The ACIT, Central Circle-1, Visakhapatnam v. Dr P Visveswara Rao, Visakhapatnam

ITSSA 27/VIZ/2004 | misc
Pronouncement Date: 18-01-2011 | Result: Dismissed

Appeal Details

RSA Number 2725316 RSA 2004
Assessee PAN AAPNR3208G
Bench Visakhapatnam
Appeal Number ITSSA 27/VIZ/2004
Duration Of Justice 6 year(s) 8 month(s) 27 day(s)
Appellant The ACIT, Central Circle-1, Visakhapatnam
Respondent Dr P Visveswara Rao, Visakhapatnam
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 18-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 18-01-2011
Date Of Final Hearing 25-10-2010
Next Hearing Date 25-10-2010
Assessment Year misc
Appeal Filed On 21-04-2004
Judgment Text
IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER IT(SS)A NO.25/VIZAG/2004 BLOCK PERIOD : 27 - 8 - 1999. DR. P. VISVESWARA RAO PROP. SAGAR DURGA HOSPITAL VISAKHAPATNAM VS. ACIT CENTRAL CIRCLE-1 VISAKHAPATNAM (APPELLANT) PAN NO: AAPNR 3208 G (RESPONDENT) IT(SS)A NO.27/VIZAG/2004 BLOCK PERIOD: 27-8-1999. ACIT CENTRAL CIRCLE-1 VISAKHAPATNAM VS. DR. P. VISVESWARA RAO PROP. SAGAR DURGA HOSPITAL VISAKHAPATNAM (APPELLANT) (RESPONDENTANT) PAN NO: AAPNR 3208 G APPELLANT BY: SHRI C.V.S. MURTHY CA RESPONDENT BY: SHRI T.H. LUCAS PETER CIT (DR) ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: 1. THE CROSS APPEALS ARE DIRECTED AGAINST THE O RDER DATED 31-12-2003 PASSED BY LD CIT(A)-I VISAKHAPATNAM AND THEY RELAT E TO THE BLOCK PERIOD ENDING 27-08-1999. 2. THE FACTS RELATING TO THE CASE ARE SET OUT I N BRIEF. THE ASSESSEE IS THE PROPRIETOR OF A HOSPITAL NAMED M/S SAGAR DURGA HOSP ITAL LOCATED AT VISAKHAPATNAM. THE DEPARTMENT CARRIED OUT SEARCH A ND SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEE ON 27-08-1999. CONSEQ UENT THERE TO A NOTICE WAS ISSUED TO THE ASSESSEE U/S 158BC OF THE ACT AND THE ASSESSEE FILED HIS BLOCK RETURN ADMITTING UNDISCLOSED INCOME AT RS.4.6 5 LAKHS WHICH WAS LATER CORRECTED TO RS.5 00 227/-. HOWEVER THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT RS.1 18 00 162/- BY MAKING SEVERAL ADDITIONS. IN THE IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 2 OF 16 APPEAL PREFERRED BY THE ASSESSEE LD CIT(A) GRANTED PARTIAL RELIEF. AGGRIEVED BY THE ORDER OF LD CIT(A) BOTH THE PARTI ES ARE IN APPEAL BEFORE US. THE ASSESSEE HAS REVISED THE GROUNDS OF APPEA L AND THE LEARNED AUTHORISED REPRESENTATIVE DURING THE COURSE OF HEA RING DID NOT PRESS THE GROUND NO.3 IN THE REVISED GROUNDS. ACCORDINGLY WE DISMISS THE SAME AS WITHDRAWN. 