DR. ASHOK UPPAL v. INCOME TAX OFFICER
[Citation -2006-LL-1117-3]

Citation 2006-LL-1117-3
Appellant Name DR. ASHOK UPPAL
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 17/11/2006
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags long-term capital gain • disclosure of income • agricultural income • consultancy charges • penalty proceeding • undisclosed income • estimated profit • cogent evidence • stock register • profit on sale • closing stock • profit margin • advance tax • ayurvedic
Bot Summary: The statements of the assessee himself, recorded during survey coupled with the fact of surrender by the assessee, justifies this action of the AO, particularly, when no proper registers of accounts are maintained. The details furnished during assessment proceedings in respect of salary are: Shri Vinod Kumar Rs. 2,250 per month Shri Suresh Kumar Rs. 1,600 per month Smt. Asha Uppal Rs. 2,500 per month At the time of the survey, the assessee had stated the following amounts as salary to the following persons. Smt. Asha Uppal Rs. 2,000 per month Shri Suresh Kumar Rs. 1,500 per month Shri Ram Kumar compounder Rs. 1,000 per month Shri Ram Dutt Rs. 1,000 per month On this basis, the AO made an addition of Rs. 12,000 on account of unrecorded salary of Shri Ram Kumar and Rs. 3,000 on account of salary paid over and above recorded in the books to Shri Ram Dutt and made an addition of Rs. 15,000 being undisclosed income of the assessee. The assessee explained that instead of Ram Kumar, the assessee wrongly mentioned the name as Vinod Kumar. Anyhow as there are some weak supporting evidences and some evidences are not available with the assessee, the assessee is not in a position to prove his affairs beyond doubt. The assessee is also suffering from depression and under treatment and so just to avoid the unnecessary litigation and harassment the assessee is ready t o surrender agricultural land sum of Rs. 1,35,000 covering all the defects in declaring his income and promise to file the return of asst. The assessee is surrendering this income under the impression and with condition that no penalty proceeding of prosecution will be launched against the assessee.


This appeal of assessee is directed against CIT(A), dt. 22nd Sept., 2000 which pertains to asst. yr. 2001-02. Ground Nos. 1 to 4 of this appeal actually raises only one issue relating to sustained addition of Rs. 95,000. facts of this issue are that assessee is R.M.P. (Registered Medical Practitioner) doctor, who examines patients and also gives medicine to them. assessee is member of Ayurvedic Chikitsak Sangh. survey under s. 133A was conducted on 26th Jan., 2001. assessee had filed return of income on 31st Aug., 2001, declaring income of Rs. 1,96,475. During course of survey, it was found that in asst. yrs. 1998-99 and 1999-2000, assessee had shown agricultural income but did not own any agricultural land. salary paid to his wife was found on higher side. Therefore, during survey he surrendered sum of Rs. 1,35,000 for asst. yr. 2001-02, as his additional income. He also deposited advance tax of Rs. 40,000 on this amount on 15th March, 2001. On examination of patient s register, it was found that assessee mentioned only name and prescription along with fees charged from patient. Complete addresses of patients were not given. No receipts were, allegedly, being given to patients for fee received from them, nor their signatures were obtained. He did not maintain stock register for medicines. He maintained only computerized ledger. Closing stock was prepared on approximate basis. AO in this background rejected books of assessee and applied provisions of s. 145(1) for estimating his income. AO made estimation of receipts from patients. AO estimated number of patients per day at 55 and, receipt from each patient at Rs. 30, to arrive at income of assessee from seeing of patients. AO also estimated receipt on account of consultation charges. explanation of assessee is that according to certificate issued by Rajasthan Ayurvedic Chikitsak Sangh (P) Regd., Sriganganagar, members of society do not charge consultation fees and profits are included in charges of medicine. assessee has shown total receipts from patients at Rs. 3,54,158 by showing average 45 patients from whom Rs. 10 to Rs. 43 are charged per patient. assessee further submitted that even otherwise surrendered amounts of Rs. 1,35,000 would cover all these minor defects, as pointed out above. But still AO estimated that assessee charges consultation fees at Rs. 25 per patient and gave medicines worth Rs. 30 to each patient. He found that if about 12 days of holidays are excluded, assessee charges such as fees, etc. for 353 working days at rate of Rs. 55 (Rs. 25 + Rs. 30), accordingly he worked out consultation fees at Rs. 4,85,375. T h e assessee has declared gross consultation fees at Rs. 3,54,158, so addition of Rs. 1,31,217 was made. AO also estimated profit on sale of medicines, by applying rate of Rs. 30 to each patient and adopting rate of profit at 20 per cent at estimated sum of Rs. 5,82,450 (55 patients x 353 days x Rs. 30), and thus arrived at sum of Rs. 1,16,490 which represented profit earned