The DCIT, Cricle-1, RAJKOT-GUJARAT V. Dr. Vijay S. Maheshwari, RAJKOT-GUJARAT

ITA 115/RJT/2008

• Counselvise Citation: 11524914 RSA 2008
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LD BHARTI
• Assessee Lawyers: J C RANPURA
• Keywords: Depreciation; Income from undisclosed sources; Source of fund
• Section: 69C; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SH. A.L. GEHLOT, ACCOUNTANT MEMBER AND SH. N .R.S. GANESAN, JUDICIAL MEMBER I.T.A. NO.115(RJT)/2008 ASSESSMENT YEAR:2004-05 THE DY. COMMR. OF INCOME-TAX, VS. DR. VIJAY S. MAH ESHWARI, CIRCLE-1, RAJKOT. RAJKOT. (APPELLANT) (RESPONDENT) C.O. NO.10/RJT/2008 (ARISING OUT OF ITA NO.115/RJT/2008) ASSESSMENT YEAR : 2004-05 DR. VIJAY S. MAHESHWARI, VS. THE DY. COMMR. OF I NCOME-TAX, RAJKOT. CIR.1, RAJKOT. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. L.D. BHARTI, DR RESPONDENT BY: SH. J.C. RANPURA, CA ORDER PER A.L. GEHLOT, AM THIS APPEAL BY THE REVENUE AND C.O. BY THE ASSESSE E ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-1, RAJKOT, DATED 21 .11.2007 FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) HAS ERRED IN LAW IN RESTRICT ING THE ADDITION OF RS.2,19,000/- AS AGAINST ADDITION OF RS.58,85,990/- ON ACCOUNT OF SUPPRESSION OF RECEIPT S. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.33,16,841/- ON ACCOUNT OF DISALLOWAN CE OF EXPENSES. 3. ON THE FACTS OF THE CASE, THE LD. CIT(A) OUGHT T O HAVE UPHELD THE ORDER OF THE A.O. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. ITA NO.115/RJT/2008 CO NO.10/RJT/2008 2 3. IN THE C.O., THE ASSESSEE HAS RAISED FOLLOWING G ROUNDS: 1. THE GROUNDS OF CROSS-OBJECTIONS MENTIONED HEREU NDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2. THE LD. CIT(A)-1, RAJKOT ERRED ON FACTS AS ALSO IN LAW IN ADOPTING THE INCOME PER OPERATION AT RS.6,100/- AS AGAINST INCOME ADMITTED AT RS.6,000/- AND RETAINING ADDITIO N OF S.2,19,000/- ON ACCOUNT OF ALLEGED SUPPRESSED RECEI PTS FROM OPERATIONS. THE ADDITION MAY KINDLY BE DELETED. 4. THE FIRST GROUND IN REVENUES APPEAL AND GROUND NO.2 RAISED BY THE ASSSSEE IN THE C.O ARE COMMON BASED ON IDENTICAL SE T OF FACTS. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DOCTOR, RUNNING EYE-CARE HOSPITAL. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED ON 03.02. 2004. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE WAS INDULG ED IN SUPPRESSING ACTUAL RECEIPTS FROM OPERATIONS/TREATMENT OF INDOOR PATIEN TS BY UNDERSTATING THE NUMBER OF PATIENTS OPERATED. DURING THE PERIOD FROM 01.04. 