3. THE DETAILS OF UNDISCLOSED INCOME DETERMINED BY THE AO ADDITIONS CONFIRMED/RELIEF GRANTED BY THE LD CIT(A) ARE TABUL ATED BELOW. ADDITIONS AMOUNT DELETED BY CIT(A) CONFIRMED BYCIT(A) 1.SUPPRESSION OF RECEIPTS 35 00 000 35 00 000 - 2.SUPPRESSION OF FEES 3 86 325 - 3 86 325 3.DEFICIT CASH BALANCE 7 81 415 - 7 81 415 4.CASH CREDITS A) WRONG CLAIM OF INTERESTS B) D.LALITHA C) M.PADMAJA D) GIFT E) CASH RECEIPTS F) LOAN FROM HUF 7 37 888 95 000 2 06 892 1 52 000 1 84 700 4 00 000 - - 2 06 892 - 1 84 700 - 7 37 888 95 000 - 1 52 000 - 4 00 000 5.INVESTMENT IN PROPERTIES A)CONSTRUCTION DIFFERENCE B)P.ANUPAMA 16 86 875 3 02 000 16 86 875 1 90 000 - 1 12 000 6.DOMESTIC EXPENSES A) DOMESTIC EXPENSES B) EDUCATION EXPENSES 10 45 000 13 95 000 10 45 000 6 35 000 - 7 60 000* (*REMANDED TO A.O) 7.INCOME OF HUF 72 630 - 72 630 8.UNPROVED LIABILITIES 8 54 437 6 24 094 2 30 343 4. THE REVENUE IS IN APPEAL IN RESPECT OF THE F OLLOWING ITEMS WHICH WERE DELETED BY THE LD CIT(A). A. SUPPRESSION OF RECEIPTS ADMITTED U/S 132(4) - RS.35 00 000/- B. INTRODUCTION OF CASH CREDITS - RS. 1 84 700/- C. INVESTMENT IN CONSTRUCTION OF HOSPITAL - RS.16 86 875/- D. DOMESTIC EXPENDITURE - RS.16 80 00 0/- IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 3 OF 16 5. THE ASSESSEE IS IN APPEAL BEFORE US IN RESPE CT OF THE FOLLOWING ITEMS WHICH WERE CONFIRMED BY THE LD CIT(A). A) SUPPRESSION OF ADVANCES - 3 86 325/- B) DEFICIT CASH BALANCE - 7 81 415/- C) LOAN FROM SMT.D.LALITHA - 95 000/- D) GIFT RECEIPTS - 1 52 000/- E) LOAN FROM HUF - 4 00 000/- F) DOMESTIC EXPENSES - 7 60 000/- G) INCOME OF HUF - 72 630/- H) LOAN FRO P.LAKSHMI & N.LAKSHMI - 2 30 343/- 6. WE SHALL TAKE UP THE APPEAL OF THE REVENUE FIRST. T HE FIRST ISSUE RELATES TO THE ADDITION OF RS.35.00 LAKHS MADE ON ACCOUNT O F SUPPRESSION OF RECEIPTS. THE FACTS RELATING TO THE SAID ADDITION ARE STATED IN BRIEF. THE HOSPITAL ALLOWS OTHER DOCTORS ALSO TO REFER AND ADMIT THEIR PATIENT S. DURING THE COURSE OF SEARCH THE DEPARTMENT STUMBLED UPON CERTAIN COVERS CONTAINING CASH. THE SAID COVERS ALSO CONTAINED THE DETAILS OF PATIENT AND ALSO THE NAME OF THE REFERRING DOCTOR. IT WAS STATED THAT THE SAID COVERS REPRESENT MONEY COLLECTED FROM PATIENTS ON BEHALF OF THE CONSULTING DOCTORS AND TH EY SHALL BE HANDED OVER TO THE RESPECTIVE DOCTORS. HOWEVER THE ASSESSEE D ID NOT ACCOUNT FOR THE RECEIPT OF SUCH CASH AS WELL AS THE PAYMENT OF THE SAME TO THE CONSULTANT DOCTORS. THE AGGREGATE OF AMOUNT FOUND IN THOSE COV ERS WAS RS.19 900/-. IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF TH E ACT ON 27-8-1999 THE ASSESSEE STATED AS UNDER TO QUESTION NO.10 POSE D TO HIM: WITH REFERENCE TO QUESTION NO.10 I ADMIT UNDER SEC TION 132(4) OF THE INCOME TAX ACT THAT I HAVE COLLECTED A BOUT RS.35 LAKHS FROM THE PATIENTS TOWARDS DOCTORS FEES WHICH IS NOT ACCOUNTED IN OUR BOOKS IN THE PAST 5 YEARS. PAR T OF THIS AMOUNT WAS PAID TO DIFFERENT DOCTORS WHO HAD TREAT ED OUR NURSING HOME PATIENTS IN THE PAST 5 YEARS. HOWEVER SUBSEQUENTLY ON 30-8-1999 HE WITHDREW THE SAID STATEMENT BY FILING AN AFFIDAVIT BEFORE THE CIT VISAKHAPATNAM I.E. WITHIN THREE DAYS. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESS EE SHOULD HAVE ACCOUNTED THE RECEIPTS AND THE PAYMENTS PERTAINING TO THE CONSULTING IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 4 OF 16 DOCTORS ALSO IN HIS BOOKS OF ACCOUNT. FOR VARIOUS REASONS STATED IN THE ASSESSMENT ORDER THE ASSESSING OFFICER CONCLUDED T HAT THE AMOUNTS SO COLLECTED FROM PATIENTS IN THE NAME OF CONSULTING D OCTORS REPRESENT UNDISCLOSED RECEIPTS BELONGING TO THE ASSESSEE. AC CORDINGLY THE ASSESSING OFFICER ESTIMATED THE AMOUNT REPRESENTING SUPPRESSI ON OF RECEIPTS AT RS.35.00 LAKHS ON THE FOLLOWING BASIS AND TREATED T HE SAME AS THE UNDISCLOSED INCOME OF THE ASSESSEE. TAKING AN AVERAGE OF 10-15 DAYS BY THE TIME THE CO VERS ARE BEING HANDED OVER TO THE CONSULTING DOCTORS AN AMO UNT OF ABOUT RS.20 000 WILL BE AVAILABLE WITH THE ASSESSEE AT ANY POINT OF TIME BELONGING TO THE CONSULTING DOCTORS WHICH G OES UNACCOUNTED IN VIEW OF THE FAULTY ACCOUNTING SYSTEM ADOPTED BY THE ASSESSEE I.E. NON-ISSUE OF RECEIPTS AND NOT CR EDITING IN THE BOOKS. THEREFORE EVEN IF WE TAKE A CONSERVATIVE ES TIMATE THE DISCLOSURE GIVEN BY THE ASSESSEE OF RS.35 00 000 UN DER SECTION 132(4) ADMITTING THE COLLECTION FROM THE PATIENTS T OWARDS DOCTOR FEE FOR THE LAST FIVE YEARS AT THE RATE OF 7 LAKHS PER YEAR ON AN AVERAGE IS ACCEPTABLE AS GENUINE AND IS IN ORDER. T HEREFORE THE EARLIER DISCLOSURE GIVEN UNDER SECTION 132(4) WAS C ORRECT AND WAS GIVEN VOLUNTARILY WITH PRESENCE OF MY MIND AND GOOD HEALTH. THE AFFIDAVIT FILED SUBSEQUENTLY BY WITHDRA WING THIS DISCLOSURE IS NOT ACCEPTED. AS SUCH RS.35 00 000 IS NOW BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS UNDISCLOSED INCOME EARNED BY THE ASSESSEE BY COLLECTING THE AMOUNTS FR OM THE PATIENTS IN THE NAMES OF THE CONSULTING DOCTORS WHI CH WERE NOT ACCOUNTED IN THE BOOKS OF THE ASSESSEE. IN THE APPEAL FILED BEFORE THE LEARNED CIT (A) THE FIRST APPELLATE AUTHORITY DELETED THE SAID ADDITION WITH THE FOLLOWING OBSERV ATIONS: 1.4 I HAVE CONSIDERED THE ISSUE. A FEW COVERS CONTA INING CASH WERE FOUND DURING THE COURSE OF SEARCH. ON THE COVERS THE NAME OF THE CONSULTANTS AND THE NAME OF THE PAT IENT WERE WRITTEN. DURING THE COURSE OF SEARCH THE APPELLANT CLAIMED THAT THE CASH IN EACH OF THE COVER REPRESENT FEES COLLEC TED FROM THE PATIENTS ON BEHALF OF THE CONSULTANTS. IT WAS CLARI FIED THAT THE CASH WAS COLLECTED AS FEES ON BEHALF OF THE CONSULT ANTS THEY WERE PUT IN THE COVERS WITH THE NAME OF THE CONSULT ANT WRITTEN ON THE COVERS AND THE COVERS WERE TO BE HANDED OVER TO THE CONSULTANTS. NOW THE QUESTION IS WHETHER THE FEES COLLECTED FROM THE PATIENTS CAN BE CONSIDERED AS THE INCOME O F THE HOSPITAL/APPELLANT. THE MAIN REASON GIVEN BY THE AS SESSING OFFICER TO ASSESS THE AMOUNT AS THE UNDISCLOSED INC OME OF THE IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 5 OF 16 APPELLANT IS THAT THE FEES COLLECTED FROM THE PATIE NTS WERE NOT RECORDED IN THE BOOKS OF THE HOSPITAL AS RECEIPTS