on sale of medicines to patients. case of assessee is that consultation charges also include profit on sale of medicines. AO gave weight to statements of assessee recorded during survey that his profit margin on medicines was approximately 40 per cent. In first appeal, learned CIT(A) did not agree with AO where he estimated number of patients at 55 per day, being baseless estimation. On date of survey, assessee, as per his own statement, had examined 22 patients until afternoon, and could examine equal number of patients in evening. learned CIT(A), thus, adopted figure of 45 patients per day. learned CIT(A) also reduced working days to 339 by considering Sunday, on which day only half day was working day. He further gave credit of 10 days for emergencies, during which clinic could remain closed. In respect of quantum of fees charged, learned CIT(A) found sum of Rs. 25 per patient as adequate. Thus, he calculated total consultancy charges at Rs. 3,70,125 (45 patients x Rs. 25 x 329 days). Insofar as profit on medicines is concerned, he adopted figure of total sales at Rs. 2 lakhs against declared sales of Rs. 1,82,771 and calculated profit by applying rate of 40 per cent, as stated by assessee, himself, which came to Rs. 80,000. Thus, addition was reduced to Rs. 95,967 from addition of Rs. 2,47,707 (Rs. 1,31,217 + Rs. 1,16,490), made by AO. assessee is further aggrieved. We have heard rival submissions and perused evidence on record. Without mentioning in so many words, we uphold rejection of books o f account and application of provisions of s. 145(1) of Act. statements of assessee himself, recorded during survey coupled with fact of surrender by assessee, justifies this action of AO, particularly, when no proper registers of accounts are maintained. learned CIT(A) has meticulously examined each detail, be it estimation of patients receipts or profit element from sale of medicines. But only argument of learned Authorised Representative, which seems to be somewhat considerable is that assessee being ayurvedic practitioner, does not charge consultancy fees b u t whatever profit, at rate of 40 per cent he charges on sale of medicines is his only gross receipt. certificate issued by Rajasthan Ayurvedic Chikitsak Sangh (P) Regd., Sriganganagar, copy of which is placed at page No. 24 of assessee s paper book, is relevant for this claim. Department has not considered this certificate although it was produced before learned AO. Since, this claim of assessee has remained unaddressed and both AO and learned CIT(A) have taken different parameters for making their estimations, we are of considered opinion, if surrender of Rs. 1,35,000 made by assessee to plug any leakage, on either of counts, i s considered, there is no need to make any further additions in either receipts from consultancy or for giving medicines. statement of assessee dt. 26th Feb., 2001, recorded during survey, clearly states that no separate consultation charges are received by him. consultation fee is included in cost of medicine only. There is no other cogent evidence in possession of AO except wild guesswork to come to conclusion that assessee also charges consultation fees in addition to earning profit on medicines @ 40 per cent, as declared by assessee himself. Thus, in given facts and circumstances, we are of considered opinion that no further addition can be made on basis of available evidence on record. Hence, we delete impugned addition of Rs. 95,967 made in this account. As result, ground Nos. (1) and (2) is not allowed, but ground Nos. (3) and (4) are allowed. Ground No. (5) relates to salary paid out of undisclosed sources. AO Ground No. (5) relates to salary paid out of undisclosed sources. AO observed that assessee has recorded salary of Rs. 1,000 per month paid to compounder Shri Ram Kumar and same salary paid to Shri Ram Dutt, Munim, and there was some, small difference of salary stated to have been paid during survey and stated during course of assessment proceedings. details furnished during assessment proceedings in respect of salary are: Shri Vinod Kumar Rs. 2,250 per month Shri Suresh Kumar Rs. 1,600 per month Smt. Asha Uppal Rs. 2,500 per month At time of survey, assessee had stated following amounts as salary to following persons. Smt. Asha Uppal Rs. 2,000 per month Shri Suresh Kumar Rs. 1,500 per month Shri Ram Kumar [compounder] Rs. 1,000 per month Shri Ram Dutt Rs. 1,000 per month On this basis, AO made addition of Rs. 12,000 on account of unrecorded salary of Shri Ram Kumar and Rs. 3,000 on account of salary paid over and above recorded in books to Shri Ram Dutt and made addition of Rs. 15,000 being undisclosed income of assessee. assessee did not mention name of this employee and did not disclose salary. assessee explained that instead of Ram Kumar, assessee wrongly mentioned name as Vinod Kumar. According to assessee Shri Vinod Kumar had never worked with him. But still AO held salary of Rs. 12,000 was paid from undisclosed sources. We have heard rival submissions and perused evidence on record. It has been submitted before us that assessee has disclosed every fact truly. name of Shri Ram Dutt was wrongly written. Actually only 3 employees were with him. payment of salary was made on cash basis. It was also submitted learned AO has not objected to name of Shri Vinod Kumar and has also not objected to quantum of his salary. assessee was obtaining signatures of employees on payment vouchers and this fact was brought to notice of AO vide letter dt. 3rd Oct., 2003. copy of this letter has been placed on record. From above facts what we capture is that AO has added this amount only on basis of doubts and suspicion. When salary was paid and signatures of employees were obtained, AO must have seen same on records that is why he did not object to salary paid to Vinod Kumar although assessee had claimed that he had only three employees including compounder Shri Ram Kumar. claim of assessee seems to be more convincing. Hence, we allow ground of appeal and delete this addition. Ground No. (6) of this appeal relates to addition made on account of salary paid to Smt. Asha Uppal wife of assessee. AO observed that she does not have any experience in line of medicines or ayurved, etc., however, salary of Rs. 2,500 per month was paid to her. Her statement was recorded in which she confirmed receipt of salary and nature of work she did for nursing home. AO found this salary as unreasonable and also excessive. But AO did not make any separate addition because assessee had made disclosure of income at time of survey on this issue. learned CIT(A) also confirmed this finding of AO. We have heard rival submissions and perused evidence on record. It is not denied by learned Departmental Representative, that she was examined by AO. Rather, this fact stands proved from appellate order, itself. AO partly accepted statement of Smt. Uppal. copy of her statement is on record. We have gone through these statements. She has confirmed factum of receipt of salary and has also mentioned nature of work she was doing. But AO picked only portion of statement from where it was inferred that since she was not qualified in medicine, so what help could she provide in earning income. We don t endorse such assimilation by learned AO. statement has to be read as whole and not in piece-meals. When her statement is read in its entirety it is clearly proved that she received such salary in lieu of work done by her. This fact has not been disproved. Therefore, in our considered opinion salary paid to her has to be allowed. salary of Rs. 2,500 per month cannot be said to be on higher side even. Ground No. (7) relates to addition of Rs. 8,400 made on account of rental income. learned Authorised Representative has straightway prayed that 1/3rd deduction should be allowed as per law from rental income. This b e in g justified claim, we allow 1/3rd deduction out of Rs. 8,400 towards maintenance, etc. and sustain remaining amount. In ground No. (8) read as under: "That learned AO has erred in not giving credit of Rs. 1,35,000 surrendered by assessee at time of survey and learned CIT(A) has further erred in not giving any finding about adjustment." This issue is stated to be covered by decision of this Bench given in case of Sushil Kumar & Brothers vs. ITO in ITA No. 663/Jd/2004 (asst. yr. 2000- 01) order dt. 1st May, 2005 (a copy of which has been filed on record). We have heard rival submissions and perused evidence on record. At p. 23 of paper book p. 5 of letter dt. 9th March, 2001 is placed. last but one para of this letter is being reproduced as under: "From above submission you will please appreciate that assessee has justified all his incomes, and investments. Anyhow as there are some weak supporting evidences and some evidences are not available with assessee, assessee is not in position to prove his affairs beyond doubt. Besides above, assessee is also suffering from depression and under treatment and so just to avoid unnecessary litigation and harassment assessee is ready t o surrender agricultural land sum of Rs. 1,35,000 covering all defects in declaring his income and promise to file return of asst. yr. 2001-02 by showing this amount. assessee is depositing Rs. 4,000 as advance tax upto 15th instant on this amount of surrender. This amount of surrender is besides amount of long-term capital gain of asst. yr. 1999-2000, which assessee is going to show separately by revising return of asst. yr. 1999-2000. going to show separately by revising return of asst. yr. 1999-2000. assessee is surrendering this income under impression and with condition that no penalty proceeding of prosecution will be launched against assessee." copy of assessee s statement is also placed on record, which starts from page No. 25 of paper book. At p. 29 of paper book, it has been stated by assessee that he is making surrender as he cannot prove additional income. above mentioned portion of letter is explanation of this surrender. In our considered opinion, surrendered amount of Rs. 1,35,000 has to be adjusted and credit of same has to be given. We allow this ground in view of our earlier order given in case of Sushil Kumar (supra) as well as on merits. In result, appeal of assessee is partly allowed. *** DR. ASHOK UPPAL v. INCOME TAX OFFICER
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