THE ACIT, CIRCLE - 1(1),, VISAKHAPATNAM vs. G. ATCHUTARAMA RAJU,, VISAKHAPATNAM

Per Shri Balakrishnan S, Accountant Member This appeal is filed by the revenue against the order of Commissioner of Income Tax (Appeals) [CIT(A)], Visakhapatnam in ITA No.0240/2013-14/Addl.CIT R-1/VSP/2013-14 dated 28.03.2014 u/s 2 I.T.A. No.398/Viz/2014 & CO No.44/Viz/2014 A.Y.2010-11 Dr. G.Atchutarama Raju., Visakhapatnam

143(3) of the Income Tax Act, 1961 (in short ‘Act’) for the Assessment Year (A.Y.) 2010-11 and the cross objections are filed by the assessee.

The Revenue raised the following grounds:

“1. The order of the CIT(A), Visakhapatnam is erroneous in law and to the facts of the case.

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dated 21.11.2012 along with a questionnaire was issued to the assessee. While filing the return of income, the assessee, in his audited P&L account has shown the following income :

(Rs.) IVF Receipts 6,23,14,053 Consultation Receipt 17,34,450 Kariyo Typing 6,99,700 Lab receipts 19,39,900 Scanner receipts 18,58,200 Surgical receipts 40,82,087

The AO required the assessee to furnish the details of IVF Receipts of Rs.6,23,14,053/-. In response, the assessee filed various details called for by the AO as follows :

(Rs.) Total receipt received from 493 IVF 4,63,23,070 patients Other than IVF Patients 1,59,90,983 6,23,14,053 The assessee submitted that the amount of Rs.1,59,90,983/- was received from “Sale of Medicines”. The AO observed that the assessee has taken a new stand stating that sale of medicines of Rs.1,59,90,983/- have been wrongly grouped under IVF receipts. The AO required the assessee to prove his claim since the onus was on the assessee. The AO also noted

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in para 4 (Page No 10) of the assessment order that there was repeated non compliance by the assessee in response to notice issued u/s 142(1), 143(2) and summons u/s 131 of the Act. The AO also stated based on the reply furnished by the auditor of the assessee dated 25.03.2013 in response to notice u/s 133(6) dated 23.03.2013, that no receipts are maintained by the assessee. The reply of the auditor is reproduced below:

“With reference to the above I herewith submit to your goodselves a self-attestedof my audit notes of Krishna IVF Clinic pertaining to the financial year 2009-10 (A.Y.2010-11) as an enclosure to this letter.

As regards primary documents for verification of income of Krishna IVF Clinic including IVF receipts we have considered excel sheets (hard copy) prepared at the reception as primary documents for verification of income of Krishna IVF Clinic. When we actually asked for the receipts, we were informed that no receipts are maintained and were orally explained the procedure in which income is collected and recorded and documents that are maintained. The procedure is explained in point no.2 of my audit notes. The slips mentioned in the procedure are also not maintained. As per the procedure that is explained to us since the excel sheets (hard copy) prepared at the reception from the primary documents, we have verified the income of Krishna IVF clinic including IVF receipts, except training fee with the excel sheets (hard copy) prepared at the reception.” Further, the AO also verified receipts from 3 patients on test check basis and found difference of Rs.1,93,731/- as unaccounted income. The AO then passed assessment order u/s 144 by assessing the income as Rs.12,89,08,645/-.

treatment without expenses towards medicines and there cannot be any medicines expenses without IVF treatment. During the course of appellate proceedings, the assessee filed additional information on 17.10.2013 and also filed a petition under Rule 46A of the I.T.Rules, 1962. The Ld.CIT(A) considered the submissions made by the assessee for admission of additional evidence. The Ld.CIT(A) remanded the case back to the AO vide his office letter dated 24.10.2013. The AO filed remand report dated 04.03.2014 as under :

