2015 (2) TMI 1202 - AT - Income Tax

Reopening of assessment - Held that - The reasons recorded by the Assessing officer are specific, definite and relevant to the matter under dispute. The return of income was filed by the assessee was accepted without any scrutiny and hence it cannot be said that the Assessing officer had expressed his opinion while processing the return of income u/s. 143(1) of the Act. In our view, the assumption of jurisdiction by the Assessing officer under the main provision of section 147 meets all the requirements of law. Further, the survey material recovered during the course of survey u/s. 133 of the Act on 24-09-2009 at the Kollam lab of the assessee , accompanied by the sworn statement of the Manager of the Kollam lab of the assessee, Shri Philip Varghese, show that the assessee has suppressed receipts for conducting MRI CT scan etc. Though the assessee issued receipts to the patients for fees collected by it for conducting various tests, copy of these receipts were not maintained in its books of accounts and only adhoc amounts were recorded in the books of account without any basis. There is variation between actual receipts and declared receipts in the books of accounts. Being so, the Assessing officer has reason to believe that the income has escaped from assessment so that the Assessing officer issued notice u/s. 148 of the Act to assess the escaped income of the assessee. Quantification of the unaccounted income - Held that - There is clear case of suppression of collections on daily basis for the assessment year 2009-10 and 2010-11 having been found during the course of survey carried out by the Department and the same was admitted by the assessee s Manager, Shri Philip Varghese in his sworn statement. The ratio laid down by the Supreme Court in the case of Commissioner of Sales Tax, Madhya Pradesh vs. H.M. Esufali H.M. Abdulali (1973 (4) TMI 49 - SUPREME Court 1) is squarely applicable to the facts of the present case wherein it was held that if the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no proof in support of that estimate is immaterial and it is his best judgment assessment. The actual collection of Kottrakkara lab as found during the survey for four months is ₹ 27,14,505/- as against shown in the books of accounts for the corresponding period at ₹ 23,76,750/-. The difference for four months is worked out at ₹ 3,37,755/-. Thus, for the whole year, the suppressed collection for the Kottarakkara lab is worked out on the basis of the actual suppressed collection at ₹ 10,13,265/-. In our opinion, it would be reasonable if the estimation of unaccounted collection is made on the basis of actual suppressed collection found during the course of survey and and increase it for the whole year by multiplying by three (i.e.,12 months divided by 4 months). For Kollam lab there is increase of 24% per annum in declared receipts as compared to the assessment year 2009-10 with the assessment year 2010-11. Accordingly, the suppressed receipts is to be estimated at the increased rate of 24% of ₹ 24,35,576/- for the assessment year 2010-11, i.e., 28,97,354/-. Thus, the addition would be ₹ 24,35,576/- for the assessment year 2009-10 and ₹ 28,97,354/- for the assessment year 2010-11 is to be made which would be over and above the returned income. There cannot be any further deduction towards expenses against the suppressed income for both the assessment years. Since in our opinion, all the expenses relating to the business are said to have been taken care of in the regular books of account. With this observation, the Revenue ground in both the appeals is partly allowed.

Summary

Issues Involved:
1. Deletion of portion of addition made towards suppression of collections.
2. Non-service of notice under sections 142(1) and 143(2).
3. Validity of proceedings initiated under section 147.
4. Quantification of unaccounted income.

Detailed Analysis:

1. Deletion of Portion of Addition Made Towards Suppression of Collections:
The Revenue contested the deletion of a portion of the addition made towards the suppression of collections by the CIT(A). The Tribunal noted that during a survey, it was found that the assessee had not maintained copies of the bills issued to patients, leading to an inference of suppressed receipts. The CIT(A) had restricted the addition to Rs. 3,37,755 based on the difference between the actual collections found during the survey and the collections recorded in the books. The Tribunal upheld this approach, emphasizing that the CIT(A) had made a reasonable estimation based on available evidence.

2. Non-Service of Notice Under Sections 142(1) and 143(2):
The assessee argued that the reassessment proceedings were invalid due to the non-service of notice under sections 142(1) and 143(2). The Tribunal found that the assessee's authorized representative had participated in the assessment proceedings, which indicated that the assessee was aware of the proceedings. The Tribunal held that the participation of the assessee's representative negated the argument of non-service of notice. The Tribunal also noted that a questionnaire under section 142(1) had been issued and responded to by the assessee, further validating the proceedings.

3. Validity of Proceedings Initiated Under Section 147:
The assessee contended that the proceedings under section 147 were invalid due to the lack of valid material indicating suppression of income. The Tribunal observed that the original return was processed under section 143(1) without scrutiny. The reasons recorded for issuing the notice under section 148 included findings from a survey indicating suppressed receipts. The Tribunal held that these reasons were specific, definite, and relevant, justifying the reassessment proceedings. The Tribunal cited the Supreme Court judgment in ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. to support the validity of the reassessment proceedings.

4. Quantification of Unaccounted Income:
The Revenue argued that the entire suppressed collection should be considered as income. The Tribunal noted that the CIT(A) had restricted the addition to Rs. 3,37,755 based on actual collections found during the survey. The Tribunal, however, found that the CIT(A)'s estimation was too conservative. The Tribunal held that the suppressed collections should be estimated for the entire year based on the actual suppressed collections found during the survey. The Tribunal estimated the suppressed collections for the Kottarakkara lab at Rs. 10,13,265 and for the Kollam lab at Rs. 13,22,311, totaling Rs. 23,35,576 for the assessment year 2009-10. For the assessment year 2010-11, the Tribunal estimated the suppressed collections at Rs. 28,97,354, considering a 24% increase in declared receipts from the previous year. The Tribunal concluded that these amounts should be added to the returned income without further deductions for expenses, as all expenses were already accounted for in the regular books.

Conclusion:
The Tribunal partly allowed the Revenue's appeals, increasing the addition towards suppressed collections, and dismissed the assessee's cross objections. The reassessment proceedings were upheld as valid, and the quantification of unaccounted income was revised based on a realistic estimation of suppressed collections.