2003 TO 31.01.2004, 589 OPERATIONS WERE CARRIED OUT WHEREAS AS PER COMPUTER IZED RECORD, ONLY 127 OPERATIONS HAVE BEEN NOTED. SOME OF THE INCRIMINATI NG DOCUMENTS INCLUDING 3C REGISTER AND DOCUMENTS EVIDENCING 589 OPERATIONS HAVE BEEN CARRIED OUT DURING THE YEAR UPTO THE DATE OF SURVEY WERE FOUND. THE RE CORD WAS IMPOUNDED. THE ASSESSEE FILED AN APPLICATION UNDER SECTION 144A OF THE ACT BEFORE THE ADDITIONAL CIT, RANGE-1, RAJKOT REQUESTING HIM TO ISSUE NECESS ARY DIRECTIONS IN RESPECT OF THE ABOVE MATTER. THE ADDITIONAL CIT, ACCORDINGLY D IRECTED THE A.O. TO APPLY OPERATION CHARGES AT AN AVERAGE OF RS.14,000/- PER OPERATION (PER PATIENT) FOR THE ENTIRE PERIOD FROM 01.04.2003 TO 31.01.2004. ACCORD INGLY, THE A.O. NOTED THAT THE TOTAL NUMBER OF OPERATIAONS FOR WHOLE YEAR CARRIED OUT (529 DURING PRE SURVEY PERIOD AND 106 OPERATIONS DURING POST SURVEY PERIOD ) TOTALING 635 OPERATIONS. THE A.O. APPLIED RATE OF RS.14,000/- PER OPERATION AND WORKED OUT RS.88,90,000/-. THE RECEIPTS OF RS.30,04,010 LACS WERE ALREADY ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THEREFORE, NE T UNACCOUNTED RECEIPTS WORKED OUT AT RS.58,85,190/-. THE A.O. DID NOT ALLO W ANY DEDUCTION AGAINST TOTAL RECEIPTS OF RS.88,90,000/-, AS DIRECTED BY THE ADDI TIONAL CIT, RANGE-1, UNDER SECTION 144A OF THE ACT. ACCORDINGLY, OUT OF TOTAL EXPENSES CLAIM OF ITA NO.115/RJT/2008 CO NO.10/RJT/2008 3 RS.33,16,841/- AMOUNT IN RESPECT OF CONSUMABLES AT RS.12,07,172/- IS DISALLOWED AND RS.20,49,669/- ARE ALLOWED INCLUDING THE PROPOR TIONATE EXPENSES FOR OPD AT RS. 9,10,380/-, AS WORKED OUT HEREUNDER: 5. CONSULTING FEE INCOME AS PER RECEIPTS & PAYMENT S A/C. 41,46,7111/- WHICH CONSISTS OF OPERATIONS RECEIPTS OF S.30,04,010/- AND OPD RECEIPTS OF RS.11,38,155/-. THE EXPENSES INCURR ED DURING THE YEAR ARE CLAIMED AT RS.33,16,841/-. ACCORDINGLY, THE PRO PORTIONATE EXPENSES FOR OPD WOULD BE RS.9,10,380/- (33,16,841/4146711 X 113 8155) THE A.O. FINALLY COMPUTED TOTAL INCOME AS UNDER: 7. SUBJECT TO ABOVE REMARKS, TOTAL INCOME IS COMPU TED AS UNDER: INCOME FROM HOUSE PROPERTY AS PER STATEMENT (-) 3 0,000/- INCOME OTHER SOURCES (INTEREST INCOME) 1,04,430/- OPERATION RECEIPTS DECLARED BY THE ASSESSEE 30,04, 010/- SUPPRESSED OPERATION RECEIPTS OPERATION RECEIPTS FOR 635 OPERATIONS -88,90,000 @ RS.14,000/- OPERATION RECEIPTS ACCOUNTED FOR BY THE ASSESSEE -30,04,010 58,85,990/- OPD RECEIPTS 11,38,155 LESS: PROPORTIONATE EXPENSES 9,10,380 NET OPD RECEIPTS 2,27,775 DEDUCTION U/S VIA AS PER STATEMENT (-) 20,792 TOTAL INCOME ASSESSED 91,71,413 5. THE LD. CIT(A) DIRECTED THE A.O. TO MAKE ADDITIO N OF RS.2,19,000/- OVER AND ABOVE THE INCOME AS PER RETURN FILED AS RS.18, 00,000/- WAS ALREADY CONSIDERED THEREIN, WITH THE OBSERVATION THAT THE E STIMATE OF OPERATION CHARGES AT RS.14,000/- BY THE AO WAS NOT REALISTIC. THE A.O. A S WELL AS THE ADDITIONAL CIT HAVE MISREAD THE DECISION OF THE HONBLE GUJARAT HI GH COURT, IN THE CASE OF FAKIR MOHAMMED HAJI HASAN VS. CIT REPORTED IN 247 ITR 290 . THE PRINCIPLE LAID DOWN IN THAT CASE ARE NOT APPLICABLE TO THE FACTS OF TH E ASSESSEES CASE, IN AS MUCH AS THE SOURCES OF INCOME ARE FROM OPERATIONS ONLY AND FOR EARNING SUCH INCOME, THE ASSESSEE INCURRED EXPENSES AND THE