ORDER
J. P. BENGRA, J.M. :
There is an appeal by the assessed and the cross appeal by the Department against a single order of the CIT(A)-IV, New Delhi pertaining to asst. yr. 1989-90. Since both these matters arise out of the single order, thereforee, for the sake of convenience these appeals are being disposed of by a consolidated order.
2. The grievance of the assessed relates to estimation of business income and thereby sustaining an addition of Rs. 30,000 towards income of assessed on account of indoor and miscellaneous receipts and secondly addition of Rs. 35,000 on account of suppression of professional receipts whereas the Department is aggrieved whether the CIT(A) has restricted the addition on account of indoor and miscellaneous income from Rs. 60,000 to Rs. 30,000 and similarly for suppression of professional receipts, he has given relief of Rs. 74,148 instead of confirming the addition made by the AO ?
3. The facts of the case are that the assessed is an individual and deriving income from medical profession by practicing at Nursing Home known as Aggarwal Nursing Home owned by her husband Dr. R. S. Aggarwal at A-22, Vishal Enclave, New Delhi. She is a child specialist and wife of Dr. R. S. Aggarwal. The assessed had been practicing since 1974 and also being assessed by the IT Department on the income from this profession. During the relevant year under consideration, a survey was conducted at the Nursing Home on 24th October, 1988, where statement of the receptionist Smt. Balwant Kaur and assessees husband Dr. R. S. Aggarwal were recorded. According to the AO the daybook maintained by the assessed did not furnish information regarding nature of professional services rendered by the assessed in respect of OPD patients. thereforee, the documents and the books of accounts found at the Nursing Home were impounded under s. 133A of the Act for examination. On further examination, the AO found infirmity in the maintenance of the books of accounts as under :
'(i) The AO in the assessment order has not mentioned in the assessment of the appellant for the asst. yr. 1988-89 (sic) it has been recorded that the daily register maintained by the assessed do not provide information regarding nature of professional services in respect of OPD.
(ii) In addition to this, during the course of examination of books of accounts the AO observed in the current year under appeal that the DPT, Polio register do not mention the nature of professional services rendered to the patients.
(iii) The receipts declared on account of DPT, Polio and injection charges were Rs. 13,275 against which medicines claimed to have been consumed at Rs. 13,200.
(iv) On comparing the rate charges for the injection/drops it was found that the professional receipts declared in administering polio as well as other immunisation were declared on a very low scale.
(v) Scrutiny of the impounded books of account disclose that the same were written only up to 30th September, 1988. It was also found that no opening and closing balance of cash were even shown since 1st April, 1988 to 30th September, 1988.
(vi) Receipts of the patients which were recorded in the patient register were not fully disclosed as the professional income. When this aspect was pointed out to the assessed on the basis of the treatment register impounded and appearing at Sl. No. 45, 46, 48 and 49, the appellant came out with the story that the receipt of the patients which are not disclosed are either complementary nature of the treatment who were kept under observation for small time were not charged.
(vii) Even where the receipts were declared, on test check it was found that the receipts although declared were not charged to the extent of 1/3rd of the total amount which should have been received.
(viii) On comparison of the miscellaneous and indoor income up to 30th September, 1988 from 1st October, 1988 to 31st March, 1989, it was found that the income prior to October, 1988 was not in the same proportion as the income declared after September, 1988.
(ix) Receipts to the extent of Rs. 9,929 were not declared in the month of September, 1988.'
4. On the basis of the reasoning, the AO made the following additions to the returned income of the assessee
Rs.
(i) Income on account of indoor practice.
60,000
(ii) On account of suppression of professional receipts as income from undisclosed sources.
1,19,148
5. This was challenged before the CIT(A). Before the CIT(A) the assessed disputed the addition and explained that the cash book was re-constructed from the photo-copy of the impounded papers produced before the AO and no defects whatsoever was noticed in the same. In support of this, the learned assessees counsel quoted from page 3 of the assessment order where the AO has given comparative figure as per the reconstructed books of accounts on 30th September, 1988 as under :
Balance as per books impounded on 30th September, 1988
Balance as per reconstructed books on 30th September, 1988.
