M/s. Sunayana Eye Clinic, Bangalore V. DCIT, Bangalore

CO 56/BANG/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6333 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 22-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GANESH RAO CIT SHRI BRITO
• Keywords: Principle of natural justice

Judgement Text

PAGE 1 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.1115/BANG/2010 (ASSESSMENT YEAR 2007-08) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5(1),BANGALORE. - APPELLANT VS M/S SUNAYANA EYE CLINIC, NO.1012/22, 26, 26 TH MAIN, 4 TH T BLOCK, JAYANAGAR, BANGALORE. - RESPONDENT PAN : AAEFS 9478 C C.O.NO.56/BANG/2010 (ASST. YEAR 2007-08) (BY ASSESSEE) DATE OF HEARING : 25/8/2011 DATE OF PRONOUNCEMENT : 26/8/2011 REVENUE BY : SHRI GANESH RAO, ADDL. CIT ASSESSEE BY : SHRI BRITO, C.A. ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT AND THE C ROSS OBJECTION PREFERRED BY THE ASSESSEE ARISE OUT OF THE ORDER OF CIT(A)-II, BANGALORE DATED 26.4.2010. THE RELEVANT ASST. YEAR IS 2007-08. PAGE 2 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 2 2. THE SOLITARY ISSUE THAT IS RAISED IN THIS APPEAL IS WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MA DE BY THE AO. THE AO HAD ESTIMATED THE PROFESSIONAL RECEIPTS AT RS.72 ,60,000/- AS AGAINST RS.47,24,050/- DECLARED BY THE ASSESSEE IN T HE RETURN OF INCOME. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON OPHTHALMIC MEDICAL SERVICES IN THE EYE CARE SEGMENT. FOR THE CONCERNED ASST. YEAR, RETURN OF INCOME WAS FILED ON 29.10.2007 DECLARING A TOTAL INCOME OF RS.14,15,900/-. THE AS SESSEE HAD MAINTAINED BOOKS OF ACCOUNTS AS STIPULATED U/S 44AA OF THE ACT AND WAS SUBJECTED TO TAX AUDITED U/S 44AB OF THE ACT. 3.1 THE RETURN OF INCOME WAS PICKED UP FOR SCRUTI NY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. THE AO I N THE COURSE OF SCRUTINY ASSESSMENT INSISTED THAT THE APPOINTMENT DI ARY FOR THE CONCERNED FINANCIAL YEAR THROUGH WHICH THE APPOINTM ENTS WERE FIXED FOR THE PATIENTS, MUST BE PRODUCED BEFORE HIM. IT WAS EXPLAINED TO THE AO THAT THE SAID DIARY, WHERE THE APPOINTMENTS WERE RECORDED, WAS NOT TRACEABLE DUE TO THE FACT THAT WHEN THE ASS ESSEE MOVED TO THE NEW PREMISES IN JULY, 2007, THE SAME MIGHT HAVE BEEN MISPLACED. THE AO CAUSED AN ENQUIRY BY DEPUTING HIS INSPECTOR TO THE ASSESSEES NEW PREMISES ON 3.12.2009. BASED ON THE INSPECTION REPORT, THE AO ISSUED A PRE-ASSESSMENT NOTICE DATED 8.12.2009 CONV EYING THAT SINCE THE PRIMARY RECORD OF PATIENT REGISTER THROUGH WHICH THE PAGE 3 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 3 APPOINTMENTS ARE FIXED ARE NOT AVAILABLE, HE PROPOS ED TO REJECT THE BOOKS OF ACCOUNTS AND ASSESSED THE TOTAL COLLECTION AT RS.72,60,000/- AND NET PROFIT AT RS.48 LAKHS AFTER ESTIMATING THE EXPENSES OF RS. 24 LAKHS. 