DR. DAVENDRA D. PATEL vs. A.C.I.T.

O/TAXAP/21/2002 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 21 of 2002 With TAX APPEAL NO. 22 of 2002 TO TAX APPEAL NO. 24 of 2002

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER ============================================================ ==== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ DR. DAVENDRA D. PATEL....Appellant(s) Versus A.C.I.T.....Opponent(s) ================================================================ Appearance: MR BS SOPARKAR FOR MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MR NITIN K MEHTA, ADVOCATE for the Opponent(s) No. 1 Page 1 of 8

O/TAXAP/21/2002 JUDGMENT ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 21/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE K.J.THAKER) 1. All these appeals involve common questions on law and facts and hence, they are decided by this common judgment. 2. These appeals u/s.260A of the Income-tax Act, 1961 are filed against the common judgment and order dated 15.06.2001 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA Nos.1749/Ahd/1995, 1750/Ahd/1995, 2698/Ahd/1995 & 2699/Ahd/1995 whereby, the appeals being ITA Nos.1749 & 1750 of 1995 filed by the assessee were dismissed and ITA Nos.2698 & 2699 of 1995 filed by the Revenue were partly allowed. 3. Briefly stated, the facts are that on 10.08.1990 the assessee filed his return of income showing loss of Rs.55,864/-. The same was processed u/s.143(1)(a) of the Act and thereafter, Notice u/s.143(2) was issued to the assessee. Final show-cause Notice dated 04.03.1993 was issued to the assessee. However, he did not file any reply until the date fixed for final hearing. Thereafter, a communication was sent to the assessee informing him that the Page 2 of 8

O/TAXAP/21/2002 JUDGMENT case would be decided on merits. On 24.03.1993 the assessee furnished details in response to the show cause Notice. Thereafter, on 25.09.1990 search u/s.132 of the Act was carried out at the residential premises of the assessee and survey u/s.133A was carried out at the clinic of the assessee. 4. During the aforesaid operation, certain incriminating papers were seized. The statements on oath of patients were recorded. A survey u/s.133A of the Act was carried out at the shop of the Chemist and certain papers were impounded and statements were recorded. Thereafter, assessment

scrutiny

was

undertaken

and ultimately, order dated 30.03.1993 u/s.143(3) of the Act was passed by the A.O. 5. Against the aforesaid order, the assessee filed appeals before the CIT(A). The learned CIT(A) partly allowed the appeals. Being aggrieved by the order passed by the CIT(A), appeals were filed before the Appellate Tribunal. The Appellate Tribunal heard the appeals together and by impugned judgment and order, the appeals being ITA Nos.1749 & 1750 of 1995 filed by the assessee were dismissed and ITA Nos.2698 & 2699 of 1995 filed by the Revenue were partly allowed. Hence, these Tax Appeals. Page 3 of 8

O/TAXAP/21/2002 JUDGMENT 6. These Tax Appeals were admitted vide common order dated 25.06.2002, which reads as under; “1. Heard Mr. Soparkar learned counsel for the appellant in all these four appeals. Tax Appeals No.21 & 23 are admitted on the following substantial questions of law: 1. Whether

the

facts

and circumstances of the case, and in light of the provisions of Section 145 of the Income Tax Act, 1961, the finding reached by the Income Tax Appellate Tribunal in sustaining addition of Rs.5 lacs as suppressed income of the appellant is perverse, contrary to the evidence on record, ex facie illegal and such as no reasonable person could have reached? 2. Whether

the

facts

and circumstances of the case, the finding reached by the Income Tax Appellate Tribunal, that the provisions of Section 145(2) of the Income Tax Act, 1961, are attracted, is legally justified?

the

facts

and circumstances of the case, and in light of the provisions of Section 145 of the Income Tax Act, 1961, the finding reached by the Income Tax Appellate Tribunal, in sustaining addition of Rs.3 lakhs as suppressed income of the appellant, is perverse, contrary to the evidence on record, ex facie illegal and such as no reasonable person could have Page 4 of 8

O/TAXAP/21/2002 JUDGMENT reached? 2. Whether

the

facts

and circumstances of the case, the finding reached by the Income Tax Appellate Tribunal, that the provisions of Section 145(2) of the Income Tax Act, 1961, are attracted, is legally justified?" 7. We have heard learned counsel for both the sides. Before we examine the order passed by the Appellate Tribunal, it would be relevant to refer to the observations made by the CIT(A) in para-11 of its judgment, which reads as under; “11. In my opinion, the submissions made by the appellant require to be substantially accepted. The appellant was given herculean task of reconciling with his books of accounts, the names of various persons who were supposed to be his patients, based on the bills issued by a third party, namely, Payal Medical Stores. The same has been done by the appellant almost to the total satisfaction of the Assessing Officer. Now, the dispute survives as regards 16 parties. In my opinion, the explanation given by the appellant deserves to be accepted. Merely because the bills issued by Payal Medical Stores mentions the name of the appellant as prescribing Doctor or mentions the Room Number, it cannot be conclusively held that the appellant must have operated upon the said patient. There are various possibilities of human error name of the patient might not have been correctly written, name of the Doctor might not have been correctly written, etc. Under the circumstances, in my opinion, such a huge addition based on speculation and impermissible inferences is not justified.” Page 5 of 8

O/TAXAP/21/2002 JUDGMENT 8. Having gone through the orders passed by the authorities below, we are of the view that the order passed by the Appellate Tribunal rejecting the appeals of the assessee cannot be sustained as the reasonings given by the Appellate Tribunal are not germane to the facts of the present case. The Appellate Tribunal has not appreciated the matter in its proper perspective and the invocation of Section 145(2) of the Act is without any basis. The provision of Section 145(2) of the Act reads as under; “145. Method of accounting: (1) … (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income.” 9. At this juncture, it would be relevant to refer to the following observations made by the Appellate Tribunal in Para-15 of its order; “15. We have carefully considered the rival submissions and also gone through the orders of the revenue authorities as well as the paper book filed by the ld. Counsel before us. One basic influence which emerges from the appraisal of facts and evidence on record is that the books of accounts maintained by the assessee are neither complete nor true. Page 6 of 8

O/TAXAP/21/2002 JUDGMENT We find that there is plethora of evidence brought out by the revenue authorities in support of the inference that the assessee has systematically indulged in suppression of operation receipts as well as consultation receipts from the patients for both the assessment years under appeal before us. This is therefore clearly a case where provisions of Section 145(2) have been rightly invoked and estimate of professional income has been made by the A.O by invoking the provisions of sec.145(2).....” 10. In our opinion, the Appellate Tribunal ought to have relied upon the findings of fact recorded by the CIT(A), which are based on specific evidence brought on record. As regards Payal Medical Stores is concerned, the assessee could not have been assessed u/s.145(2). Thus, the impugned judgment of the Appellate Tribunal allowing the appeals filed by the Revenue deserves to be quashed and set aside and the appeals filed by the assessee deserves to be allowed. 11. For the foregoing reasons, the appeals are partly allowed. The impugned judgment and order dated 15.06.2001 passed by the Appellate Tribunal is quashed and set aside and the orders passed by the CIT(A) in the respective appeals stand restored. These appeals stand disposed of accordingly.

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O/TAXAP/21/2002 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 8 of 8