OPD
Rs.
Rs.
36,663
36,663
DPT
660
660
Misc. Income
-
17,865
Indoor
-
43,685
Injection
-
4,821
6. Regarding OPD register, it was pointed out that in the OPD cases the assessed prepared and maintained OPD register in which receipts were only from OPD cards. It was explained that entries in the said register w.e.f. 1st October, 1988 could not be made because of illness and bad health of the accountant. However, the AO himself noted at page 3 of the said order that the balance of OPD shown in the impounded books as on 30th September, 1988, were the same as the balance as per the re-constructed books of accounts.
7. Regarding discrepancy on account of receipts from patients in-patients register, it was pointed out that only 11 patients treated free of cost by the assessed and 25 by her husband Dr. R. S. Aggarwal. In confirming the same certificates were produced from the patients. Regarding, declared receipts of Rs. 13,275 on account of DPT, polio and injection charges whereas the cost of medicine has been claimed at Rs. 13,200. The assessed furnished the following details of medicines purchased and consumed :
Rs.
(a) DPT polio Injection
4,820
(b) Syringes purchased
4,235
(c) Life saving drugs.
1,456
(d) Equipment vis baby laryngoscope set purchased
Rs. 1,475
weighing machine
Rs. 1,211
2,687
13,200
8. It was pointed out that AO has wrongly claimed the entire amount of Rs. 13,200 as cost of medicines purchased as against the rates of Rs. 13,275 on account of DPT Polio and injection charges. It was pointed out that expenditure on account of these items and purchase of syringes for a sum of Rs. 4,822 + Rs. 4,235 = 9,059 relates to the income receipt of these items and injection charges were at Rs. 13,275 which gave handsome margin of profit i.e. Rs. 13,275 - Rs. 9,059 = Rs. 4,280. Regarding professional receipts declared on account of DPT etc. (mentioned above) it was pointed out that the amount charged by the assessed for immunisation services were quite in order against the cost of medicine which was shown in the chart available at page 2 and 3 of the assessment order. On the basis of the above information, it is pointed out that the charts for immunisation services made by the assessed were quite high in comparison to cost of medicine and thereforee the observation of the AO that professional receipts were declared on lower side in comparison to the cost of medicine was without any basis. Regarding misc. and indoor income for the period up to 30th September, 1988 and thereafter it was contended that after the month of September, 1988 because of ensuing winter season the patients maintained healthy life. thereforee, (sic -income) for the period from October, 1988 to March, 1989 was lesser than the earlier period because it was a lean period for the medical profession. Regarding non-disclosure of amount of Rs. 9,029 in the month of September, 1988 it was contended that the details of OPD income, misc. income DPT Polio income from 1st September, 1988 to 30th September, 1988 are as under :
Rs.
'OPD
6,486
Miscellaneous
5,890
DPT Polio
150
Income from injection
1,239
13,765
Add : Income from path. lab. referred to by the appellant which are included in the income from path. lab. by Dr. R. S. Aggarwal
2,920
16,685'
9. Thus it was pointed out that the AO has accepted that Rs. 6,486 on account of income from OPD has been recorded in the books and thereforee the balance of Rs. 9,199 has been mentioned by him as not recorded in the month of September, 1988 but he omitted to see that in the reconstructed books accounts, the assessed has disclosed these figures which are appearing in figure of misc. income/indoor income and injection income as well as DPT income. The assessed has pointed out the break-up of various heads as income from the month of April, 1988 to March, 1989 given at page 22 of the paper book. It was pointed out that the income which has been mentioned by the AO as missing from September, 1988 has been included in the total professional receipts and thereforee there was no justification to estimate the addition of Rs. 1,19,148 on account of suppression of income in the returned income. It was further clarified that the assessed had not disclosed the income from path. lab. Path lab. is owned by Dr. R. S. Aggarwal and he has been returning income from Path. lab. in his return of income which is being assessed by the Department.
