2008 (10) TMI 188 - HC - Income Tax

Income From Undisclosed Sources - The assessee (a nursing home) has on its panel as many as 36 visiting doctors who were specialists in various fields of medicine. The assessee had not accounted the fee collected by the specialists in its accounts. The assessee, explained that it is the practice of the nursing home that the visiting specialists collected their fee directly from the patients and it was not charged to the account of the nursing home anytime. The assessee also filed a joint statement of 36 visiting specialists, wherein all the visiting specialists have stated that they were collecting the fee from the patients directly and it was not charged to the accounts of the assessee AO has not conducted inquiry to establish the truth of the joint statement - The technical insistence by the Assessing Officer that the assessee should have examined all the specialists is an untenable view. In the absence of contra material, the Assessing Officer cannot reject the genuineness and correctness of the statement. Question is answered in favour of assessee.

Summary

Issues:
1. Whether the fee collected by visiting specialists should be accounted for by the nursing home.
2. Burden of proof on the assessee regarding income not belonging to them under sections 68 to 69B of the Act.

Analysis:

Issue 1:
The respondent, a nursing home with visiting specialists, faced a challenge regarding the fee collected by these specialists. The intelligence wing discovered that the specialists' fees were not accounted for by the nursing home. The assessee explained that the specialists directly collected fees from patients, not through the nursing home. The Assessing Officer disallowed the amounts not accounted for, considering all specialists were not examined. However, the Commissioner of Income-tax and the Tribunal found the assessee's explanation valid, setting aside the Assessing Officer's decision. The Revenue appealed the decision.

Issue 2:
The substantial question of law revolved around the burden of proof regarding unaccounted income under sections 68 to 69B of the Act. The Revenue argued that the burden was on the assessee to examine all visiting specialists to claim deductions. The Tribunal's decision, shifting the burden to the Revenue to prove the income belonged to the assessee, was contested. The Court emphasized that the Income-tax Act's enquiry is not adversarial, allowing an inquisitorial approach. The joint statement of specialists, stating they collected fees directly, was deemed credible. The Assessing Officer's insistence on examining all specialists was deemed untenable. Without contrary evidence, the genuineness of the statement could not be rejected. Consequently, both appeals were dismissed in favor of the assessee.

This detailed analysis highlights the key legal issues, arguments presented, and the court's reasoning leading to the final judgment.