Ita/34/2013 Of The Commissioner Of Income Tax v. Dr. P.sasikumar

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU TUESDAY, THE 12TH DAY OF JULY 2016/21ST ASHADHA, 1938 ITA.No. 34 of 2013 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 251/COCH/2011 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 29-06-2012 APPELLANT(S)/RESPONDENT:------------ THE COMMISSIONER OF INCOME TAXTRICHUR. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: -------------- DR. P.SASIKUMAR POOJASREE, VALIYAPADAM, P.O CHOKKANATHAPURAM, PALAKKAD 678 005. R1 BY ADV. SRI.T.M.SREEDHARAN (SR.) R1 BY ADV. SRI.V.P.NARAYANAN R1 BY ADV. SMT.BOBY M.SEKHAR R1 BY ADV. SMT.DIVYA RAVINDRAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20.06.2016,ALONG WITH ITA. 47/2013 AND CONNECTED CASES, THE COURT ON 12.07.2016DELIVERED THE FOLLOWING: APPENDIX IN ITA.34/13 APPELLANTS' EXHIBITS: ANNEXURE A: A TRUE COPY OF THE ASSESSMENT ORDER U/S.153A DATED24.12.2009.24.12.2009. ANNEXURE B: TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 31.1.2011.(APPEALS) DATED 31.1.2011. ANNEXURE C: TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATETRIBUNAL DATED 29.6.2012.TRIBUNAL DATED 29.6.2012. ANNEXURE D: TRUE COPY OF THE STATEMENT RECORDED UNDER SEC.132(4)FROM DR.P.SASIKUMAR.FROM DR.P.SASIKUMAR. ANNEXURE E: TYPEWRITTEN COPY OF THE STATEMENT. /TRUE COPY/ ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. JUDGMENT Antony Dominic, J. 1. These appeals are filed by the Revenue challengingthe common order passed by the Income Tax AppellateTribunal, Cochin Bench, disposing of ITA.Nos.251 to257 of 2011 filed by the assessee and ITA.Nos.268 to274 of 2011 filed by the Revenue. The appeals werein relation to the assessment years 2002-03 to 2008-09. Since common issues are involved, the cases weredisposed of by the Tribunal by a common order, andfor the same reason, these cases were also heardtogether and are disposed of by this common judgment. 2.The assessee is an Ophthalmic Surgeon working inPalakkad. He has a clinic called Vijayam Eye Clinicfor treating outpatients, and he also performssurgeries in a hospital by name M/s.Sai Nursing Home,Olavakkode. The department conducted search andseizure operation on 5.12.2007. Consequent to that,assessments for the assessment years 2002-03 to 2008- 09 were reopened and completed under section 153A ofthe Income Tax Act, 1961, whereby, the assessingofficer made additions under various heads. In theappeals filed, certain modifications were made by theCommissioner of Income Tax (Appeals). Aggrieved bythe appellate orders, the assessee and the Revenuefiled appeals before the Tribunal. By the impugnedcommon order, the appeals filed by the Revenue weredismissed, and the assessee's appeals were partlyallowed. It is challenging these orders, the Revenuehas filed these appeals, and the questions of lawraised are mainly regarding the scope of assessmentunder section 153A of the Act and the correctness ofthe deletion ordered. 3.We heard the learned senior standing counsel for theRevenue and the learned senior counsel who appearedfor the assessee.Revenue and the learned senior counsel who appearedfor the assessee. 4.From the order of the Tribunal, we find that, at theoutset, the Tribunal has answered the contention ofthe assessee with respect to the scope of assessmentsmade under section 153A of the Act. Thereafter, theoutset, the Tribunal has answered the contention ofthe assessee with respect to the scope of assessmentsmade under section 153A of the Act. Thereafter, the ITA.34/13 & con. cases Tribunal has dealt with each of the issues raisedbefore it. For convenience, we shall also adopt bythe same method. 3.We heard the learned senior standing counsel for theRevenue and the learned senior counsel who appearedfor the assessee.Revenue and the learned senior counsel who appearedfor the assessee. 4.From the order of the Tribunal, we find that, at theoutset, the Tribunal has answered the contention ofthe assessee with respect to the scope of assessmentsmade under section 153A of the Act. Thereafter, theoutset, the Tribunal has answered the contention ofthe assessee with respect to the scope of assessmentsmade under section 153A of the Act. Thereafter, the ITA.34/13 & con. cases Tribunal has dealt with each of the issues raisedbefore it. For convenience, we shall also adopt bythe same method. 5.The first issue that was dealt with in the impugnedorder and raised before us was regarding the scopeof assessments made under section 153A. Tribunal hasanswered this issue, after referring to the orderspassed by the Mumbai, Ahammedabad, Visakhapatnam,Kolkata, Bangalore and Delhi Benches of the Tribunalitself. Accordingly, the Tribunal concluded theissue thus:order and raised before us was regarding the scopeof assessments made under section 153A. Tribunal hasanswered this issue, after referring to the orderspassed by the Mumbai, Ahammedabad, Visakhapatnam,Kolkata, Bangalore and Delhi Benches of the Tribunalitself. Accordingly, the Tribunal concluded theissue thus: “Thus, we notice that various co-ordinatebenches have taken the view that the completedassessments shall not abate and only theassessments or reassessments relating to any ofthe six assessment years, which are pending onthe date of initiation of search, shall abate.Further it has been held that the completedassessments, through automatically reopened asper the provisions of sec.153A, yet they can bedisturbed only in respect of