2021 (6) TMI 847 - AT - Income Tax

Reopening of assessment u/s 148 - commission to doctors in cash for the use of stents supplied to various hospitals - as argued cash was actually given to some other person who may be the partner of the firm M/s. Cardio Technovention and for siphoning of profits of the form, the hospital; National Heart Institute as discount on purchases; the purchase manager at the hospital for placing the order, the accounts personnel at the hospital for releasing payments, in a trustee of the hospital, a new employee at the hospital, the patient who was operated upon, the vendor from home stands were purchased, any other facilitator or mediator so on and so forth - HELD THAT - As submitted by the Revenue, in the diaries the relevant notings read in a cryptic form like NHI/PS/CO/548 15000 and the Revenue read it as Hospital name/Doctors initial/product name/date/bill number commission amount paid . While reading so, Revenue stopped at the second position, namely, Doctors initial to fasten the liability. Even if we go by the decoding of the code as done by the Revenue, as argued by the Ld. AR and rightly also, there is no reason as to why we should stop at our select the 2nd position to fasten the liability or to conclude that the doctor received the amount. It could equally be possible that the hospital might have received such amount in respect of a particular patient attended by such Doctor to use such instrument. This possibility cannot be ruled out. When there are more possibilities than one, and many of such possibilities exclude the involvement of a particular person suggesting the involvement of somebody else also, in our considered opinion it would be unreasonable to conclude that such person who also been exonerated by one of the possibilities, to have received the commission. As rightly argued on behalf of the assessee, this code could also be indicative of a transaction and for the purpose of identification of transaction, the name of the hospital/name of the doctor/name of the instrument so on and so forth could have been noted in respect of the commission paid. Without any supporting material supplying a direction to this entry towards the doctor and doctor alone, is unreasonable and such an entry does not take us anywhere more particularly to point out the doctor to have received the commission. As seen from the record and the orders in case of M/s. Cardio Technovention that the plea of the Revenue was that the commission that was paid to the agent through banking channels was received back by M/s. Cardio Technovention in cash to pay the same to the doctors. In the order for the assessment year 2014-15 in the case of M/s. Cardio Technovention, in appeal, Ld. CIT(A) on a consideration of the entire material reached the conclusion that in respect of the commission paid to the agent, the same was confirmed by the agents, by cogent record and supported by the denial of the hospitals and the facts and circumstances did not prove that there was any withdrawal in cash by the commission agent from their bank accounts nor any evidence to show that it was paid to the doctors. It was further observed that such commission paid to the agents was accepted in the earlier assessment years by the Department. It was the specific finding of the Ld. CIT(A) in such order that the rough noting in the notebook referred to by the Revenue does not confirm the fact that commission was not paid to the agents or that it was received back from the agents. Amply clear that the plea of the Revenue that though the commission was initially paid to the agents through banking channels, it was received back in cash to be paid to the doctors, falls to ground. There is no material before us to disturb this finding returned by the learned Commissioner of Income Tax (Appeals) in the case of M/s. Cardio Technovention. Apart from that there is no denial of the fact that in the subsequent assessment year of a 2011-12 the additionunder section 68 of the Act was deleted by the learned Commissioner of Income Tax (Appeals) by invalidating the reopening whereas for the assessment year 2012-13, the proposed addition on account of the alleged cash commission was dropped and the learned Assessing Officer accepted the return filed by the assessee. All these things cumulatively go to show that M/s. Cardio Technovention was given a clean chit from the accusation of receiving the commission paid to agent through banking channels, in cash and paid to the doctors, which the doctors could not show as the receipt due to the prohibition of the regulations of the Medical Council of India. It further establishes that, when once the very allegation of cash commission is ruled out, no further inference could be drawn against the doctors to say that they have received such non-est commission. No merit in the argument of the Revenue and accordingly, hold that the addition cannot be sustained. Consequently, we direct the learned Assessing Officer to delete the addition. Appeal of the assessee is allowed.

Summary

Issues Involved:
Reopening of assessment for assessment year 2010-11 based on information from survey, Addition of income based on coded entries deciphered from notebooks, Confirmation of addition by CIT(A), Allegation of undisclosed income received as commission, Contradictory actions by Revenue in similar cases, Justifiability of addition without concrete evidence, Interpretation of coded entries, Comparison with similar cases involving cash commission payments, Relevance of supporting documents in assessment proceedings.

Reopening of Assessment:
The case involved the reopening of assessment for the assessment year 2010-11 based on information obtained during a survey in the case of M/s. Cardio Technovention. The assessee, a Doctor by profession, had his case reopened under section 148 of the Income Tax Act, 1961. The survey revealed handwritten notebooks containing coded entries related to cash transactions for the financial years 2008-09 to 2012-13, leading to the suspicion of undisclosed income.

Addition of Income based on Coded Entries:
The Assessing Officer added a specific sum to the assessee's income for the financial year 2009-10 based on deciphered coded entries indicating commission payments. The CIT(A) confirmed this addition, leading the assessee to appeal, arguing that the authorities failed to consider supporting documents and explanations provided. The argument centered around the interpretation of the coded entries and the lack of concrete evidence linking the entries to the assessee.

Contradictory Actions by Revenue:
The assessee highlighted the Revenue's inconsistent approach in similar cases involving cash commission payments. The Revenue had alleged that commissions paid to agents through banking channels were later paid to doctors in cash, but this claim was refuted in the case of M/s. Cardio Technovention. The assessee contended that the Revenue's varying stances on similar transactions undermined the justification for the addition to the assessee's income.

Justifiability of Addition without Concrete Evidence:
The Revenue's case relied on the deciphered codes from the notebooks, assuming they represented commission payments to the assessee. However, the assessee argued that the interpretation was speculative, with multiple potential recipients of the alleged commissions. The lack of direct evidence linking the coded entries to the assessee raised doubts about the validity of the addition to the income.

Interpretation of Coded Entries:
The dispute centered on the interpretation of the coded entries found in the impounded notebooks. The Revenue's interpretation suggested direct commission payments to the assessee, while the assessee's representative argued that the codes could refer to various entities besides the assessee, making it unreasonable to attribute the payments solely to the assessee without concrete proof.

Comparison with Similar Cases:
The Tribunal compared the present case with the findings in the case of M/s. Cardio Technovention, where similar allegations of cash commission payments were refuted. The orders in the related cases indicated that the allegations against the assessee lacked substantial evidence and contradicted previous decisions, leading to the conclusion that the addition to the assessee's income was unjustifiable.

Relevance of Supporting Documents:
The Tribunal emphasized the importance of supporting material and concrete evidence in tax assessment proceedings. The lack of definitive proof linking the coded entries to the assessee, coupled with inconsistencies in the Revenue's arguments and actions in similar cases, played a crucial role in the Tribunal's decision to overturn the addition to the assessee's income.

This detailed analysis of the judgment covers the issues involved comprehensively, highlighting the key legal arguments and conclusions reached by the Tribunal in the case.