3.2 ON RECEIPT OF THE PROPOSITION LETTER FROM THE AO, THE ASSESSEE MADE A DETAILED WRITTEN SUBMISSION VIDE LE TTER DATED 14.12.2009 REFUTING THE PROPOSITION LETTER AND EXPL AINING THAT THE BOOKS OF ACCOUNTS CANNOT BE REJECTED MERELY ON ACCOU NT OF NON- AVAILABILITY OF APPOINTMENT DIARY AND IN PARTICULAR, BECAUSE THE ASSESSEE HAD MAINTAINED ALL THE NECESSARY BOOKS OF A CCOUNTS AND RECORDS PRESCRIBED U/S 44AA(3) READ WITH RULE 6F. IT WAS ALSO SUBMITTED THAT THE PROPOSAL TO REJECT THE BOOKS OF ACCOUNT IS ILLEGAL AND PERVERSE AND THE INSPECTION REPORT CANNOT BE A BASIS TO ESTIMATE THE INCOME FOR FINANCIAL YEAR 2006-07 BASED ON THE I NFORMATION PREVALENT WHEN THE INSPECTION WAS CONDUCTED (FINANC IAL YEAR 2009-10). IT WAS SUBMITTED THAT THE YEAR UNDER ASSESSMENT, THE ASSESSEE WAS OPERATING IN A SMALL RENTAL PREMISES AND WAS NOT EQ UIPPED WITH THE LATEST SURGICAL EQUIPMENT ETC. MOREOVER, IT WAS SU BMITTED THAT THE REPORT OF THE INSPECTOR BASED ON WHICH THE AO WAS P ROPOSING TO ESTIMATE THE PROFESSIONAL INCOME WAS NOT PUT TO THE ASSESSEE FOR ITS REBUTTAL. 3.3 THE AO REJECTED THE OBJECTIONS RAISED BY THE AS SESSEE AND PASSED THE ASSESSMENT ORDER DATED 17.12.2009 BY REJECTING THE BOOKS OF ACCOUNTS STATING THAT THE BASIC PATIENT RE GISTER AND THE PAGE 4 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 4 REGISTER OF SURGERY DURING THE FINANCIAL YEAR 2006-07 WAS NOT PRODUCED. THE AO ESTIMATED THE PROFESSIONAL RECEIP TS AT RS.72,60,000/- AND ALLOWED EXPENSES TO THE EXTENT O F RS.24,95,458/- AND FIXED THE TOTAL INCOME AT RS.47,64,542/-. 4. AGGRIEVED BY THE ASSESSMENT IN REJECTING THE BOO KS OF ACCOUNTS AND ESTIMATING THE PROFESSIONAL INCOME, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUT HORITY. 5. THE CIT(A) EXAMINED THE ENTIRE FACTS OF THE CAS E AND CONSIDERED THE GROUNDS RAISED BEFORE HIM AND ALSO T HE WRITTEN SUBMISSIONS. HE ALLOWED THE APPEAL OF THE ASSESSEE FOR HIS DETAILED REASONING MENTIONED IN PARAGRAPHS 3.4 TO 3.9. THE FINDINGS OF THE CIT(A) IS REPRODUCED BELOW FOR THE SAKE OF CONVENIE NCE:- 3.4 FROM THE ABOVE, IT CAN BE SEEN THAT THE ESTIMATION OF PROFESSIONAL INCOME WAS MADE ON THE BASIS OF THE INSPECTORS REPORT AND WITHOUT ANY CORROBORATING DOCUMENTARY EVIDENCE. THE AO ALSO HELD THAT HE IS ESTIMATING SUCH PROFESSIONAL INCOME SINCE THE APPELLANT HAD FAILED TO PRODUCE APPOINTMENT REGISTER, RESULTING IN A WHOPPING ESTIMATION OF INCOME AT RS.72,60,000/-. IN THE WRITTEN SUBMISSION, THE APPELLANT HAS ALLEGED THAT THE AO HAS NOT PROVIDED A COPY OF THE INSPECTORS REPORT CARRIED OUT ON 3.12.2009 AND TILL DATE THE APPELLANT HAS NOT RECEIVED A COPY OF THE INSPECTION REPORT THAT IS BEING USED AGAINST HIM. 3.5 THE RETURN OF INCOME FOR AY 2007-08 WAS FILED ON 29.10.2007 ENCLOSING TAX AUDIT REPORT IN FORM NO.3CB AND CD WHEREIN THE AUDITOR HAS PAGE 5 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 5 CERTIFIED THAT THE APPELLANT IS MAINTAINING GENERAL LEDGER, BANK PASSBOOK, CASH BOOK, PURCHASE REGISTER, SALES REGISTER AND JOURNAL REGISTER, WHIC H WERE VERIFIED/EXAMINED WITH REFERENCE TO THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AS ON 31.3.2007, WHICH ARE IN AGREEMENT WITH THE BOOKS OF ACCOUNT. THE APPELLANT HAD MAINTAINED ALL THE PRESCRIBED BOOKS OF ACCOUNT AND DOCUMENTS AS REQUIRED U/S 44AA READ WITH RULE 6F. THE AO DID NOT FIND OMISSION OR ERRORS IN ACCOUNTING OR MISSTATEMENT IN THE ACCOUNTS MAINTAINED BY THE APPELLANT. 3.6 I HAD OCCASION TO GO THROUGH THE RETURN OF INCOME FOR AY 2005[P6 AND 2006-07. DURING THE FOLLOWING YEARS, THE PROFESSIONAL RECEIPTS DISCLOSED ARE AS UNDER: ASST. YEAR PROFESSIONAL REMARKS RECEIPTS (RS.) 2005-06 42,22,346 ---- 2006-07 43,00,000 --- 2007-08 47,24,050 RELEVANT ASST. YEAR 3.7 THE TABULATED DETAILS SHOW THAT PROFESSIONAL PRACTICE WAS INCREASING YEAR TO YEAR. THE AO HAS ESTIMATED PROFESSIONAL RECEIPT MANY-FOLD AS AGAINST THE DECLARED RECEIPT OF RS.47,24,050/-. MOREOVER, THE SUPPRESSED RECEIPTS HAVE NOT BEEN LINKED WITH UNDISCLOSED INVESTMENT EITHER MOVABLE OR IMMOVABLE ASSETS OR PARKED IN THE FORM OF FIXED DEPOSIT. ADMITTEDLY, THE ESTIMATION IS MADE WITHOUT DOCUMENTA RY SUPPORT. THUS IT IS PURELY A SUSPICION AND GUESSWOR K. 3.8 IT IS ALSO HELD THAT THE ESTIMATE IS ON THE BAS IS OF ENQUIRY REPORT OF THE INSPECTOR AND THE SAME IS NOT MADE AVAILABLE TO THE APPELLANT FOR HIS REBUTTAL. THUS, THIS IS PAGE 6 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 6 AGAINST PRINCIPLE OF NATURAL JUSTICE. RELIANCE IS PLACED ON THE DECISION IN THE CASE OF J P PHILIP V STATE OF K ERALA (1993) 201 ITR 591 (KER) WHEREIN IT WAS HELD THAT A BEST JUDGMENT ASSESSMENT ON THE SOLE BASIS OF AN INSPECT ION REPORT, WHICH WAS NOT MADE AVAILABLE AND THE CONTEN TS WHEREOF WERE NOT STATED OR DISCUSSED WITH THE ASSES SEE CANNOT BE SUSTAINED AS THE SAME CANNOT BE TERMED AS REASONABLE AND BASED ON MATERIAL. 3.9 FROM THE DISCUSSION MADE ABOVE, IT IS CLEAR THA T NO MATERIAL COULD BE BROUGHT ON RECORD BY THE AO TO JUS TIFY THE ADDITION TO THE EFFECT AS TO WHETHER THE RECEIP TS HAVE BEEN SUPPRESSED AND THE ADDITIONS HAVE BEEN MA DE ON THE ESTIMATE BASIS WITHOUT ANY MATERIAL IN HIS POSSESSION. LIKEWISE, IT WAS OBSERVED THAT NO ATTE MPT WAS MADE BY THE APPELLANT TO SUPPRESS THE PROFESSION AL RECEIPTS BY NOT MAINTAINING BASIC REGISTER (APPOINTM ENT DIARY). THUS THE ADDITION OF RS.25,35,950/- (RS.72,60,000 RS.47,24,050/-) MADE ON ESTIMATED B ASIS IS NOT SUSTAINABLE. HENCE, THE ADDITION OF RS.25,3 5,950/- IS DELETED. 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. THE LEARNED DR STRONGLY RELIED ON THE ORDER OF ASSESSMENT AND THE GROUNDS OF APPEAL RAISED. 8. THE LEARNED AR, ON THE OTHER HAND, REITERATED T HE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS CLEAR THAT THE ASSESSEE COULD NOT PRODUCE THE APPOINTMENT DIARY THROUGH WHICH APPOINTMENTS ARE FIXED BEFORE THE AO. THE BOOKS OF ACCOUNTS ARE MAINTAINED ON A DAY TO DAY BASIS PAGE 7 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 7 DULY SUPPORTED BY RECEIPTS, BILLS AND VOUCHERS. NO M ISTAKES, OMISSIONS OR ERRORS WERE FOUND BY THE AO IN THE BOOKS OF ACCOU NT. MOREOVER, THE SUPPRESSED INCOME HAS NOT BEEN LINKED WITH ANY U NDISCLOSED INVESTMENT EITHER IN ANY MOVABLE OR IMMOVABLE ASSETS OR PARKED IN THE FORM OF FIXED DEPOSIT NOR WAS ANY CASH FOUND. THE PROFESSIONAL RECEIPTS DECLARED IN THE PREVIOUS ASST. YEARS, NAMEL Y, ASST. YEAR 2005- 06 AND 2006-07, WAS BELOW THE PROFESSIONAL RECEIPT THAT WAS DISCLOSED IN THE CURRENT YEAR. IT IS THUS OBVIOUS T HAT IT WAS ON MERE SUSPICION THAT THE AO DISREGARDED THE PROFESSIONAL FEES AS PER THE BOOKS OF ACCOUNTS AND ADOPTED AN ESTIMATION WHICH H AS RESULTED IN AN ASSESSMENT THAT IS WRONG AND NOT BASED ON FACTS. 9.1 THE AO CAUSED AN ENQUIRY BY DEPUTING HIS INSPEC TOR TO THE ASSESSEES PREMISES ON 3.12.2009. BASED ON THE INSPECTION REPORT, THE AO ISSUED A PROPOSITION LETTER DATED 8.12.2009 CONVEYING THAT SINCE THE PRIMARY RECORD OF PATIENT REGISTER THROUG H WHICH APPOINTMENTS ARE FIXED IS NOT AVAILABLE, HE PROPOSE D TO DETERMINE THE PROFESSIONAL INCOME BASED ON ENQUIRIES MADE BY THE I NSPECTOR ON ESTIMATED BASIS. THE ASSESSEE HAD REQUESTED THE AO TO PROVIDE HIM A COPY OF THE INSPECTION REPORT OF THE INSPECTOR CARRI ED OUT ON 3.12.2009. THE INSPECTION REPORT, FOR THE REASONS B EST KNOWN TO THE AO, WAS NOT MADE AVAILABLE TO THE ASSESSEE FOR HIS REBUTTAL, THUS VIOLATING THE PRINCIPLE OF NATURAL JUSTICE. THE HO NBLE KERALA HIGH COURT IN THE CASE OF J P PHILIP V STATE OF KERALA ( 201 ITR 591) HAD HELD THAT WHEN A BEST JUDGMENT ASSESSMENT ON THE SO LE BASIS OF AN INSPECTION REPORT, WHICH WAS NOT MADE AVAILABLE TO THE ASSESSEE, PAGE 8 OF 8 ITA NO.1115/BANG/2010 & C.O.NO.56/BANG/2010 8 CANNOT BE SUSTAINED AS THE SAME CANNOT BE TERMED AS REASONABLE AND BASED ON MATERIAL. 9.2 THE FINDING OF THE FIRST APPELLATE AUTHORITY F OR DELETING THE ADDITION MADE BY THE AO IS WELL JUSTIFIED AND NO EVIDENCE HAS BEEN PLACED ON RECORD BY THE REVENUE TO DISPEL THE S AME. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED F OR. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ON LY SUPPORTING THE ORDER OF THE CIT(A). SINCE WE HAVE DISMISSED THE APPEAL FILED BY THE REVENUE, THE CROSS OBJECTION FIL ED BY THE ASSESSEE HAS BECOME INFRUCTUOUS. 12. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED ON FRIDAY, THE 26 TH DAY OF AUGUST, 2011 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.