those issues forwhich some incriminating materials requiringsuch disturbance is unearthed during the courseof search proceeding. Since majority bencheshave taken the above said view in a consistentmanner, we are also inclined to take the samebenches have taken the view that the completedassessments shall not abate and only theassessments or reassessments relating to any ofthe six assessment years, which are pending onthe date of initiation of search, shall abate.Further it has been held that the completedassessments, through automatically reopened asper the provisions of sec.153A, yet they can bedisturbed only in respect of those issues forwhich some incriminating materials requiringsuch disturbance is unearthed during the courseof search proceeding. Since majority bencheshave taken the above said view in a consistentmanner, we are also inclined to take the same view discussed above. However, we feel itpertinent to express the view that if the AOfinds out any defect on any issue in respect ofthe pending assessments which got abated andsuch kind of issues are also available in otherassessments, which have already been completedand did not abate, then in our view, the AO isentitled to examine those issues in those yearsalso in order to find out whether similar defectsexist in those years or not. In such a situation,in our view, it is not necessary to satisfy thecondition that some incriminating materialsconcerning to those issues should havenecessarily been found out in respect of thoseassessment years.” In so far as the above conclusion of the Tribunal isconcerned, we find that this very question has beenconsidered by this Court in the judgment inITA.169/15 and connected cases, where this Court hasanswered the question thus: “17. After considering the rival submissionsand appreciating and perusing the pleadingsand documents produced by the Revenue andthe written submissions made by the learnedcounsel for the assessee, we find that theTribunal without taking any efforts to find out In so far as the above conclusion of the Tribunal isconcerned, we find that this very question has beenconsidered by this Court in the judgment inITA.169/15 and connected cases, where this Court hasanswered the question thus: “17. After considering the rival submissionsand appreciating and perusing the pleadingsand documents produced by the Revenue andthe written submissions made by the learnedcounsel for the assessee, we find that theTribunal without taking any efforts to find out the facts and circumstances involved in thecases on hand has relied on the decision of theSpecial Bench of the ITAT in All CargoLogistics Ltd (supra) and has held that therewas no need to interfere with the orderpassed by the Appellate Tribunal. In order toconsider the issue, we think it is profitable toextract Section 132 (1) and clause (a) and sub-section (4). "132. Search and seizure (1) Where the Director General or Director or theChief Commissioner or Commissioner or AdditionalDirector or Additional Commissioner or JointDirector or Joint Commissioner in consequence ofinformation in his possession, has reason to believethat --- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-taxAct, 1922 (11 of 1922), or under sub-section (1) ofSection 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-taxAct, 1922 (11 of 1922), or under sub-section (1) ofsection 142 of this Act was issued to produce, orcause to be produced, any books of account orother documents has omitted or failed to produce,or cause to be produced, such books of account orother documents as required by such summons ornotice, or etc. etc. Sub-section (4): The authorised officer may, duringthe course of the search or seizure examine on oath any person who is found to be in possession orcontrol of any books of account, documents, money,bullion, jewellery or other valuable article or thingand any statement made by such person during suchexamination may thereafter be used in evidence inany proceeding under the Indian Income-tax Act,1922 (11 of 1922), or under this Act." 18. On going through Section 132 of theIncome Tax Act, what we find is that if theauthority specified therein has reason tobelieve that any person to whom a summonsunder sub-section (1) of section 37 of theIndian Income-tax Act, 1922 (11 of 1922), orunder sub-section (1) of section 131 of the1961 Act, or a notice under sub-section (4) ofsection 22 of the Indian Income-tax Act, 1922(11 of 1922), or under sub-section (1) ofsection 142 of 1961 Act was issued to produce,or cause to be produced, any books of accountor other documents has omitted or failed toproduce, or cause to be produced, such booksof account or other documents as required bysuch summons or notice etc. etc., can authorisethe officers referred therein to enter andsearch any building etc. etc. Such authorisedofficer under sub-section (4) of Section 132may during the course of search or seizureexamine on oath any person who is found to bein possession or control of any books ofaccount, document, money, bullion, jewellery or other valuable article or thing and anystatement made by such person during suchexamination may thereafter be used inevidence in any proceeding under the IndianIncome-tax Act, 1922 or under the Act 1961.Therefore, going by the said provision not onlythe books, documents etc. etc. that areunearthed during the course of search but astatement made by such person during suchexamination can also be used in evidence in