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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
These two appeals by the assessee are arising out of the common order of Commissioner of Income Tax (Appeals)-7, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-7/IT.05 & 04/Rg.16(3)/2014-15 dated 10.02.2015. The Assessments were framed by the Asst. Commissioner of Income Tax, Range-11(3), Mumbai (in short ACIT/ AO) for the assessment year 2007-08 & 2008-09 vide order of even date 23.12.2010 under section 143(3) r.w.s 147 and 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’) respectively.
The first common issue in these two appeals of assessee is regards to the order of CIT(A) confirming the action of the AO in making addition on the basis of disclosure made by assessee during survey proceedings under section 133A of the Act amounting to Rs. 30 lacs in AY 2007-08 and amounting to Rs. 55 lacs in AY 2008-09. The assessee has raised the identical worded grounds in both the years. The facts and circumstances are exactly identical, hence, taking the facts from AY 2007-08, which being a lead year, we have taken the facts from this year and will decide the issue. The grounds raised in AY 2007-08 reads as under:-
1. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the assessing Officer of Rs. 23,75,000/- under the head Business and Profession considering the same to be voluntary disclosure by your appellant during the Survey Proceedings under section 133A of the Income Tax Act 1961 Your Appellant submits that looking to the facts and circumstances c of the Appellants case and in law, the said addition is arbitrary, unrealistic and without any basis. Your appellant submits that the statement obtained by the surveying party in course of the survey was obtained by putting your appellant under mental exhaustion and duress and is not supported by any evidence. Your appellant therefore submits that the Learned Assessing Officer be directed to delete the said addition.
Briefly stated facts are the assessee is a dental surgeon and practicing in clinic at Dadar and Bandra in Mumbai. A survey under section 133A of the Act was carried out on the clinic of the assessee on 17-01-2008 by the ADIT(inv), Unit-1(3), Mumbai, wherein the assessee has made a disclosure of Rs. 30 lacs in FY 2006-07 relevant to AY 2007- 08 and a sum of Rs. 55 lacs in FY 2007-08 relevant to AY 2008-09, the year in which survey was conducted. During the year course of survey physical cash of Rs. 3,93,890/- found but the cash balance as per the cash book was Rs. 3,96,780/-. Hence, there was excess cash recorded in the books of accounts at Rs. 2889/-. That means assessee has shortage of cash to that extent. During the survey certain registers, documents which related to information regarding treatment conducted on patient date wise and their names, amounts paid were mentioned in pencil which were in cash, cheques and credit cards. These were verified with the books of account and these registers were impounded for further verification. During the survey proceedings under section 133A of the Act, a statement was recorded under section 131 of the Act, wherein he offered the income in these two assessment years i.e. 2007-08 and 2008- 09 amounting to Rs. 30 lacs and 55 lacs respectively, vide question No. 13 and 14 as under: - “Q 13 Please produce the Patient Register & daily receipt cash, register for the current year as well as the earlier years?
Ans. I am producing before you Patient register & daily receipt cash register for FY 2006-07 & 2007-08, the earlier years registers are not available.
Q.14 It is noticed from the above register's that Professional fees received from the patients are not fully reflected in the books of accounts for the FY 2006-07 & 2007-08. Please explain the discrepancy?
Ans. Yes. I confirm the discrepancy and confirm that he professional fee received are not fully reflected in the books of accounts for the FY 2006-07 & 2007-08 i.e. pertaining to Ay 2007-08 & 2098-09. In order to cover up the discrepancy, I am voluntarily offering Rs.30,00,000/- (Rupees Thirty Lacs and Rs. 55,00,000/- (Rupees Fifty five Lacs) for A.Y. 2007-08 and 2008-09 respectively as my additional income i.e. over and above my regular income for A. Y. 2007-08 & 2008-09. 1 confirm that 1 will pay the due taxes in time.”
