Dr.P.Sasikumar, Palakkad V. DCIT, Trichur

ITA 208/COCH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7508 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: T M SREEDHRAN
• Keywords: Search and seizure; Revised return
• Section: 143(3); 153A; 27; 132

Judgement Text

ITA NO S 207 & 208/C/2015 . 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 207 & 208/COCH/2015 (ASST YEAR S 2007 - 08 & 08 - 09 ) DR P SASIKUMAR POOJASREE VALIAPADAM PO CHOKKANATHAPURAM PALAKKAD 678 005 VS THE DY COMMR OF INCOME TAX CENTRAL CIRCLE THRISSUR ( APPELLANT) (RESPONDENT) PAN NO. AJEPS6498E ASSESSEE BY SH T M SREEDHRAN REVENUE BY SH K PGOPAKUMAR, SR DR DATE OF HEARING 3 RD FEB 2015 DATE OF PRONOUNCEMENT 9 TH FEB 2016 OR D ER PER GEORGE GEORGE . K. J M: THESE TWO APPEALS, AT THE INSTANCE OF THE ASSESSEE ARISE OUT OF THE CONSOLIDATED ORDER OF THE CIT(A) DATED 22.1.2015. THE RELEVANT ASSESSMENT YEARS ARE 2007 - 08 AND 2008 - 09. 2 SINCE COMMON ISSUE IS RAISED IN THESE APPEALS AND THEY PERTAIN TO TH E SAME ASSESSEE, THESE APPEALS WERE HEARD TOGETHER AND DISPOSE OFF BY THIS CONSOLIDATED ORDER. ITA NO S 207 & 208/C/2015 . 2 3 IDENTICAL 8 GROUNDS ARE RAISED IN EACH OF THESE APPEALS; HOWEVER, ALL THE GROUNDS RELATE TO A SOLITARY ISSUE ; NAMELY WHETHER THE PENALTY CAN BE IMPOSED U/S 27 1(1)( C) OF THE ACT ON THE ADDITION SUSTAINED BY THE TRIBUNAL FOR THE RECEIPTS ON ACCOUNT OF SALE OF PMMA LENS. 4 BRIEF FACTS RELATING TO THE ISSUE ARE AS FOLLOWS: THE ASSESSEE IS A LEADING OPHTHALMIC SURGEON IN PALAKKAD. T HE ASSESSEE WAS DERIVING INCO ME FROM CONSULTATION, SURGERY AND SALE OF LENSES. SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT WAS CONDUCTED IN THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE ON 5 TH DEC 2007. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, BOOKS O F ACCOUNT AND FIXED DEPOSITS /BONDS FOR RS . 38,43,1 1 0/ - WERE SEIZED. THE A SSESSMENT U/S 143(3) R.W.S 153A WAS COMPLETED ON 31.12.2009 . SUBSEQUENT TO THE ASSESSMENT ORDER, PENALTY U/S 271(1)( C) OF THE ACT WAS IMPOSED FOR AYS 2007 - 08 AND 2008 - 09 FOR RS. 11,72,075 AND RS 13,44,720/ - RESPECTIVELY. LATER ON, BASED ON THE ITAT ORDER DATED 29.6.201 2 , IN QUANTUM ASSESSMENT, THE PENALTY WAS REDUCED TO RS. 4,18,627/ - AND RS. 4,23,111/ - FOR THE AYS 2007 - 08 A N D 2008 - 09 RESPECTIVELY. TH E DETAILS OF THE ADDITION SUSTAINED BY THE ITAT IN THE QUANTUM ASSESSMENT FOR THE AYS 2007 - 08 AND 2008 - 09 ARE AS FOLLOWS: ITA NO S 207 & 208/C/2015 . 