2022 (12) TMI 1472 - AT - Income Tax

Suppression of professional receipts from the patients under OPD category - assessee has shown some Zero Receipt Patients in IPD indoor patient department - On analysis of disc of computer during the search action, it was noted that many patients were operated but payments made by them, are not accounted in the books of account and such patients were referred as Zero Receipt Patients-IPD - CIT(A) restricted the addition to the extent of 30% of alleged suppressed receipt by taking view that only profit element of reasonable basis should be taxed - HELD THAT - AO has granted concession of two patients in respect of other hospitals for treatment of free patients, however, no such concession was allowed in case of assessee-hospital. It is a common factor that a privately managed hospital has to treat second category of patients as free-of-cost, which may include relatives of doctors, para-medical staffs, close relatives or family friends etc., During the hearing, we also find that certain patients which were closely related with the partners of assessee-hospital. Thus, we find that the Assessing Officer has made addition without being confronting information collected by her at the back of assessee-hospital. No show cause notice before making such addition on account of suppressed addition, therefore the addition is not justified. We further find that allegation of suppressed income for A.Y 2008-09 is of Rs. 148,000, however, the assessee-hospital had paid the tax of Rs. 33,17,496/-and the partners had paid tax of Rs. 28,22,084/-thus total tax of Rs. 61,39,580/-was paid. Thus, we find merit in the submission made by Ld. AR for the assessee that allegation of suppress receipt of IPD patients of is not tenable. Hence, we direct the Assessing Officer to delete the entire addition of suppressed receipt on account of IPD patients. In the result, the grounds of appeal raised by assessee are allowed.

Summary

Issues Involved:
1. Addition on account of suppression of professional receipts.
2. Legality of the addition based on assumptions and presumptions.
3. Admissibility of electronic evidence without proper certification.
4. Confrontation of evidence gathered during the search with the assessee.

Detailed Analysis:

1. Addition on account of suppression of professional receipts:
The core issue in these appeals is the addition made by the Assessing Officer (AO) on account of suppression of professional receipts from the patients admitted to the hospital. The AO noted that the hospital's accounting software had an option for modifying receipts, leading to the suppression of actual receipts. The AO identified "Zero Receipt Patients-IPD" who were treated but payments made by them were not accounted for in the books. The AO prepared a chart (Annexure-A) quantifying the unaccounted income from such patients, leading to an addition of Rs. 1.48 lakh for the assessment year 2008-09.

2. Legality of the addition based on assumptions and presumptions:
The assessee argued that the addition was based on assumptions and not on reliable evidence. The hospital provided details of patients who were genuinely treated free of cost and submitted that the software used was defective, leading to incorrect entries. The AO's assumption that the hospital did not treat any patients free of cost was challenged. The CIT(A) partially agreed with the assessee, noting that only the profit element should be taxed and restricted the addition to 30% of the alleged suppressed receipts. However, the Tribunal found that the AO's addition was based on presumptions and not on concrete evidence, thus directing the deletion of the entire addition.

3. Admissibility of electronic evidence without proper certification:
The assessee contended that the electronic evidence (hard disc data) used by the AO was not admissible as it lacked the mandatory certification under section 65B(2) of the Indian Evidence Act. The Tribunal acknowledged this argument, citing relevant case laws, and emphasized that the absence of such certification rendered the electronic evidence inadmissible.

4. Confrontation of evidence gathered during the search with the assessee:
The Tribunal noted that the AO did not confront the assessee with the evidence gathered during the search, violating the principles of natural justice. The AO's failure to issue a show-cause notice before making the addition further compounded this issue. The Tribunal highlighted that the AO's conclusions were based on "probable reasons" rather than concrete evidence, leading to an unjustified addition.

Conclusion:
The Tribunal found merit in the assessee's arguments that the addition was based on assumptions and not on reliable evidence. It also noted procedural lapses by the AO, such as not confronting the assessee with the evidence and not issuing a show-cause notice. The Tribunal directed the deletion of the entire addition of Rs. 1.48 lakh for the assessment year 2008-09 and allowed the appeals for the other assessment years on similar grounds, emphasizing the importance of adhering to legal procedures and relying on concrete evidence.