anyproceeding under the Income Tax Act, 1961.Thus viewing the provision in such manner, it isan admitted fact that the Managing Partner ofthe firms in question has given a voluntarystatement to the Assessing Officer thatthere is a undisclosed income of Rs.2.75Crores, which according to the learnedcounsel, was retracted by the ManagingPartner subsequently. Thus it can be seen thateven according to the assessee, there was adisclosure made by giving a statement duringthe course of search and therefore, theAssessing Officer, by virtue of the powerconferred on him under section 153A wascompetent to issue notice under the saidprovision and require the assessee firms tofurnish the returns as provided thereunder.Neither under section 132 or under section153A, the phraseology “incriminating” is usedby the Parliament. Therefore, any material which was unearthed during search operationsor any statement made during the course ofsearch by the assessee is a valuable piece ofevidence in order to invoke section 153A ofthe Income Tax Act, 1961. 19. In order to appreciate the provisions ofSection 153A in a proper manner, it isappropriate to extract the said provision,which reads thus: 153A. [(1)] Notwithstanding anything contained insection 139, section 147, section 149, section 151 andsection 153, in the case of the person where asearch is initiated under section 132 or books ofaccount, other documents or any assets arerequisitioned under section 132A after the 31st dayof May, 2003, the Assessing Officer shall-- (a) issue notice to such person requiring him tofurnish within such period, as may be specified inthe notice, in return of income in respect of eachassessment year falling within six assessment yearsreferred to in clause (b), in the prescribed form andverified in the prescribed manner and setting forthsuch other particulars as may be prescribed and theprovisions of this Act shall, so far as may be, applyaccordingly as if such return were a return required to be furnishedunder section 139; (b) assess or reassess the total income of sixassessment years immediately preceding the assessment year relevant to the previous year inwhich such search is conducted or requisition ismade. Provided that the Assessing Officer shall assess orreassess the total income in respect of eachassessment year falling within such six assessmentyears: Provided further that assessment or reassessment,if any, relating to any assessment year falling withinthe period of six assessment years referred to inthis sub-section pending on the date of initiation ofthe search under section 132 or making ofrequisition under section 132A, as the case may be,shall abate. Provided also that the Central Government may byrules made by it and published in the OfficialGazette (except in cases where any assessment orreassessment has abated under the second proviso),specify the class or classes of cases in which theAssessing Officer shall not be required to issuenotice for assessing or reassessing the total incomefor six assessment years immediately preceding theassessment year relevant to the previous year inwhich search is conducted or requisition is made. Provided also that the Central Government may byrules made by it and published in the OfficialGazette (except in cases where any assessment orreassessment has abated under the second proviso),specify the class or classes of cases in which theAssessing Officer shall not be required to issuenotice for assessing or reassessing the total incomefor six assessment years immediately preceding theassessment year relevant to the previous year inwhich search is conducted or requisition is made. [(2)] If any proceeding initiated or any order ofassessment or reassessment made under subsection(1) has been annulled in appeal or any other legalproceeding, then, notwithstanding anything containedin sub-section (1) or section 153, the assessment orreassessment relating to any assessment year whichhas abated under the second proviso to sub-section (1), shall stand revived with effect from the date ofreceipt of the order of such annulment by theCommissioner. Provided that such revival shall cease to haveeffect, if such order of annulment is set aside.Explanation.-- For the removal of doubts, it ishereby declared that.-- (i) save as otherwise provided in this section, section153B and section 153C, all other provisions of thisAct shall apply to the assessment made under thissection. (ii) in an assessment or reassessment made inrespect of an assessment year under this section,the tax shall be chargeable at the rate or rates asapplicable to such assessment year." 20. On a plain reading of Section 153A, it isclear that once search is initiated underSection 132 or a requisition is made underSection 132A after the 31st day of May 2003,the Assessing Officer is empowered to issuenotice to such person requiring him to furnishreturn of income in respect of eachassessment year following within sixassessment years referred to in clause (b). Itfurther treats the returns so filed as if suchreturn were a return required to be furnishedunder Section 139. So that on a reading ofSection 153A(1) it is categoric and clear thatonce a notice is issued and the Assessing Officer has required the assessee to furnishreturn for a period of six assessment years ascontemplated under clause (b) then theassessee has to furnish all details with respectto each assessment year since the same istreated as a return filed under section 