A ND THE PAYMENTS OF THE FEES TO THE CONSULTANTS WERE ALSO N OT RECORDED. BUT WILL THE FAILURE OF THE HOSPITAL TO RECORD THE RECEIPTS FROM THE PATIENTS AND PAYMENTS MADE TO CON SULTANTS MAKE THE RECEIPT THE INCOME OF THE APPELLANT? IT WIL L NOT FOR THE SIMPLE REASON THAT NO EVIDENCE WAS FOUND TO SHO W THAT THE AMOUNT COLLECTED BELONGED TO THE HOSPITAL. NO EVIDE NCE WAS FOUND TO SHOW THAT THE FEES COLLECTED FROM THE PATI ENTS WAS NOT FULLY HANDED OVER TO THE CONSULTANTS AND THAT A PART OF IT WAS APPROPRIATED BY THE HOSPITAL. SIMILARLY NO EVI DENCE WAS FOUND WHICH WOULD INDICATE THAT THE CASH IN THE COV ERS WERE NOT MEANT TO BE PAID TO THE CONSULTANTS BUT WAS THE INCOME OF THE HOSPITAL. 1.5 MOREOVER AS MENTIONED IN THE EARLIER PARAGRAP H THE TOTAL OF THE AMOUNTS RECORDED ON THE COVERS FOUND WAS ONLY RS.19 900. EVEN THIS AMOUNT THE APPELLANT CONTENDS AS BELONGED TO CONSULTANTS. ON THE BASIS OF THE ABOVE INFORMATION THE ASSESSING OFFICER ESTIMATED THE UN DISCLOSED INCOME AT RS.7 LAKHS PER YEAR FOR 5 YEARS. THE TOTA L UNDISCLOSED INCOME WAS WORKED OUT AT RS.35 00 000. I DO NOT FIND ANY JUSTIFICATION FOR MAKING SUCH AN ESTIMATED ADDITION. FIRST OF ALL NO EVIDENCE WAS FOUND TO COME TO THE CONCLUSION THAT THE AMOUNTS COLLECTED FROM THE PATIENTS ON BEH ALF OF THE CONSULTANTS REPRESENTED THE INCOME OF THE APPELLANT . AS STATED EARLIER APPARENTLY THE FEES COLLECTED FROM THE PAT IENTS BELONGED TO THE CONSULTANTS. AN ADDITION COULD BE M ADE IN THIS REGARD IF THERE IS ANY EVIDENCE TO SHOW THAT OUT O F THE TOTAL FEES COLLECTED FROM THE PATIENTS A PART WAS APPROP RIATED BY THE HOSPITAL AND THAT SUCH AMOUNTS WERE NOT RECORDE D IN THE BOOKS OF THE HOSPITAL. SINCE NO SUCH EVIDENCE WAS F OUND DURING THE COURSE OF SEARCH OR DURING THE SUBSEQUEN T ENQUIRIES THE ADDITION OF RS.35 00 000 IS WITHOUT ANY BASIS. THE ADDITION IS DELETED. THE REVENUE IS ASSAILING THE DECISION OF LEARNED CI T(A). 6.1 WE HAVE HEARD THE RIVAL CONTENTIONS ON THI S ISSUE. THE DEPARTMENT HAS SEIZED CERTAIN COVERS CONTAINING CASH AGGREGATI NG TO RS.19 900/-. THESE COVERS ALSO CONTAINED THE NAME OF THE PATIENT AND ALSO THE NAME OF THE CONCERNED DOCTOR. THE ASSESSEE HAS STATED THAT THESE AMOUNTS WERE DIRECTLY COLLECTED FROM THE PATIENTS ON BEHALF OF T HE CONSULTANT DOCTORS AND HANDED OVER TO THE CONCERNED DOCTORS. THE ASSESSEE DID NOT ACCOUNT IN HIS IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 6 OF 16 BOOKS EITHER THE RECEIPT OF SUCH FEES OR THEIR PAYM ENTS TO THE CONSULTING DOCTORS WHICH MAY BE A LACUNA IN THE SYSTEM FOLLOW ED BY THE ASSESSEE. HOWEVER THE SIMPLE QUESTION THAT REQUIRES TO BE CO NSIDERED IN THE INSTANT CONTEXT IS WHETHER THERE IS ANY BENEFIT OR PROFIT E LEMENT ATTRIBUTABLE TO THE ASSESSEE ON SUCH COLLECTIONS OR PAYMENTS. THE LEAR NED CIT(A) IS VERY MUCH CATEGORICAL IN OBSERVING THAT THE REVENUE DID NOT FIND ANY