Full Judgment
S. Sankarasubban, J.
1. This appeal has been filed against the order passed by the Tribunal, Cochin Bench in ITA No. 587/Coch/1990, under Section 260A of the IT Act, 1951. Questions of law framed in this case are as follows :
'(i) Was the Tribunal justified in law and in the facts and circumstances of the case in sustaining the levy of penalty under Section 271(1)(c) in respect of the estimated addition of Rs. 51,515 for the asst. yr. 1984-85 ?
(ii) In the facts and circumstances of the case and in the absence of any material disclosing any receipt on account of delivery charges (labour room charges) in addition to what is recorded in the accounts, was the Tribunal justified in holding that the provisions of Expln. 1 to Section 271(1)(c) are attracted and that penalty was leviable by invoking the Explanation ?
(iii) Whether, on the facts and circumstances of the case, the order of the Tribunal allowing the Departmental appeal is legal, valid and sustainable in law ?'
The facts of the case are as follows :
2. Assessee is the proprietor of a hospital at Cannanore. He filed a return of income for the asst. yr. 1984-85 declaring an income of Rs. 35,148. A search was conducted on the premises of the assessee on 12th Dec, 1985, and consequent to the seizure of certain material, the following additions were made :
(i) Addition on account of omission to account delivery charges 51,515
(ii) Addition for omission to account operation theatre and other 3,81,950 charges
(iii) Omission to account for medical attention charges 2,49,170
The assessee took the matter in appeal and finally at the level of the Tribunal only the addition mentioned at No. (i) above was sustained. The other two additions were deleted.
3. During the pendency of the appeal, the AO initiated penalty proceedings under Section 271(1)(c) and levied a penalty of Rs. 3,72,619 with reference to all the additions made. The GIT(A) held that no penalty could be levied with reference to the items at Nos. (ii) and (iii) above, since they have been deleted and if at all any penalty can be levied, it can be levied only on the amount of Rs. 51,515. So far as this aspect is concerned, the appellate authority held that the Tribunal upheld the addition of Rs. 51,515 only on the ground that there is nothing on record to show that the assessee had not charged any fees as claimed by him in 449 out of 654 cases admittedly attended to in the hospital. The appellate authority took the view that there is no concrete evidence to show that the assessee had in fact earned the income of Rs. 51,515 and in the circumstances, according to the appellate authority, no penalty for concealment was leviable even in respect of the said addition of Rs. 51,515.
4. Against that order, the Department took the matter before the Tribunal and the Tribunal set aside the order passed by the appellate authority and allowed the appeal filed by the Department and sustained the levy of penalty on the amount of Rs. 51,515. The Tribunal stated thus :
'Having regard to the rival submissions, we are of the view that the assessee cannot succeed insofar as the penalty relates to the addition of Rs. 51,515. There is of course no merit in the grounds taken before us that the GIT(A) erred in deleting the penalty insofar as it relates to the other additions deleted by the appellate authorities.........The only question to be considered is whether the CIT(A) was right in deleting the penalty insofar as it relates to the addition of Rs. 51,515, which addition has been sustained by the Tribunal........We are of the view that the CIT(A) was not justified in deleting the entire penalty of Rs. 3,72,619. We are of the view that he should have sustained the penalty so far as it relates to the addition of Rs. 51, 515, which has been sustained by the Tribunal. To our mind, the addition of Rs. 51,515 is not simply on estimate basis. There is a clear finding that the assessee has not disclosed any charges in respect of as many as 449 cases, out of a total of 654 cases. The only explanation given was that he gave a concession in respect of these cases and nothing was charged.'
It is against the above judgment that this appeal has been filed.
5. Learned counsel for the appellant, Sri. T.M. Sreedharan submitted that there is nothing to show that, as a matter of fact, the assessee earned the income with regard to Rs. 51,515. According to the assessee, the appellant gave sufficient explanation and it was bona fide one and hence, there is no concealment. On the other hand, learned counsel for the Department submitted that it is very clear that the assessee has concealed the income with regard to delivery charges.
6. As per Section 271(1)(c), penalty can be imposed only if the AO is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income and he may direct that such person shall pay by way of penalty. Explanation 1 cl. (B) says that 'such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating' to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of cl. (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed'.
7. According to the assessment order, there was omission to account for the receipts in the hospital under various heads. This includes delivery charges. The AO found the following facts : 'In this context, it is found on examination of the birth register with reference to the inpatient register and the bills maintained in respect of the accounting period that out of a total of 654 cases, the omission to levy operation and delivery charges was in 491 cases. As the hospital is not a charitable one, it is highly improbable that operation theatre and delivery charges were not received in 491 cases out of a total of 654 cases. Whenever the assessee had given free treatment, the words 'free' was indicated in the bill or birth register or IP. register'. Therefore, the AO took the view that he wilfully omitted to account for the delivery charges and operation charges in the above 491 cases.
8. After hearing both sides, we are of the view that it cannot be said that the income was concealed. The explanation given by the assessee was that so far as the delivery charges are concerned, in many cases, charges were not realised. But the only drawback was that the assessee was not able to prove that delivery charges were not received in all such cases. It is also found that in many cases, delivery charges were not recovered.
9. Taking all these into consideration, we are of the view that it is not a case where there is concealment or willful evasion. Hence, we are of the view that the Tribunal was not correct in treating the income as concealed. Appeal is allowed. Judgment of the Tribunal is set aside and it is also held that the assessee is not liable to pay penalty for the amount of Rs. 51, 515.