139. Itis true that as per the first proviso, theAssessing Officer is bound to assess orreassess the total income with respect to eachassessment year following the six assessmentyears specified in sub-clauses (a) and (b) ofSection 153A. However, even if no documentsare unearthed or any statement made by theassessee during the course of search undersection 132 and no materials are received forthe aforespecified period of six years, theassessee is bound to file a return, is thescheme of the provision. Even though thesecond proviso to Section 153A speaks ofabatement of assessment or reassessmentpending on the date of the initiation of searchwithin the period of six assessment yearsspecified under the provision that will also notabsolve the assessee from his liability tosubmit returns as provided under Section153A(1)(a). This being the scheme of theprovisions of the Act, the Appellate Tribunalought to have considered the issue withspecific reference to the facts involved in thecase and as provided under Section 153A.” ITA.34/13 & con. cases In the light of the judgment of this Court, theaforesaid conclusion of the Tribunal cannot besustained. 6.Having answered the first question in favour of theRevenue and against the assessee, we shall nowproceed to examine the other findings of theTribunal. 7.In paragraph 7 of its order, on the basis of its ITA.34/13 & con. cases In the light of the judgment of this Court, theaforesaid conclusion of the Tribunal cannot besustained. 6.Having answered the first question in favour of theRevenue and against the assessee, we shall nowproceed to examine the other findings of theTribunal. 7.In paragraph 7 of its order, on the basis of its conclusion with respect to the scope of assessmentunder section 153A, the Tribunal has held that theassessments relating to the assessment years 2002-03to 2006-07 have been concluded and were not pendingas on the date of initiation of search, since nonotice under section 143 has been issued.Accordingly, it was also held that the concludedassessments can be disturbed only if the departmenthas unearthed any incriminating materials warrantingsuch disturbance or any identical issues areavailable in the concluded assessment as in thepending assessment. It is on that footing, the ITA.34/13 & con. cases Tribunal proceeded to consider the issues raisedbefore it. 8.The first issue considered by the Tribunal is inrelation to the estimation of suppressed consultationrelation to the estimation of suppressed consultation fee. The assessing officer had estimated thesuppressed consultation fee for the assessment years2002-03 to 2008-09. This has been set aside by theTribunal relying on its conclusion on the scope ofthe assessment under section 153A and by stating inparagraph 10 of its order thus: “in view of the legal position discussed in thepreceding paragraphs, the assessing officercould not make any addition for assessmentyears 2002-03 to 2005-06. Accordingly, weuphold the decision of the Ld CIT(A) in respectof these four years, as the same is inaccordance with legal position discussed in thepreceding paragraphs”. 9.Similarly, in so far the assessment years 2006-07 and2007-08 are concerned, the Tribunal has found thatthe assessing officer himself did not make anyaddition as he did not find any suppression as per2007-08 are concerned, the Tribunal has found thatthe assessing officer himself did not make anyaddition as he did not find any suppression as per ITA.34/13 & con. cases his computation. For the assessment year 2008-09,the Tribunal has found that the seized record wasapplicable for the first 9 months of the financialyear and, therefore, set aside the order of the CIT(Appeals) in this regard on the reasoning that: “Accordingly, we are of the view that noaddition could be made for the assessment year2008-09 also, as the department has failed tobring on record any actual suppression ofconsultation fee on the basis of seized record”. According to us, the findings of the Tribunal with respect to the addition towards suppression ofconsultation fee for the assessment years 2002-03 to2005-06 and 2008-09 cannot be sustained and the orderof the assessing officer has to be restored and we doso. 10.The next issue considered by the Tribunal is thesuppression of income from surgeries and sale oflenses. The records seized on search were comparedwith the records maintained by M/s.Sai Nursing Homeand the assessing officer did not find any differencesuppression of income from surgeries and sale oflenses. The records seized on search were comparedwith the records maintained by M/s.Sai Nursing Homeand the assessing officer did not find any difference According to us, the findings of the Tribunal with respect to the addition towards suppression ofconsultation fee for the assessment years 2002-03 to2005-06 and 2008-09 cannot be sustained and the orderof the assessing officer has to be restored and we doso. 10.The next issue considered by the Tribunal is thesuppression of income from surgeries and sale oflenses. The records seized on search were comparedwith the records maintained by M/s.Sai Nursing Homeand the assessing officer did not find any differencesuppression of income from surgeries and sale oflenses. The records seized on search were comparedwith the records maintained by M/s.Sai Nursing Homeand the assessing officer did not find any difference between the two. However, the cost of acrylic lensused in the package of surgery performed by theassessee was found to be only `600/- whereas theassessee was found to be charging `8400/- from thepatients. In the other package of surgery where PMMAlenses are used, it was found that the assessee wascharging `2000/- from patients, while the bill seizedfrom the assessee showed that the price was only`208/-. When the assessee was questioned on theprice difference, he maintained that the PMMA lenswere being supplied by M/s.J.N.surgicure directly tothe patients but conceded that there were some profitin the transaction. The assessing officer summonedthe proprietor of M/s.J.N.surgicure and in hisstatement, he reiterated that lens was being suppliedto the patients for `2000/- per lens, which was alsoshown in the books of accounts maintained by thatconcern. 