1 Court No. - 35 Case :- INCOME TAX APPEAL No. - 398 of 2005 Appellant :- Dr. R.A. Verma, Medical Officer, Primary Healthcentre, Bansi Respondent :- Commissioner Of Income Tax, Allahabad Counsel for Appellant :- Suyash Agrawal,R.R. Kapoor Counsel for Respondent :- Ashish Agarwal Hon'ble Bharati Sapru,J. Hon'ble Saumitra Dayal Singh,J. Heard Shri Suyash Agrawal, learned counsel for appellant and Shri Ashish Agrawal, learned counsel for respondent. This appeal under Section 260-A of Income Tax, 1961(hereinafter referred to as 'Act') has been filed by assessee against order of Income Tax Appellate Tribunal dated 08.06.2005 for assessment year 1998-99 raising following questions of law: "(i) Whether on facts and circumstances of case, Tribunal was legally justified to ignore evidences filed and submissions made as mentioned in para no.5 of impugned order and sustaining additions on account of alleged income from private practice relying on report of Inspector? (iv) Whether on facts and circumstances of case, Tribunal was legally justified in holding that appellant has made false claim of agricultural income and investment in movable properties including bank balance and cash in hand was made from alleged private practice? (v) Whether Tribunal was justified in not 2 considering that inquiry conducted by department in A.Y.2000-01 will not have any binding effect for previous assessment years, in view of settled proposition of law that res judicata has not application in tax matters? appeal pertains to assessment year 1998-99. assessee had disclosed income from salary of Rs.1,61,100/- and agricultural income of Rs.1 lac. Admittedly, on 22.08.2000 Income Tax Inspector visited Gomti Hospital being run by partnership firm of Smt. Pallavi Verma and Smt. Geeta Pandey spouses of appellant and one Dr. P.P. Pandey respectively. Based on observations made by Income Tax Inspector in that survey, he submitted report stating that at that time assessee had been found to be engaged in private practice at said medical establishment. By assessment order dated 12.02.2001 Assessing Officer made addition to undisclosed income of assessee from such private practice at Rs.6,67,616/-. Also while making addition Assessing Officer also disallowed agricultural income of assessee of Rs.84,000/- and added same to assessee's undisclosed income from private practice. assessee's first appeal was dismissed by CIT (Appeals). further appeal of assessee to Tribunal was partly allowed. It reduced undisclosed income of asseesse from private practice to Rs. 5 lacs. While doing so Tribunal has 3 recorded its findings as below:- "The enquiry of Inspector clearly established that assessee was having regular consultations chamber at Gomti Hospital and examining patients on all week days. assessee has not also denied that he was examining patients on all week days. assessment has not also denied that he was examining patients at Gomti Hospital and visiting his native village on Sundays. He has wrongly claimed that these visits were as honourary consultant and was going charitable works. Inspector himself has noticed that fee of Rs.60/- per patient was charged by assessee for examining patients at Gomti Hospital. very fact that firm in name of Gomti Hospital was constituted by wives of two Doctors and partners themselves had no professional qualification or skill to run hospital made it clear that in order to overcome departmental prohibition on private practice Doctor started hospital in name of spouse and carried on private practice. income from undisclosed sources utilised for making household expenses, making false claim of agricultural income and investment in moveable properites including bank balance and cash in hand was clearly from private practice. It is observed that income-tax proceedings are required to be decided on balance of probabilities and preponderance of facts criteria of ordinary intelligence and reasonable prudence is to be applied while examining evidence for deciding issue. Besides, direct evidence being in possession of assessee, assessee cannot be expected to reveal true facts prejudicial to his interest. totality of facts and circumstances, therefore, prove that assessee was doing private practice. fact that private practice was against departmental rules and he was drawing non-practicising allowance cannot 4 adversally affect claim of revenue because even income derived from illegitimate or irregular practice is liable to tax. Since there cannot be assets or expenditure without any source or income to support same, findings of lower authorities that in view of claim of agricultural income, low household withdrawals and investment in moveable properties, assessee was liable to be assesseed for his income from private practice is considered well founded. total of wrong claim of agricultural income of Rs.84,000/- cash in bank balance of Rs.2,20,615/- investment in moveable property to extent of Rs.1,94,626/- and household withdrawal Rs.72,000/- (Rs.1,20,000 minus Rs.48,000/-) works out to Rs.5,71,591/- as against declared salary income of Rs.1,61,090/- which was subject to TDS and other such deductions. Considering finding of ld. CIT (A) that entire claim for agricultural income was false because there was no agricultural