"In this case, the assessee had submitted additional evidence before your office and the same had been forwarded to the undersigned vide the letter referred at Ref.No.(i) wherein you had requested the undersigned to comment on the admissibility of additional evidence and also on its merits. In response to the above letter, a remand report was sent vide the letter referred at Ref.No.(ii) above. However, further additional evidence was submitted by the assessee to the undersigned vide his letter dated 23-01-2014 and as per your instructions, the same were verified and following is the gist of findings (i) In his letter dated 23:01-2014, the assessee submitted the details of other than IVF patients from 01-04-2009 to 31-03-2010. During the course of assessment proceedings, the assessee had failed to submit the above evidence and the assessee's contention is that the required information has been compiled now and the same may be considered as additional evidence. (ii) Upon perusal of the additional evidence submitted, it may be stated that the assessee does not keep and maintain "carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him" as prescribed under Rule 6F(2)(iv) of the I.T.Rules, 1962. (iii) However, the assessee has submitted the details of the information that are required to be maintained by a person carrying on medical profession as prescribed under Rule 6F(3)(i) of the I.T.Rules, 1961 i.e. a daily case register in Form No.3C. It may be stated here that these details in Form Nio.3C were not provided by the assessee during the course of assessment proceedings before the Assessing Authority.

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(iv) At the outset, a small clarification regarding the nature of categorization of receipts may be made. In the Profit & Loss Account for the year ended 31-03-2010 submitted by the assessee, I.V.F. Receipts were shown at Rs.6,23,14,053/-. However, during the course of assessment proceedings, the assessee has distinguished the above LV.F. Receipts under two heads as has been brought out by the A.O. in his Assessment Order in Page No.

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only and the treatment procedure as follows." In view of the above, the assessee claimed that all the patients who enter the hospital premises need not undergo the entire medical procedure that involves I.V.F. treatment. Thus, the assessee's contention is that the estimation made by the Assessing Authority wherein he has taken the average per patient receipt for a couple undergoing I.V.F. treatment and has estimated the receipts from patients undergoing other than I.V.F. treatment on the same basis is a mistake. Thus, the assessee claims that the Assessing Officer's contention that even the non-I.V.F. patients have undergone the complete I.V.F. treatment and the estimation of receipts from them on the basis of average receipt per I.V.F. process is erroneous. (vi) The additional evidence submitted by the assessee contains names, addresses and telephone nos. of 1,359 other than I.V.F. patients. It is not possible on my part to individually ascertain whether these patients have undergone the complete I.V.F. treatment or only partial treatment claimed by the assessee. (vii) During the verification of the information submitted, the assessee stated that the other than I.V.F. receipts include receipts in lieu of medicines and certain other expenses. However, the same patient also has to pay consultation fees and has to undergo various medical tests. It was cross verified from the data submitted as well as from the Day Book maintained by the assessee that whether receipts corresponding to other charges like consultation fees and lab receipts were being- disclosed by the assessee or not. It was found that for the same patent who had undergone consultation, medical tests etc. as well as medicines which were classified as other than I.V.F. receipts, the corresponding payment receipts were being shown under the respective heads. This has been illustrated by the assessee through an example in his letter dated 26-02-2014. Thus, in view of the above, it may be concluded that the assessee does not maintain original bills with regard to INF. receipts. He only maintains the list of patients and various kinds of treatment that they undergo on a Comput9r Excel Sheet. Therefore, it is not possible to ascertain the actual receipts by the assessee in lieu of these patients".

In response to the remand report, the assessee submitted his reply dt 19.03.2014. The assessee also filed certain additional details in response to queries raised by Ld.CIT(A). The Ld.CIT(A) required the assessee to clarify whether the cash receipts, bills / vouchers are available manually or in digital form. In response, the assessee clarified that the 8 I.T.A. No.398/Viz/2014 & CO No.44/Viz/2014 A.Y.2010-11 Dr. G.Atchutarama Raju., Visakhapatnam