11.Based on the enquiries conducted, the assessingofficer took the view that M/s.J.N.surgicure hascolluded with the assessee and that the assessee wasofficer took the view that M/s.J.N.surgicure hascolluded with the assessee and that the assessee was making a profit of about `1800/- per lens. Though itwas the case of the assessee that the concernstarted its business only in the year relevant to theassessment year 2007-08, yet the suppressed incomefor all the years under consideration was computed bythe assessing officer on the presumption that theassessee could have adopted the same methodology inthose years also. On that basis, the assessingofficer computed the gross collections for therelevant assessment year 2008-09 and treating that asthe basis, computed the annual collection for otheryears also. Similarly, on the same basis, theassessing officer adopted an increase of 10% in thefee charged by the assessee for surgeries.Accordingly, the annual collection for other yearswas computed by reducing 5% every year from theamount computed for the assessment year 2008-09 andthe difference between the receipts estimated by himand that reported by the assessee was treated assuppressed surgery receipts. 12.The CIT (Appeals) disagreed with the estimation madeby the assessing officer. In so far as the sale of lens is concerned, it was concluded by the CIT(Appeals) that the profit of sale of PMMA lenses was`1800/- per lens in the year relevant to theassessment year 2008-09 and for other years, theprofit was reduced by `50/- per year. He rejectedthe plea of the assessee that M/s.J.N.Surgicure hadstarted business only in the assessment year 2008-09.Accordingly, the undisclosed income towards surgeryalso was estimated by the CIT (Appeals). These rivalcontentions were appreciated by the Tribunal and onfacts, the Tribunal came to the following findings: 12.The CIT (Appeals) disagreed with the estimation madeby the assessing officer. In so far as the sale of lens is concerned, it was concluded by the CIT(Appeals) that the profit of sale of PMMA lenses was`1800/- per lens in the year relevant to theassessment year 2008-09 and for other years, theprofit was reduced by `50/- per year. He rejectedthe plea of the assessee that M/s.J.N.Surgicure hadstarted business only in the assessment year 2008-09.Accordingly, the undisclosed income towards surgeryalso was estimated by the CIT (Appeals). These rivalcontentions were appreciated by the Tribunal and onfacts, the Tribunal came to the following findings: “20. We have heard the rival contentions on thisissue. As concluded by Ld CIT(A), the sum total ofall evidences gathered during the course of searchand also the result of investigations conductedthereafter was that the appellant was makingprofit on sale of PMMA lenses. There is nodispute with regard to the fact that the assesseehas correctly reported the number of surgeriesperformed by him and it is also an undisputed factthat there was no difference in the surgery feescharged by the assessee. Both the AO as well asLd CIT(A) has proceeded to compute the profit onsale of PMMA lens by following their own methods.From the observations of Ld CIT(A), which wereextracted in the preceding paragraphs, we notice that the methodology adopted by the AO wassuffering from many defects and consequently ithas given illogical results. Besides the mistakespointed out by Ld CIT(A), we notice that the AOhas made many assumptions while working out thesuppressed receipts and such assumptions did nothave any basis. Accordingly, we agree with the LdCIT(A) that the methodology adopted by the AOcannot be considered as correct method ofworking out the suppressed surgery receipts.However, we notice that the Ld CIT(A) has alsomade certain assumptions without any basis. Thedepartment has noticed the price difference insale of PMMA lens only in respect of the lenssupplied by M/s.J.N Surgicure. The Ld CIT(A)also accepts the fact that the said concern cameinto existence only in the financial year relevant tothe assessment year 2007-08. Having observedso, the Ld CIT(A) went on further to observe that“the pattern of earning profit margin on supply oflens to the patient did exist even in earlier years”.This observation of Ld CIT(A) did not havesupport of any material. Thus we find that thefirst appellate authority has also proceeded tocompute the suppressed surgery receipts onsurmises and conjectures. 