land in name of assessee and fact that A.O. has estimated household expenses at Rs.10,000/- per annum on very conservative figure, total of above expenditure and investments from unexplained sources even after giving allowance of Rs.1 lakh for not salary after tax will be around Rs. 5 lakh for accounting period relevant to A.Y. 1998-99, which is subject matter of this appeal. In all fairness, we, therefore, confirm addition of Rs.5 lakh on account of income from private practice, including of undisclosed income declared as agricultural income by assessee in its relevant return of income. addition of Rs.1,67,660/- is therefore deleted. addition of Rs.5 lakh is confirmed. grounds of appeal to that extent are partly allowed. Learned counsel for assessee Shri Suyash Agrawal submits that entire material that had been relied upon by revenue to make addition on account of undisclosed 5 income from private practice is referable solely to period 22.08.2000 survey itself having been conducted on 22.08.2000, i.e. during previous year referable to Assessment Year 2001-02 and not to Assessment Year with 1998-99. Elaborating submissions further learned counsel for assessee submits that other than survey report, there is no material that as may indicate that assessee had indulged in private practice in previous year relevant to assessment year 1998-99 or that he was in possession of receipt of Rs.5 lacs (from that source) as has been estimated by Tribunal. He therefore, submits that assessment had been made in absence of any evidence of assessee having indulged in private practice during previous year relevant to assessment year 1998-99. Opposing aforesaid submissions Shri Ashish Agrawal, learned counsel for revenue submits that in response to notice issued to assessee during course of assessment proceedings, he did not deny fact that even during assessment year 1998-99 assessee had indulged in private practice at medical establishment, Gomti Hospital. He, therefore, submits that nature of activity being same, revenue authorities and Tribunal have 6 not committed any error in upholding estimation of undisclosed income from private practice. He further submits that sufficient relief has already been granted by Tribunal and therefore, appeal deserves to be dismissed. Having considered arguments so made by learned counsel for parties we find that vide his reply dated 12.09.2000 in response to notice dated 17.08.2000, assessee had specifically disputed fact of having indulged in private practice during previous year relevant to assessment year 1998-99. In this regard vide para 5 of aforesaid reply assessee had stated that being government servant he could not have indulged in private practice and that he had only examined certain patients on charitable consideration. He also disclosed that in relevant year he had indulged in charitable activities with certain other organisations. Then, it is undisputed fact between parties that other than survey report dated 11.09.2000 which refers to survey dated 22.08.2000, there is no material or evidence brought on record by revenue authorities that may support their case of assessee having indulged in private practice or having derived income as estimated. In first place perusal of survey report dated 22.08.2000 reveals that fact discovered therein were only with reference to previous year 2000-01. Further, 7 there is no material referred in that report that may be considered adverse to assessee for Assessment Year 1998-99. Even from finding of Tribunal it is seen, Tribunal did not find existing, any material on record from which it could be inferred that assessee had engaged in private practice during relevant period. inference of Tribunal to that extent is presumptive inference drawn on basis of fact discovered two years later which fact was irrelevant for Assessment Year 1998-99. Each assessment year comprises separate unit of assessment. We find that in facts of present case assessment has been made for Assessment Year 1998-99 purely on basis guess work and is not supported by any evidence and material on record. evidence relied upon by learned counsel for revenue in shape of reply as filed by assessee cannot constitute admission on part of assessee having indulged in private practice for Assessment Year 1998-99 inasmuch as he specifically stated that in that year assessee had only indulged in charitable work. Thus, we find that assessment made against assessee for Assessment Year 1998-99 is not based on any material or evidence but on pure guess work unsupported with evidence. Then it is noted, assessing officer himself allowed agricultural income Rs. 36,000/-. That head of income 8 having been found present in present case, and there being absence of any proof of assessee having engaged in private practice, disallowance of agricultural income also could not have been made in absence of any cogent material or evidence in that regard. questions of law are, therefore, answered in favour of assessee and against revenue. Accordingly addition made to income of assessee for Assessment Year 1998-99 in respect of undisclosed income for private practice of Rs.5 lacs is deleted. appeal is accordingly allowed. Order Date :-05.12.2017 pks R. A. Verma v. Commissioner of Income-tax, Allahabad