10. On the basis of the submissions made by the assessee, the CIT(A) still found following discrepancies :
'(1) Discrepancy in the treatment register which was explained by the assessed on account of free treatment of some patients.
(ii) The income for the period up to September, 1988 not having the same proportion as income for the period after September, 1988.
(iii) The reasons for non-inclusion of the income from the Path. lab on the cases referred by the appellant.'
For other discrepancies, he has accepted that the assessed could successfully explain the discrepancy mentioned by the ITO. Keeping in view the history of income under the head misc. and indoor income shown by the assessed pertaining to asst. yrs. 1990-91 and 1991-92 given by the assessed in his chart he estimated the figure as un-accounted in respect of indoor and misc. receipts of Rs. 30,000 as against Rs. 60,000 made by the AO. Regarding suppression of professional receipts he considered that addition of Rs. 35,000 on account of suppression of professional receipts on estimate basis is justified keeping in view the income shown in the asst. yrs. 1988-89 and 1989-90. Thereby gave a relief of Rs. 1,04,148. The assessed as well as the Department is aggrieved by that order.
11. The learned assessees counsel argued that though the cash book was not completely drawn on the date when the survey took place at the Nursing Home of the assessed but the assessed on the basis of books of accounts impounded by the Department prepared and reconstructed cash book which completely gives the picture that no income from misc. and indoor and injection charges has been concealed by the assessee. On the basis of reconstructed cash book the CIT(A) knocked down the major discrepancy pointed out by the AO except only three, one relating to discrepancy in treatment register, relating to the free treatment of some patients, the income from the period up to September, 1988 having the same proportion as income from period after September, 1988 and third reason for non-inclusion of the income from Path. lab. on the cases referred by the assessee. Regarding non inclusion of income from Path. lab. on the cases referred by the assessee, it is pointed out that the Path. lab. is owned by her husband Dr. R. S. Aggarwal and he has been showing income from Path. lab. which is clear from the statement of computation of income filed by Dr. R. S. Aggarwal Along with his return of income for asst. yr. 1989-90. A perusal of the income and expenditure account attached with the computation of income shows that Dr. R. S. Aggarwal had shown income from Lab. Rs. 24,680 paid the tax on that income. thereforee, the income derived by her husband in his individual capacity has been wrongly clubbed with the income of the assessee. Regarding discrepancy in the treatment register in respect of free patients, it is pointed out that the assessed had given list of patients who have been treated free of charge. These patients had given their affidavit which is at page 111 to 120. It is also pointed out that as per notification of Dy. Director, Technical, the assessed is under obligation to give treatment free of charge to the patients who have been treated for operation in the Nursing Home. The instructions of the Dy. Director (Health) is given at page 123 to 125 of the paper book. In view of these evidences on record, the discrepancy found by the CIT(A) is fully explained. As regards income from period September, 1988 and thereafter it is pointed out that if we look into the history given by the assessed at pages 19 to 21 of the paper book giving details of income in each head it will be clear that in the past as well as in the subsequent assessment years, the returned income on account of OPD income, indoor income, DPT, Polio income including injection charges were accepted by the Department. This is also clear from the copy of the assessment order. thereforee, simply on the basis of the month-wise details of OPD, indoor income, DPT polio income from 1st April, 1987 to 31st March, 1988 it cannot be concluded that income is not of same standard. The assessed has explained that during October, 1988 to March, 1989 generally the people enjoy good health and this period is a lean period. This aspect of the matter has not been looked into by the CIT(A). In view of the past history as well as this, no addition could be sustained. Regarding suppression of professional receipts the learned assessees counsel submitted that the previous history as well as the subsequent history of the assessed has been accepted. thereforee, no income should be treated as suppressed income. It is also pointed out that the assessed has been maintaining three registers giving information regarding treatment of all the patients. Though the assessed had not maintained the register in the form-3C strictly but whatever information is sought in Form No. 3C is given in the three registers maintained by the assessee. The purpose of register to introduce this form to extract information and not to find out technical defaults. In view of these no addition could be sustained, on account of suppression of professional receipts. As against this, the learned Departmental Representative relied on the order of the AO and it is pointed out that defects were found in the maintenance of books of accounts which is enumerated in the order of the CIT(A). thereforee, the Department was justified in applying provisions of s. 145(2) of the Act. On account of defects found, the AO was justified in estimating the income. The CIT(A) has not looked into the material in the light of the objections raised by the AO and deleted the additions. This should have been sustained. On query, the learned Departmental Representative admitted that some of the observations of the AO was not correct as pointed out by the AO e.g. the income from Path. Lab.