21. The fact remains that the only evidence foundout by the department with regard to sale ofPMMA lens was a bill sent through courier. Thesaid bill showed the sale of value of lens atRs.208/-. Apart from this bill, no other evidence was found during the course of search. However,the AO has tried to corroborate this informationfrom other customers of M/s J.N.Surgi cure andfound out that the sale value of PMMA lenssupplied to them was in the range of Rs.100/- toRs.300/- per lens. In page 17 of MMA-24, the saleprice of PMMA lens was shown at Rs.600/- perlens. Thus the sale price of PMMA lens was in therange of Rs.100/- to Rs.600/- as per the evidencegathered by the AO. 21. The fact remains that the only evidence foundout by the department with regard to sale ofPMMA lens was a bill sent through courier. Thesaid bill showed the sale of value of lens atRs.208/-. Apart from this bill, no other evidence was found during the course of search. However,the AO has tried to corroborate this informationfrom other customers of M/s J.N.Surgi cure andfound out that the sale value of PMMA lenssupplied to them was in the range of Rs.100/- toRs.300/- per lens. In page 17 of MMA-24, the saleprice of PMMA lens was shown at Rs.600/- perlens. Thus the sale price of PMMA lens was in therange of Rs.100/- to Rs.600/- as per the evidencegathered by the AO. 22. The AO has also conducted enquiries with ShriS.M.Ouseph, the proprietor of M/s.J.N. Surgi cureand also examined the books of accounts of thesaid concern. It was noticed that the said concernhas accounted the sale price of the lens suppliedto the patients of the assessee at Rs.2000/- only,i.e., as per the bills raised on the patients. Thoughthe AO has tried to highlight the violation of salestax rules by M/s.J.N. Surgi cure, in our view, theycannot be taken support to draw adverseinferences against the assessee. The AO has alsofailed to disprove the claim that the lens weresupplied to the patients directly by M/s.J.N.Surgicure. Since the books of account maintainedby M/s.J.N. Surgi cure also tallied with the amountcollected from the patients, in our view,effectively, the AO could not establish that theassessee has actually made any profit on the saleof lenses. The conclusion reached by the AO thatthe assessee has made profit of Rs.1800/- perlens is also, in our view, on the basis of surmises and conjectures, as the evidences found during thecourse of search itself showed that the cost oflens ranges from Rs.100/- to Rs.600/-. Hence, theprofit, if any, could not be Rs.1800/- per lens, asworked out by the AO and Ld CIT(A). 23. In our view, the only point which goes againstthe assessee is the reply given by him to thequestion no.27 posed to him, wherein he hadadmitted that there was some profit margin onsale of PMMA lens to the assessee. Similarly, ShriS.M.Ouseph, the proprietor of M/s.J.N. Surgicure also could not give any convincing explanationwith regard to the difference in selling price ofPMMA lens. Accordingly, since the departmenthas found some evidence concerning M/s.J.N.Surgi cure and since the assessee has alsoaccepted the existence of some profit element inrespect of supplies made by that concern, we areof the view that the estimate, if any, in respect ofsuppressed surgical fee receipts could be madeonly in respect of PMMA lens supplied by M/s.J.N.Surgi cure and not by any other concern. Sincethe said concern has started business only in theyear relevant to the assessment year 2007-08, inour view, the estimation of profit could be madeonly for assessment year 2007-08 and 2008-09only in respect of the PMMA lens supplied byM/s.J.N. Surgi cure. For other years, thedepartment did not unearth any incriminatingmaterial to suggest that such kind of practice wasin vogue in those yeas also. The AO also did no examine other suppliers, who supplied lens in theyears relevant to the assessment years 2002-03to 2006-07, to find out the practice followed bythem. Thus, in the absence of any material or anyinformation suggesting any suppressed profitelement in respect of purchases made in otheryears, in our view, it would not be correct on thepart of the tax authorities to estimate the profitfrom the purchase of PMMA lens/ suppression ofsurgery receipts for assessment years 2002-03 to2006-07. Accordingly, we set aside the orders ofLd CIT(A) in respect of suppressed surgeryreceipts for assessment years 2002-03 to 2006-07 and direct the AO to delete the addition madeon this issue in those years. examine other suppliers, who supplied lens in theyears relevant to the assessment years 2002-03to 2006-07, to find out the practice followed bythem. Thus, in the absence of any material or anyinformation suggesting any suppressed profitelement in respect of purchases made in otheryears, in our view, it would not be correct on thepart of the tax authorities to estimate the profitfrom the purchase of PMMA lens/ suppression ofsurgery receipts for assessment years 2002-03 to2006-07. Accordingly, we set aside the orders ofLd CIT(A) in respect of suppressed surgeryreceipts for assessment years 2002-03 to 2006-07 and direct the AO to delete the addition madeon this issue in those years. 24. In view of the foregoing discussions, we are ofthe view that the profit on PMMA lens supplied byM/s.J.N. Surgi cure during the years relevant tothe assessment years 2007-08 and 2008-09 canonly be treated as the suppressed income in thehands of the assessee. Both the tax authoritieshave taken the view that the profit was Rs.1800/-per lens. However, we have already noticed thatthe sale value of PMMA lens was in the range ofRs.100/- to Rs.600/- per lens. Hence thepresumption of the tax authorities that the profitwas Rs.1800/- per lens, is also in our view, notcorrect. It is also not established that M/s.J.N.Surgi cure has parted the entire profit with theassessee. The business deal is normally finalizedaccording to the understanding reached between the seller and buyer. It is also quiet common thatthe businessmen fixes different selling price todifferent customers. Hence the selling pricecharged to one customer cannot always be taken asthe base for determining the selling price forothers. Hence, on a conspectus of the matter, weare of the view that the profit that might haveaccrued to the assessee on purchase of PMMA lensmay be taken at Rs.600/- per lens (30% of thesales value) and in our view the same would meetthe ends of justice. We order accordingly. ThePMMA lens used by the assessee in the yearsrelevant to the assessment years 2007-08 and2008-09 were 1414 lens and 1450 lensrespectively. Accordingly, the AO is directed tocalculate the profit on the above quantities byapplying a rate of Rs.600/- per lens. The order ofLd CIT(A) stands modified accordingly. “ 13.A reading of the above findings of the Tribunalwould show that the findings are completely factualand these findings do not give rise to any questionof law for the consideration of this Court in anappeal filed under section 260A of the IT Act. Thatapart, in respect of the assessment years other than2007-08 and 2008-09, we find that absence of anyincriminating material unearthed on search is one ofthe reasons stated by the Tribunal. Though we do not approve this reasoning, we find that there is noother material at all to sustain the finding of theCIT(Appeals) or interfere with the finding of theTribunal. Therefore, we confirm the findings of theTribunal in so far as these issues are concerned. 14.The next issue considered by the Tribunal is withreference to the disallowance of a portion of salaryand expenses claimed by the assessee. Here again, onthe basis of the sworn statement of the assessee, theassessing officer has come to the conclusion that theassessee was incurring `10,000/- per month as salaryand, accordingly, restricted the salary to`1,20,000/- for the year relevant for the assessmentyears 2007-08 and 2008-09. For other years,proportionate reduction was allowed in salary. Theseadditions were confirmed by the CIT (Appeals).Reading of paragraph 26 of the order of the Tribunalshows that it has taken note of the fact that theaddition was made by the assessing officer entirelyon the basis of the sworn statement of the assessee,the inaccuracy of which was evident from thestatement of the employees of the assessee recorded by the assessing officer himself. The Tribunal has,therefore, found that the facts contained in thestatement ought to have been corroborated and thatthe assessing officer did not cross verify thestatement with other employees. It was also foundthat the assessing officer has factually ignored thesalary payments made to two cousin brothers of theassessee, whose services were availed of by him. Onthis basis, the Tribunal, after recognizing that theonly option was to estimate a reasonable amounttowards salary expenses, estimated `21,500/- as themonthly salary payment for the assessment year 2008-09. On that basis, the Tribunal has estimated thesalary payments for the years 2002-03 to 2008-09 anddirected the assessing officer to work out thedisallowance charges estimated by it. This findingagain is completely a factual one and we see noreason to interfere with the same. 15.The next issue is with respect to disallowance of apart of the expenditure claimed under the head'consumables and medicines'. We find that theassessing officer disallowed 80% of the amount ITA.34/13 & con. cases claimed by the assessee which was confirmed by theCIT (Appeals). The Tribunal, however, modified thesame and directed the assessing officer to restrictdisallowance to 30% of the expenditure claimed. Thisagain is a factual finding and there is no reason toupset the same. 16.The issue that was thereafter considered by theTribunal is with respect to the assessments of giftsunder section 68 of the Act. Admittedly, theassessee had received gifts from his father-in-law,brother-in-law and brother during the years relevantto the assessment years 2002-03 to 2007-08. Theassessing officer has disallowed the claim and madeaddition on the ground that the donors have failed toprove their respective creditworthiness, placingreliance on Commissioner of Income Taxv.C.P.Mohanakala[2007 291 ITR 278]. This addition wasconfirmed by the CIT (Appeals) also. In so far asthis issue is concerned, the relevant findings of theTribunal contained in paragraphs 33 to 38 are thefollowing: “33. We shall examine the facts prevailing in theinstant case. There is no dispute with regard tothe identities of the donors and all the donors areclose relatives of the assessee herein. In theinstant cases, the gifts have not been received ininstruments issued by the foreign banks. Instead,all the donors have issued cheques from theirrespective “Non Resident External bank accounts”maintained in the Indian banks. The peculiarfeature of these bank accounts are that thedeposits into these bank accounts could be madeonly in foreign currencies, i.e., the account holderscannot deposit Indian currencies into these bankaccounts. These peculiar characteristics of theNRE bank accounts have been lost sight of by boththe tax authorities. The AO, apparently placingreliance on noting made in a seized book (A/TC-32), has observed that