EVIDENCE TO SHOW THAT THE FEES SO COLLECTED WAS NOT FULLY HANDE D OVER TO THE CONSULTANTS OR THAT A PART OF IT WAS ATTRIBUTABLE TO THE HOSPIT AL. THERE CANNOT BE ANY DISPUTE THAT THE BLOCK ASSESSMENTS SHOULD BE MADE O NLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. IN THE INSTANT CASE NO INCRIMINATING MATERIAL WAS FOUND TO SUGGES T THAT THE ASSESSEE IS MAKING PROFIT OUT OF THE RECEIPTS COLLECTED ON BEHA LF OF THE CONSULTANT DOCTORS. THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE STATEMENT GIVEN BY THE ASSESSEE UNDER SECTION 132(4) OF THE ACT WH ICH IS EXTRACTED IN THE PRECEDING PARAGRAPH. HOWEVER THE ASSESSEE HAS RET RACTED FROM THE SAID STATEMENT WITHIN THREE DAYS AND HENCE IN OUR VIEW; MUCH RELIANCE CANNOT BE PLACED UPON THE SAID STATEMENT. IN THE CASE OF RAJESH JAIN VS. D.C.I.T (2006) 100 TTJ (DELHI) 929 IT HAS BEEN HELD THAT T HE CONFESSIONAL STATEMENT SHOULD BE CORROBORATED WITH SOME MATERIAL TO SHOW THAT ASSESSMENT MADE IS JUST AND FAIR MEANING THEREBY T HE ASSESSING OFFICER CANNOT MAKE ADDITION ONLY ON THE STRENGTH OF THE CO NFESSIONAL STATEMENT. THE ASSESSING OFFICER HAS ALSO PLACED RELIANCE ON T HE DECISION OF HON'BLE JURISDICTIONAL A.P. HIGH COURTS DECISION IN THE CA SE OF RAJANIK & CO. (251 ITR 561) IN SUPPORT OF HIS DECISION TO EXTRAPOLATE SUCH SUPPRESSION OF RECEIPTS. HOWEVER IN OUR VIEW THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE SINCE IT IS NOT PROVED T HAT THE FEES COLLECTED ON BEHALF OF THE CONSULTING DOCTORS DID ACTUALLY BELON G TO THE ASSESSEE HEREIN. IN VIEW OF THE FOREGOING DISCUSSIONS WE ARE OF THE VIEW THAT THE LEARNED CIT(A) IS RIGHT IN DELETING THE IMPUGNED ADDITION O F RS.35.00 LAKHS AND ACCORDINGLY UPHOLD HIS DECISION ON THIS ISSUE. IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 7 OF 16 7. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE RELA TES TO RS.1 84 700/- REPRESENTING INTRODUCTION OF CASH RECEIPTS IN THE B OOKS OF ACCOUNT ON VARIOUS DATES. THE ASSESSING OFFICER NOTICED THAT T HE ASSESSEE HAD INTRODUCED ROUND SUM AMOUNTS OF RS.5 000/- EACH BET WEEN THE PERIOD FROM APRIL 1993 AND DECEMBER 1993. THE ASSESSING OFFIC ER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE THAT SUCH RECEIPTS WERE ALSO INCLUDED IN THE TOTAL HOSPITAL RECEIPTS ALREADY DISCLOSED TO THE DE PARTMENT. ACCORDINGLY HE TREATED THE ABOVE SAID SUM OF RS.1 84 700/- AS THE UNDISCLOSED INCOME OF THE ASSESSEE. THE LEARNED CIT (A) DELETED THE SAME FOR THE REASON THAT THE SAID AMOUNT HAD ALREADY BEEN INCLUDED IN THE TOTAL HOSPITAL RECEIPTS. 