3 S.NO ASST YEAR ADDITIONS SUSTAINED BY ITAT BREAK UP REASONS FOR SUSTAINING ADDITIONS BY ITAT 1 2007 - 08 RS.12,43,683/ - I)SALARY T O EMPLOYEES RS 1,88,250. II)CONSUMABLES AND MEDICINES RS.2,07,033/ - III) RECEIPTS FROM SURGERY AND SALE OF LENSES RS.8,48,400/ - ESTIMATION. REFER PARA 26 PAGE 24 LAST LIME ESTIMATION. REFER PARA 28 PAGE 25. ESTIMATION. REFER PARA 23 PAGE 21. 2 2008 - 0 - 9 12,44,995/ - I)SALARY TO EMPLOYEES RS 1,88,250. II)CONSUMABLES AND MEDICINES RS.1,86,745/ - III) RECEIPTS FROM SURGERY AND SALE OF LENSES RS 8,70,000/ - ESTIMATION. REFER PARA 26 PAGE 24 LAST LIME ESTIMATION. REFER PARA 28 PAGE 25. ESTIMATION. REFER PARA 23 PAGE 21. 5 AGGRIEVED BY THE PENALTY IMPOSED U/S 271(1)( C) OF THE ACT , THE ASSESSEE PREFERRED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY FOR THE AYS 2007 - 08 AND 2008 - 09. THE CIT(A), AFTER ELABORATELY ANALYZING THE TRIBUNALS ORDER DATED 29.6 .2012 IN THE QUANTUM ASSESSMENT, DELETED THE PENALTY LEVIED ON THE ADDITIONS SUSTAINED BY THE ITAT ON ACCOUNT OF SALARY PAID TO EMPLOYEES AND CONSUMABLES AND MEDICINES FOR BOTH THE ASSESSMENT YEARS. THE CIT(A), HOWEVER, HELD THAT THE PENALTY HAS TO BE LEV IED ON THE ADDITIONS SUSTAINED BY THE ITAT ON ACCOUNT OF SALE OF LENSES. 6 AGGRIEVED BY THE CIT(A) ORDER, RETAINING THE PENALTY IMPOSED U/S 271(1)(C), IN RESPECT OF THE ADDITIONS SUSTAINED BY THE ITAT FOR THE RECEIPTS ON ITA NO S 207 & 208/C/2015 . 4 ACCOUNT OF SALE OF LENSES, THE A SSESSEE IS IN APPEAL BEFORE US FOR BOTH THE ASSESSMENT YEARS. THE LD AR SUBMITTED THAT THE ENTIRE ADDITION ON ACCOUNT OF SALE OF LENSES IS BASED ON ESTIMATE AT THE LEVEL OF THE AO, THE CIT(A) AND THE ITAT. IT WAS SUBMITTED THAT THERE WAS NO TANGIBLE EVIDEN CE IN THE COURSE OF SEARCH , WHICH HAS LEAD TO THE ADDITION OF THE RECEIPT ON ACCOUNT OF SALE OF LENSES. THEREFORE, IT WAS SUBMITTED THAT THE ADDITION, BEING PURELY ON ESTIMATED BASIS , THE LEVY OF PENALTY U/S 271(1)( C) OF THE ACT . IS NOT WARRANTED. 6.1 ON THE OTHER HAND, THE LD D R STATED THAT THE ADDITIONS WERE MADE NOT ON MERE ESTIMATION. IT WAS SUBMITTED THAT THE ADDITIONS WERE BASED ON THE ADMISSION OF THE ASSESSEE IN THE COURSE OF SEARCH PROCEEDINGS THAT THERE IS PROFIT MARGIN ON THE SALE OF PMMA LEN SES. IT WAS CONTENDED BY THE LD DR THAT EVEN ON AN ESTIMATED ADDITION, PENALTY CAN BE IMPOSED AND RELIED ON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS PRASANNA DURGAR REPORTED IN 371 ITR 19(CAL). 7 WE HAVE HEARD THE RIVAL S UBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT(A) CONFIRMED THE PENALTY IMPOSED ON THE ADDITIONS SUSTAINED BY THE ITAT FOR THE RECEIPT OF SALE OF PMMA LENS. THE RELEVANT CONCLUSION OF THE CIT(A) FOR SUSTAINING THE PENALTY, READ AS UNDER: 6 . FOR TH E ASSESS M E NT YE AR S 200 7 - 08 AND 2008 - 0 9 OTHE R THAN D I SAL L OWANCE O N ACCO U NT OF SALARY AND THE D I SA LL OWA N CE OF EXPEN S ES UNDER THE HEAD ' CONS UM A BL ES AND MEDIC IN ES ' , THE R E IS CERTAIN RECEIPT F R O M S UR GERY AND SALE OF L ENSES . I T HAS BEEN H E LD BY TH E L EARNE D BE N C H OF I TA T , KOCHI IN PARA 23 &24 OF I TS ITA NO S 207 & 208/C/2015 . 