2006-VIL-358-ITAT-JDP

Equivalent Citation: [2007] 107 TTJ 831 (JODH)

Income Tax Appellate Tribunal JODHPUR

IT APPEAL NO. 388 (JODH) OF 2001

Date: 07.11.2006

DR. ANAND CHHABRA.

Vs

INCOME-TAX OFFICER.

BENCH

Member(s)  : R. S. SYAL., HARI OM MARATHA.

JUDGMENT

The appeal of the Revenue and cross-objection of the assessee, filed in relation to appellate order dt. 30th May, 2001 pertaining to asst. yr. 1998-99, are being disposed of by a common order.

2. The brief facts of the case are that the assessee is a doctor who derives income from a nursing home run in the name and style of M/s Anand Nursing Home. On 24th March, 1998, the assessee filed his return declaring income of RS.l,01,997 from profession and Rs. 7,400 from long-term capital gains. The AO made various additions like, on account of suppression of professional income amounting to Rs. 2,15,520, on account of inadequate household expenses amounting to Rs. 1,01,183 and on account of unexplained investment in the construction of the building amounting to Rs. 1,05,568. In first appeal, the learned CIT(A) gave part relief to the assessee and hence both the parties are aggrieved.

3. The assessee has taken additional legal grounds, which challenge the survey proceedings. These additional grounds being purely legal one for which no further investigation of facts is required or admitted in the list of grounds taken in cross-objection, the learned Departmental Representative could not successfully controvert the admission of the legal grounds. Since, these grounds go to the very root of the matter we chose to decide them before deciding other grounds. These grounds read as under:

"(1) That the order passed by the ITO is illegal and against law because survey was conducted by the Inspector, who has no authority under IT Act.

(2) That the addition made on the basis of statement recorded by the Inspector is illegal and against law.

(3) That the statement is unsigned and without signature of the person; recording of the statement is no statement in the eyes of law. Therefore, the basis taken by the ITO as well as the CIT is illegal and against law".

4. We have heard the rival submissions and perused the evidence on record.

5. As far as the first additional ground is concerned, the same has to be dismissed because the survey was conducted under the authority of the ITO by the Inspector. There is no irregularity in such a proceeding. The ITO can authorize an Inspector and get the survey conducted under his supervision.

6. Additional ground Nos. 2 and 3 can be decided together because these relate to statements recorded during survey.

7. The facts of this issue are that the statements are recorded by the Inspector under the supervision of the ITO. The recording of the statements is to be taken as valid one, if this is properly recorded. But, it is not clear from the statements recorded during survey as to who recorded these statements. There is no name of the person who recorded the statements and the officer has not even cared to put his signature at the end of the statement, therefore, these statements lose authenticity to a greater extent and thus cannot be relied upon. Thus, while considering the additions on merits, in our considered opinion, these statements cannot be considered. Ground No. 3 of the additional ground is, therefore, allowed.

8. The survey party reached the premises of the assessee at 10 AM. and left at 1 PM. During the course of survey, it was found that seven persons were occupying the patients' beds and 25 patients were sitting in the OPD. The survey team also found difference of cash of Rs. 104. The assessee has taken plea from the very beginning that a copy of statement recorded during survey was not provided to him. The assessee obtained a certified true copy of the statement at the first appellate stage.

9. The first ground of Revenue's appeal relates to professional income. The assessee has also taken a ground in his cross-objection as ground No. 1 in this regard.

10. The facts of this issue are that the assessee has shown total professional receipts of Rs. 3,33,980, out of which indoor patients' receipts have been shown at RS.87,290 and outdoor patients' receipts at Rs. 2,46,690. According to the AO, the assessee charged Rs. 70 from the indoor patients and Rs. 30 for first consultation. The AO noticed that the receipts were not issued for consultation charges and these were issued only for indoor patients. Even these receipts do not bear the signatures of the payees and their full addresses were not mentioned. Therefore, the AO rejected the books of account and applied the provisions of s. 145(1) of the Act to estimate professional receipts of the assessee. The AO estimated that the assessee had provided consultation to outdoor patients numbering 35 per day, which also included fees received for outside visits. The survey team found that no entries were made in the patients register although 30 patients were waiting for consultation on that day. The AO ignored the version of the assessee that the survey team visited at early hours when no patient was actually consulted and that is why no entry was found in this regard. Ignoring all these submissions of the assessee, the AO took the working days 353 in the year and estimated total receipts from outdoor patients at Rs. 3,70,650 taking the fees charged Rs. 30 per patient which resulted into an addition of Rs. 1,29,960 in outdoor patients account. Likewise, for indoor patients, the AO estimated average receipts per day at Rs. 490 and estimated annual income from indoor patients at Rs. 1,78,850 by taking all the days into account. This resulted into an addition of Rs. 91,560 in the indoor patients' receipts.