7.1 THE IMPUGNED AMOUNT AGGREGATING TO RS.1 84 700/ - HAS ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE PRIOR TO THE DATE OF SEARCH. ACCORDING TO THE ASSESSEE THE S AME REPRESENTS REGULAR FEES COLLECTED FROM THE PATIENTS AND FURTHER THE SA ME HAS ALREADY BEEN INCLUDED IN THE TOTAL HOSPITAL RECEIPTS DISCLOSED B Y THE ASSESSEE. THE DEPARTMENT DID NOT SEIZE ANY MATERIAL DURING THE CO URSE OF SEARCH SUGGESTING ANY DISCREPANCY ON SUCH RECEIPTS. IN VIEW OF THE ABOVE THE DEFICIENCY IF ANY IN RESPECT OF THESE CREDITS COU LD BE VERIFIED ONLY DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS AS HEL D BY HYDERABAD BENCH OF ITAT IN THE CASE OF ESSEM INTRA PORT SERVICES (P) LTD. V. C.I.T (72 ITD (HYD) 228). ACCORDINGLY WE DO NOT FIND ANY INFIRM ITY IN THE DECISION OF THE LEARNED CIT (A) IN DELETING THE SAID ADDITION OF RS .1 84 700/-. 8. THE NEXT ISSUE RELATES TO THE DELETION OF RS.16 86 875/- REPRESENTING ADDITION MADE ON ACCOUNT OF DIFFERENCE IN COST OF C ONSTRUCTION. THE ASSESSEE HAD CONSTRUCTED A HOSPITAL BUILDING DURING THE ACCOUNTING YEAR 1994-95 TO 1999-2000. THE ASSESSING OFFICER REFERRE D THE MATTER OF VALUATION OF COST OF CONSTRUCTION TO THE DVO AND ON THE BASIS OF HIS REPORT ARRIVED AT THE DIFFERENCE IN COST OF CONSTRUCTION A T RS.16 86 875/- AND TREATED THE SAID DIFFERENCE AS THE UNDISCLOSED INCO ME OF THE ASSESSEE. THE LEARNED CIT (A) DELETED THE SAME BY PLACING RELIANC E ON THE DECISION OF IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 8 OF 16 HON'BLE SUPREME COURT IN THE CASE OF AMIYABALA PAUL VS. CIT (262 ITR 407). 8.1 THERE IS NO DISPUTE BETWEEN THE PARTIES THAT TH E DEPARTMENT DID NOT UNEARTH ANY INCRIMINATING MATERIAL DURING THE COURS E OF SEARCH WHICH SUGGEST THAT THERE WAS ANY DIFFERENCE OR UNDER STAT EMENT IN THE COST OF CONSTRUCTION OF THE IMPUGNED HOSPITAL BUILDING. TH E BLOCK ASSESSMENT IS FRAMED ON THE BASIS OF EVIDENCE FOUND AS A RESULT O F SEARCH OR OTHER DOCUMENTS AND MATERIALS WHICH ARE RELATABLE TO SUCH EVIDENCE. IN SUPPORT OF THIS PROPOSITION THE ASSESSEE HAS RELIED UPON T HE FOLLOWING CASE LAW: A. CIT VS. RAVIKANTH JAIN (250 ITR 141 (DEL) B. SUNDAR AGENCIES V D.C.I.T (63 ITD 245 (MUMBAI) C. PRATAPSING AMRO SING RAJENDRA SING ETC. (200 ITR 788 (RAJ) IN THE INSTANT CASE SINCE NO EVIDENCE WAS FOUND DUR ING THE COURSE OF SEARCH AND THE IMPUGNED ADDITION HAS BEEN MADE ONLY ON THE STRENGTH OF DVOS REPORT THE SAME IS NOT SUSTAINABLE IN BLOCK ASSESSMENT PROCEEDINGS. ACCORDINGLY WE UPHOLD THE ORDER OF THE LEARNED CIT (A) ON THIS ISSUE. 9. THE NEXT ISSUE RELATES TO THE DELETION OF RS.16 80 000/- REPRESENTING ESTIMATED ADDITION MADE FOR DOMESTIC EXPENSES. THE ASSESSING OFFICER MADE AN ADDITION OF RS. 10 45 000/- ON ESTIMATED BA SIS TOWARDS DOMESTIC EXPENDITURE. THE ASSESSING OFFICER ALSO ADDED A SUM OF RS.6 35 000/- TOWARDS ESTIMATED EDUCATIONAL EXPENSES. THE LEARNED CIT(A) DELETED THESE ADDITIONS AS THEY WERE NOT BASED UPON ANY SEIZED MA TERIAL. 