5 ORDER TH A T '2 3 . IN OUR VIEW , THE ONLY PO IN T W HICH GOES AGAINST THE ASSESSEE IS THE REPLY GIVEN BY HIM TO THE QUESTION NO . 27 POSED TO HIM , WHEREIN HE HAD A D MI T T ED THAT THERE WAS SOME PRO F I T MARGIN ON SALE OF PMMA LENS TO THE ASSE S SEE . SIMILAR L Y , SH R I S . M . OUSEPH , THE PROPRIETOR OF M/ S J . N . SURGI CURE A LSO COULD NOT GIVE ANY CONVI N CING E X PLANATION WITH REGARD TO THE DIFFERENCE IN S E L L I N G P R ICE OF PMMA LENS . ACCORD I NGLY , SINCE THE DEPARTMENT HAS FOUND S OM E EVIDENCE C ONCERNI N G M IS J. N . SURGI CURE AND SINCE THE ASSESSEE H AS A LSO ACCEPTED THE EXI S TENCE OF SOME PROFIT ELEMENT I N RESPECT OF SUPPL I ES MADE BY THAT CONCERN , WE A RE OF THE VIEW THAT THE ESTIMATE , IF ANY , IN RESPECT OF SUP P R ESSED S URGI C AL FE E RE CEIPTS CO ULD BE M ADE ON L Y IN R ESPECT OF PMMA LENS SUPPLIED BY MIS J . N . SURGI CURE AND NOT BY ANY OTHER CONCERN . S IN CE THE SAID CONCERN HAS S TA R TED BUSINESS ONLY I N THE YEAR RELEVANT TO THE A S SESSMENT YEAR 2007 - 08 , IN OU R VIEW , THE ESTIMATION OF PROFIT COULD BE MADE ONLY FO R ASST . YEAR 2007 - 08 A N D 2008 - 09 ONLY IN RESPECT OF THE PMMA LENS SUPPLIED BY MIS J.N. SURGI CURE . FOR OTHER YEARS, THE DEPARTMENT DID NOT UNEA R TH ANY INCRIMINATING MATERIAL TO SUGGEST THAT SUCH KIND OF PRACTICE WAS IN VOGUE IN THOSE YEA R S ALSO. THE A . O DID NOT EXAMINE OTHER SUPPLI E RS , WHO SUPPLIED LENS IN THE YEARS REL E VANT TO THE ASSESSMENT YEARS 2002 - 03 TO 2006 - 07 , TO FIND OUT THE PRACTICE FOLLOWED BY THEM . THUS, IN THE ABSENCE OF ANY MATERIAL OR ANY INFORMATION SUGGESTING ANY SUPPRESSED PROF I T ELEMENT IN RESPECT OF PURCHASES MADE IN OTHER YEARS , IN OUR VIEW, IT WOULD NOT BE CO R RECT ON THE PART OF THE T A X AUTHORITIES TO EST I MATE THE PROFIT FROM THE PURCHASE OF PMMA LENS/SUPPRESSION OF SURGERY RECEIPTS FOR ASSESSMENT YEARS 200 2 - 03 TO 2006 - 07 . ACCORDINGLY , WE SET ASIDE THE ORDERS OF LD . CIT(A) IN RESPECT OF SUPPRESSED SURGERY RECEIP T S FOR ASSESSMENT YEAR 2002 - 03 TO 2006 - 07 AND DIRECT THE A . O TO DELETE THE ADDIT I ON MADE ON THIS ISSUE IN THOSE YEARS . 24 . IN VIEW OF THE FOREGOING DISCUSSIONS , WE ARE OF THE V IEW THAT THE PROFIT ON PMMA LENS SUPPLIED BY MIS J . N. SURGI CURE DUR I NG THE YEARS RELEVA NT TO THE ASSESSMENT YEARS 2007 - 08 AND 200 8 - 09 CAN ONLY BE TREATED AS THE SUPPRESSED INCOME IN THE HANDS OF THE ASSESSEE . BOTH THE TAX AUTHORITIES HAV E TAKEN THE VIEW T HAT THE PROFIT WAS RS. 1800/ - PER LENS. HOWEVER , WE HAVE A LREADY NOTICED THAT THE SALE VALUE OF PMMA L ENS WAS IN THE RATE OF RS. 100 / - TO 600/ - PER LENS . HENCE THE PRESUMPTION OF THE TAX AUTHORITIES THAT THE PROFIT WAS RS . 1 8 00 / - PER LENS IS ALSO IN OUR VIEW , NOT CORRECT . IT IS ALSO NOT ESTABLISHED THAT M/S J . N . SUR G I CURE HAS PARTED THE ENTIRE PROFIT WITH THE ASSESSEE . THE BUSINESS DEAL IS NORMALLY FINALIZED ACCORDING TO THE UND E RSTAND I NG REACHED BETW E EN THE SEL L ER AND BUYER . IT IS ALSO QUIET COMMON THAT THE BUSINESSMEN FIXED DIFFERENT SELLING PRICE TO ITA NO S 207 & 208/C/2015 . 6 DIFFERENT CUST O MERS . H E NCE THE SELLING PRICE CHA RGE D TO ONE CUSTOMER CANNOT ALWAYS BE TAKEN AS TH E BASE FOR DETERMINING THE SELLING PRICE FOR OTHERS . HENCE , ON A CONSPECTUS OF T HE MATER , WE ARE OF THE VIEW THAT THE PROFIT THAT MIGHT HAVE ACCRUED TO THE A SS ESSEE ON PURCHASE O F P MM A L E NS MAY BE TAKEN AT RS . 600/ - PER LENS (30% OF SAL E S VALUE) AND IN OUR VIEW TH E SAME WOULD MEET THE ENDS OF JUSTICE . WE O R D ER ACCORDINGLY . THE PMMA LENS USED BY THE ASSESSEE IN THE YEA R S RELEVANT TO THE ASSESSMENT YEA R S 2007 - 08 AND 2008 - 09 WERE 1414 LEN S AND 1 450 LENS RESPECT I VELY . ACCOR D ING L Y , T H E AO I S D I RECTED TO CALCULATE THE P R OFIT ON THE ABOVE QUANTITIES BY APPLY ING A RATE OF RS . 600/ - PER LENS . THE ORDER OF LD CIT(A ) STANDS MODIF IED ACCORDI N GLY ' 7. IT IS AMP L Y CLEAR THAT THE LEANED BENCH HAS HELD THAT 'THE DEPARTMEN T HAS FOUND SOME EVIDENCE CONCERNING M I S J N. S U RGI CA R E AND SINCE THE ASSESSEE H AS A L SO ACCE P TE D T H E EX I STENCE OF SOME PR OF IT ELEMENT IN RESPECT OF SUPPLIES MADE BY THAT CONCERN. THE LEARNED BENCH ITAT HAS HELD THE SUPPRESSED INCOME, ONLY FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 IN THE HANDS OF THE ASSESSEE. THE FINDINGS OF THE LD BENCH OF ITAT CLEARLY SUGGEST OF SUPPRESSION OF INCOME, AND AS SUCH, THE SUPPRESSI ON OF INCOME IS BASED ON THE EVIDENCE FOUND BY THE DEPARTMENT AND AT THE SAME TIME, THE ASSESSEE HAS ALSO ACCEPTED THE EXISTENCE OF SOME PROFIT ELEMENT IN RESPECT OF SUPPLIES OF LENSES. AS A MATTER OF FACT, IT CLEARLY ESTABLISHED THAT THERE HAVE BEEN CONC EALMENT OF PARTICULARS OF INCOME IN RESPECT OF THE LENSES SUPPLIED BY THE SUPPLIER WHERE THE ASSESSEE HAD RECEIVED CERTAIN INCOME AND, SUCH INCOME OTHERWISE COULD NOT HAVE BEEN BROUGHT TO TAX UNLESS DEPARTMENT COULD HAVE FOUND THE EVIDENCE ON SUPPLY FROM M /S J NS URGI CARE. AS SUCH, THIS AMOUNTS TO CONCEALMENT OF PARTICULARS OF INCOME AND HENCE, THE PROVISIONS OF SECTION 271(1)( C) ARE ATTRACTED . ACCORDINGLY, THE PENALTY ON THE QUANTUM OF INCOME, ON RECEIPTS FROM LENS, SURGERY AND SALE OF LENSES, DETERMINED BY THE LD BENCH ITAT AT RS. 8,48400/ - FOR THE AY 2007 - 08 AND AT RS. 8,70,000/ - FOR THE AY 2008 09 ARE LEVIABLE. THE AO IS DIRECTED TO LEVY THE PENALTY U/S 271(1)( C ) ON THE QUANTUM OF RS. 8,48,400/ - AND RS. 8,70,000/ - FOR THEAY2007 - 08 AND 2008 - 09 RESPECTIVELY. 8 FROM THE ABOVE FINDINGS OF THE CIT(A), WHICH HA D EXTRACTED THE TRIBUNAL ORDER IN THE QUANTUM ASSESSMENT, IT IS CLEAR THAT THE DEPARTMENT HAS FOUND EVIDENCES CONCERNING THE SALE OF PMMA LENS BY MIS J . N. SURGI CURE AND THE ASSESSEE HAS ALSO ACCEPTED THE EXISTENCE OF THE PROFIT ELEMENT OF SALE OF THESE LENSES. THE ASSESSEE DID NOT DISCLOSE ANY INCOME FROM THE SALE OF LENS IN THE ITA NO S 207 & 208/C/2015 . 7 RETURN FILED ; AND BUT FOR THE SEARCH PROCEEDINGS, THE SAME WOULD HA VE BEEN ESCAPED ASSESSMENT. THE PLEA OF THE LD AR THAT THIS ADDITION IS PURELY AN ESTIMATED ADDITION, IS FACTUALLY INCORRECT. THE TRIBUNAL , IN THE QUANTUM ASSESSMENT , HAD CATEGORICALLY HELD THAT FOR AYS 2007 - 08 AND 2008 - 09, 1414 AND 1450 LENSES WERE SOLD R ESPECTIVELY. ON THE SALE OF THESE LENSES, THE PROFIT MARGIN IS ESTIMATED AT 600 PER LENS AND ACCORDINGLY , THE ADDITION S WERE MADE. THE ADDITION S MADE W ERE DULY ACCEPTED BY THE ASSESSEE AND NO FURTHER APPEAL HAS BEEN FILED BEFORE THE HONBLE HIGH COURT. I T IS NOT A PURE ESTIMATE OR A GUESS WORK , WHICH HAS LEAD TO THIS ADDITION AND THE ASSESSEE HIMSELF HAS ADMITTED THAT THE INCOME HAS ARISES ON SALE OF THESE PMMA LENSES. EVEN OTHERWISE, THE PENALTY CAN BE IMPOSED ON AN ESTIMATED ADDITION. I N THE CASE OF CIT VS S KRISHNASWAMY & SONS (1996) 219 ITR 157) SEARCH OPERATION WAS CARRIED OUT IN THE CASE OF A TRANSPORT OPERATOR SHOWED THAT COLLECTIONS FOR A NUMBER OF DAYS HAD BEEN SUPPRESSED. SUCH SUPPRESSION WAS ADMITTED BY THE ASSESSEE BY FILING A REVISED RETURN. I T HAS BEEN HELD THAT THE PENALTY COULD BE LEVIED EVEN THOUGH THE ASSESSMENT WAS BASED ON ESTIMATE, 9 IN VIEW OF THE AFORESAID REASONING AND THE JUDICIAL PRONOUNCEMENT, WE HOLD THAT TH E PENALTY HAS BEEN RIGHTLY CONFIRMED BY THE C IT(A) IN RESPECT OF THE ABOVE MENTIONED QUANTUM ADDITION SUSTAINED BY THE ITAT. IT IS ORDERED ACCORDINGLY. ITA NO S 207 & 208/C/2015 . 8 10 IN THE RESULT THE APPEAL S FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF FEB 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCO UNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 9 TH FEB 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN