Ita/251/2010 Of The Commissioner Of Income Tax v. Dr.k.kunhammed

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 12TH OCTOBER 2010 / 20TH ASWINA 1932 ITA.No. 251 of 2010() --------------------------- ITA.125/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT(S): APPELLANT ------------------------------- THE COMMISSIONER OF INCOME TAX, KANNUR. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT ------------------------------------ DR.K.KUNHMMED, CHIEF MEDICAL OFFICER, MANZOOR HOSPITAL, KANHANGAD, KASARAGOD. BY ADV. SRI.S.ARUN RAJ THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 12/10/2010, ALONG WITH I.T.A. NO.300/2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: SVS/ C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. ------------------------------------------ I.T.A.Nos.251 & 300 OF 2010 ------------------------------------------- Dated this the 12[th] day of October, 2010 J U D G M E N T ~~~~~~~~~~~ C.N.Ramachandran Nair, J. The connected Income Tax Appeals, one filed by theassessee and the other filed by the revenue, arise from theorders of the Tribunal disposing of appeals filed by the assesseeas well as the revenue against the block assessment completedin the case of the assessee for the block period commencingfrom 1.4.1996 to 29.8.2002. 2.We have heard Adv.Sri.T.N.Seetharaman appearingalong with Adv.Sri.Arun Raj.S. for the assessee and theStanding Counsel appearing for the department. 3.Assessee is a reputed Gynecologist working in ahospital owned by his wife and managed by his wife's father.During search conducted in the Hospital on 29.8.2002, thedepartment recovered computer statements showingprofessional charges paid to the assessee for services rendered ITA.Nos.251 & 300/2010 2 to in-patients. Along with recovery of accounts from thehospital, the department also recorded statement from theassessee under Section 132 (4) of the Income Tax Act. Besidesthe amount paid from the hospital towards professional chargesrecovered from in-patients the assessee was also allowed tocollect consultation fee directly from the out-patients. One of thedisputes is on the income of Rs.15,84,814/-, assessed for theassessment year 2003-04 forming part of block period. This isthe amount shown in the computer accounts seized from thehospital as payable to the assessee from 1.4.2002 till date ofsearch. Along with this amount the assessing officer furtherestimated Rs.1,95,937/- towards undisclosed income collected bythe assessee during this period for out-patient consultation.Assessee does not deny the receipt of this income. However theassessee contended that time for filing return for the assessmentyear 2003-2004 was not over as on date of search and assesseehad infact later paid advance tax including this amount also asincome for the assessment year 2003-2004. Therefore, thisincome should not be treated as undisclosed income for theblock period in terms of Section 158BB(1)(d) of theAct was the ITA.Nos.251 & 300/2010 cash of the assessee. The assessing officer rejected thecontention and assessed the income as part of undisclosedincome for the block period. In the first appeal the addition wasconfirmed and on second appeal the Tribunal also confirmed itagainst which the assessee has filed this appeal. ITA.Nos.251 & 300/2010 cash of the assessee. The assessing officer rejected thecontention and assessed the income as part of undisclosedincome for the block period. In the first appeal the addition wasconfirmed and on second appeal the Tribunal also confirmed itagainst which the assessee has filed this appeal. 4.Counsel for the assessee contended that the incomefound from the seized accounts of the hospital should be treatedas income accounted in the books of accounts of the assesseeand since time for filing return for assessment year 2003-2004was not over and assessee had infact paid advance tax it shouldnot be treated as undisclosed income. Standing Counselsubmitted that Section 158BB(i)(d) has no application becausethe assessee admittedly has not maintained any books ofaccounts and the details of his income are collected fromcomputer accounts seized from the hospital. Assessee's counselcontended that assessee had infact made statement to thedepartmental officer during the course of search stating thataccounts are maintained by the hospital run by his father-in-lawand so much so such accounts should be treated as his accounts ITA.Nos.251 & 300/2010 and therefore, it should be excluded under the provision of theabove section. We are unable to accept the contention of theassessee for several reasons. In the first place, assesseeadmitted that he did not maintain any books of accounts inrespect of the professional income received by him. This isconceded by him in the statement given during search. Theassessee's contention that books of accounts maintained by hisfather-in-law should be treated as his accounts is equallyunacceptable because seized accounts pertains to the incomeand expenditure of the hospital wherein assessee is one of thepayees. Assessee is admittedly an employee of the hospital andthe accounts maintained by the employer that too clandestinelycannot be treated as accounts maintained by the assessee for thepurpose of 155BB (i)(d) of the Act. Lastly, the account seized bythe department from the hospital pertaining to payments todoctors including the assessee was not intended to be passed onto the department because the assessee never before disclosedincome from in-patients received from the hospital comparableto the amount for this year. We are of the view that the Tribunalrightly concluded that, but for the seizure of the account from ITA.Nos.251 & 300/2010 the hospital, neither the assessee nor the hospital would havedisclosed this income. In our view, inorder to qualify forexemption under section 158BB(1)(d) what is required is that theassessee should produce records showing that he has accountedthe income in the books of accounts and other documentsmaintained by him in the normal course relating business orprofession. The assessee's contention that the clandestineaccounts maintained by the hospital and seized by thedepartment during search should be treated as the accountmaintained by him lacks any merit and all the authoritiesincluding the Tribunal rightly rejected the same. Further thefindings of the Tribunal as to whether certain amount of incomewas accounted by the assessee in his books of accounts is only afinding on facts. Therefore, we do not find any merit in theassessee's appeal and no substantial question of law also isinvolved. We therefore reject the appeal. 5.In the departmental appeal, the only question raised iswhether the Tribunal was justified in confirming the order theCIT (Appeal) cancelling the addition of Rs. 28 lakhs assessed for ITA.Nos.251 & 300/2010 6 5.In the departmental appeal, the only question raised iswhether the Tribunal was justified in confirming the order theCIT (Appeal) cancelling the addition of Rs. 28 lakhs assessed for ITA.Nos.251 & 300/2010 6 various years in the block period towards NRI gifts accounted bythe assessee. Standing counsel pointed out that the only reasonwhy the CIT (Appeal) deleted the addition is that the assesseehas in the returns filed for all the years disclosed amount of NRIgifts received the total of which is assessed as disclosed incomefor the block period. The Standing Counsel referred to thestatement given by the assessee during search under Section132(4), the relevant portion of which is extracted herein. “Qn.(56).For the assessment year 1996-97,you have declared that you have received agift of Rs.3 lakhs from abroad, for 1997-98,you have declared receipt of 2 lakhs and for1998-99, you have declared a sum of Rs. 3lakhs and for 1999-2000, you have declared areceipt of 23 lakhs as gift from abroad. Doyou admit these statements were wrong. Ans.These statements are wrong. Qn.(57).You please explain how these giftswere managed as stated in the Income taxstatements. Ans.These gifts were managed bypaying the amount in cash after receiving thedemand drafts in India to the respectivepersons.” ITA.Nos.251 & 300/2010 6.Relying on the above statement counsel for thedepartment submitted that neither the CIT (Appeal) nor theTribunal considered the relevance of the above statement basedon which the gifts though returned in the income tax returns andclaimed as exempt were treated as part of disclosed income. TheStanding Counsel has relied on the decision in the judgment ofthis Court in I.T.A.No.551 of 2009, wherein the Division Benchheld that the statement given under Section 132(4) of the I.T.Acthas evidentiary value and can be relied on in block assessment.He has also referred to the decision of the Supreme Courtreported in [291 ITR 278], wherein the Supreme Court has heldthat payments through banks have no consequence, if thetransactions are not proved as genuine. Counsel for theassessee relied on the decision of the Delhi High Court inCommissioner of Income-tax v. Vishal Aggarwal[283(ITR) 326] and contended that gifts declared in the regularincome tax returns filed cannot be treated as undisclosed incomefor the block period. ITA.Nos.251 & 300/2010 7.We are of the view that the findings of the Tribunalcannot be sustained because Tribunal has not considered thesignificance of the above statement given by the assessee in thecourse of search wherein the assessee conceded that gifts arenot genuine and on the other hand gifts were received aftermaking cash payments. Eventhough counsel appearing for theassessee submitted that assessee should be given an opportunityto substantiate that the statement made is not true and correct,we do not think we should decide the issue because neither theTribunal nor the CIT (Appeal) has considered the reason which isthe statement given by the assessee based on which the giftsoriginally returned in the regular returns were treated asundisclosed income for the block period. The assessee'scontention accepted by the Tribunal is the disclosure of theamount as gift in the regular income tax returns filed whichaccording to the Tribunal is sufficient to treat the income asdeclared income. However assessee has stated in the statementgiven during search that gifts were received againstconsideration given in cash. In our view it was the duty of the 1[st]appellate authority and the Tribunal to go through the statement ITA.Nos.251 & 300/2010 ITA.Nos.251 & 300/2010 recorded from the assessee and such statements being evidenceby itself under Section 132(4) of the Act to consider whether theinclusion of the gifts originally returned were not genuine andwas rightly treated as undisclosed income. Since both theappellate authorities did not consider the matter in the correctperspective based on the findings recorded in the assessmentorder and grounds raised by the department, we allow thedepartment's appeal by setting aside the orders of the Tribunalin I.T.A.No.125/2005 and that of the first appellate authority onthis issue and we restore the appeal to the 1[st] appellate authorityto reconsider the correctness of the assessment based on theevidence available including the statement recorded from theassessee and after giving an opportunity to the assessee and alsoto the assessing officer to present the case. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.SURENDRA MOHAN, JUDGE)