the donors have receivedcash from the assessee and gave cheques in returnto him, i.e. He has presumed that the donors havebeen compensated by the assessee. However, theAO has failed to substantiate his conclusions bycomparing the noting made in the above citedseized book with the bank accounts of the donors.On a perusal of the said noting, in our view, it ispossible to interpret that they were pertaining tosome other transactions, altogether not connectedwith the gifts. The AO has also failed tounderstand that the Indian cheques or Indiancurrencies cannot be deposited into NRE bankaccounts. Hence, it cannot normally be presumedthat the assessee has funded the money required for issuing the gift cheques. Thus, in our view, theAO has reached such conclusions on the basis ofsurmises and conjectures. for issuing the gift cheques. Thus, in our view, theAO has reached such conclusions on the basis ofsurmises and conjectures. 34. Under the Indian Tax laws, the “Non ResidentExternal Accounts” always enjoyed a specialstatus. According to sec.10(4)(ii) of the Incometax Act, the interest earned on NRE account isexempt. Under the old scheme of Wealth tax Act,the balance outstanding in the NRE account wasexempt from wealth tax. Similarly under the oldscheme of Gift tax Act, the gifts given from outof NRE account was exempt from the Gift tax. 35. There is no dispute with regard to the factthat the donors have made deposits into theseNRE accounts by bringing foreign currencies fromabroad. The assessee herein, being residentIndian, could not have foreign currencies with him.The AO has taken adverse view on the ground thatthe donors have failed to produce copies ofcertain forms required to be filed under theForeign Exchange Management Act. In our view,the failure on the part of the donors to complywith the procedural formalities, if any, under anyother Act cannot be used to take adverse viewagainst the assessee. Since the donors have madedeposits by bringing money from abroad and sincethe impugned gifts have been made from thebalance available with their respective NRE bankaccounts, in our view, the creditworthiness of thedonors also stand proved. 36. Further, all the donors have confirmed thepayment of gifts by giving affidavits/letters. Theoccasion for making gift has also been stated, i.e,the construction of house by the assessee. Thereis no dispute that all the donors are close relativesof the assessee. There is no material on record tosuggest that the assessee has compensated thesedonors in lieu of receipt of gifts. All these factsgo to establish the genuineness of gift. Thoughthe tax authorities have relied upon host ofdecisions, all those decisions lay down variousprinciples for accepting the cash credits. In ourview, the assessee has discharged the primaryburden of proof placed upon him u/s 68 of theAct. 37. Even if an assessee fails to prove the threemain ingredients, viz, identify of the creditor,credit worthiness of the creditor and thegenuineness of the transactions, the Hon'bleSupreme Court in the case of P.Mohanakala & Orshas held that the assessees can still contend thatthe cash credits cannot be treated as his incomeby bringing on record the attending circumstancesand other material. In this regard, we extractbelow the following observations made by Hon'bleApex Court in the above cited case:- “The authorities upheld the opinion formed bythe AO that the explanation offered was notsatisfactory. The assessees did not take the plea that even if the explanation is notacceptable the material and attendingcircumstances available on record do not justifythe sum found credited in the books to betreated as a receipt of an income nature. Theburden in this regard was on the assessees.” We have already explained the peculiarcharacteristics of the NRE bank accounts and theassessee has brought to the notice of the AO thatthe donors have made gifts from their respectiveNRE accounts. Thus the material and theattending circumstances show that the assesseecould not have funded these donors for making theimpugned gifts to the assessee. 38. In view of the foregoing discussions, we are ofthe view that the assessee has discharged theprimary burden of proof placed upon him and theLd CIT(A) was not right in law in confirming theadditions pertaining to the gifts. Accordingly, weset aside the order of Ld CIT(A) on this issue anddirect the AO to delete the additions relating tothe gifts.” We have already explained the peculiarcharacteristics of the NRE bank accounts and theassessee has brought to the notice of the AO thatthe donors have made gifts from their respectiveNRE accounts. Thus the material and theattending circumstances show that the assesseecould not have funded these donors for making theimpugned gifts to the assessee. 38. In view of the foregoing discussions, we are ofthe view that the assessee has discharged theprimary burden of proof placed upon him and theLd CIT(A) was not right in law in confirming theadditions pertaining to the gifts. Accordingly, weset aside the order of Ld CIT(A) on this issue anddirect the AO to delete the additions relating tothe gifts.” 17.The above reasoning of the Tribunal would show thatin so far as this case is concerned, on facts, therewas sufficient materials before the Tribunal to provethe identity of the donors who are close relatives ofthe assessee, the source and the creditworthiness ofin so far as this case is concerned, on facts, therewas sufficient