TMI Blog2016 (7) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee recorded by the assessing officer himself. The Tribunal has, therefore, found that the facts contained in the statement ought to have been corroborated and that the assessing officer did not cross verify the statement with other employees. It was also found that the assessing officer has factually ignored the salary payments made to two cousin brothers of the assessee, whose services were availed of by him. On this basis, the Tribunal, after recognizing that the only option was to estimate a reasonable amount towards salary expenses, estimated ₹ 21,500/- as the monthly salary payment for the assessment year 2008- 09. On that basis, the Tribunal has estimated the salary payments for the years 2002-03 to 2008-09 and directed the assessing officer to work out the disallowance charges estimated by it. This finding again is completely a factual one and we see no reason to interfere with the same. Disallowance of a part of the expenditure claimed under the head 'consumables and medicines' - Held that:- We find that the assessing officer disallowed 80% of the amount claimed by the assessee which was confirmed by the CIT (Appeals). The Tribunal, however, modified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the appellate orders, the assessee and the Revenue filed appeals before the Tribunal. By the impugned common order, the appeals filed by the Revenue were dismissed, and the assessee's appeals were partly allowed. It is challenging these orders, the Revenue has filed these appeals, and the questions of law raised are mainly regarding the scope of assessment under section 153A of the Act and the correctness of the deletion ordered. 3.We heard the learned senior standing counsel for the Revenue and the learned senior counsel who appeared for the assessee. 4.From the order of the Tribunal, we find that, at the outset, the Tribunal has answered the contention of the assessee with respect to the scope of assessments made under section 153A of the Act. Thereafter, the Tribunal has dealt with each of the issues raised before it. For convenience, we shall also adopt by the same method. 5.The first issue that was dealt with in the impugned order and raised before us was regarding the scope of assessments made under section 153A. Tribunal has answered this issue, after referring to the orders passed by the Mumbai, Ahammedabad, Visakhapatnam, Kolkata, Bangalore and Delhi Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hief Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that --- (a) any person to whom a summons under subsection (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of Section 131 of this Act, or a notice under subsection (4) of section 22 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or etc. etc. Sub-section (4): The authorised officer may, during the course of the search or seizure examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of search by the assessee is a valuable piece of evidence in order to invoke section 153A of the Income Tax Act, 1961. 19. In order to appreciate the provisions of Section 153A in a proper manner, it is appropriate to extract the said provision, which reads thus: 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 149, section 151 and section 153, in the case of the person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall-- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, in return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome in respect of each assessment year following within six assessment years referred to in clause (b). It further treats the returns so filed as if such return were a return required to be furnished under Section 139. So that on a reading of Section 153A(1) it is categoric and clear that once a notice is issued and the Assessing Officer has required the assessee to furnish return for a period of six assessment years as contemplated under clause (b) then the assessee has to furnish all details with respect to each assessment year since the same is treated as a return filed under section 139. It is true that as per the first proviso, the Assessing Officer is bound to assess or reassess the total income with respect to each assessment year following the six assessment years specified in sub-clauses (a) and (b) of Section 153A. However, even if no documents are unearthed or any statement made by the assessee during the course of search under section 132 and no materials are received for the aforespecified period of six years, the assessee is bound to file a return, is the scheme of the provision. Even though the second proviso to Section 153A speaks of abatement of assessment or rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2008-09, the Tribunal has found that the seized record was applicable for the first 9 months of the financial year and, therefore, set aside the order of the CIT (Appeals) in this regard on the reasoning that: Accordingly, we are of the view that no addition could be made for the assessment year 2008-09 also, as the department has failed to bring on record any actual suppression of consultation fee on the basis of seized record . According to us, the findings of the Tribunal with respect to the addition towards suppression of consultation fee for the assessment years 2002-03 to 2005-06 and 2008-09 cannot be sustained and the order of the assessing officer has to be restored and we do so. 10. The next issue considered by the Tribunal is the suppression of income from surgeries and sale of lenses. The records seized on search were compared with the records maintained by M/s.Sai Nursing Home and the assessing officer did not find any difference between the two. However, the cost of acrylic lens used in the package of surgery performed by the assessee was found to be only ₹ 600/- whereas the assessee was found to be charging ₹ 8400/- from the patients. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These rival contentions were appreciated by the Tribunal and on facts, the Tribunal came to the following findings: 20. We have heard the rival contentions on this issue. As concluded by Ld CIT(A), the sum total of all evidences gathered during the course of search and also the result of investigations conducted thereafter was that the appellant was making profit on sale of PMMA lenses. There is no dispute with regard to the fact that the assessee has correctly reported the number of surgeries performed by him and it is also an undisputed fact that there was no difference in the surgery fees charged by the assessee. Both the AO as well as Ld CIT(A) has proceeded to compute the profit on sale of PMMA lens by following their own methods. From the observations of Ld CIT(A), which were extracted in the preceding paragraphs, we notice that the methodology adopted by the AO was suffering from many defects and consequently it has given illogical results. Besides the mistakes pointed out by Ld CIT(A), we notice that the AO has made many assumptions while working out the suppressed receipts and such assumptions did not have any basis. Accordingly, we agree with the Ld CIT(A) that the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t establish that the assessee has actually made any profit on the sale of lenses. The conclusion reached by the AO that the assessee has made profit of ₹ 1800/- per lens is also, in our view, on the basis of surmises and conjectures, as the evidences found during the course of search itself showed that the cost of lens ranges from ₹ 100/- to ₹ 600/-. Hence, the profit, if any, could not be ₹ 1800/- per lens, as worked out by the AO and Ld CIT(A). 23. In our view, the only point which goes against the assessee is the reply given by him to the question no.27 posed to him, wherein he had admitted that there was some profit margin on sale of PMMA lens to the assessee. Similarly, Shri S.M.Ouseph, the proprietor of M/s.J.N. Surgi cure also could not give any convincing explanation with regard to the difference in selling price of PMMA lens. Accordingly, since the department has found some evidence concerning M/s.J.N. Surgi cure and since the assessee has also accepted the existence of some profit element in respect of supplies made by that concern, we are of the view that the estimate, if any, in respect of suppressed surgical fee receipts could be made only in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns may be taken at ₹ 600/- per lens (30% of the sales value) and in our view the same would meet the ends of justice. We order accordingly. The PMMA lens used by the assessee in the years relevant to the assessment years 2007-08 and 2008-09 were 1414 lens and 1450 lens respectively. Accordingly, the AO is directed to calculate the profit on the above quantities by applying a rate of ₹ 600/- per lens. The order of Ld CIT(A) stands modified accordingly. 13. A reading of the above findings of the Tribunal would show that the findings are completely factual and these findings do not give rise to any question of law for the consideration of this Court in an appeal filed under section 260A of the IT Act. That apart, in respect of the assessment years other than 2007-08 and 2008-09, we find that absence of any incriminating material unearthed on search is one of the reasons stated by the Tribunal. Though we do not approve this reasoning, we find that there is no other material at all to sustain the finding of the CIT(Appeals) or interfere with the finding of the Tribunal. Therefore, we confirm the findings of the Tribunal in so far as these issues are concerned. 14. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly, the assessee had received gifts from his father-in-law, brother-in-law and brother during the years relevant to the assessment years 2002-03 to 2007-08. The assessing officer has disallowed the claim and made addition on the ground that the donors have failed to prove their respective creditworthiness, placing reliance on Commissioner of Income Tax v. C.P.Mohanakala [2007 291 ITR 278]. This addition was confirmed by the CIT (Appeals) also. In so far as this issue is concerned, the relevant findings of the Tribunal contained in paragraphs 33 to 38 are the following: 33. We shall examine the facts prevailing in the instant case. There is no dispute with regard to the identities of the donors and all the donors are close relatives of the assessee herein. In the instant cases, the gifts have not been received in instruments issued by the foreign banks. Instead, all the donors have issued cheques from their respective Non Resident External bank accounts maintained in the Indian banks. The peculiar feature of these bank accounts are that the deposits into these bank accounts could be made only in foreign currencies, i.e., the account holders cannot deposit Indian currencies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g affidavits/letters. The occasion for making gift has also been stated, i.e, the construction of house by the assessee. There is no dispute that all the donors are close relatives of the assessee. There is no material on record to suggest that the assessee has compensated these donors in lieu of receipt of gifts. All these facts go to establish the genuineness of gift. Though the tax authorities have relied upon host of decisions, all those decisions lay down various principles for accepting the cash credits. In our view, the assessee has discharged the primary burden of proof placed upon him u/s 68 of the Act. 37. Even if an assessee fails to prove the three main ingredients, viz, identify of the creditor, credit worthiness of the creditor and the genuineness of the transactions, the Hon'ble Supreme Court in the case of P.Mohanakala Ors has held that the assessees can still contend that the cash credits cannot be treated as his income by bringing on record the attending circumstances and other material. In this regard, we extract below the following observations made by Hon'ble Apex Court in the above cited case:- The authorities upheld the opinion formed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 19. The Tribunal has gone into certain additions made in the assessment year 2005-06. These additions are of ₹ 15,59,880/- relating to interior decoration and ₹ 16.75 lakhs towards the difference in the purchase price of a property in Bangalore. In so far as the addition towards interior decoration is concerned, the Tribunal has remanded the matter to the assessing officer with a direction to examine the claim of the assessee with regard to the theory of gift of ₹ 10 lakhs. However, reading of paragraphs 42 ad 43 of the order of the Tribunal would show that the case of the assessee itself was a contradictory one. Initially the assessee had claimed that he had received a gift from his father-in-law, though his father-in-law had not declared the cost of the item in his cash flow statement. Subsequently, the assessee himself represented that he had included ₹ 10 lakhs in his cash flow statement filed before the assessing officer and pleaded that credit should be given to him. After taking note of this fact and also holding that the assessee had failed to substantiate his claim, the Tribunal concluded that the theory of gift needs to be rejected. Thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id addition. The case of the assessee is that the AO did not find any material to show that the assessee has actually paid ₹ 45.00 lakhs for purchase of Bangalore property. 21. A reading of the findings of the Tribunal shows that the assessee did not have a consistent case that the Tribunal has set aside the order of the fist appellate authority by putting the entire burden of proof on the assessing officer. Secondly, if the case of the assessee was that the property was purchased along with another person as claimed by him, it was for the assessee to have examined that person. Therefore, the interference of the Tribunal on this issue was totally unwarranted. Accordingly, we set aside the order of the Tribunal to the extent it has set aside the addition of ₹ 16.75 lakhs made towards difference in the purchase price of Bangalore property. 22. Thereafter, the Tribunal has proceeded to examine the issues raised in the appeals filed by the Revenue. The first issue considered by the Tribunal was regarding the correctness of the first appellate authority s order in telescoping the benefit. Having considered the issue in the light of the reasons given by the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of Ld CIT(A) that the report prepared by the architect was only an estimate for the proposed construction and not the estimate of cost of actual construction. The assessee highlighted the following observation made by the architect in his report. Almost 80 lakhs work completed. The balance 90 lakhs considered for personal loan (sd.) 17.11.06 The assessee, by placing reliance on the following case law, further submitted that the Ld CIT(A) was empowered to consider fresh evidences and can also consider the issues not specifically raised before the Ld CIT(A). a) CIT vs. Kashi Nath Chandiwala (2006) (228 ITR 318) (All) b) CIT Vs. Mcmillan Co (1958) (33 ITR 182) (SC) c) CIT Vs. Shapoorfi Pallonji Mistry (1962) (44 ITR 891) (SC) d) CIT Vs. Kanpur coal syndicate (1964) (53 ITR 225) (Cal) e) CIT Vs. Hardutory Motilal Chamaia (1967) (66 ITR 443) (SC) The assessee further submitted that the report of the architect do not certify that he has inspected the premises. Accordingly he submitted that the report of the DVO has more evidentiary value than that of the architect in the facts and circumstances of the case. It was also brought to the notice of Ld CIT(A) tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the additions made by the Assessing Officer in A.Yrs. 2004-05 to 2006-07 were not sustainable even on the basis of the above seized document which estimates the cost of construction completed up to 17.11.2006 to be only of ₹ 80 lakhs as against over ₹ 1 Crore declared by the Appellant. I, therefore, find that no unaccounted investment can be determined even on the basis of specific seized document relied upon by the Assessing Officer for making the addition. For this reason itself, it was essential to know the actual cost of construction of the appellant's residence. The report of the DVO was an important and crucial document for the purpose and therefore, was required to be considered as an important, vital and reliable piece of evidence to ascertain the truth and impart justice even though the same was not used by the Assessing Officer for making the addition. It was a material fact on record and Appellant was fully aware of the same as his property was inspected and he responded to the proceedings before DVO. The report of the DVO in all fairness, therefore, ought to have been supplied to the appellant as it was his normal right to know the outcome of proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... architect. In this regard, the Ld CIT(A) has given a specific finding that the loan obtained from HDFC bank on 20.11.06 was not used for any further construction. Thus, it is seen that the assessee had obtained loan from HDFC bank on the basis of the report of the architect for some other purpose and not for the purpose of construction of residential building and hence the assumption made by the AO was proved to be wrong. Under these facts and circumstances, we are of the view that the Ld CIT(A) has taken a conscious view on this issue by properly appreciating the available evidences and accordingly granted relief. Hence, we do not find any infirmity in his decision on this issue and accordingly uphold the same. 24. These findings, again, are completely factual and arrived in the light of the materials considered by the Tribunal. Therefore, we are not inclined to interfere with these findings. In the result, these appeals are disposed of restoring the additions made by the Assessing Officer towards suppressed consultation fee for the assessment years 2002-03 to 2005-06 and also additions of ₹ 15,59,880/- and ₹ 16.75 lakhs for the assessment years 2005-06. The Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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