DCIT, Thrissur V. Dr. Hemalatha Warrier, Palakkad

ITSSA 5/COCH/2006

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8656 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-01-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 13-10-2010
• Assessment Year: misc
• Appeal Filed On: 19-01-2006
• Court: TRIBUNAL
• Department Lawyers: SHRIS C SONKAR
• Assessee Lawyers: C R HARISH
• Keywords: Depreciation; Block assessment; Retraction
• Section: 131; 132

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.(SS)A. NOS. 212/COCH/2005 & 05/COCH/2006 BLOCK PERIOD : 01.4.1996 TO 26.2.2003 DR. HEMALATHA WARRIER, 15/550(1)-EMMEL COLONY, KUNNATHURMEEDU, PALAKKAD. [PAN:AAGPW 8163Q] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, THRISSUR. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI C.R.HARISH, CA REVENUE BY SHRIS.C.SONKAR, DR O R D E R PER SANJAY ARORA, AM: THESE ARE CROSS APPEALS, I.E., BY THE ASSESSEE AN D THE REVENUE ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-I , KOCHI (CIT(A) FOR SHORT) DATED 21.10.2005, PARTLY ALLOWING ASSESSEES APPEAL CONTE STING ITS BLOCK ASSESSMENT U/S. 158BC OF THE INCOME-TAX ACT, 1961 ('THE ACT', HEREINAFTE R) VIDE ORDER DATED 23.3.2005 . 2. THE FACTS OF THE CASE, IN SO FAR AS ARE RELEVANT , ARE THAT THE ASSESSEE IS A PRACTISING GYNAECOLOGIST, ALSO ATTACHED, I.E., APART FROM HER PRIVATE PRACTICE, WHICH SHE DOES FROM HER RESIDENCE AT PALAKKAD, TO SOME HOSPITALS IN THE CITY AS A VISITING DOCTOR. SHE WAS SUBJECT TO SEARCH U/S. 132 OF THE ACT AT HER RESIDE NCE ON 26.2.2003. CASH AT ` 10.24 LAKHS, FDRS, DIARIES AND DOCUMENTS WERE FOUND AND S EIZED, AS WELL AS HER DEPOSITION TAKEN. RETURN DECLARING UNDISCLOSED INCOME AT ` 15.55 LAKHS WAS FILED ON 16.12.2003 IN PURSUANCE TO NOTICE U/S. 158BC DATED 23.7.2003, WHI CH, HOWEVER, CAME TO BE ASSESSED AT ` 32.22 LAKHS. IN FIRST APPEAL, SHE SECURED RELIEF F OR ` 4.12 LAKHS. AGGRIEVED, BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL. IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 2 3. WE SHALL TAKE UP THE ASSESSEES APPEAL, BEING SE NIOR, FIRST. THE ONLY ISSUE AGITATED PER THE SAME IS THE ASSESSMENT OF UNDISCLOSED INCOM E FOR A.Y. 2003-04 OF THE BLOCK PERIOD (I.E., FROM 1.4.1996 TO 26.2.2003) AT ` 1495522 AS AGAINST AT ` 286182 BY THE ASSESSEE, SO THAT A DIFFERENCE OF ` 1209340 OBTAINS. THE GROSS RECEIPT FOR THE YEAR AT ` 30 LAKHS IS NOT DISPUTED. THE BASIS FOR THE SAME IS A DIARY MAINTAINED BY THE ASSESSEE REGARDING HER ENTIRE RECEIPTS, I.E., FROM PRIVATE P RACTICE AS WELL AS FROM HOSPITALS. THE SAME, AS STATED, ALSO CONTAINS RECEIPT OF HER HUSBA ND, DR. C.MOHANAN, AN ORTHOPAEDIC SURGEON, AND WHO ALSO HAS PROFESSIONAL RECEIPTS FRO M PRACTICE AS WELL AS FROM DISTRICT HOSPITAL, PALAKKAD, THE INCOME COMPONENT OF THE SA ID RECEIPT (OF `30 LAKHS) , I.E., AT ` 19.96 LAKHS, IS ALSO NOT DISPUTED. IT IS THE BIFUR CATION THEREOF INTO DISCLOSED AND UNDISCLOSED PARTS THEREOF, THAT IS THE SUBJECT MATT ER OF LIS. THE BASIS OF THE ASSESSEES