12. We have given our careful consideration to the rival submissions and have gone through the relevant material available on record. The learned assessees counsel argued that there was no discrepancy in the patients treatment register vis-a-vis treatment of some patients free of cost. In this connection he has invited our attention to the paper book pages 111 to 190 where these patients have given affidavit in support of the case that they have been treated free of cost. Our attention was also invited to pages 123 and 124 to highlight the fact the Nursing Home is under an obligation to treat the patients free of cost as per direction of the Dy. Director, Family Planning. After going through the affidavit of the patients and the direction of the Dy. Director, Family Planning, we are of the opinion that the assessed had been able to successfully explain the discrepancy pointed out by the CIT(A) with regard to patients treated free of cost. The Revenue has not brought anything on record to show that any fee actually have been paid by these patients or they have not been treated free of cost. In view of this there is no justification for making any addition.
13. As regards non inclusion of income from Path. lab is concerned, the learned assessees counsel brought to our notice that the pathology is owned by Dr. R. S. Aggarwal, husband of the assessed and he has been showing income from pathology in his return of income, and also paid tax thereon. A perusal of income and expenditure account, attached with the computation of income filed in the paper book to explain that Dr. R. S. Aggarwal who is husband of the assessed had been showing income from pathology in his return and also paid tax. The Department has not brought any evidence on record to show that the income from pathology is being derived by the assessed or the same is not owned by Dr. R. S. Aggarwal. In the absence of definite evidence, there is no reason to include income derived from pathology in the income of the assessee. As regards misc. and indoor income for the period from September, 1988 and thereafter is concerned, the learned assessees counsel has submitted that such comparison with the income for asst. yrs. 1990-91 and 1991-92 is not called for because such receipt depended on number of patients treated by the assessed in a particular period and further the overall receipts for the whole year were more than preceding two years. We find substance in the argument of the learned assessees counsel where we find that in the comparative figure placed at page 19 of the paper book with month-wise details given at pages 20 to 24 of the paper book, the receipt from OPD including misc. and other indoor receipts were shown at Rs. 93,983 and Rs. 71,075 as against receipts declared and accepted by the assessed at Rs. 20,207 and Rs. 73,230 in asst. yrs. 1988-89 and Rs. 56,028 and Rs. 50,060 accepted by the Revenue in asst. yr. 1987-88. In the subsequent year also, the receipt and income returned by the assessed has been accepted. Even though indoor income has been declared lesser figure of Rs. 53,827 in the asst. yr. 1990-91 and almost the same at Rs. 71,765 in the asst. yr. 1991-92. thereforee, there is no reason to make any addition on this count. The provision of s. 145(2) may be technically applicable in the case of the assessed but a perusal of the record goes to show that the assessed had maintained complete records of original entries regarding names and addresses of such patients to whom treatment given or prescribed and fee charged. However, the same is not exactly in Form No. 3C but the information given in these registers basically comprised the requirement laid down in Form No. 3C. The cash book prepared after reconstruction from the impounded record show that there is progressive result of income in these years. thereforee, when the income declared is better than earlier year, there is no reason to sustain any addition. In view of our above discussion we are of the opinion that there is no justification to sustain any addition. So far as the Departments contention is concerned, we find that the Department has not made out any case vis-a-vis the material on record to sustain any addition. thereforee, the appeal filed by the assessed succeeds and the appeal filed by the Department fails.