11. In first appeal, all the submissions of the assessee that he charged only a fees of Rs. 50 per indoor patient, there is no rule to take the signature of the patients in the register and that when survey team reached at the nursing home, the indoor and outdoor patients register wherein the cash book was found written upto 23rd March, 1998 made this on estimate of indoor and outdoor patients. The learned CIT(A) found that the assessee maintained the books of account on day-to-day basis. The indoor patients register was written up to 22nd March, 1998, which was also signed by the Inspector on 24th March, 1998. The learned CIT(A) upheld the application of the provisions of s. 145(1) technically, but still maintained ad hoc lump sum addition of Rs. 80,000 in both these accounts.

12. After hearing rival submissions, we are of the considered opinion that when the statements of the assessee are excluded from evidence, no further valid evidence remains to be considered for making any estimation either of indoor patients or outdoor patients. Therefore, even if the provisions of s. 145(1) are invoked no further addition. is warranted in this account. Hence, we accept this ground of cross-objection and dismiss ground of the appeal of the Revenue taken in this regard.

13. The next ground of Revenue's appeal relates to addition made on account of low household withdrawals.

14. The AO made an addition of Rs. 1,01,183 which was restricted to Rs. 23,813. Both the parties have taken their respective grounds.

15. We have heard the rival submissions and perused the evidence on record.

16. The assessee had withdrawn Rs. 38,200 from his account and Rs. 10,617 from his wife's account, respectively and thus total withdrawals were shown at Rs. 48,817. The AO made an estimation of household expenses by coming to a conclusion that on the education of children, electricity, water and telephone charges at Rs. 14,400 must have been spent. He opined that the remaining amount was sufficient for day-to-day household expenses and thus estimated Rs. 12,500 as monthly expenditure to make an addition of Rs. 1,01,183 in this account. The learned CIT(A) reduced this addition to Rs. 23,813.

17. After considering the rival submissions, we construe that on the basis of living standard of the family of the assessee, the AO estimated Rs. 12,500 as household expenses of the assessee and the learned CIT(A) took this figure at Rs. 6,000 per month. But, in our considered opinion, there is no such basis for making these estimations. The baseless addition cannot be sustained in the eyes of law. Since, we have ignored the statements recording during survey, we accept the household expenses declared by the assessee and his wife and delete the entire addition made in this account. Therefore, ground taken by the Revenue fails and the ground taken by the assessee succeeds.

18. The next issue taken by the Revenue relates to deletion of an addition of Rs. 1,05,568 made on account of unexplained investment in the construction of building.

19. The facts of this issue are that during survey, it was noticed that the assessee had constructed one property known as Anand Nursing Home and the investment in the construction was claimed at Rs. 4,05,548 in two assessment years, namely, 1997-98 and 1998-99 at Rs. 1,40,608 and Rs. 3,18,170, respectively. The AO referred the matter of the investment to the Departmental Valuation Officer who estimated the cost of construction at Rs. 1,87,262 in asst. yr. 1997-98 and Rs. 4,23,738 in the assessment year under appeal. According to this report for the year under consideration, a difference of Rs. 1,05,568 was found. When the AO show-caused the assessee, he explained the following points against the proposed addition in this account:

1. Plinth area rates have been taken on the basis of CPWD BSE in place of PWD rates.

2. Departmental Valuation Officer has made wrong addition for engineer/architect fees.

3. The Departmental Valuation Officer did not allow rebate of 2 per cent for architect fees.

4. Rebate of 10 per cent for self-supervision has not been allowed.

20. But, the AO did not accept the above explanations of the assessee and made the impugned addition of Rs. 1,05,568 under s. 69 of the Act. The learned CIT(A), however, after considering the case of CIT vs. Hotel Joshi (1999) 157 CTR (Ra}) 369 adopted local PWD rates against CPWD rates adopted by the Departmental Valuation Officer and reduced the cost of investment. The learned CIT(A) also allowed rebate of self-supervision @ 7.5 per cent and deleted the entire addition.

21. After hearing the rival submissions, in the light of the available material on record, we do not find any infirmity in the order of the learned CIT(A) for determining the cost of construction. It is by now settled law that only local PWD rate has to be adopted. For self-supervision rates ranging between 7 to 10 per cent are to be allowed. Since, the entire addition has been deleted, there is no reason to interfere in the total deletion of the addition made by the AO and hence we dismiss this ground of appeal of the Revenue as well.

22. The ground taken by the assessee in relation to less percentage on account of self-supervision, on account of architect fee is of academic interest only. Insofar as the claim of the assessee that the expenditure was made in this building in two assessment years, the same has to be allowed, as claimed. There is no reason to reject this claim of the assessee.

23. In the result, the appeal of the Revenues stands dismissed and cross-objection is partly allowed.

 

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