personnel were not able to retrieve any counter copy from the system. However, the Ld.AR submitted 12 booklets representing the cash book maintained in the system in respect of the professional receipts and stated that this is in compliance to the requirement of Rule 6F, wherein, the complete particulars of the patients visited every day, the amount collected from them for various services are duly accounted for. Considering the submissions made by the assessee, the Ld.CIT(A) found that sufficient time was not given to reply to the show cause notice 26.03.2013, on account of difficulty faced by the assessee consequent to removal of accountant and differences with the auditor. The Ld.CIT(A) also stated that it would not substitute the requirement to maintain and produce the primary documents, particularly, the professional receipts which are collected in cash. In response to which, the assessee produced his laptop to show the information in the form of cash book was verified for the dates of visit with the entries in the system and found to tally. The assessee was asked to give patient information details of 10 patients, which was furnished on 21.03.2014. The Ld.CIT(A) after cross verifying the entries with the cash register, found that to be a credible piece of evidence as the data has been recorded contemporaneously with the treatment process. The Ld.CIT(A) also found that in some cases, the 9 I.T.A. No.398/Viz/2014 & CO No.44/Viz/2014 A.Y.2010-11 Dr. G.Atchutarama Raju., Visakhapatnam

medicines prescribed also matches. The Ld.CIT(A) found merit in the argument of the assessee that every patient who have visited does not undergo IVF treatment and thus concluded that AO was not justified in adoption of average fee of Rs.93,961/- in respect of these patients and also observed that even in the remand report, the AO has not referred to any specific evidence to substantiate such estimation. The Ld.CIT(A) thus concluded that the AO is justified in rejecting the books of accounts and that there was substantial compliance to the requirements of Rule 6(f) is not tenable. The Ld.CIT(A) considering the above submissions, estimated that assessee would have earned average income of Rs.20,000/- per patient. The Ld.CIT(A) also noted and verified that the number of patients with regard to the receipts based on ID proof comes to 889 patients and estimated the income as Rs.1,77,80,000/-. After considering the admitted income of Rs.1,39,70,893/-, the Ld.CIT(A) treated Rs.38,09,107/- as unexplained income and directed the AO to add this to the total income.

reply of the Statutory Auditor and stated that the assessee has not maintained books as specified in Rule 6(f) of the IT Rules.

the Ld.CIT(A) in para No.11.7 of the order. Even though, we agree with the contention of the revenue that the burden to establish the correctness of the completeness of the books of accounts is with the assessee, merely on the fact that the assessee could not produce vouchers, need not be a ground to estimate the income of the assessee. Though such vouchers are even maintained, in the entirety of the facts found in this case, the assessee has maintained his accounts and recorded professional receipts therein. Peculiar facts of this case are that the absence of vouchers shall not give any rise to presumption that there was any non disclosure of income but the assessee failed to produce substantial evidence with respect to receipts from IVF and non-IVF patients. In the absence of evidence for verifying the receipts for IVF and non-IVF towards medicines for Rs 1,39,70,813/- the Ld.CIT(A) has arrived at an average income of Rs 20000/- per patient, from 889 patients, considering it reasonable. We find that Ld.CIT(A) has rightly considered the submissions of the assessee and arrived at an average rate of Rs 20,000/- per patient. We also find merit in the estimation which is reasonably arrived at by the Ld.CIT(A). In view of the above findings and based on the merits of the case, we find no infirmity in the order of Ld.CIT(A) and no interference is required. In 12 I.T.A. No.398/Viz/2014 & CO No.44/Viz/2014 A.Y.2010-11 Dr. G.Atchutarama Raju., Visakhapatnam

effect the grounds raised by the revenue are dismissed. In the result, appeal of the revenue is dismissed.

Order pronounced in the open court on 16th March, 2022. (दुव्वूरु आर.एल रेड्डी) (एस बालाकृष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 16.03.2022 L.Rama, SPS

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आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Circle-1(1) Visakhapatnam 2. ननधधाऩरती/ The Assessee– Dr. G.Atchutarama Raju, D.No.14-37/29, Krishna IVF Centre, Krishna Nagar, Visakhapatnam 3. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals)-1, Visakhapatnam

Sr. Private Secretary ITAT, Visakhapatnam