CLAIM IS ADVANCE-TAX, WHICH STANDS DEPOSITED AT ` 5.20 LAKHS, SO THAT THE INCOME TO THE CORRESPONDING EXTENT IS CLAIMED AS DISCLOSED ON THE BASIS OF THE RULINGS BY THE HIGHER COURTS OF LAW. THE REVENUE, ON THE OTHER HAND, CON TENDS THAT ONLY THE ADVANCE-TAX DEPOSITED PRIOR TO THE DATE OF SEARCH COULD BE CONS IDERED FOR THE PURPOSE OF DISCLOSED INCOME, AND NOT THAT DEPOSITED AFTER THE DATE OF SE ARCH. THIS IS PARTICULARLY SO IN VIEW OF THE HUGE, UNEXPLAINED VARIATION BETWEEN THE AMOUNT DEPOSITED BEFORE AND AFTER SEARCH. THE FIRST TWO INSTALMENTS OF ADVANCE-TAX, WHICH FAL L PRIOR TO THE DATE OF SEARCH, AGGREGATE TO ` 70,000/- ONLY. THE SAME, AS PER THE MANDATE OF LAW , ARE TO BE DEPOSITED TO COVER 60% OF THE TOTAL TAX LIABILITY FOR THE YEAR. ACCORDING LY, THE ESTIMATED TAX LIABILITY FOR THE YEAR, AND THE INCOME TOWARD WHICH THE SAME IS DEPOSITED, AND WHICH COULD, THEREFORE, BE CONSIDERED AS LIABLE TO BE RETURNED OR DISCLOSED BY THE ASSESSEE, WAS WORKED OUT BY THE ASSESSING OFFICER (A.O.) AT RS. 1.17 LACS AND ` 4.57 LAKHS RESPECTIVELY. IN CALCULATING THIS AMOUNT, HE ALSO WORKED BACK AND ADDED/INCLUDED THE ASSESSEES CLAIM FOR DEPRECIATION ALLOWANCE AND EXPENDITURE. FURTHER, THE SAME WAS AL SO IN LINE WITH THE DISCLOSED INCOME FOR THE PRECEDING YEAR, I.E., A.Y. 2002-03, BEING A T ` 4.04 LAKHS. HOWEVER, ALLOWING FURTHER LEVERAGE TO ACCOUNT FOR OTHER INCOME AS WEL L AS THE FACT THAT THE ADVANCE-TAX IS PAID ON AN ESTIMATED BASIS, HE CONSIDERED ` 5 LAKHS AS THE ASSESSEES DISCLOSED INCOME OUT OF THE TOTAL ADMITTED INCOME OF ` 19.96 LAKHS, SO THAT THE BALANCE ` 1495522 WAS CONSIDERED AS UNDISCLOSED INCOME. THE FIRST APPELL ATE AUTHORITY UPHELD THE AOS STAND ON IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 3 THE BASIS THAT THE TAX PAID AFTER THE DATE OF SEARC H CANNOT BE CONSIDERED AS PART OF THE DOCUMENTED INCOME. 4. BEFORE US, THE RESPECTIVE CASES OF BOTH THE PART IES REMAIN THE SAME. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE M ATERIAL ON RECORD. 5.1 WE ARE WHOLLY UNABLE TO APPRECIATE THE ASSESS EES CASE AND FIND IT UNTENABLE BOTH IN LAW AND ON FACTS. THE UNDISCLOSED INCOME, BY DEFIN ITION (SECTION 158B(B)), IS ONE THAT IS BASED ON THE MATERIAL FOUND IN SEARCH AS WELL AS TH E EVIDENCES RELATABLE THERE-TO, I.E., EXTENDS TO THAT WHICH STANDS NOT DISCLOSED OR WOULD NOT HAVE BEEN TO THE REVENUE. CLEARLY, THE SECOND REQUIREMENT ONLY APPLIES IN RES PECT OF THE PERIOD(S) FOR WHICH THE RETURN OF INCOME HAS NOT FALLEN DUE FOR FURNISHING AS ON THE DATE OF SEARCH, INCLUDING FOR THE YEAR OF SEARCH, PART OF WHICH, I.E., UP TO THE SEARCH DATE, FORMS PART OF THE BLOCK PERIOD. IN THIS RESPECT, THE ACT (PER SECTION 158B B(D)) ITSELF PRESCRIBES THAT INCOME AS RECORDED IN THE BOOKS OF ACCOUNTS AND OTHER DOCUMEN TS MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE DATE OF SEARCH OR REQUISITION RELA TING TO THE RELEVANT YEARS, IS TO BE CONSIDERED AS DISCLOSED. WHAT IS SUCH MATERIAL IN THE INSTANT CASE? WE FIND NONE. THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS, EVEN AS HER RECEIPT ADMITTEDLY EXCEEDS ` 10 LAKHS PER ANNUM, WHICH IS THE PRESCRIBED LIMIT P RESCRIBED FOR THE PURPOSE UNDER THE ACT (SECTION 44A). NEITHER HER RETURN OF INCOME FOR THE CURRENT YEAR NOR FOR THE PRECEDING YEARS, IS BASED ON ANY SUCH BOOKS OF ACCO UNTS. THE DIARY MAINTAINED BY HER, ADMITTEDLY CONTAINS PROFESSIONAL RECEIPTS WHICH ARE NOT TO BE DISCLOSED TO THE DEPARTMENT, RATHER, AS CONTENDED, EVEN THAT OF HER HUSBAND. IN ANY CASE, THE SAME DO NOT FORM THE BASIS ON WHICH HER RETURNS TO THE REVENUE STAND FIL ED. THE QUESTION, THEREFORE, THAT ARISES IS TO WHAT EXTENT THE SAME (DIARY) CAN BE SAID TO I NCLUDE THE DISCLOSED RECEIPTS . A FAIR ESTIMATE WOULD BE A FIGURE IN LINE WITH HER RETURN FOR THE IMMEDIATELY PRECEDING YEAR, AS ONLY A PART OF THE TOTAL INCOME, RECORDED LIKEWISE, STOOD DISCLOSED FOR THAT YEAR AS WELL. WHEN WE SAY IN LINE, WHAT IS MEANT IS IN TANDEM WITH AND WHICH WOULD IMPLY OBSERVING A SIMILAR PERCENTAGE OR RATIO, I.E., OF G ROSS TOTAL RECEIPT. THIS IS, OF COURSE, SUBJECT TO THE ASSESSEE EXHIBITING ANY INTENTION T O DISCLOSE A GREATER OR HIGHER PERCENTAGE. THE ADVANCE-TAX AS DEPOSITED, ARISE AS IT DOES OUT OF THE PROCESS OF SELF-ASSESSMENT, IS A IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 4 GOOD INDICATOR IN THIS REGARD, AND IT IS PRECISELY ON ACCOUNT OF THIS THAT THE COURTS HAVE REGARDED IT AS A PART OF THE RECORD MAINTAINED BY T HE ASSESSEE IN THE NORMAL COURSE, SO THAT THE INCOME TO THE CORRESPONDING EXTENT HAS TO BE CO NSIDERED AS DISCLOSED. THERE IS NO, AND POSSIBLY COULD NOT BE, ANY QUARREL WITH THIS PR OPOSITION. HOWEVER, WHEN WE SAY ADVANCE-TAX OR TAX DEPOSITED, WHAT IS MEANT IS ONLY THAT WHICH STANDS DEPOSITED PRIOR TO THE DATE OF SEARCH, AND WHICH UNDERSTANDING THE REV ENUE CONCEDES TO/AGREES WITH. THIS IS ALL THE MORE SO IN THE PRESENT CASE AS THE SAME IS IN LINE WITH THE ASSESSEES DISCLOSED INCOME FOR THE IMMEDIATELY PRECEDING YEAR. THE TAX DEPOSITED SUBSEQUENT TO THE DATE OF SEARCH IS NOT AT ALL RELEVANT IN DETERMINING THE DI SCLOSED INCOME IN SUCH A SITUATION. WHAT, IT MAY BE ASKED, IS THE BASIS FOR PAYING THE THIRD INSTALMENT OF ADVANCE- TAX AT ` 4.50 LAKHS, WHICH IS TO COVER 40% OF THE TOTAL TAX, AS AGAINST ` 0.70 LAKHS TOWARDS 60% OF THE TOTAL LIABILITY PER THE FIRST TWO INSTALMENT S THEREOF? A LITTLE MORE PAYMENT, AND IT WOULD WELL BE OPEN FOR THE ASSESSEE TO CONTEND, I. E, GIVEN ITS STAND, THAT ITS ENTIRE INCOME IS DISCLOSED. IT IS THE DISCLOSED INCOME THAT RE SULTS IN THE PAYMENT OF ADVANCE-TAX AND NOT VICE-VERSA. IT IS ONLY IN THE ABSENCE OF ANY RE CORD OR BASIS FOR THE FORMER THAT THE ADVANCE-TAX IS TAKEN AS A FAIR APPROXIMATION OF THE INCOME THAT THE ASSESSEE HAD INTENDED TO DISCLOSE TO THE REVENUE. PUT SUCCINCTLY, THE MA TTER IS FIRSTLY SPECIFICALLY COVERED BY LAW; SECONDLY, ON FACTS, THERE IS NO BASIS FOR THE ASSESSEE TO CLAIM THAT SHE INTENDED TO DISCLOSE THE PERCENTAGE OF HER TOTAL INCOME, AS AVE RRED BY HER ( OVER 85%). IN FACT, THE PAYMENT OF THE THIRD INSTALMENT OF THE TAX AT ` 4.50 LAKHS HAS BEEN PAID BY THE ASSESSEE PRIMARILY OUT OF HER UNDISCLOSED INCOME. A POST-SE ARCH EVENT CANNOT BE A USEFUL GUIDE IN INTERPRETING THE PRE-SEARCH BEHAVIOUR OR EVENTS, UN LESS THE SAME IS IN SYNC THEREWITH OR BASED ON SOME INDEPENDENT MATERIALS. 5.2 THE REVENUE, ON THE OTHER HAND, HAS ADOPTED THE TAX PAID (PRIOR TO SEARCH) AND THE RETURNED INCOME(FOR THE PRECEDING YEARS) AS THE BAS IS FOR ESTIMATING THE DISCLOSED AND, BY IMPLICATION, THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE SPLIT PERIOD FALLING FOR BLOCK ASSESSMENT FOR A.Y. 2003-04. NO INFIRMITY IN THE S AID ESTIMATION, WHICH IS IN AGREEMENT BOTH WITH THE STATUTE AS WELL AS THE LAW AS EXPLAIN ED BY THE HIGHER COURTS, STANDS POINTED OUT BY THE ASSESSEE. REFERENCE IN THIS CONTEXT MAY BE PROFITABLY DRAWN IN THE CASE OF CIT VS . BINOY MATHAI (2009) 311 ITR 226(KER.). THERE IS NO DENIAL OF LA W ( ) BY THE REVENUE, IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 5 AS THE ASSESSEE CLAIMS (AS HELD BY THE HIGHER COURT S OF LAW), WHICH WE FIND HAS ESTIMATED THE UNDISCLOSED INCOME VERY FAIRLY. WE DECIDE ACCO RDINGLY, UPHOLDING ITS STAND. . 6. NEXT, WE COME TO THE REVENUES APPEAL. THE SAME CONTAINS THREE ISSUES, EACH OF WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST RELA TES TO THE DELETION OF AN ADDITION TO INCOME OF ` 2.70 LAKHS FOR A.Y. 2002-03. THE BRIEF FACTS ARE T HAT THE DIARY FOUND IN SEARCH, MARKED KPU-A(5), REVEALED RECEIPTS AT ` 563150/- AND ` 2654135 FOR THE FIRST THREE (3) AND THE LATTER NINE (9) MONTHS OF THE CAL ENDAR YEAR 2002 RESPECTIVELY. THE TWO RECEIPTS, AGGREGATING TO ` 32.17 LAKHS, FALL IN TWO CONSECUTIVE PREVIOUS YEARS . IT IS THE FORMER WE ARE CONCERNED WITH. ON THAT BASIS, THE A SSESSEES PROFESSIONAL RECEIPT FOR THE FINANCIAL YEAR 2001-02 WAS CONSIDERED BY THE AO AT ` 21 LAKHS. THE ASSESSEE OBJECTED, STATING THAT SHE HAD LEFT GOVERNMENT SERVICE ONLY I N FEBRUARY, 2002, WHICH OCCUPIED BULK OF HER TIME, LEAVING WITH HER WITH NOT ENOUGH TIME TO DEVOTE TO HER PRIVATE PRACTICE, WHICH ADMITTEDLY, WAS CARRIED ON ALONGSIDE, AND WAS FOR THAT REASON AT A .NOMINAL AMOUNT ONLY. FURTHER, THE RECEIPT FROM THE 3 HOSPITALS S TOOD INCLUDED IN THE DIARISED AMOUNTS, I.E., FOR THE LAST THREE MONTHS OF THE F.Y. 2001-02 . THE RECEIPT FROM THE HOSPITALS FOR THE YEAR (F.Y. 2001-02) AT ` 9.46 LAKHS BEING ADMITTED, THE AO ADDED ANOTHER 3 LAKH S AS RECEIPT FROM PRIVATE PRACTICE FOR THE PREVIOUS YEAR 2001-02, ESTIMATING THE TOTAL RECEIPT THEREFOR AT ` 12.46 LAKHS. ALLOWING 30% TOWARDS EXPENDITURE, HE E STIMATED THE ASSESSEES INCOME FOR THE YEAR AT `8.70 LAKHS AS AGAINST ` 6 LAKHS DECLARED BY THE ASSESSEE. THE DIFFERENCE OF ` 2.70 LAKHS WAS, THEREFORE, CONSIDERED BY HIM AS UND ISCLOSED INCOME FOR A.Y. 2002-03. THE LD. CIT(A) DELETED THE SAME ON T HE BASIS THAT THE SAME WAS DE HORS ANY MATERIAL FOUND IN SEARCH, AND IS, THUS, NOT SUS TAINABLE IN LAW, AS CLARIFIED BY THE TRIBUNAL AND VARIOUS HIGH COURTS. 7.1 WE, AGAIN, FIND THE ASSESSEES CASE AS WITHOUT MERIT. THAT SHE WAS DOING PRIVATE PRACTICE DURING THE YEAR IS NOT DENIED, AND IS RATH ER BORNE BY THE FACT OF THE SAME BEING INCLUDED IN THE RECEIPT AT ` 5.63 LAKHS FOR THE PERIOD JANUARY, 2002 TO MARCH, 2 002. THAT BEING THE CASE, THE RECEIPT FOR THE YEAR FROM THIS SOURCE HAS TO BE ESTIMATED; THE ASSESSEE ADMITTING TO AN UNDISCLOSED INCOME OF ` 6 LAKHS, WHICH IS AGAIN ONLY AN ESTIMATION . IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 6 ESTIMATION IS INTRINSIC TO THE ASSESSMENT OF INCOME DISCLOSED OR UNDISCLOSED WHICH ONLY SIGNIFIES IT BEING DECLARED TO THE REVENUE OR NOT. THE ONLY CONDITION IS THAT THE SAME IS TO BE BASED ON CERTAIN MATERIALS/EVIDENCE AND RE ASONABLY ESTIMATED, I.E., BY DRAWING COGENT INFERENCES THEREFROM. REFERENCE IN THIS CON TEXT IS DRAWN TO THE DECISION IN THE CASE OF HOTEL KUMAR PALACE VS. CIT , 283 ITR 110 (P&H); RAJNIK AND CO. VS. CIT (ASSISTANT) , 251 ITR 651 (A.P.); CIT VS. RAJENDAR PRASAD GUPTA , 248 ITR 350 (RAJ.) NAPAR DRUGS (P.) LTD. V. CIT (DY.) (2006) 98 ITD 285 (DEL.)( TM). THE LD. CIT(A) CONTRADICTS HIMSELF WHEN HE DELETES THE ADDITION ON THIS SCORE; HE HAVING HIMSELF UPHELD THE ESTIMATION OF THE ASSESSEES UNDISCLOSED INCOME FOR A.Y. 2003-04 ON THE BASIS OF THE FIRST TWO INSTALMENTS OF ADVANCE TAX DEPOSITED IN V IEW OF THE ASSESSEE MAINTAINING A COMBINED RECORD FOR THE TOTALITY OF HER RECEIPTS, A ND IT BEING ALSO NOT DENIED THAT A PART OF IT WAS BEING REGULARLY DISCLOSED TO THE REVENUE, WI TH THE ASSESSEE ALSO DEPOSITING ADVANCE-TAX. THE ONLY QUALIFICATION IN THIS REGARD, AS AFORESTATED, IS OF IT BEING MADE REASONABLY, BY FACTORING IN ALL THE RELEVANT INFORM ATION. COMING TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE AO HAS BEEN INFACT V ERY CHARITABLE IN ESTIMATING THE RECEIPT FROM THE PRIVATE PRACTICE FOR THE RELEVANT YEAR AT ` 3 LAKHS. THIS IS AS THE RECEIPT FOR MARCH 2002, WHICH IS ADMITTEDLY ONLY FROM PRIVATE P RACTICE, IS ITSELF AT ` 2.34 LAKHS . EVEN A FLAT DISCOUNT OF 50% FOR THE BALANCE 11 MONT HS, OR EVEN AT RS. 1 LACS P.M. (SAY) WOULD YIELD A MUCH HIGHER FIGURE. IN FACT, NO MATER IAL HAS BEEN PLACED ON RECORD TO EXHIBIT THE FACT THAT THE ASSESSEE LEFT ATTENDING T HE HOSPITALS IN FEBRUARY, 2002 OR STARTED PRACTICE ONLY IN NOVEMBER, 2001, AS CONTENDED. AGA IN, THE RECEIPT FOR THE FOLLOWING YEAR (F.Y. 2002-03) FROM PRIVATE PRACTICE IS ADMITTEDLY AT ` 30 LAKHS. AN INCREASE OF 1000% IN ONE YEAR, IS OUT OF BOUNDS OF FEASIBILITY, MORE SO CONSIDERING THAT SHE WAS PRACTISING FOR LONG AND IN THE SAME AREA, AND THE PROFESSIONAL REP UTATION, WHICH IS THE BASIS FOR PRACTICE, GROWS WITH PUBLIC CONFIDENCE, WHICH IS A GRADUAL AN D PAINSTAKING PROCESS, CONSUMING TIME. A MORE DIRECT ESTIMATE WOULD BE TO REDUCE TH E RECEIPT FROM THE HOSPITALS FOR THE MONTHS OF JANUARY AND FEBRUARY, 2002 (FROM THE TOTA L RECEIPTS FOR THESE TWO MONTHS AT ` 3.29 LAKHS) TO YIELD THE VOLUME OF PRACTICE FOR THE SE TWO MONTHS, I.E., IMMEDIATELY PRIOR TO LEAVING THE HOSPITALS, AND AVERAGE OUT THE SAME FOR THE FIRST 9 MONTHS OF THE FINANCIAL YEAR; THE FIGURE FOR MARCH02 BEING AVAILABLE. THE RECEIPT FROM PRIVATE PRACTICE, ADOPTING ANY SUCH APPROACH, BASED ONLY ON THE UNDISPUTED MAT ERIALS, WOULD YIELD AN ESTIMATE IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 7 MUCH HIGHER THAN THAT BY THE AO. AS ALSO OBSERVED B Y THE BENCH DURING THE HEARING, A PERSON WOULD NOT LEAVE CERTAIN SOURCE OF INCOME W HICH THE HOSPITALS IN THE INSTANT CASE REPRESENT UNLESS ASSURED OF THE SAME OR APPROXIMA TELY THE SAME INCOME FROM THE OTHER SOURCE/S; THE RECEIPT FROM HOSPITALS, WHICH ENTAIL A LOWER RATE OF EXPENDITURE, FOR THE FOLLOWING YEAR BEING ADMITTEDLY TO THE TUNE OF ` 1.75 LAKHS PER MONTH. 7 . 2 FURTHERMORE, AN EXPENDITURE OF 30% HAS BEEN ESTIMAT ED AND ALLOWED BY THE AO ON THE TOTAL RECEIPT OF ` 12.46 LAKHS, WHILE THE LEVEL OF EXPENDITURE AGAINST HOSPITAL RECEIPTS WOULD ONLY BE ON A LOWER LEVEL SCALE. ANOTHER ASPE CT THAT HAS ESCAPED TO BE CONSIDERED BY THE LD. CIT(A) IS THAT THE EXPENDITURE TO THE EX TENT OF ` 1.06 LAKHS HAS BEEN OMITTED TO BE ACCOUNTED FOR BY THE ASSESSEE IN HER CASH FLOW STATEMENT, AND FOR WHICH NO SEPARATE ADDITION HAS BEEN MADE BY THE AO, ALLOWING HER TEL ESCOPING BENEFIT. THE ORDER OF THE LD. CIT(A) IS SILENT ON THIS MATTER. 7.3 WE, THEREFORE, CONSIDER THE UNDISCLOSED INCOME FOR A.Y. 2002-03, AS ASSESSED BY THE AO, AS VERY REASONABLE, BASED ON MATERIALS GATH ERED IN SEARCH AND, CONSEQUENTLY, UPHOLD THE SAME. 8. THE SECOND ISSUE AGITATED BY THE REVENUE IS THE DELETION OF THE ADDITION MADE QUA INVESTMENT IN POST OFFICE MONTHLY INCOME SCHEME (MI S) AT ` 42,000/-. THE ASSESSEE, VIDE HER SWORN STATEMENT MADE UNDER SECTION 131 OF THE ACT ADMITTED TO DEPOSITS UNDER MIS AGGREGATING TO ` 2,98,000/-, EVEN AS THE CORRECT FIGURE WOULD, AS PO INTED OUT BY THE AO, BE ` 2.94 LAKHS (I.E., ` 42.000 X 7). HOWEVER, AS ONLY SIX DEPOSITS WERE RE FLECTED IN THE CASH FLOW STATEMENT, THE AO ADDED THE REMAINING ` 42,000/-. IN APPEAL, IT WAS EXPLAINED THAT THE ASSESSEE HAD, VIDE HER SUBSEQUEN T STATEMENT DATED 8.5.2003, FURNISHED THE DETAILS OF THE INVESTMENT MADE BY HER, INCLUDIN G THE ACCOUNT NOS. OF THE DEPOSITS HELD IN HER NAME AT ` 1.68 LAKHS. THE BALANCE DEPOSIT, IT WAS URGED BEFO RE THE LD. CIT(A), BELONGED TO THE ASSESSEES HUSBAND AND FATHER-IN-LA W, AND WERE DULY ACCOUNTED FOR BY THEM. UNDER THE CIRCUMSTANCES, THE RECEIPT OF ` 42,000/-, AS STATED BY THE AO, IS NON- EXISTENT. THE LD. CIT(A) FOUND THE ASSESSEES CONT ENTION OF THE DEPOSITS HAVING BEEN IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 8 ACCOUNTED FOR BY THE, HUSBAND AND FATHER-IN-LAW AS CORRECT AND, CONSEQUENTLY, THE ADDITION OF ` 42,000/- IS WITHOUT ANY BASIS; THERE BEING NO DEPO SITS FOR THAT AMOUNT. THE REVENUE IS AGGRIEVED, AGITATING THE ISSUE ON THE BA SIS OF THE ABSENCE OF SATISFACTORY EXPLANATION, AND OF THE ASSESSEE AS INCLUDING THE A CCOUNTS OF HER HUSBAND AND FATHER-IN- LAW TO EXPLAIN THE INVESTMENTS. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. THE MATTER IS PURELY FACTUAL. THE ASSESSEE CLAIMS TO HAVE ACCOUNTED FOR THE MIS DEPOSITS HELD IN HER NAME (AT ` 1.68 LAKHS), AND BALANCE INVESTMENTS TO BE IN THE N AMES OF OTHER FAMILY MEMBERS, WHO HAVE BEEN FOUND BY THE LD. CIT(A) TO HAVE ACCOUNTED FOR THE SAME. THERE IS, THUS, NO BASIS TO HOLD FOR THE NON-DISCLOSURE OF A DEPOSIT O F ` 42,000/-. THE REVENUES CONTENTION OF THE ASSESSEES INCLUSION OF HER HUSBAND AND FATH ER-IN-LAW TO EXPLAIN THE INVESTMENTS, I.E., BEFORE THE LD. CIT(A), IS ALSO NOT TENABLE. T HE ADDITION BY THE AO IS ONLY TOWARD THE DEPOSIT THAT HAS NOT BEEN DISCLOSED, WITHOUT FURNIS HING ITS PARTICULARS. THE INVESTMENT BY THE HUSBAND AND FATHER-IN-LAW HAS BEEN DULY CONSIDE RED BY HIM, I.E., AT THE ASSESSMENT STAGE, OR ELSE THE ADDITION EFFECTED IN THE HANDS O F THE ASSESSEE WOULD HAVE BEEN FOR ` 1.26 LAKHS, I.E., ` 2.94 LAKHS MINUS ` 1.68 LAKHS, AND NOT FOR ` 42,000/- ONLY. TRUE, THE RETRACTION BY THE ASSESSEE HAS TO BE SUPPORTED, BUT WHERE THE EXISTENCE OF THE DEPOSIT ITSELF IS IN DISPUTE, REVENUE HAS TO RELY ON SOMETHING MORE THAN THE STATEMENT, SO AS TO ESTABLISH THE EXISTENCE OF THE SEVENTH DEPOSIT, AND WHICH WE FIND AS MISSING, SO THAT IT HAS NO CASE, AND THE LD. CIT(A) HAS JUSTIFIABLY DELETED THE ADDITION . WE UPHOLD THE SAME. 10. THE LAST AND FINAL ISSUE IS QUA ADDITION OF ` 1 LAKH BY THE AO TOWARD EXPENDITURE ON FURNISHING HER RESIDENTIAL HOUSE BY THE ASSESSEE , WHO, VIDE HER STATEMENT DATED 26.2.2003, ADMITTED TO HAVE INCURRED AN EXPENDITURE OF ` 1.50 LAKHS ON FURNISHING HER NEWLY CONSTRUCTED RESIDENTIAL HOUSE, I.E., TOWARD F URNITURE, TV, MUSIC SYSTEM, ETC. HOWEVER, AS THE CASH FLOW STATEMENT SUBMITTED BY HE R SUBSEQUENTLY INCLUDED ONLY ` 50,000/- TOWARDS THE SAME, THE AO ADDED BACK THE BA LANCE ` 1 LAKH. IN APPEAL, THE ASSESSEE CONTENDED THAT HER STATEMENT, THOUGH FACT UALLY CORRECT, DID NOT IMPLY THAT THE ENTIRE EXPENDITURE OF ` 1.50 LAKHS STOOD ACTUALLY INCURRED ONLY AFTER THE C ONSTRUCTION OF THE NEW HOUSE. MANY OF THE ITEMS, I.E., TV, MUSIC SYST EM, ETC. WERE ALREADY IN POSSESSION OF IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 9 THE ASSESSEE, WHO WAS ENJOYING A DECENT LIFE STYLE EVEN PRIOR TO THE SHIFTING OF HER RESIDENCE. THE SAME FOUND FAVOUR WITH THE LD. CIT( A), FINDING THE ASSESSEES STATEMENT, WHO WAS NOT SPECIFICALLY ENQUIRED FOR THE INVESTMEN T MADE ON OR AFTER 1.4.1996, AS ONLY LOGICAL. AGGRIEVED, THE REVENUE IS IN APPEAL. 11. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. FIRSTLY, TO HOLD THAT THE ASSESSEE WAS NOT SPECIFICALLY QUESTIONED IN RES PECT OF THE INVESTMENT/EXPENDITURE ON FURNISHING AFTER 31.3.1996, IS MIS-CONCEIVED. THIS IS, AS SHE WAS BEING QUESTIONED ONLY IN RESPECT OF EXPENDITURE ON FURNISHING OF HER NEWLY C ONSTRUCTED RESIDENTIAL HOUSE AT PALAKKAD, I.E., DURING THE FINANCIAL YEAR 1996-97, WHICH WAS ADMITTEDLY COMPLETED DURING THE SAID YEAR BY INCURRING A COST OF OVER ` 19 LAKHS, FOLLOWED BY THE SHIFTING OF RESIDENCE. THE FURNISHING WOULD, CONSEQUENTLY, ONLY BE ON OR A FTER THE SAID SHIFTING, TOWARD WHICH THE ASSESSEE HERSELF ADMITS OF AN EXPENDITURE OF ` 50,000/- DURING THE SAID PERIOD. THE ASSESSEE WAS WELL AWARE OF BEING QUESTIONED IN RES PECT OF EXPENDITURE ON FURNISHING OF HER HOUSE, AND WHICH ONLY IMPLIES FRESH EXPENDITURE , AND HAS NOT STATED OF ANY AMBIGUITY IN THE QUESTION POSED TO HER OR HER UNDERSTANDING THEREOF, THOUGH HAS ONLY REVISED HER ESTIMATE OF EXPENDITURE TO 1/3 RD . THE ISSUE, THUS, IS ESSENTIALLY ONE OF QUANTUM, WHICH ALONE IS UNDER DISPUTE, WITH THE ASSESSEE STATING O F HER ESTIMATE ON EXPENDITURE SO INCURRED BEING INCORRECT AS MOST OF THE EQUIPMENT W AS OLD. THAT COULD BE, BUT THEN IT IS ONLY THE ASSESSEE WHO HAS TO JUSTIFY HER EARLIER MI S-STATEMENT ON FACTS. THE REVENUE FINDING HER STATEMENT AS REASONABLE DID NOT PROBE H ER FURTHER IN THE MATTER, SO THAT IT IS NOW NOT OPEN TO THE ASSESSEE TO RETRACT HER STATEME NT, I.E., WITHOUT SOME CORROBORATIVE MATERIAL, I.E., PER A BALD ASSERTION ALONE. TRUE, SOME EQUIPMENTS OF THE HOUSEHOLD, VIZ. A.C., TV, FURNITURE, WOULD ONLY BE AVAILABLE, AND W HICH WOULD BE CONTINUED WITH ON SHIFTING TO THE NEW HOUSE, AND IT IS NOT THE REVENU ES CASE THAT THE ENTIRE SUCH GOODS STOOD BOUGHT ANEW. AT THE SAME TIME, HOWEVER, MANY NEW ITEMS WOULD ALSO BE REQUIRED TO BE ADDED. MORE THAN ONE TV (IN A HOUSE), IS MOR E OF A NORM, ESPECIALLY IN A HOUSE WITH FEW ROOMS. SIMILAR IS THE CASE FOR MUSIC SYSTE M; THE ITEMS, IT MAY BE MENTIONED, BEING ONLY ILLUSTRATIVE. NO ITEM-WISE INVENTORY WAS MADE OR ATTEMPTED TO BE VALUED BY EITHER SIDE, WITH THE ASSESSEE BEING QUESTIONED, RA THER, ON THE EXPENDITURE ON THE FURNISHING OF HER NEW HOUSE, AND WHICH WOULD INCLUD E A WHOLE RANGE OF HOUSEHOLD IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 10 GOODS/ITEMS. SHE REPLIED, QUOTING A LUMP SUM FIGURE , SANS ANY DETAILS, SO THAT THE ONUS, ON A SHIFT IN STAND, OR A STEEP DECLINE IN THE ESTI MATE, IS ONLY ON HER AND, IN ITS ABSENCE, IS NO MORE THAN AN ALIBI . A SINGLE ITEM, AS PAINTS (SAY), WOULD COST A SUBS TANTIVE SUM. IN FACT, FITTINGS AND FURNITURE, WHICH HAVE TO BE ACQU IRED ANEW, OR ALMOST, TO SUIT THE NEW PHYSICAL ENVIRONMENT, ITSELF WOULD WORK AS TO AS MU CH. THE QUESTION BOILS DOWN TO REASONABILITY, AND WE CONSIDER THE ASSESSEES ESTIM ATE OF `1.5 LAKHS ON THE FURNISHING OF HER NEW HOUSE, AS ACCEPTED BY THE REVENUE, AS REASO NABLE, WITH NO VALID BASIS TO DISTURB THE SAME. WE DECIDE ACCORDINGLY. 12. IN THE RESULT THE ASSESSEES APPEAL IS DISMISSE D, AND THE REVENUES APPEAL IS PARTLY ALLOWED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 25 TH JANUARY, 2011 GJ COPY TO: 1. DR. HEMALATHA WARRIER, 15/550(1)-EMMEL COLONY, K UNNATHURMEEDU, PALAKKAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL C IRCLE, THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R./I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSI STANT REGISTRAR) IT(SS)A NOS. 212/COCH/2005 & 05/COCH/2006 11