MOMENT THE SOU RCE OF EXPENSES ARE ITA NO.115/RJT/2008 CO NO.10/RJT/2008 4 EXPLAINED, PROVISIONS OF SECTION 69C ARE NOT APPLIC ABLE. THE LD. CIT(A), AFTER CONSIDERING ALL THE FACTS FOUND THAT EVEN IF SIMPL E AVERAGE IS ADOPTED GROSS RECEIPT PER OPERATION COMES TO RS.11,050/- (36,56,9 60/331) AND AFTER CONSIDERING THE COST OF LENSES AND OTHER COST OF RS.14,10,000/- AND RS.4,51,000/-, AVERAGE COST OF OPERATION WORKS OUT AT RS.5,422/- WHICH LEA VES NET EARNING PER OPERATION OF RS.5,628/-. THE LD. CIT(A), FURTHER NOTED THAT T HE ASSESSEE HIMSELF HAS OFFERED RS.6,000/- PER OPERATION. THEREFORE, CONSIDERING TH E OTHER ERRORS AND OMISSIONS, THE NET EARNING PER OPERATION IF ADOPTED AT RS.6,10 0/- WILL MEET THE ENDS OF JUSTICE. THUS, CONSIDERING TOTAL NUMBER OF OPERATI ONS REMAINING UNACCOUNTED AS ADMITTED BY THE ASSESSEE AT 331, APPLYING RS.6,100/ - PER OPERATION TOTAL UNACCOUNTED INCOME COMES TO RS.20,19,00/- AGAINST I NCOME OF RS.18,00,000/- SHOWN BY THE ASSESSEE. 6. THE LD. CIT(A), ACCEPTED THE RECONCILIATION FILE D BY THE ASSESSEE AND FOUND THAT TOTAL NUMBER OF OPERATIONS COMES TO 331. THE DETAIL IS AS UNDER: NATURE OF RATE NO. OF AMOUNT OPERATION OPERATIONS (RS.) PMMA 6000 TO 7000 32 2,19,000 7001 TO 8000 112 8 ,70,610 8001 TO 9000 47 3,97, 700 ABOVE 9000 1 17, 400 192 15,05,610 FOLDABLE BELOW 12000 1 7,50 0 12000 TO 17000 65 10,74,000 17001 TO 19000 57 10,20,250 OPERATION CARRIED OUT 1 AFTER SURVEY DULY RECORDED 124 21,01,750 AGS 4000 3 12,000 4500 1 4,500 4 16,500 OTHER BELOW 3000 8 19,600 3000 TO 5000 3 13,500 11 33,100 TOTAL 311 35,56,960 WHILE ACCEPTING THE ABOVE OPERATIONS OF 331 AND CON SIDERING THE ANNEXURE-3, A LIST OF TOTAL 331 OPERATIONS, WHICH WERE RECONCILED , IT WAS POINTED OUT BY THE ITA NO.115/RJT/2008 CO NO.10/RJT/2008 5 ASSESSEE THAT THE A.O. IN MAKING ARITHMETICAL CALC ULATION DID NOT CONSIDER SOME IMPORTANT FACTS SUCH AS THOUGH THREE OPERATIONS WE RE PERFORMED ON 24.03.2003, THE PAYMENTS WERE RECEIVED ON 8 TH AND 22 ND APRIL. SIMILARLY CONSIDERING ONE PATIENTS , TWO OPERATIONS I.E. FOR LEFT AND RIGHT EYE AND CHARGES COLLECTED FOR BRUSHING ETC., THE TOTAL NUMBER OF OPERATIONS COME S TO 331. 7. THE CIT(A) HAS ALSO EXAMINED THE OPERATION CHARG ES. FROM THE ABOVE TABLE IT TRANSPIRES THAT HE FOUND THAT RS.2,100 TO RS.21,000 WERE THE CHARGES FOR THE OPERATION. HE FURTHER NOTED THAT THE CHARGES W ERE DEPENDING UPON THE QUALITY OF LENS, USE AND FINANCIAL CAPACITY OF THE PATIENTS. THE CIT(A) ACCEPTED THE ASSESSEES CONTENTION THAT COST OF LENS AND OTH ER OPERATION EXPENSES WERE VERIFIABLE AND THE SAME WERE VERIFIED WITH REFERENC E TO RELEVANT RECORD, I.E. CASE PAPERS, INVOICES OF LENS, ETC. THE CIT(A) WAS OF THE VIEW THAT ESTIMATE OF RS.14,000 BY A SIMPLE AVERAGE PER OPERATION IS NOT JUSTIFIABLE IN ANY MANNER. THIS IS A CASE OF SURVEY U/S 133A WHERE ASSESSING O FFICER HAD ALL OPPORTUNITIES OF SAYING WHAT HAD HAPPENED AND WHAT WAS HAPPENING AND HOW RECEIPTS WERE CONCEALED AND EXPENDITURES HOW WERE ACCOUNTED FOR. THUS, THERE IS NO NEED TO EXTRAPOLATE OR USE IN ARITHMETICAL FORMULA TO ARRIV E AT CONCEALED INCOME. IT HAS ALSO BEEN NOTED BY THE CIT(A) THAT THERE WAS DETAIL ED VERIFICATION DURING SURVEY AND FURTHER PROCESS OF INVESTIGATION OF SURVEY, AND AS A RESULT OF THIS, THE ASSESSEE MADE DECLARATION OF UNDISCLOSED INCOME AT RS.18 LAKHS WHICH HAS BEEN ACCEPTED BY THE SURVEY TEAM. AS REGARDS THE A DDITION ON ACCOUNT OF POST SURVEY PERIOD, THE CIT(A) NOTED THAT THE OPERATION CHARGES FOR THE SAID PERIOD WERE DULY SUPPORTED BY RECEIPTS AND DETAILS OF CORR ESPONDING EXPENSES. THE ASSESSING OFFICER DID NOT POINT OUT ANY DEFECT IN T HE BOOKS OF ACCOUNT MAINTAINED FOR THE POST SURVEY PERIOD. THE CIT(A) FOLLOWED TH E DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS ANANTKUMAR DEEPAKKUMAR 160 TASXM AN 206 WHEREIN IT HAS BEEN HELD THAT DISCREPANCIES IN PRE SURVEY PERIOD C OULD NOT LEAD TO ANY PRESUNMPTION THAT DISCREPANCIES WOULD HAVE CONTINUE D IN POST SURVEY PERIOD PARTICULARLY WHEN THE ASSESSING OFFICER COULD NOT F IND ANY DEFECT IN THE BOOKS OF ITA NO.115/RJT/2008 CO NO.10/RJT/2008 6 ACCOUNT RELEVANT TO POST SURVEY PERIOD. THE CIT(A) DID NOT FIND ANY JUSTIFICATION IN ESTIMATING THE RECEIPT FOR THE POST SURVEY PERIO D. 8. THE LD. CIT(A), HAS ALSO EXAMINED THE ISSUE RELA TING TO DISALLOWANCE OF EXPENSES. THE LD. CIT(A), NOTICE THAT THE OPERATION S CHARGES FOR POST SURVEY PERIOD ARE DULY SUPPORTED BY RECEIPTS AND DETAILS O F CORRESPONDING EXPENSES, THE BOOKS OF ACCOUNT WERE AUDITED AND AUDITOR HAS ALSO DID NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE. THE LD. CIT(A), DID NOT FIND ANY JUSTIFICATION IN ESTIMATING RECEIP TS FOR THE POST SURVEY PERIOD. SIMILARLY, WITH REFERENCE TO THE EXPENDITURE CLAIME D, THE LD. CIT(A), FOUND THAT THE ASSESSEE HAS INCURRED SUCH EXPENSES IN THE COUR SE OF AND FOR THE PURPOSE OF BUSINESS. IT HAS ALSO BEEN NOTED BY THE CIT(A) THAT WHAT CAN BE TAXED AS INCOME AND NOT THE GROSS RECEIPTS. THE LD. CIT(A), NOTED THAT EVEN DEPRECIATION ON MACHINERY WAS NOT ALLOWED EVEN THOUGH THOSE WERE USED FOR PROFESSION, WHICH IS EVIDENCED BY RECEIPTS. THE LD. CIT(A), THE REFORE, DIRECTED THE A.O. TO ALLOW EXPENDITURE OF RS.33,16,841/-. 9. THE CIT(A) HAS ALSO CONSIDERED THE JUDGMENT OF T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHD HAJI HASAN VS CIT 2 47 ITR 290 (GUJ) AND DISTINGUISHED THE SAME AND FOUND THAT THE PRINCIPLE LAID DOWN IN THAT CASE IS NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE INASMUCH AS THE SOURCE OF INCOME ARE FROM OPERATIONS ONLY AND FOR EARNING SUCH INCOME, T HE ASSESSEE INCURRED E4XPENSES AND THE MOMENT, THE SOURCES OF EXPENSES A RE EXPLAINED, PROVISIONS OF SECTION 69C WOULD NOT BE APPLICABLE. THE CIT(A) , ON EXAMINATION OF RECORD AND FACTS FOUND THAT IF SIMPLE AVERAGE IS ADOPTED, GROSS RECEIPT PER OPERATION COMES TO 11,050 (RS.36,56,960 / 331) AND AFTER CONS IDERING THE COST OF LENS AND OTHER IMPLANTS RS.14,10,000 AND RS.4,15,000, THE AV ERAGE COST OF OPERATION WORKS OUT TO RS./5,422 WHICH LEAVE NET EARNING PER OPERATION AT RS.5,628. THE CIT(A) NOTED THAT THE ASSESSEE HIMSELF HAS OFFERED RS.6,000 PER OPERATION. HOWEVER, CONSIDERING THE POSSIBLE ERRORS AND OMISSI ONS, THE CIT(A) CONSIDERED NET EARNING PER OPERATION AT RS.6,100 WHICH WOULD M EET THE ENDS OF JUSTICE, IN ITA NO.115/RJT/2008 CO NO.10/RJT/2008 7 HIS OPINION. THE CIT(A) ACCORDINGLY CALCULATED TOT AL UNACCOUNTED INCOME AT RS. 20,19,100 (6,100 X 331) AS AGAINST DECLARED BY THE ASSESSEE AT RS.18 LAKHS. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO MAKE A DDITION OF RS.20,19,100 BEING THE DIFFERENCE OVER AND ABOVE THE INCOME DECLARED I N THE RETURN OF RS.18 LAKHS. 10. THE LD. DR, BY REFERRING TO AOS ORDER PARA-2 S UBMITTED THAT THE A.O. HAS GIVEN FULL DETAILS IN HIS ORDER. THE FACTS NOTED BY THE A.O. ARE BASED ON MATERIAL FOUND AT THE TIME OF SURVEY. THE LD. DR, SUBMITTED THAT NUMBER OF OPERATIONS AND RATE APPLIED BY THE A.O. CANNOT BE DECREASED AND SA ME WERE SUPPORTED BY THE MATERIAL. THE LD. DR, RELIED ON THE ORDER OF THE A. O. 11. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT DURING THE COURSE OF SURVEY, BOOKS OF ACCOUNTS WERE INCOMPLETE AND RECEIPTS FROM PATIENTS WERE NOT PROPERLY RECORDED. THE LD. C IT(A), SUBMITTED THAT ON THAT ACCOUNT, THE ASSESSEE HAS ALREADY ADMITTED ADDITIO NAL INCOME OF RS18,00,000/- TAKING AN AVERAGE RECEIPT OF RS.6,000/- PER PATIENT FOR 300 PATIENTS AND CREDITED TO THE BOOKS OF ACCOUNT, WHICH IS NOT IN DISPUTE. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT A.O. TOTALLY IGNORED THE FACT ON THE GROUND THAT EXPENSES ON CONSUMABLE AND INDIRECT EXPENSES WERE FULLY SUPPORT ED BY BILLS, VOUCHERS AND BOOKS OF ACCOUNT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN THE AO DID NOT ALLOW THE DEPRECIATION ON USE OF MACHINERY AND MEDICAL EQUIPMENTS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSEE HAS EXPLAINED THE TOTAL NUMBER OF PATIENTS AND NECESSARY RECONCILIATION WAS ALSO FILED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER ANNEXURE-A/3 IMPOUNDED DURING SURVEY, TOTAL NUMBER OF PATIENTS UPTO THE DATE OF SURVEY WE RE 617 AND POST SURVEY PERIOD 106 PATIENTS WERE OPERATED. THUS, TOTAL NUMBER OF P ATIENTS WAS 723. OUT OF 723 PATIENTS, 88 PERTAINED TO THE IMMEDIATELY PRECEDING YEAR AND EXCLUDED BY THE A.O. THUS, 635 NUMBER OF PATIENTS WERE RELEVANT TO THE PREVIOUS YEAR. OUT OF THAT 635 PATIENTS, RECEIPT FROM 120 PATIENTS WERE D ULY RECORDED IN THE BOOKS OF ACCOUNT AND RECEIPT FROM 84 PATIENTS WERE NOT ENTER ED IN 3C REGISTER, WERE DULY ISSUED AND CREDITED IN COMPUTERIZED BOOKS. THUS, T OTAL 211 PATIENTS WERE AS PER ITA NO.115/RJT/2008 CO NO.10/RJT/2008 8 BOOKS OF ACCOUNT AND RECORDS. THE LD. COUNSEL FOR T HE ASSESSEE ALSO REFERRED TO PAGE 17 TO 19 IN SUPPORT OF THE FACT THAT THE RECEI PTS FROM 84 PATIENTS WAS ALSO RECORDED. THE LD. COUNSEL SUBMITTED THAT THE ASSESS EE FURNISHED THREE CHARTS, PAPER BOOK PAGES 36 TO 55, 78 TO 106 AND 107 TO 115 EXPLAINING DETAILS OF EACH PATIENTS ALONGWITH COPIES OF WHOLE CASE, PAPERS CO NTAINING DETAILS OF NATURE OF OPERATION PERFORMED AND TYPE OF LENSES IMPLANTED. T HE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT VIDE ORDER UNDER SECTION 25 0(4) DATED 08.10.2007, DIRECTED THE A.O. TO CARRY OUT VERIFICATION OF DATA RELATED TO OPERATION CHARGES AND COST OF LENSES IMPLANTED, BUT THE A.O. DID NOT CARR Y OUT ANY SUCH VERIFICATION. HE SIMPLY RELIED UPON HIS ASSESSMENT ORDER. THE LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF HEARING IN THE PRESENCE OF THE A.O., THE LD. CIT(A), CARRIED OUT THE TEST CHECK OF RELEVANT DAT A AS TO THE OPERATION CHARGES PER PATIENT AND COST OF LENSES IMPLANTED WITH REFER ENCE TO CASE PAPERS AND COPIES OF INVOICES PRODUCED. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE CONCLUSION OF LD. CIT(A) IS UPTO THE VERIFICATION O F RECORD AND RECONCILIATION. THE LD. CIT(A), HAS RIGHTLY APPRECIATED THE FACT THAT S O FAR AS THE RATIO TO THE POST SURVEY PERIOD IS CONCERNED, IT IS AN ADMITTED FACT THAT OPERATION CHARGES FOR THE SAID PERIOD WERE DULY SUPPORTED BY THE RECEIPTS. TH E LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A), EXAMINED TH E AVERAGE RECEIPT OF OPERATIONS AND AFTER CONSIDERING THE COST OF OPERA TIONS, THE NET EARNINGS PER OPERATION COMES TO RS.5,628/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HIMSELF OFFERED RS.6,000/- PER OPERATI ON AND AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES, THE ENHANCEMENT TO RS. 6,100/- BY THE LD. CIT(A), IS NOT JUSTIFIED. 12. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES, RECORD PERUSED. THE ASSESSEE IS A DOCTOR RUNNING EYE CARE HOSPITAL. A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT ON 03-02-2004. THE CASE OF THE ASSESSING OFFICER IS THAT DURING THE COURSE OF SURVEY SOME RECORDS STATED TO BE RELATING TO THE UNACCOUNTED OPERATION CHARGES WERE FOUND. AS PER TH E ASSESSING OFFICER, TOTAL OPERATIONS CARRIED OUT FOR THE WHOLE YEAR WAS 635 O UT OF WHICH 529 OPERATIONS ITA NO.115/RJT/2008 CO NO.10/RJT/2008 9 RELATED TO PRE SURVEY PERIOD AND 106 OPERATIONS REL ATED TO POST SURVEY PERIOD. WHILE ESTIMATING THE INCOME, THE ASSESSING OFFICER APPLIED THE RATE OF RS.14,000 PER OPERATION AND TOTAL RECEIPTS WAS THUS ESTIMATED AT RS.88,90,000 AGAINST THE DECLARED AMOUNT OF RS. 30,04,010. THE ASSESSING OF FICER WORKED OUT THE UNACCOUNTED RECEIPTS AT RS.58,85,190. THE ASSESSIN G OFFICER ALLOWED PROPORTIONATE EXPENSES AND REFUSED TO APPORTION ANY EXPENSES TOWARDS THE SO- CALLED UNACCOUNTED RECEIPTS ESTIMATED BY HIM. THE CIT(A) EXAMINED EACH AND EVERY ASPECT OF THE ISSUE AND CONSIDERED THE SUBMIS SIONS OF ASSESSEE AS WELL A THE ASSESSING OFFICER. THE CIT(A) ACCEPTED THE ASS ESSEES CONTENTION THAT OUT OF 529 POST SURVEY OPERATIONS, 88 OPERATIONS PERTAINED TO ASSESSMENT YEAR 2003- 04. THE LD.AR FILED A COPY OF ASSESSMENT ORDER PAS SED U/S 143(3) R.W.S. 147 OF THE ACT FOR THE ASSESSMENT YEAR 2003-04 TO BUTTRESS THE POINT THAT THE INCOME FROM THESE 88 OPERATIONS HAS BEEN TAXED IN THAT ASS ESSMENT YEAR. THIS LEAVES NO DOUBT THAT THE INCOME FROM THESE 88 OPERATIONS C ANNOT BE INCLUDED IN THE RECEIPTS TO BE ESTIMATED FOR THE YEAR UNDER CONSIDE RATION. 13. THE CIT(A), DURING THE COURSE OF HEARING, ASKED THE ASSESSEE TO FURNISH THE BASIC PATIENTS RECORD CONTAINING NAMES OF PATIE NTS, TYPE OF CONTACT GLASSES, IMPLANTS, ETC. THE ASSESSEE FILED THREE CHARTS AS PER ANNEXURES I, II & III EXPLAINING THE DETAILS CALLED FOR BY THE CIT(A) ALO NG WITH THE COPIES OF CASE PAPERS OF ALL PATIENTS WHICH CONTAINED DETAILS OF O PERATION PERFORMED AND TYPE OF LENSES IMPLANTS. IN RESPECT OF LENSES, THE ASSESSE E FILED A SAMPLE COPY OF INVOICES OF DIFFERENT QUALITIES OF LENSES. THE CIT (A) IN HIS ORDER, AT PAGE 19 PARAGRAPH 4.3 DISCUSSED THE ISSUE IN DETAIL AND HEL D THAT SINCE ALL THE BASIC RECORDS ARE AVAILABLE, IT WAS NOT DIFFICULT TO ARRI VE AT THE SPECIFIC COST OF THE EXPENDITURE AS NUMBER OF PATIENTS WERE ONLY 335. W ITH A VIEW TO ARRIVE AT CORRECT UNDISCLOSED INCOME, THE CIT(A) CALLED REMAND REPORT U/S 250(4) OF THE ACT. THE ASSESSING OFFICER APPEARED BEFORE THE CIT(A) AND FI LED LETTER DATED 15-10-2007 A COPY OF WHICH WAS GIVEN TO ASSESSEES COUNSEL FOR H IS COMMENTS. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES, THE CIT(A) EXAMINED THE RELEVANT MATERIAL AND VERIFIED THE FACTS IN THE PRESENCE OF ASSESSING OFFICER. THE CIT(A) ITA NO.115/RJT/2008 CO NO.10/RJT/2008 10 FOUND THAT BROADLY, OPERATIONS PERFORMED BY THE ASS ESSEE COULD BE DESCRIBED AS PMMA, FOLDABLE, AGS, PCB, ETC. THE CIT(A) DISCUSSE D THE DIFFERENT TYPES OF OPERATIONS AT PAGE 25 OF HIS ORDER AT PARAGRAPH 4. 13 THE CIT(A) EXAMINED THE RATE OF OPERATION CHARGES IN RESPECT OF DIFFERENT T YPES OF OPERATIONS. AFTER CONSIDERING THE ARITHMETICAL ERROR IN CALCULATION O F OPERATION CHARGES, THE CIT(A) FOUND THAT TOTAL NUMBER OF OPERATIONS CARRIED OUT W AS 331, A DETAILED TABLE IS REPRODUCED AT PARAGRAPH 6 OF THIS ORDER. THE CIT(A ) HELD THAT THERE WERE IN ALL 331 OPERATIONS FOR WHICH RECEIPTS WERE NOT ACCOUNTE D FOR BY THE ASSESSEE AND RECEIPTS FROM THE SAME HAVE TO BE TAXED. AT PARAGR APH 4.17 OF CIT(A) ORDER, IT IS SEEN THAT THE CIT(A) EXAMINED THE CHARGES OF OPERAT ION. THE CIT(A), ON THE BASIS OF FACTS AND MATERIAL AVAILABLE ON RECORD FOU ND THAT THE AVERAGE GROSS RECEIPT PER OPERATION COMES TO RS.11,050 AND AFTER CONSIDERING THE COST OF OPERATION NET RECEIPT COMES TO RS.5,628 AGAINST THE INCOME ESTIMATED BY THE ASSESSING OFFICER APPLYING THE OPERATION CHARGES AT RS.14,000 PER OPERATION. WE FIND THAT THE ASSESSING OFFICER IS NOT CORRECT IN A PPLYING THE RATE RS.14,000 PER OPERATION. THE VIEW OF THE ASSESSING OFFICER IS NO T CORRECT INASMUCH AS THE EXPENSES HAVE ALREADY BEEN ACCOUNTED FOR AND ONLY R ECEIPTS HAVE NOT BEEN ACCOUNTED FOR. THEREFORE, IN PRINCIPLE WE ARE NOT IN AGREEMENT WITH THE ASSESSING OFFICER. THE CIT(A) HAS TAKEN THE CORREC T VIEW THAT AFTER REJECTING THE BOOKS OF ACCOUNT THE PROFIT / INCOME FOR THE RELEVA NT YEAR IS TO BE ESTIMATED. AS PER THE CALCULATIONS OF THE CIT(A) THE NET EARNING PER OPERATION COMES TO RS.5,628 AS AGAINST THE NET OPERATION CHARGE OF RS. 6,000 DECLARED BY THE ASSESSEE. HOWEVER, THE CIT(A) HAS ESTIMATED THE SA ME AT RS.6,100 TO COVER UP THE POSSIBLE PETTY ERRORS AND OMISSIONS IN THE CALC ULATION AND ESTIMATION TO MEET THE ENDS OF JUSTICE. IN THE CIRCUMSTANCES, WE HAVE TO NECESSARILY FIND THAT THE ORDER OF CIT(A) IS A REASONED ORDER BASED ON MATERI AL FACTS AND RECORDS. THE REVENUE DID NOT POINT OUT ANY CONTRARY MATERIAL REG ARDING THE ESTIMATION OF OPERATION CHARGES AND THE TOTAL NUMBER 331 PATIENTS RESORTED TO BY THE CIT(A) WHERE THE RECEIPTS WERE NOT ACCOUNTED FOR. IN THE ABSENCE OF ANY CONTRARY MATERIAL WE ARE INCLINED TO UPHOLD THE ORDER OF CIT (A). GROUND 1 OF REVENUES APPEAL AND GROUND 2 OF THE CROSS OBJECTION FAIL. ITA NO.115/RJT/2008 CO NO.10/RJT/2008 11 14. GROUND NO.2 OF REVENUES APPEAL IS IN RESPECT O F DELETION OF ADDITION OF RS.33,16,841 ON ACCOUNT OF DISALLOWANCE OF EXPENSES . AS DISCUSSED IN ABOVE PARAGRAPHS WE NOTE THAT THE CIT(A) HAS ALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE AT RS.33,16,841 BY GIVING A FINDING THAT T HE COST OF LENSES, IMPLANTS AND OPERATION EXPENSES HAS TO BE ALLOWED IN ARRIVIN G AT THE INCOME OF THE ASSESSEE. WE FURTHER NOTICE THAT EVEN DEPRECIATION ON MACHINERY HAS NOT BEEN ALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OF FICER IS NOT CORRECT IN DISALLOWING ALL EXPENSES INCLUDING POST SURVEY PERI OD EXPENSES. THE EXPENSES CLAIMED BY THE ASSESSEE WERE THE REGULAR EXPENSES A CCOUNTED FOR IN THE BOOKS OF ACCOUNT INCURRED FOR THE PURPOSES OF BUSINESS. THEREFORE, THE SAME IS ALLOWABLE. AFTER CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE CIT(A) HAS RIGHTLY ALLOWED TH E EXPENSES INCURRED BY THE ASSESSEE FOR THE PURPOSE OF RUNNING HIS PROFESSION THE ORDER OF CIT(A) ION THE ISSUE IS CONFIRMED. 15. IN THE RESULT, BOTH APPEAL OF THE REVENUE AND T HE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-05-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 27 TH MAY, 2011 PK/- COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT(A)-I, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT