2016 (11) TMI 384 - AT - Income Tax

Undisclosed income - Held that - Nothing incriminating which is conclusively confirmed by Revenue is on record but there is no doubt possibility of leakage which can only be confirmed once patients confirmation/ verification are on record. We have observed that the matter is very old and it is now almost an impossible task to get confirmations/ verification from patients at this stage after 15 years and also that this is the second round of litigation before the Tribunal, We have also observed that the remaining addition sustained is of ₹ 12,19,055/- on this account in the hands of the assessee which is subject matter of litigation before us. The assessee has stated that she will not pursue further litigation if the matter is settled by the Tribunal and the learned counsel for the assessee has given concession in this regard. Keeping in view peculiar facts and circumstances of the case as enumerated above as well concession offered by the assessee and in exercise of our power u/s 254(1) of the Act with a view to render substantial justice to both the parties , we confirm/sustain the addition to the tune of ₹ 7 lacs as undisclosed income in the hands of the assessee as against the addition of ₹ 12,19,055/- sustained by the ld. CIT(A). Thus, the assessee will get relief of addition of ₹ 5,19,055/- as undisclosed income as confirmed/sustained by the learned CIT(A) with the conditions that the assessee will deposit all due taxes and interest accrued thereon as per provisions of the Act on the additions sustained by us within 60 days of the receipt of this order.

Summary

Issues Involved:
1. Double addition of income.
2. Verification of discrepancies between receipt books and actual income.
3. Reconciliation of amounts recorded in books of accounts.
4. Cross-verification of patient payments.
5. Compliance with Tribunal's directions for verification and reconciliation.
6. Settlement of prolonged litigation.

Issue-wise Detailed Analysis:

1. Double Addition of Income:
The assessee contended that the CIT(A) allowed only partial relief for double additions made by the AO, totaling ?15,72,755/-, while the entire addition of ?27,91,810/- should have been considered. The AO had accepted the claim of double addition during remand proceedings, confirming that the total amount received was shown in the returns of income for the relevant year. The CIT(A) gave relief of ?7,56,955/- for double addition concerning 77 patients and an additional ?8,15,800/- based on reconciliation charts, aggregating to ?15,72,755/-. The balance addition of ?12,19,065/- was confirmed by the CIT(A).

2. Verification of Discrepancies Between Receipt Books and Actual Income:
The AO noted discrepancies between amounts inscribed on the back of receipts and those recorded in the books of accounts, totaling ?27,91,810/-. The assessee explained that the amounts written on the back of receipts represented the total fees received from patients, distributed among the assessee, her husband, Malpani Infertility Clinic, and the anesthetist. The AO accepted this explanation where amounts fell within the range of fees mentioned in the book "How to have a Baby – Overcoming Infertility," authored by the assessee and her husband.

3. Reconciliation of Amounts Recorded in Books of Accounts:
The assessee provided a comprehensive reconciliation chart detailing amounts charged, amounts recorded in books, reasons for differences, and instances of double addition. The CIT(A) noted that the AO agreed with the assessee's explanation in many instances, except where amounts did not tally with the published rate list. The Tribunal directed the CIT(A) to re-examine the issue and avoid double additions. The CIT(A) accepted the reconciliation and gave partial relief.

4. Cross-Verification of Patient Payments:
The Tribunal in the first round of litigation directed cross-verification of patient payments. The AO issued notices under Section 133(6) to 88 patients, but only four responded, confirming the amounts. The remaining patients either did not respond or could not be traced. The CIT(A) observed that after a span of 10 years, it was challenging to trace patients, but no discrepancies were found in the amounts confirmed by the four patients.

5. Compliance with Tribunal's Directions for Verification and Reconciliation:
The Tribunal's directions included verifying patient payments and reconciling discrepancies. The AO and the assessee made efforts, but many patients could not be traced due to the long lapse of time. The CIT(A) recognized the difficulty in verification after 10 years and gave partial relief based on the reconciliation provided by the assessee.

6. Settlement of Prolonged Litigation:
The assessee expressed a desire to settle the prolonged litigation and accepted the addition as may be decided by the Tribunal. The Tribunal, considering the virtual impossibility of further verification after 14-15 years, sustained an addition of ?7,00,000/- as undisclosed income, giving relief of ?5,19,055/- from the addition of ?12,19,055/- confirmed by the CIT(A). The assessee agreed to pay all due taxes and interest on the sustained addition within 60 days.

Conclusion:
The Tribunal partly allowed the appeals, sustaining additions of ?7,00,000/- in ITA No. 7617/Mum/2013 and ?5,50,000/- in ITA No. 7618/Mum/2013 as undisclosed income, with conditions for payment of due taxes and interest. The decision aimed to settle the prolonged litigation and provide substantial justice to both parties.