OPENING OF THE ASSESSMENT AND THEREFORE, THE PROCEEDINGS INITIATED U/S. 147 OF TH E ACT WAS IMPROPER AND THE ASSESSMENT WAS NOT VALID AND TO BE CANCELLED ON THA T COUNT. 5. FIRST WE SHALL TAKE UP THE LEGAL GROUND RAISED B Y THE ASSESSEE IN C.O. NO. 31/COCH/2014. 6. THE LD. AR SUBMITTED THAT THE RE-ASSESSMENT PROC EEDINGS WERE INITIATED INVOKING THE PROVISIONS OF SEC. 147 VIDE NOTICE U/S . 148 OF THE ACT DATED 11/01/2012. THE ASSESSMENT WAS COMPLETED U/S. 143( 3) R.W.S. 147 OF THE ACT. THEREFORE, NOTICE U/S. 143(2) OF THE ACT HAS TO BE ISSUED WITHIN THE LIMITATION I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 3 PERIOD AND BEFORE COMPLETION OF ASSESSMENT. IN THE PRESENT CASE OF THE ASSESSEE, ACCORDING TO THE LD. AR, NO NOTICE HAS BE EN ISSUED OR SERVED ON THE ASSESSEE BEFORE PROCEEDING TO COMPLETE THE ASSESSME NT. THE LD. AR SUBMITTED THAT IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO APPLY HIS MIND TO THE CONTENTS OF THE RETURN FILED BY THE ASSESSEE IN RES PONSE TO THE NOTICE U/S. 148 AND THEREAFTER ISSUE NOTICE U/S. 143(2) BEFORE PROC EEDING TO COMPLETE THE ASSESSMENT PROCEEDINGS. THE NON-ISSUE OF NOTICE U/ S. 143(2) AFTER FILING THE RETURN VITIATED THE REASSESSMENT PROCEEDINGS. THE LD. AR RELIED ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF ACIT & ANR . VS. HOTEL BLUE MOON (2010) 321 ITR 362 AND THE JUDGMENT OF THE DELHI HI GH COURT IN THE CASE OF ALPINE ELECTRONICS ASIA PTE. LTD. VS. DIRECTOR GENER AL OF INCOME-TAX & OTHERS (2012) 341 ITR 247 (DELHI) WHEREIN IT WAS HELD THAT PROVISO TO S. 292BB IS APPLICABLE. PRINCIPLE OF ESTOPPEL U/S. 292BB WILL N OT APPLY. ASSESSING OFFICER CANNOT RELY UPON THE MAIN S. 292BB AND CLAIM THAT N OTICE U/S. 143(2) IS DEEMED TO BE SERVED WITHIN THE STIPULATED TIME. BEING SO, NOTICE U/S. 148 IS QUASHED. THE LD. AR ALSO RELIED ON THE FOLLOWING CASE LAW: (I) CIT VS. RAJEEV SHARMA (2010) 232 CTR (ALL.) 3 03. (II) VIPAN KHANNA VS. CIT & ORS. (2002) (255 ITR 2 20) (P&H). (III)CIT VS. M.CHELLAPPAN & ANR. (2006) 281 ITR 44 4 (MAD.) I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 4 6.6 IN VIEW OF THE ABOVE LEGAL POSITION, IT WAS SUBMITTED THAT NO NOTICE U/S. 143(2) WAS ISSUED OR SERVED ON THE ASSESSEE BEFORE THE COMPLETION OF ASSESSMENT, WHICH IS MANDATORY TO ASSUME JURISDICTI ON BY THE ASSESSING OFFICER TO MAKE AN ASSESSMENT OR RE-ASSESSMENT AND AS SUCH THE ASSESSMENT MADE VIDE ORDER DATED 30-03-2013 FOR THE ASSESSMENT YEAR 2009 -10 DESERVES TO BE CANCELLED. 6.7 IT WAS FURTHER SUBMITTED THAT IF AT ALL IT I S TO BE HELD THAT THE NOTICED ISSUED U/S. 148 IS INVALID AND THE ASSESSMENT ORDER PASSED U/S. 143(3) WITHOUT ISSUING NOTICE U/S. 143(2), THE TRIBUNAL MAY ESTIMATE THE E SCAPED INCOME OF THE ASSESSEE BY APPLYING THE NET PROFIT RATE ON THE SUP PRESSION OF COLLECTION SUSTAINED BY THE CIT(A) AT RS.3,37,755/-. 7. ACCORDING TO THE LD. DR, THE ALLEGED IRREGULA RITY IN THE SERVICE OF THE NOTICE UNDER SECTION 143(2), AS POINTED OUT BY THE LD. AR IS VIRTUALLY INSIGNIFICANT, IN AS MUCH AS THE ASSESSEE WAS REPRESENTED BY ITS OWN AUD ITOR, SHRI ALEX KURIAKOSE WHO REPRESENTED THE CASE ON BEHALF OF THE ASSESSEE. THAT APART, IT WAS SUBMITTED THAT IN THE COURSE OF HIS HEARING EITHER BEFORE THE ASSESSING OFFICER OR THE CIT(A , THE ASSESSEE HAS NEVER RAISED ANY GRIEV ANCE WITH REGARD TO NON SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT I N RELATION TO THE ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER. ACC ORDING TO THE LD. DR, IF THERE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 5 BE SOME IRREGULARITY, AS ALLEGED BY THE LD. AR, IT COULD BE SAID TO BEEN WAIVED BY THE CONDUCT OF THE ASSESSEE AND IT DOES NOT MAKE TH E ASSESSMENT ORDER INVALID. 7.1 THE LD. DR SUBMITTED THAT IN THIS CASE, THE AS SESSEE HAS NOT FILED THE REVISED RETURN OF INCOME IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT VIDE LETTER DATED 11/01/2012 AND THE ASSESS EE REPLIED VIDE LETTER DATED 08/02/2012 THAT THE ORIGINAL RETURN FILED ON 30-09- 2009 IS TO BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF TH E ACT. IN THE MEANTIME, THE ASSESSING OFFICER CONVEYED TO THE ASSESSEE ON 16/0 4/2012 THAT SINCE THE ORIGINAL RETURN OF INCOME WAS FILED ELECTRONICALLY WHICH IS MANDATORY, THE ASSESSEE WAS REQUIRED TO FILE RETURN IN RESPONSE TO NOTICE U/S. 148 ALSO ELECTRONICALLY. INSPITE OF THIS, THE ASSESSEE OPTED NOT TO FILE THE REVISED RETURN ELECTRONICALLY. FURTHER, THE ASSESSING OFFICER VIDE HIS LETTERS DATED 19-09- 2012 AND 09-10-2012 ASKED THE ASSESSEE TO COMPLY WITH THE LETTER DATED 16-04- 2012. HOWEVER, THERE WAS STILL NO RESPONSE FROM THE ASSESSEE. FINALLY, ON 1 0-12-2012, THE AO SENT A LETTER TO THE ASSESSEE AS FOLLOWS: GOVERNMENT OF INDIA INCOME TAX DEPARTMENT OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX KOLLAM RANGE, K OLLAM NO. AACFT1116C/CIR.1/2011-12 DATE: 10/12/2012 I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 6 TO, M/S. TRAVANCORE DIAGNOSTICS PVT. LTD., CHAMAKADA, NAJEEM COMPLEX, KOLLAM. SUB: INCOMETAX ASSESSMENT IN YOUR OWN CASE A.Y. 2009-10 REG. REF: NOTICE U/S. 143(2) DATED 11/01/2012. SIR, INCOME TAX ASSESSMENT FOR THE A.Y. 2 009-10 IS POSTED FOR HEARING AT MY OFFICE AT KOLLAM ON 19-12-12 AT 3:30 P.M. YOU ARE REQUESTED TO APPEAR BEFORE ME ON THE DATE OF HEARING EITHER IN PERSON O R THROUGH AN AUTHORIZED REPRESENTATIVE. FAILURE ON YOUR PART, THE ASSESSME NT WILL BE FINALIZED ON THE BASIS OF MATERIAL AVAILABLE ON RECORDS. YOURS FAITHFULLY, SD/- (V.VINODKUMAR) ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-1,KOLLAM 7.1.1 THE LD. DR SUBMITTED THAT THE ASSESSEES AUTH ORIZED REPRESENTATIVE SHRI ALEX KURIAKOSE APPEARED BEFORE THE AO ON 19/12/2012 , 11/03/2013 AND 27/03/2013 AND FINALLY, THE ASSESSMENT ORDER WAS PA SSED BY THE AO ON 30-03- 2013. AGAINST THIS ASSESSMENT ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 7.2 THE ASSESSEE RAISED ANOTHER GROUND WITH REGARD TO NON ISSUE OF NOTICE UNDER SECTION 142(1) OF THE I.T. ACT. AS SEEN FROM THE ASSESSMENT ORDER, A I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 7 QUESTIONNAIRE UNDER SECTION 142(1) OF THE ACT WAS I SSUED AND DISPATCHED ON 25- 02-2013 TO WHICH THE ASSESSEE REPLIED ON 05/03/2013 . A PROPOSAL WAS ISSUED TO THE ASSESSEE ON 25/03/2013 AND IN RESPONSE TO THE P ROPOSAL, THE ASSESSEE FILED REPLY ON 26-03-2013 AND SHRI ALEX KURIAKOSE, CA APP EARED ON 27/03/2013 AND THE CASE WAS DISCUSSED WITH HIM. BEING SO, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL THAT THERE WAS NO ISSUE OF N OTICE UNDER SECTION 142(1) OF THE ACT. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. IN THIS CASE, THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 30-09-2009 DECLARING TOTAL INCOME OF RS.1,58,519/-. THE SAME W AS PROCESSED U/S. 143(1) ON 01-11-2010. THERE WAS A SURVEY AT THE ASSESSEES K OTTARAKKARA LAB. CONSEQUENT TO THE SURVEY ACTION, NOTICE U/S. 148 OF THE I.T. ACT WAS ISSUED ON 11-01-2012. THE ASSESSEE FILED REPLY ON 08-02-2012 STATING THAT IT HAD FILED RETURN ON 30-09-2009 AND THAT THE SAME MAY BE TREAT ED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. AC CORDINGLY, THE ORIGINAL RETURN FILED BY THE ASSESSEE ON 30-09-2009 WAS TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U/S. 148 OF THE I.T. ACT. 8.1 LATER IT WAS INFORMED BY THE AO VIDE LETTERS DA TED 16/04/2012 AND 19/09/2012 REQUIRING THE ASSESSEE TO FILE THE RETUR N OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT FOR THE ASSESSM ENT YEAR 2009-10 I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 8 ELECTRONICALLY. HOWEVER, THE ASSESSEE FAILED TO RES POND TO THE SAME AND ONE MORE REMINDER WAS SENT TO HIM BY THE AO VIDE LETTER DATED 09/10/2012 WHEREIN THE ASSESSEE WAS ASKED TO COMPLY WITH LETTER DATED 16/04/2012 AND FURNISH PROOF IMMEDIATELY. FURTHER VIDE LETTER DATED 10/12 /2012, THE CASE WAS POSTED FOR HEARING, SEEKING APPEARANCE OF THE ASSESSEES A UTHORIZED REPRESENTATIVE ON 19/12/2012. THE ASSESSEES AUTHORIZED REPRESENTATIV E SHRI ALEX KURIAKOSE, CA APPEARED AND PARTICIPATED IN THE ASSESSMENT PROCEED INGS. FURTHER ON 11/03/2013 AND 27/03/2013, THE ASSESSEES AUTHORIZE D REPRESENTATIVE APPEARED AND FINALLY THE ASSESSMENT ORDER WAS PASSED ON 30/0 3/2013. 8.2 IN OUR OPINION, THE ALLEGED IRREGULARITY IN THE SERVICE OF THE NOTICE UNDER SECTION 143(2), AS POINTED OUT BY THE LD. AR IS VIR TUALLY INSIGNIFICANT, IN AS MUCH AS THE ASSESSEE WAS REPRESENTED BY ITS OWN AUDITOR, SHRI ALEX KURIAKOSE WHO REPRESENTED THE CASE ON BEHALF OF THE ASSESSEE. THA T APART, IT WAS SUBMITTED THAT IN THE COURSE OF HIS HEARING EITHER BEFORE THE ASSE SSING OFFICER OR THE CIT(A) , THE ASSESSEE HAS NEVER RAISED ANY GRIEVANCE WITH RE GARD TO NON SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT IN RELATION TO THE ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER. ACCORDING TO TH E LD. DR, IF THERE BE SOME IRREGULARITY, AS ALLEGED BY THE LD. AR, IT COULD BE SAID TO BEEN WAIVED BY THE CONDUCT OF THE ASSESSEE AND IT DOES NOT MAKE THE AS SESSMENT ORDER INVALID. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 9 9. COMING TO THE ISSUE OF NOTICE UNDER SECTION 143( 2) OF THE ACT, IT SHOULD BE REMEMBERED THAT THE BASIC PURPOSE OF ISSUING A NOTI CE UNDER SECTION 143(2) OF THE ACT IS TO GIVE AN OPPORTUNITY TO THE ASSESSEE, WHO HAS SUBMITTED HIS RETURN TO SUPPORT THE SAME BY ADDUCING THE NECESSARY EVIDE NCE, DOCUMENTS ETC. CLAUSE (II) OF SECTION 143(2) STATES THAT IF THE ASSESSING OFFICER CONSIDERS IT NECESSARY TO EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDER STATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAID THE TA X IN ANY MANNER HE MAY SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM, ON A DATE TO BE SPECIFIED THEREIN EITHER TO ATTEND HIS OFFICE OR TO PRODUCE, OR CAUSE TO BE PRODUCED ANY EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF THE RE TURN. THE PROVISO AS IT EXISTED AT THE RELEVANT TIME STATES THAT NO NOTICE SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF 12 MONTHS FROM THE END OF THE M ONTH IN WHICH THE RETURN WAS SUBMITTED. IN THE PRESENT CASE, THE ASSESSING OFFI CER ISSUED VARIOUS LETTERS DATED 16/04/2012 AND 19/09/2012 AND 09/10/2012 TO T HE ASSESSEE TO FILE THE RETURN ELECTRONICALLY. FURTHER, THE ASSESSING OFF ICER ISSUED LETTER DATED 10/12/2012 SEEKING APPEARANCE OF THE ASSESSEE OR AS SESSEES AUTHORIZED REPRESENTATIVE. CONSEQUENT TO THIS, THE ASSESSEES AUTHORIZED REPRESENTATIVE, SHRI ALEX KURIAKOSE APPEARED BEFORE THE AO ON 19/12 /2012, 11/03/2013 AND 27/03/2013 AND FINALLY, THE ASSESSMENT WAS PASSED O N 30/03/2013. WE WOULD BE CLOSING OUR EYES TO THE REALITIES IF WE HOLD THA T THE PARTICIPATION OF THE ASSESSEE IN THE PROCEEDINGS FIXED ON VARIOUS DATES CANNOT BE ATTRIBUTED TO THE SERVICE OF THE NOTICE UPON A PERSON WHO IS AUTHORI ZED TO RECEIVED THE SAME. THE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 10 LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US TH AT THE PARTICIPATION OR ATTENDANCE IN THE PROCEEDINGS BEFORE THE ASSESSING OFFICER ON VARIOUS DATES WAS NOT PURSUANT TO THE NOTICE UNDER SECTION 143(2) OF THE I.T. ACT. THAT, IN OUR OPINION, IS AN ARGUMENT THAT IS FAR-FETCHED TO MERI T ACCEPTANCE. IT IS DIFFICULT TO VISUALIZE HOW ELSE COULD THE ASSESSEE HAVE COME TO KNOW THAT HIS CASE IS POSTED BEFORE THE ASSESSING OFFICER ON 19/12/2012 AT 3.30 P.M. EXCEPT FROM THE NOTICE. ADMITTEDLY, SHRI ALEX KURIAKOSE, THE ASSESSEES COU NSEL APPEARED BEFORE THE AO ON 19/12/2012, 11/03/2013 AND 27/03/2013. THUS TH E ABOVE CONDUCT ON THE PART OF THE ASSESSEE SHOWS THAT THE ASSESSEE IS AWA RE OF THE VARIOUS PROCEEDINGS BEFORE THE AO AND POSTING OF HIS CASE ON 19/12/2012 AND SUBSEQUENT DATES. AS ALREADY POINTED OUT BY US IN EARLIER PARA, THE ISSU E OF NOTICE UNDER SECTION 143(2) OF THE ACT IS TO ENABLE THE ASSESSEE TO ADDUCE EVID ENCE IN SUPPORT OF THE RETURN SUBMITTED BY HIM. THE PROVISION IS ESSENTIALLY CONC EIVED IN THE INTEREST OF THE ASSESSEE AND ONCE HE COMES TO KNOW OF THE OPPORTUNI TY THAT HAS BEEN ACCORDED TO HIM AND ALSO TAKES A STEP TOWARDS AVAILING OF TH E SAME, IT DOES NOT LIE IN HIS MOUTH TO TURN ROUND AND CONTEND THAT THERE WAS NO V ALID SERVICE OF THE NOTICE UPON HIM. 9.1 SEVERAL AUTHORITIES WERE CITED ON BEHALF OF THE ASSESSEE TO THE EFFECT THAT IF THERE IS NO VALID SERVICE OF NOTICE UNDER SECTIO N 143(2) OF THE ACT, THE ASSESSMENT ORDER IS NULL AND VOID. THE QUESTION BEF ORE US HOWEVER IS WHETHER THERE WAS VALID SERVICE OF NOTICE UPON THE ASSESSEE . WE HAVE HELD, CONSIDERING I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 11 THE FACTS OF THE CASE, AND THE CONDUCT OF THE ASSES SEE, THAT THERE HAS BEEN A VALID SERVICE OF NOTICE UPON THE ASSESSEE. HE HAS A LSO PARTICIPATED IN THE PROCEEDINGS. IN THE DECIDED CASES TO WHICH OUR AT TENTION WAS DRAWN, THE DISCUSSION HAS PROCEEDED ON THE BASIS THAT THERE WA S NO SERVICE OF NOTICE UPON THE ASSESSEE AND THEREFORE THE ASSESSMENT ORDER WAS NULL AND VOID. WHEN THE FACTS SHOW THAT THERE HAS BEEN EFFECTIVE SERVICE OF THE NOTICE UPON THE ASSESSEE PURSUANT TO WHICH HE HAS ALSO PARTICIPATED IN THE P ROCEEDINGS FOR ASSESSMENT OF HIS INCOME, THERE IS NOTHING IN LAW TO COMPEL US TO HOLD THAT DESPITE NOTICE THAT HIS CASE WAS POSTED FOR HEARING BEFORE THE ASSESSIN G OFFICER, THE ASSESSMENT ORDER PASSED AFTER GIVING HIM FULL OPPORTUNITY OF B EING HEARD WOULD STILL BE INVALID. THAT WILL BE A TRAVESTY OF JUSTICE. IN VI EW OF THE ABOVE, WE ARE OF THE OPINION THAT THE ASSESSMENT ORDER DATED 30/03/2013 IS PROPERLY FRAMED. ACCORDINGLY, THE LEGAL ISSUE RAISED BY THE LD. AR I S DISMISSED. 10. REGARDING NON ISSUE OF NOTICE U/S.143(2) OF TH E I.T. ACT. SEVERAL CASE LAW WERE CITED ON BEHALF OF THE ASSESSEE TO THE EFF ECT THAT IF THERE IS NO VALID SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT, THE ASSESSMENT ORDER IS NULL AND VOID. IN THE CASE OF ACIT VS. HOTEL BLUE MOON ( 2010) (321 ITR 362), THE SUPREME COURT WAS CONCERNED WITH THE QUESTION WHETH ER IN THE CASE OF BLOCK ASSESSMENT PROCEEDINGS UNDER CHAPTER XIVB OF THE AC T, THE ISSUE OF NOTICE U/S. 143(2) OF THE ACT WITHIN THE PRESCRIBED PERIOD IS M ANDATORY. IT WAS HELD THAT THE NOTICE IS THE VERY FOUNDATION FOR THE JURISDICTION TO ASSESS THE UNDISCLOSED INCOME I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 12 FOUND IN THE COURSE OF THE SEARCH AND SEIZURE AND T HEREFORE THE ISSUE OF SUCH A NOTICE AND THE SERVICE THEREON ON THE PERSON WHO IS FOUND TO HAVE EARNED THE UNDISCLOSED INCOME IS MANDATORY. IN THIS DECISION, THE SUPREME COURT ALSO AFFIRMED THE DECISION OF THE DELHI HIGH COURT IN TH E CASE OF CIT VS. PAWAN GUPTA (2009) (318 ITR 322). WE FIND THAT THESE JUDGMENTS ARE NOT RELEVANT TO THE FACTS OF THE PRESENT CASE. 10.1 THE JUDGMENT OF THE COURT IN THE CASE OF CIT V S. RAJESH KUMAR SHARMA (2009) (311 ITR 235) DOES NOT COVER THE PRESENT ISS UE AT ALL. THIS DECISION HAS BEEN ERRONEOUSLY RELIED UPON BY THE ASSESSEE. IN T HIS DECISION, THE ASSESSEE QUESTIONED THE VALIDITY OF THE SERVICE OF NOTICE IS SUED U/S. 148 OF THE ACT ON THE GROUND THAT IT WAS SERVED ON A PERSON WHO WAS NOT A UTHORIZED TO RECEIVE SUCH A NOTICE. THE COURT ACCEPTED THE ASSESSEES CONTENTI ON AND HELD THAT THERE WAS NO PROPER SERVICE OF THE NOTICE U/S. 148 OF THE ACT AND THEREFORE THE ENTIRE REASSESSMENT PROCEEDINGS WERE WITHOUT JURISDICTION AND INVALID. A PERUSAL OF THE JUDGMENT SHOWS SEVERAL DISTINGUISHING FEATURES. FIR STLY, IT WAS DEALING WITH A NOTICE ISSUED U/S. 148 OF THE ACT TO REOPEN THE ASS ESSMENT PROCEEDINGS WHICH IS A JURISDICTIONAL NOTICE AFFECTING THE VERY VALIDITY OF THE REASSESSMENT PROCEEDINGS. IN THE CASE OF Y.NARAYANA CHETTY AND ANR. VS. ITO, NELLORE (1959) 35 ITR 388, IT WAS HELD BY THE SUPREME COURT AS FOLLOWS: THE ARGUMENT IS THAT THE SERVICE OF THE REQUISITE NOTICE ON THE ASSESSEE IS A CONDITION PRECEDENT TO THE VALIDITY OF RE-ASSESSMEN T MADE UNDER SECTION 34; AND IF A VALID NOTICE IS NOT ISSUED AS REQUIRED, PR OCEEDINGS TAKEN BY THE INCOME-TAX OFFICER IN PURSUANCE OF AN INVALID NOTIC E AND CONSEQUENT ORDERS OF I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 13 REASSESSMENT PASSED BY HIM WOULD BE VOID AND INOPER ATIVE. IN OUR OPINION, THIS CONTENTION IS WELL-FOUNDED. THE NOTICE PRESCR IBED BY SECTION 34 CANNOT BE REGARDED AS A MERE PROCEDURAL REQUIREMENT; IT I S ONLY IF THE SAID NOTICE IS SERVED ON THE ASSESSEE AS REQUIRED THAT THE INCOME- TAX OFFICER WOULD BE JUSTIFIED IN TAKING PROCEEDINGS AGAINST HIM. IF NO NOTICE IS ISSUED OR IF THE NOTICE ISSUED IS SHOWN TO BE INVALID THEN THE VALID ITY OF THE PROCEEDINGS TAKEN BY THE INCOME-TAX OFFICER WITHOUT A NOTICE OR IN PU RSUANCE OF AN INVALID NOTICE WOULD BE ILLEGAL AND VOID. THAT IS THE VIEW TAKEN BY THE BOMBAY AND CALCUTTA HIGH COURTS IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. RAMSUKH MOTILAL (1955) 27 ITR 54 AND R.K. DAS & CO. VS. COM MISSIONER OF INCOME-TAX (1956) 30 ITR 439 AND WE THINK THAT THAT VIEW IS RI GHT. 10.2 THE LD. AR ALSO RELIED ON THE JUDGMENT OF TH E DELHI HIGH COURT IN THE CASE OF ALPINE ELECTRONICS ASIA PTE. LTD. VS. DIRECT OR GENERAL OF INCOME-TAX & OTHERS (2012) 341 ITR 247 (DELHI) WHEREIN IT WAS HE LD THAT PROVISO TO S. 292BB IS APPLICABLE. PRINCIPLE OF ESTOPPEL U/S. 292BB WIL L NOT APPLY. ASSESSING OFFICER CANNOT RELY UPON THE MAIN S. 292BB AND CLAIM THAT N OTICE U/S. 143(2) IS DEEMED TO BE SERVED WITHIN THE STIPULATED TIME. BEING SO, NOTICE U/S. 148 WAS QUASHED BY THE COURT IN THAT CASE. 10.3 IN THE PRESENT CASE, IT WAS HELD THAT THE P ARTICIPATION OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS WAS OF NO CONSEQUENCE BE CAUSE THE PROVISIONS OF SEC. 292BB CAME INTO FORCE ONLY FROM 01-04-2008. H OWEVER, THE PARTICIPATION OF THE ASSESSEES AUTHORIZED REPRESENTATIVE IN THE ASS ESSMENT PROCEEDINGS IN THE PRESENT CASE IS AN IMPORTANT FACT TO BE TAKEN NOTE OF, NOT BECAUSE OF SECTION 292BB BUT IN THE LIGHT OF THE FACT THAT THE ASSESSE ES AUTHORIZED REPRESENTATIVE HAD ACTUALLY APPEARED AND FILED HIS POWER OF ATTORN EY SO AS TO COMPLETE THE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 14 ASSESSMENT PROCEEDINGS. THE PARTICIPATION OF THE AS SESSEES AUTHORIZED REPRESENTATIVE SHOWS THAT WHAT WAS THE APPARENT ARG UMENT WHICH WAS PLACED BEFORE US, WAS NOT REAL. IT WOULD BE AGAINST THE S PIRIT OF LAW RELATING TO INCOME ASSESSMENTS IF ONE WERE TO TOO READILY BE WILLING T O HOLD THAT THERE WAS NON- SERVICE OR INVALID SERVICE OF THE NOTICE U/S. 143(2 ) OF THE ACT, MERELY ON PERIPHERAL ALLEGATIONS OR ACTS AND NOT LOOKING AT T HE SUBSTANCE I.E. WHETHER THE NOTICE IN FACT WAS SERVED AND EVEN ACTED UPON BY WA Y OF APPEARANCE BEFORE THE ASSESSING OFFICER. THIS HAS MADE THE IMPUGNED ORDE R ERRONEOUS AND PERVERSE AS RELEVANT AND MATERIAL ASPECTS HAVE BEEN IGNORED AND NOT GIVEN CREDENCE. A PROVISION INTENDED FOR THE BENEFIT OF THE ASSESSEE AND CONCEIVED IN ACCORDANCE WITH THE RULES OF NATURAL JUSTICE SHOULD NOT BE PER MITTED TO BE ABUSED BY THE VERY PERSON FOR WHOSE BENEFIT IT IS INTENDED AND SHOULD NOT BE PERMITTED TO BECOME A TOOL TO WARD OFF THE LIABILITY TO PAY THE TAX. WE ARE NOT TO BE UNDERSTOOD AS SAYING THAT IN NO CASE CAN THE SERVICE OF NOTICE U/ S. 143(2) OF THE ACT CAN BE HELD TO BE INVALID. IN MAKING THE AFORESAID OBSERVA TIONS, WHAT WE INTEND IS MERELY TO CAUTION THE DEPARTMENTAL AUTHORITIES TO K EEPING MIND THE FOLLOWING OBSERVATIONS MADE BY THE FEDERAL COURT IN CHATTURAM VS. CIT (1947) 15 ITR 302: THE INCOME-TAX ASSESSMENT PROCEEDINGS COMMENCE WIT H THE ISSUE OF A NOTICE. THE ISSUE OR RECEIPT OF A NOTICE IS NOT, H OWEVER, THE FOUNDATION OF THE JURISDICTION OF THE INCOME-TAX OFFICER TO MAKE THE ASSESSMENT OR OF THE LIABILITY ASSESSEE TO PAY THE TAX. IT MAY BE URGED THAT THE ISSUE AND SERVICE OF A NOTICE U/S. 22(1) OR (2) MAY AFFECT THE LIABIL ITY UNDER THE PENAL CLAUSES WHICH PROVIDE FOR FAILURE TO ACT AS REQUIRED BY THE NOTICE. THE JURISDICTION TO I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 15 ASSESS AND THE LIABILITY TO PAY THE TAX, HOWEVER, A RE NOT CONDITIONAL ON THE VALIDITY OF THE NOTICE. SUPPOSE A PERSON, EVEN BEF ORE A NOTICE IS PUBLISHED IN THE PAPERS U/S. 22(1), OR BEFORE HE RECEIVES A N OTICE U/S. 22(2) OF THE INCOME-TAX ACT, GETS A FORM OF RETURN FROM THE INCO ME-TAX OFFICER AND SUBMITS HIS RETURN, IT WILL BE FUTILE TO CONTEND TH AT THE INCOME-TAX OFFICER IS NOT ENTITLED TO ASSESS THE PARTY OR THAT THE PARTY IS NOT LIABLE TO PAY ANY TAX BECAUSE A NOTICE HAD NOT BEEN ISSUED TO HIM. THE L IABILITY TO PAY THE TAX IS FOUNDED ON SECTIONS 3 AND 4 OF THE INCOME-TAX ACT, WHICH ARE THE CHARGING SECTIONS. SECTION 22, ETC. ARE THE MACHINERY SECTI ON TO DETERMINE THE AMOUNT OF TAX. 10.4 FURTHER, REGARDING NON ISSUE OF NOTICE U/S. 142(1) OF THE I.T. ACT, IT IS NOTICED FROM THE ASSESSMENT ORDER THAT A QUESTIONNA IRE U/S. 142(1) WAS ISSUED AND DISPATCHED ON 25-02-2013 TO WHICH THE AS REPLIE D ON 05/03/2013. A PROPOSAL WAS ISSUED TO THE ASSESSEE ON 25-03-2013 T O WHICH THE ASSESSEE REPLIED ON 26-03-2013 AND SHRI ALEX KURIAKOSE, CA APPEARED BEFORE THE ASSESSING OFFICER ON 27/03/2013 AND THE CASE WAS DI SCUSSED WITH HIM. BEING SO, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL THAT THERE WAS NO ISSUE OF NOTICE U/S. 142(1) OF THE I.T. ACT. BOTH THE GROUNDS OF THE ASSESSEE RELATING TO ISSUE OF NOTICE U/S. 142(1) AND 143(2) ARE DISMISSED. 11. REGARDING RE-OPENING OF THE ASSESSMENT, THE LD. AR SUBMITTED THAT THERE IS NO VALID MATERIAL UNDER THE POSSESSION OF THE AS SESSING OFFICER TO ESTABLISH OR TO INDICATE SUPPRESSION OF INCOME OF THE ASSESSEE I N THE ASSESSMENT YEARS 2009- 10. ONLY ON THE BASIS OF PRESUMPTION, THE ASSESSIN G OFFICER ASSUMED THE JURISDICTION U/S. 147 OF THE I.T. ACT. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 16 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. IN THIS CASE, THE ORIGINAL RETURN OF INCOME WAS PROCESSED AND ACCEPTE D U/S. 143(1) OF THE ACT AND THERE IS NO ASSESSMENT U/S. 143(3) OF THE I.T. ACT. IT IS NOT IN DISPUTE THAT THE IMPUGNED NOTICE WAS ISSUED U/S. 148 ON 11-01-2012 W HICH WAS BEFORE THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 2 009-10 WHICH IS UNDER APPEAL AND HENCE THE CASE OF THE ASSESSEE WOULD SQU ARELY FALL UNDER THE MAIN PROVISION OF SEC. 147 OF THE I.T. ACT AND NOT UNDER THE PROVISO TO SEC. 147 OF THE I.T. ACT. SUFFICIENT MATERIAL EXISTED ON RECORD FO R ISSUANCE OF NOTICE U/S. 148 OF THE I.T. ACT. THE ASSESSING OFFICER HAS RECORDED T HE REASON FOR ISSUE OF NOTICE U/S. 148 AS FOLLOWS: (A) A SURVEY WAS CONDUCTED. (B) RETURN OF INCOME WAS FILED ELECTRONICALLY. (C) DURING THE COURSE OF SURVEY, IT IS SEEN THAT T HE ASSESSEE HAS NOT MAINTAINED COPIES OF THE BILLS ISSUED TO THE P ATIENTS FOR THE EARLIER YEARS TO SUBSTANTIATE THE RECEIPTS ADMITTE D IN THE BOOKS OF A/C. 12.1 THE ABOVE REASONS RECORDED BY THE ASSESSING OF FICER ARE IN CONFORMITY WITH LAW WHILE ISSUING THE NOTICE U/S. 148 OF THE A CT. ON GOING THROUGH THE ABOVE REASONS, WE OBSERVE THAT THE REASONS RECORDED BY THE ASSESSING OFFICER ARE SPECIFIC, DEFINITE AND RELEVANT TO THE MATTER U NDER DISPUTE. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE WAS ACCEPTED WITHO UT ANY SCRUTINY AND HENCE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD EXPRE SSED HIS OPINION WHILE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 17 PROCESSING THE RETURN OF INCOME U/S. 143(1) OF THE ACT. IN OUR VIEW, THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER THE MAIN PROVISION OF SECTION 147 MEETS ALL THE REQUIREMENTS OF LAW. 12.2 FURTHER, THE SURVEY MATERIAL RECOVERED DUR ING THE COURSE OF SURVEY U/S. 133 OF THE ACT ON 24-09-2009 AT THE KOLLAM LAB OF T HE ASSESSEE , ACCOMPANIED BY THE SWORN STATEMENT OF THE MANAGER OF THE KOLLA M LAB OF THE ASSESSEE, SHRI PHILIP VARGHESE, SHOW THAT THE ASSESSEE HAS SUPPRES SED RECEIPTS FOR CONDUCTING MRI CT SCAN ETC. THOUGH THE ASSESSEE ISSUED RECEIP TS TO THE PATIENTS FOR FEES COLLECTED BY IT FOR CONDUCTING VARIOUS TESTS, COPY OF THESE RECEIPTS WERE NOT MAINTAINED IN ITS BOOKS OF ACCOUNTS AND ONLY ADHOC AMOUNTS WERE RECORDED IN THE BOOKS OF ACCOUNT WITHOUT ANY BASIS. THERE IS V ARIATION BETWEEN ACTUAL RECEIPTS AND DECLARED RECEIPTS IN THE BOOKS OF ACCO UNTS. BEING SO, THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT THE INCOME HAS E SCAPED FROM ASSESSMENT SO THAT THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 O F THE ACT TO ASSESS THE ESCAPED INCOME OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMI TY IN THE ASSUMPTION OF JURISDICTION U/S. 147 OF THE ACT BY THE ASSESSING O FFICER SO AS TO ISSUE NOTICE U/S. 148 OF THE ACT. THIS GROUND OF THE ASSESSEE IN C.O. NO. 31/COCH/2014 IS DISMISSED. 12.3 IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTED BY THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVER I STOCK BROKERS (P) LTD. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 18 (2007) (291 ITR 500) WHEREIN THE SUPREME COURT HAS EXPLAINED THE LAW AS UNDER: 16. SECTION 147 AUTHORIZES AND PERMITS THE ASSESSI NG OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WO RD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUST IFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD H AVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE P UBLIC EXCHEQUER WITH AN IN- BUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED B Y THE DELHI HIGH COURT IN CENTRAL PROVINCE MANGANESE ORE CO. LTD. VS. ITO (19 91) (191 ITR 662), FOR INITIATION OF ACTION U/S. 147 (A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING, IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE S TAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIA L ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETH ER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCER N AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION. 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITU TED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIA LLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION . UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID D OWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDI CTION U/S. 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY TH E ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHAR GEABLE TO INCOME-TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I ) OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITI ONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFI CER COULD HAVE JURISDICTION TO ISSUE NOTICE U/S. 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION S UFFICES. IN OTHER WORDS, IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 19 ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO RE-OP EN THE ASSESSMENT. IT IS, HOWEVER, TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 14 7. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION AND NOT THE PROVISO. 12.4 IN VIEW OF THE ABOVE, THE ACTION OF THE ASSESS ING OFFICER IN ISSUING THE IMPUGNED NOTICE IS THUS IN CONFORMITY WITH THE LAW LAID DOWN BY THE SUPREME COURT IN THE PRESENT CASE. THE APPEAL OF THE ASSES SEE IN C.O. NO. 31/COCH/2014 IS DISMISSED. 13. THE GROUNDS IN C.O. NO. 32/COCH/2014 WERE NOT PRESSED DURING THE XC HEARING AND HENCE, THEY ARE DISMISSED AS NOT PRESSE D. 14. NOW COMING TO THE REVENUE APPEALS IN I.T.A. NOS . 289&290/COCH/2014, THE ISSUE IS ONLY WITH REGARD TO QUANTIFICATION OF THE UNACCOUNTED INCOME. 15. THE LD. DR RELIED ON THE ORDER OF THE ASSESSI NG OFFICER. THE LD. DR SUBMITTED THAT THE ENTIRE SUPPRESSED COLLECTION IS TO BE CONS IDERED AS INCOME OF THE ASSESSEE OVER AND ABOVE THE INCOME RETURNED BY THE ASSESSEE SINCE ALL THE EXPENSES WERE TAKEN CARE OF IN THE REGULAR BOOKS OF ACCOUNTS AND THE ASSESSEE ONLY SUPPRESSED THE INCOME AND NOT THE EXPENSES. 16. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A PRI VATE LTD. COMPANY AND THEY HAVE TWO UNITS ONE AT KOLLAM AND OTHER AT KOTTARAKK ARA. ACCORDING TO THE LD. AR, I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 20 THEY HAVE BEEN DOING CLINICAL DIAGNOSTICS SINCE 199 9 EXCEPT MRI SCAN AND THEIR SISTER CONCERN, TRAVANCORE HEALTH CARE PVT. LTD. WI TH HEAD OFFICE AT TRIVANDRUM AND BRANCHES AT MANY PLACES INCLUDING KOLLAM, WAS D OING MRI SCANNING UNDER THE BRAND NAME METRO SCANS. THE LD. AR SUBMITTED THA T THE KOLLAM CENTRE WAS TAKEN ON LEASE BY METRO SCANS AND A PORTION OF THIS LEASED PREMISES WAS SUB- LEASED TO THE ASSESSEE ON A MONTHLY RENT OF RS.25,0 00/- AND FROM THIS AMOUNT, TAX WAS DEDUCTED AND PAID EVERY MONTH. ACCORDING TO TH E LD. AR, THEY ARE DISTINCT AND DIFFERENT ASSESSEES THOUGH CLOSELY ASSOCIATED. THE METRO SCANS HAVE MRI FACILITY WHEREAS THE ASSESSEE DID NOT HAVE MRI FACI LITY AND FOR PRACTICAL PURPOSE, THEY ARE SEPARATE ESTABLISHMENT HAVING SEPARATE ACC OUNTING AND SEPARATE STAFF. ACCORDING TO THE LD. AR, THE MANAGER OF THE ASSESSE E WAS ALSO SUPERVISING THE MATTERS OF METRO SCANS AS HE WAS ALSO ONE OF THE DIRECTORS OF TRAVANCORE HEALTH CARE PVT. LTD. (METRO SCANS). 16.1 THE LD. AR SUBMITTED THAT THERE WAS A SURVE Y UNDER SECTION 133A AT KOLLAM AND KOTTARAKKARA CENTRES ON 24/09/2009. BUT MISTAKENLY ENOUGH THE KOLLAM SURVEY WAS SPREAD OVER TO METRO SCANS TOO AND COLLECTIONS FROM THEIR MRI SCANS BELONGING TO METRO SCANS WAS ALSO TAKEN AS TH E ASSESSEES COLLECTION. ACCORDING TO THE LD. AR, TREATING THE COLLECTION FO UND FROM MRI SCAN IN THEIR PREMISES WAS WITHOUT BASIS. CASH COLLECTION FROM M RI SCAN FOR THAT DAY FOUND WAS TREATED AS THE COLLECTION BELONGING THE ASSESSE E. ACCORDING TO THE LD. AR, THE BOOKS OF ACCOUNTS AND COLLECTION FROM MRI SCANS OF SEPARATE ASSESSEE WERE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 21 CONSIDERED WRONGLY AS BELONGING TO THE ASSESSEE. A CCORDING TO THE LD. AR, EVERY COLLECTION ATTRIBUTABLE TO THE ASSESSEE WAS DEPOSIT ED IN THE UCO BANK, KOLLAM OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE SURVEY WAS CONDUCTED AT TWO PREMISES AT KOLLAM, ONE, THE ASSESSEES PREMISES AN D THE OTHER METRO SCANS(TRAVANCORE HEALTH CARE P. LTD.) HAVING SCANNI NG UNIT. THE MRI SCAN UNIT BELONGED TO ANOTHER ASSESSEE. THE ASSESSING OFFICE R NOTICED THAT THE ASSESSEE HAD NOT MAINTAINED COPIES OF HIS BILLS ISSUED TO TH E PATIENTS FOR THE EARLIER YEARS TO SUBSTANTIATE THE RECEIPTS ADMITTED IN THE BOOKS OF ACCOUNTS. HOWEVER ACCORDING TO THE LD. AR, THERE NO VALID MATERIAL IN THE POSSESSI ON OF THE ASSESSING OFFICER TO ESTABLISH SUPPRESSION OF INCOME BECAUSE OF THE SURV EY. THIS IS ENOUGH FOR THE INITIATION OF RE-ASSESSMENT PROCEEDINGS UNDER SECTI ON 147 OF THE ACT. THE LD. AR RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS (1976) 103 ITR 437 (SC), ITO VS. MADNANI ENGINEE RING WORKS LTD. (1979) 118 ITR 1 (SC), BIRLA VXL LTD. VS. ASSTT. CIT (1996) 21 7 ITR 1(GUJ.), ABP LTD. VS. JT. CIT & ORS. (2005) (278 ITR 627) (CAL.), SHAMBHU NAT H SHEO PRASAD VS. CIT(1993) 113 CTR (PAT.) 166. 16.2. THE LD. AR SUBMITTED THAT THE INCOME OF THE A SSESSEE WAS ESTIMATED BY THE ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER ASSUMED THAT TRAVANCORE DIAGNOSTICS P. LTD. (THE ASSESSEE) AND TRAVANCORE HEALTH CARE P. LT.D (SISTER CONCERN) ARE ONE AND THE SAME. THE CO LLECTION FROM MRI SCANNING IS THE COLLECTION OF THE ASSESSEE. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 22 16.3 THE LD. AR SUBMITTED THAT THE ASSESSEE HAS TWO CLINICAL LABS ONE AT KOLLAM AND ANOTHER AT KOTTARAKKARA. THE ASSESSING OFFICER , FIRST COMPARED THE COLLECTION FOR THE MONTH OF AUGUST 2007 OF KOTTARAKKARA UNIT W ITH THE KOLLAM UNIT WITH THE IMPOUNDED STATEMENT AND ARRIVED AT A FORMULA THAT T HE KOLLAM COLLECTION IS MORE THAN 130.50% OF KOTTARAKKARA COLLECTION. THE ASSES SING OFFICER RELIED ON THE IMPOUNDED LOOSE SHEETS FOR THE MONTH OF AUGUST 2007 , WHICH RELATES TO THE ASSESSMENT YEAR 2008-09 AND NOT RELATING TO THE ASS ESSMENT YEAR IN QUESTION. ACCORDING TO THE LD. AR, LOOSE SHEETS HAVE NO EVIDE NTIARY VALUE. FOR THIS, THE LD. AR RELIED ON THE JUDGMENT OF THE SUPREME COURT IN T HE CASE OF CIT VS. V.C. SHUKLA (1998) 3 SCC 410). THE ASSESSING OFFICER RELIED ON THE SWORN STATEMENT OF THE MANAGER, SHRI PHILIP VARGHESE, THE MANAGER OF THE A SSESSEE. HOWEVER, THE LD. AR SUBMITTED THAT THE STATEMENT HAS NO EVIDENTIARY VAL UE FOR WHICH HE RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F PAUL MATHEW & SONS REPORTED IN 263 ITR 101. MOREOVER, ACCORDING TO THE LD. AR, TH E ASSESSING OFFICER HAS ADOPTED PICK AND CHOOSE METHOD IGNORING THE ANSWERS TO THE QUESTIONS WHICH IS RELEVANT TO THE ASSESSEE BY GIVING HIS OWN INTERPRE TATION FOR ESTIMATION OF SUPPRESSED COLLECTION. 16.4 THE LD. AR SUBMITTED THAT THE PROPER ACCOUN TS ARE MAINTAINED AT KOTTARAKKARA FOR BOTH THE UNITS AND THE COLLECTION FROM ANCHAL AND ADOOR UNITS OF METRO SCANS, ANOTHER ASSESSEE WHO HAD ENTRUSTED THE WORK ON ACCOUNT OF FAILURE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 23 OF THEIR MACHINE WHICH WAS THE PRACTICE FOLLOWED IN THE ASSESSEES BUSINESS. THE AO TREATED THE DIFFERENCE OF RS.27,14,505/- AS SUPP RESSION FOR KOTTARAKKARA LAB ALONE FOR FOUR MONTHS. ACCORDING TO THE LD. AR, TH E AO ARRIVED AT THE TOTAL COLLECTION AT KOTTARAKKARA AND THE TURNOVER OF KOLL AM AND TREATED AS GROSS COLLECTION ADDING 259.76% OF THE RETURNED COLLECTIO N AND FROM THAT REDUCED THE EXPENDITURE S P&L A/C AS PER RETURN. ACCORDING TO THE LD. AR, THE DIFFERENCE WAS DUE TO WRONG INCLUSION OF METRO SCANS INCOME FROM M RI, WHICH IS NOT ATTRIBUTABLE TO THE ASSESSEE. ACCORDING TO THE LD. AR, THE CIT( A) SUSTAINED THE ADDITION OF RS.3,37,755/- BUT DID NOT ALLOW THE PORTION OF THE FEES COLLECTED FOR WORK REFERRED BY THE SISTER CONCERNS AT ANCHAL AND ADOOR ON ACCOU NT OF BREAK DOWN OR REPAIR OF THEIR MACHINES. THE LD. AR SUBMITTED THAT THIS PAYM ENT MAY BE ALLOWED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. IN THIS CASE THERE WAS A SURVEY U/S. 133A OF THE I.T. ACT ON 24-09-200 9 AT THE KOLLAM LAB OF THE ASSESSEE. DURING THE SURVEY ACTION, SUPPRESSED RECE IPTS WERE FOUND. IT WAS FOUND THAT THOUGH THE ASSESSEE ISSUED RECEIPTS TO THE PAT IENTS FOR FEES COLLECTED BY IT FOR CONDUCTING VARIOUS TESTS, THE COPY OF THESE RECEIPT S WERE NOT MAINTAINED IN ITS BOOKS OF ACCOUNTS AND ONLY ADHOC AMOUNTS WERE RECOR DED IN THE BOOKS OF ACCOUNTS. THE DETAILS OF RECEIPTS FOR THE SERVICES FROM BOTH THE LABS ADMITTED BY THE ASSESSEE IN ITS RETURNS AND ACTUAL COLLECTION F ROM KOTTARAKKARA LAB COMPUTED FROM DOCUMENTS FOUND DURING SURVEY ARE AS FOLLOWS: I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 24 A.Y. ADMITTED INCOME FROM SERVICES FOR THE ENTIRE YEAR (WORKING DAYS) FOR KOLLAM & KOTTARAKKARA LAB) ADMITTED AVERAGE DAILY COLLECTION FROM BOTH LABS ACTUAL COLLECTION FROM KOTTARAKKARA LAB ALONE ACTUAL AVERAGE DAILY COLLECTION FROM KOTTARAKKARA LAB ALONE 2009-10 RS.72,26,148 RS.19,798 RS.27,14,505 (FOR 4 MONTHS) RS.22,434 (DIVIDED BY 121) THUS, DURING THE SURVEY, THE ACTUAL COLLECTION IN K OLLAM LAB WAS RS. 51,370/-. FOR THE MONTH OF AUGUST 2007, THE COLLECTION AT KOLLAM LAB STOOD AT RS. 10,09,300/- WHILE IT WAS RS.8,32,170/- AT KOTTARAKKARA. SIMILA RLY, FOR THE MONTH OF NOVEMBER, 2008, THE COLLECTION AT KOLLAM LAB STOOD AT RS.8,74 ,100/-, WHILE COLLECTION AT KOTTARAKKARA LAB WAS AT RS.6,78,626/- THUS IT WAS C LEAR THAT THE COLLECTION AT KOLLAM WAS ALWAYS MORE THAN THAT OF KOTTARAKKARA LA B. 17.1 FOR THE ASSESSMENT YEAR 2009-10, THE AVERA GE COLLECTION PER WORKING DAY FROM KOTTARAKKARA BRANCH WAS WORKED OUT AT RS.27,14 5/-. THE ASSESSING OFFICER WORKED OUT THE TOTAL COLLECTION FROM KOTTARAKKARA B RANCH FOR 300 DAYS AT RS.81,43,515/- THE TOTAL COLLECTION FROM KOLLAM BRA NCH WAS WORKED OUT AT RS.1,06,27,287/-. 17.2 ON THE CONTRARY, THE CIT(A) OBSERVED THAT TH E ACTUAL COLLECTION FOUND AS PER IMPOUNDED DOCUMENT FOR FOUR MONTHS WAS RS. 27,1 4,505/- AND COLLECTION SHOWN FOR THESE FOUR MONTHS IN THE BOOKS OF ACCOUNT S WAS RS. 23,76,750/-. BEING SO, THE CIT(A) WORKED OUT THE DIFFERENCE AT RS.3,37 ,755/-. IN VIEW OF THIS, THE I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 25 CIT(A) HELD THAT THE ASSESSING OFFICER HAS ESTIMATE D THE INCOME BASED ON PRESUMPTIVE BASIS. ACCORDINGLY, THE CIT(A) RESTRIC TED THE ADDITION MADE BY THE ASSESSING OFFICER TO RS.3,37,755/- AS DIFFERENCE OF RECEIPTS OF FOUR MONTHS FOUND AS PER ACTUAL GROSS COLLECTION SHOWN IN THE INCRIMINAT ION DOCUMENT AND THE COLLECTION SHOWN FOR THIS PERIOD IN THE BOOKS OF ACCOUNTS. THU S THE CIT(A) OBSERVED THAT THERE IS NO MATERIAL TO SUGGEST THE SUPPRESSION OF COLLECTIONS FOR MORE THAN RS.3,37,755/-AND DELETED THE BALANCE ADDITION. 17.3 AS SEEN FROM THE ABOVE, THERE IS CLEAR CAS E OF SUPPRESSION OF COLLECTIONS ON DAILY BASIS FOR THE ASSESSMENT YEAR 2009-10 AND 2010-11 HAVING BEEN FOUND DURING THE COURSE OF SURVEY CARRIED OUT BY THE DEPA RTMENT AND THE SAME WAS ADMITTED BY THE ASSESSEES MANAGER, SHRI PHILIP VAR GHESE IN HIS SWORN STATEMENT. THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CAS E OF COMMISSIONER OF SALES TAX, MADHYA PRADESH VS. H.M. ESUFALI H.M. ABDULALI ( 1973) (90 ITR 271) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E WHEREIN IT WAS HELD THAT IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO PROOF I N SUPPORT OF THAT ESTIMATE IS IMMATERIAL AND IT IS HIS BEST JUDGMENT ASSESSMENT. 17.4 NOW COMING TO THE QUANTUM OF SUPPRESSED INC OME, THE ASSESSING OFFICER HAS MADE ESTIMATION OF THE SAME FOR ALL WORKING DAY S OF THE RELEVANT YEAR AT THE DAILY RATE OF SUPPRESSION OF COLLECTIONS. IN OUR O PINION, THIS IS A MECHANICAL I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 26 APPROACH BY THE ASSESSING OFFICER. BUSINESS GRAPH CANNOT BE STRAIGHT THROUGHOUT THE PERIOD AND ONE CANNOT PRESUME THAT THE ASSESSEE INVARIABLY FOLLOWED SUPPRESSION OF COLLECTION ON EVERY DAY AT A GIVEN R ATE IN THE ENTIRE BUSINESS YEAR. THE ASSESSING OFFICERS ESTIMATION IS A RIGID ONE W ITHOUT GIVING SCOPE FOR FLUCTUATIONS. BEING SO, WE ARE OF THE OPINION THAT THE ESTIMATION DONE BY THE ASSESSING OFFICER HAS TO BE MODIFIED. AT THE SAME TIME, WE ARE NOT IN AGREEMENT WITH THE LD. COUNSEL OF THE ASSESSEE THAT ONLY THE EVIDENCE FOUND RELEVANT TO THE SUPPRESSED RECEIPTS IS TO BE CONSIDERED FOR ADDITIO N. IT CANNOT BE EXPECTED THAT THE ASSESSEE WOULD RETAIN DOCUMENTS REGARDING THE C ONCEALMENT OF INCOME. IF THE DOCUMENTS FOR EVERY CONCEALMENT ARE INSISTED TO BE OBTAINED BY THE ASSESSING OFFICER, PRACTICALLY IT IS IMPOSSIBLE. WE CANNOT S HUT OUR EYES TO THE EVIDENCE COLLECTED BY THE AUTHORITIES IN THE COURSE OF SURVE Y ACTION. THERE WAS EVIDENCE COLLECTED BY THE AUTHORITIES IN THE COURSE OF SURVE Y U/S. 133A OF THE I.T. ACT ON 24- 09-2009.. 18.5 IT IS ALSO TO BE NOTED THAT THE MANAGER OF THE COMPANY, SHRI PHILIP VARGHESE HAD DEPOSED AT THE TIME OF SURVEY THAT THE INCOME FROM KOLLAM LAB WAS NOT INCLUDED IN THE DAILY STATEMENT AND NOT ACCOUNT ED FOR. BEING SO, ONE HAS TO MAKE A REALISTIC ESTIMATION OF INCOME ON THE BASIS OF EVIDENCE BROUGHT ON RECORD. THE ASSESSING OFFICER IS AUTHORIZED AND EMPOWERED T O MAKE SUCH ESTIMATION IN A JUDICIOUS MANNER ON THE BASIS OF THE MATERIAL AVAIL ABLE ON RECORD. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 27 18.6 THE ACTUAL COLLECTION OF KOTTRAKKARA LAB AS FO UND DURING THE SURVEY FOR FOUR MONTHS IS RS.27,14,505/- AS AGAINST SHOWN IN THE BO OKS OF ACCOUNTS FOR THE CORRESPONDING PERIOD AT RS.23,76,750/-. THE DIFFER ENCE FOR FOUR MONTHS IS WORKED OUT AT RS. 3,37,755/-. THUS, FOR THE WHOLE YEAR, T HE SUPPRESSED COLLECTION FOR THE KOTTARAKKARA LAB IS WORKED OUT ON THE BASIS OF THE ACTUAL SUPPRESSED COLLECTION AT RS.10,13,265/-. IN OUR OPINION, IT WOULD BE REASONA BLE IF THE ESTIMATION OF UNACCOUNTED COLLECTION IS MADE ON THE BASIS OF ACTU AL SUPPRESSED COLLECTION FOUND DURING THE COURSE OF SURVEY AND AND INCREASE IT FOR THE WHOLE YEAR BY MULTIPLYING BY THREE (I.E.,12 MONTHS DIVIDED BY 4 MONTHS). 18.7 NOW COMING TO THE KOLLAM LAB, THERE IS NO D ISPUTE THAT THE COLLECTION OF KOLLAM LAB IS ESTIMATED T 130.5% MORE THAN THE COL LECTION AT KOTTARAKKARA LAB. ACCORDINGLY, THE SUPPRESSION OF COLLECTION IN KOLLA M LAB IS WORKED OUT AT RS. 13,22,311/- (RS.10,13,265 X 130.5%). THUS, THE TOT AL SUPPRESSED COLLECTION FOR THE ASSESSMENT YEAR 2009-10 IS WORKED OUT AT RS.23, 35,576/- AS AGAINST RS.3,37,755/- WORKED OUT BY THE CIT(A). 18.8 SIMILARLY, ON THE SAME BASIS, THE SUPPRESSED R ECEIPTS FOR ASSESSMENT YEAR 2010-11, IS TO BE ESTIMATED. AS SEEN FROM THE REC ORDS, THE DECLARED TURNOVER FOR THE ASSESSMENT YEAR 2009-10 IS RS. 72,26,143. AS A GAINST THIS, THE ACTUAL RECEIPTS FOR THE ASSESSMENT YEAR 2010-11 IS RS.89,59,491/-. THUS, THERE IS INCREASE OF 24% PER ANNUM IN DECLARED RECEIPTS AS COMPARED TO T HE ASSESSMENT YEAR 2009-10 I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 28 WITH THE ASSESSMENT YEAR 2010-11. ACCORDINGLY, THE SUPPRESSED RECEIPTS IS TO BE ESTIMATED AT THE INCREASED RATE OF 24% OF RS.24,35, 576/- FOR THE ASSESSMENT YEAR 2010-11, I.E., 28,97,354/-. THUS, THE ADDITION WOUL D BE RS.24,35,576/- FOR THE ASSESSMENT YEAR 2009-10 AND RS.28,97,354/- FOR THE ASSESSMENT YEAR 2010-11 IS TO BE MADE WHICH WOULD BE OVER AND ABOVE THE RETURN ED INCOME. THERE CANNOT BE ANY FURTHER DEDUCTION TOWARDS EXPENSES AGAINST T HE SUPPRESSED INCOME FOR BOTH THE ASSESSMENT YEARS. SINCE IN OUR OPINION, AL L THE EXPENSES RELATING TO THE BUSINESS ARE SAID TO HAVE BEEN TAKEN CARE OF IN THE REGULAR BOOKS OF ACCOUNT, WITH THIS OBSERVATION, THE REVENUE GROUND IN BOTH THE AP PEALS IS PARTLY ALLOWED. 19 IN THE RESULT, THE APPEALS IN I.T.A. NOS. 289&29 0/COCH/2014 FILED BY THE REVENUE ARE PARTLY ALLOWED AND THE CROSS OBJ ECTIONS IN C.O. NO. 31&32/COCH/2014 FILED BY THE ASSESSEE ARE DISMISSED . PRONOUNCED IN THE OPEN COURT ON 12-02-2015 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 12-02-2015 GJ COPY TO: 1. THE TRAVANCORE DIAGNOSTICS PVT. LTD., KAILAS ARC ADE, DIST. HOSPITAL ROAD, KOLLAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM (CAMP. KOCHI) 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. I.T.A. NOS.289&290/COCH/2014 & C.O. NOS.31&32/COCH/2014 29