The AO has recorded the finding of fact that the assessee has paid taxes for AY 2008-09 to the tune of Rs. 22.50 lacs but the assessee vide letter dated 27.03.2008 addressed to ADIT (Inv) Unit-1(3), Mumbai retracted the voluntary disclosure partially and offered to disclose only a sum of Rs. 6.25 lacs as additional income for Ay 2007-08 in place of Rs. 30 lacs already disclosed at the time of survey on 17.01.2008. The AO made addition of voluntary disclosure made during the survey that the voluntary disclosure was not taken under coercion or threat and assessee himself has confirmed the discrepancy in the books of accounts in regard to accounting for the professional fees. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the AO. Aggrieved, now assessee is in appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. The admitted facts in the present case are that the assessee is a practicing doctor and a survey under section 133A of the Act was carried out on the clinic of the assessee at Dadar, from where certain registers were found, which relates to information of treatment of patients, date wise and their name, amounts paid were mentioned in pencil such as cash, cheques, and credit cards. These entries were verified with the books of accounts and further these registers were impounded by the department. It is noticed that during survey proceedings there was discrepancy of shortage of cash in hand of ₹ 2889/-. During survey, cash of ₹ 3,93,890/- was found whereas cash balance as per books of accounts was to the tune of ₹ 3,97,780/-. When these facts were confronted the assessee admitted additional income to be disclosed amounting to ₹ 30 lacs in AY 2007-08 and ₹ 55 lacs in AY 2008-09. Subsequently, the assessee filed retraction letter dated 27.03.2008, retracted this surrender made in AY 2007-08, restricting the surrender at ₹ 6,25,000/- instead of ₹ 30 lacs surrendered during survey. In regard to AY 2008-09, since no documents were found, no disclosure was offered. The relevant letter of Dr. Sandesh M Mayekar dated 27.03.2008 reads as under:-
“I, DR. SANDESH M. MAYEKAR, Dental Surgeon, practicing at Room no.4, 1s, floor, Mayur Niwas, 169-A, Dr. Ambedkar Road, Dada (E) Mumbai 400 014 and Bandra humbly submit as under.
On 17th January 2008, survey u/s 133A of the Income Tax Act 1961 was carried on at my dental practice consulting room at Dadar and Bandra.
At the time of survey, I was at Dadar clinic and my wife Swati was at Bandra clinic. From the beginning of the survey, I was asked any question on income, accounts, money and income tax matters, I kept on telling Income Tax officials that my wife who is a Chartered Accountant looks after accounts and tax matters and my sister helps me, looks after day to day administration and collections and I am not conversant with these matters or details.
At the end of the survey, around 11.30 p.m. my statement was recorded on ground floor of my clinic at Dadar. At that time my wife was on the 1st floor in different premises giving her statement. At the time of my statement, my wife was not around.
During my statement, I was asked questions as to how our new house at Bandra was financed. I had replied that we took loan from HDFC bank and sold our old house at Wadala and also my brothers helped me. Later, I came to know from my wife that our housing loan was from ICICI Bank and not HDFC Bank and our Wadala house was sold much later. It just goes to show that I am not conversant even with such financial transactions.
Last question asked to me was that "there is discrepancy in the amount of professional fees disclosed in books of account and what do I say about it.”
At that time my wife was not present to give me any details. I was prompted to say without confirming with any books of accounts or person that there is discrepancy in professional fees disclosed in the books of accounts not only of 2006-07 but also of 2007-08 and in order to cover up the discrepancy, I am offering 30 lacs and 55 lacs respectively as my additional income over and above my regular income for Assessment Year 2007-08 and 2008-09 and will pay tax due on t. The figures had no bass whatsoever with the books of account or other evidence.
Honestly, I had no idea about whether there is any discrepancy or not in my books so question or my knowing of any figure was just not possible. Secondly, the income I earn is by physical efforts so it has imitations of human capacity. To earn so much extra income, I may have to work at least 20 hours a day, add more equipments and assistants.
After receiving Xerox copies of impounded registers and other relevant papers in the month of March 2008 and also on going through books of accounts of financial year 2006-07 it was noticed that figure of professional fees disclosed was less by Rs. 6,07,247/-. This could be because several reasons. Patients Register is being maintained at the consulting room by the receptionist sitting at the reception who is not a qualified accountant. Fees received from the patients are also collected by the receptionist. Every day the receptionist records in the Patients register, serial number, name of the patient, treatment carried out and the amount paid or payable. Sometimes even though the payment is not received from patients, the amount is entered in Patient Register by the receptionist as if it was actually received.
I therefore deny figure of 30 lacs discrepancy mentioned by me as it is arbitrary, unrealistic and without any basis. I say that unforeseen errors/actions by receptionist and to buy peace with income tax department and in view of unforeseen mistake of writing amount of Rs. 6,07,247/- in Patients Register, an amount of Rs. 6,25,000/- be considered as additional income for financial year 2006-07. 1 am accordingly paying self assessment tax and filing revised return.
As far as accounting year 2007-08 is concerned, as the survey was conducted on 17th January 2008, the books of accounts were neither complete nor updated. However my staff has meticulously gone through all the books, papers and documents and I did not find any omission of receipts or any other fact or evidence suggesting it. Thus there is no discrepancy and I have not earned any extra income not recorded in the books. I have already paid advance tax on the basis of honest and bonafide estimate of my true income.”
In view of the above retraction letter, which was filed before the ADIT(investigation) Unit-1(3), Mumbai, while survey report was being prepared, we find that the assessee has revised his return of income for AY 2007-08, which was filed on the basis of copies of books of account and patient register obtained from the department after compiling all the clerical mistakes in the patient register to the tune of ₹ 6,07,247/-. We have gone through the assessment order and even the order of CIT(A) but find that both the authorities below did not find any discrepancy in books of account. As regards to AY 2008-09, survey took place on 17.01.2008, when accounting year was not over and assessee filed his return of income after computing all the income correctly as per the books of accounts maintained. The AO has examined the books of account for AYs 2007-08 and 2008-09 and accepted the books of account but assessment was made after making addition of disclosure made during the course of survey, which was made by the assessee without verifying the impugned material. We find that the assessee in his revise return for AY 2007-08 offered an additional income of ₹ 6.25 lacs, which was calculated based on total receipts as per patient register and as per cash book.
We find that the assessment made by AO in both the years making this addition of ₹ 30 lacs in AY 2007-08 and ₹ 55 lacs in AY 2008-09 is not based on any documentary evidence and the addition is based on just a disclosure made during the course of survey without any basis. Now we are placing reliance on one of the authorities relied on by the learned counsel for the assessee of Hon’ble Chattisgarh High court in ITO vs. Vijay Kumar Kesar (2010) 327 ITR 497 (Chattisgarh), wherein Hon’ble High Court after considering the facts dismissed the Revenue’s appeal by holding that the order passed by the CIT(A), which has been subsequently confirmed by the Tribunal. Hon’ble High Court held that the findings recorded by the both the forums below cannot be termed perverse and beyond record. The CIT(A) after considering the material produced by the assessee during the assessment proceedings and on due appreciation thereof, has accepted the explanation of the assessee for retracting his admission as bona fide and further accepted the books of accounts prepared by the assessee on the basis of duly verified primary evidence. The Tribunal has confirmed the order of the CIT(A) in para 8 of the order which we have already produced. The substantial questions of law on which the appeal has been admitted are basically the questions of fact. It is settled law that confession made by the assessee during survey proceedings is not conclusive and it is open to the assessee to establish by filing cogent evidence that the same was not true and correct.
Further, the CBDT vide Instruction F. No. 286/2/2003 - IT (Inv.) dated 10-3-2003 regarding Confession of additional income during the course of search & seizure and survey operation is relevant. The same is summarised as below- "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure seizure and survey operations operations do not serve any useful purpose purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search & seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. No addition only on the basis of statement.” Even, the same position was reiterated by CBDT vide circular F.No. 286/98/2013-IT(Inv.II) dated 18.12.2014.
In the present case, the books of account were accepted by the AO in both the years and no material whatsoever was available with the Revenue for making this addition of disclosure made during the course of survey except the amount of ₹ 6,07,247/-, which was declared by the assessee in the revise return of the income for AY 2007-08 amounting to ₹ 6.25 lacs. Hence, the addition made by AO and confirmed by CIT(A) is 12 & 3065/Mum/2015 based on conjunctures and surmises. Hence, we delete the addition in both the years and allow this issue of the appeals of the assessee.
The next common issue in these appeals of assessee is as regards to the disallowance of interest on education loan amounting to ₹ 73460/- in AY 207-08 and ₹ 1,62,687/- in AY 2008-09.
At the outset, Ld Counsel for the assessee fairly argued that the CIT(A) has already directed the AO to consider this interest under section 80E of the Act. Hence this common issue has become infructuous.
The next issue in AY 2007-08 is as regards to the disallowance of foreign travel expenses of ₹ 81,677/-. At the outset Ld Counsel for the assessee has not pressed this issue due to smallness of the amount and hence dismissed as not pressed.
In the result, both the appeals assessee are partly allowed. Order pronounced in the open court on 09-07-2018.