9.1 UNDISPUTEDLY THE ASSESSING OFFICER DID NOT RELY ON ANY SEIZED MATERIAL FOR MAKING THE IMPUGNED ADDITION. THE HON 'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V JETHMAL BOOB (215 CTR (R AJ) 36) HAS HELD THAT IN A BLOCK ASSESSMENT PROCEEDING NO ADDITION CAN BE M ADE TOWARDS LOW DOMESTIC EXPENSES MERELY ON ESTIMATED BASIS. IN PAR AGRAPH 15 OF THE REPORT THE HON'BLE COURT HAS OBSERVED AS UNDER IN THIS REGARD. IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 9 OF 16 THE LAST QUESTION WAS PERTAINING TO DECISION OF THE TRIBUNAL THAT UNDER CHAPTER XIV-B OF THE IT ACT ESTIMATED ADDITION ON ACCOUNT OF UNRECORDED HOUSEHO LD EXPENSES IS NOT PERMISSIBLE. WE ARE OF THE OPINION THAT WHILE COMPLETING THE ASSESSMENT UNDER CHAPTER XIV-B ADDI TIONS CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING DOCUMENT/MATERIAL COLLECTED SEIZED DURING THE COUR SE OF SEARCH. THE VARIOUS BENCHES OF THE TRIBUNAL ARE FO LLOWING THIS PRINCIPLE. THIS BEING A SETTLED PRINCIPLE OF LAW NO REFERENCE IS RECOMMENDED ON THIS ACCOUNT ALSO. THU S THE MATTER WAS NOT REFERABLE. TAKING NOTE OF ALL THE F ACTS THE TRIBUNAL PASSED THE ORDER THEREFORE AGAIN IT BEIN G A SETTLED LAW IT WAS NOT FOUND TO BE ISSUE FOR REFERENCE TO THE SCOPE. IN VIEW OF THE SPECIFIC PROVISION RELATING TO THE D ETERMINATION OF UNDISCLOSED INCOME STATED ABOVE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED CIT (A) IN DELETING THE ADD ITIONS MADE ON ESTIMATED BASIS SINCE THEY ARE NOT BASED ON ANY EVIDENCE FOU ND DURING THE COURSE OF SEARCH. 10. NOW WE SHALL CONSIDER THE ISSUES AGITATED I N THE APPEAL OF THE ASSESSEE. THE FIRST ISSUE RELATES TO THE SUPPRESSI ON OF FEE RECEIPTS AGGREGATING TO RS.3 86 325/-. DURING THE COURSE OF SEARCH THE DEPARTMENT SEIZED CERTAIN RECEIPT BOOKS PERTAINING TO THE MO NTHS: APRIL 1998 OCTOBER 1998 NOVEMBER 1998 AND JULY 1999. THE ASS ESSING OFFICER COMPARED THE ENTRIES FOUND IN THE RECEIPT BOOKS WIT H THE BOOKS OF ACCOUNT AND NOTICED THAT THE FEE AMOUNTS RECORDED IN THE BO OKS OF ACCOUNT WERE LESSER THAN THE ACTUAL RECEIPTS. THE ASSESSING OFF ICER WORKED OUT THE ACTUAL DIFFERENCE FOR THE FOUR MONTHS CITED ABOVE AND ALSO WORKED OUT THE AVERAGE OF THE FOUR TOTALS. THE AVERAGE SUPPRESSION OF FEE RECEIPTS IN THESE FOUR MONTHS WAS WORKED OUT AT RS.22 725/-. BY TAKING T HE ABOVE SAID AVERAGE AMOUNT AS THE BASIS THE ASSESSING OFFICER CALCULAT ED THE SUPPRESSION OF RECEIPTS FOR THE FINANCIAL YEAR 1998-99 (12 MONTHS) AND FOR THE PERIOD FROM 1.4.99 TO THE DATE OF SEARCH (5 MONTHS) AT RS.3 86 325/- AND TREATED THE SAME AS THE UNDISCLOSED INCOME OF THE ASSESSEE. T HE LEARNED CIT(A) ALSO CONFIRMED THE SAME. IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 10 OF 16 10.1 BEFORE LEARNED CIT(A) IT WAS SUBMITTED THA T DIFFERENCE SO FOUND IN THE FEE RECEIPTS HAS BEEN TAKEN CARE OF WHILE FILIN G THE REGULAR RETURN OF INCOME. IT WAS SUBMITTED THAT THE ASSESSEE HAS DECLA RED HIGHER AMOUNT IN THE RETURN OF INCOME VIS-A-VIS THE AMOUNT RECORDED IN THE FEE RECEIPT BOOKS. THE DETAILS ARE AS GIVEN BELOW. ACCOUNTING YEAR AS PER RETURN AS PE R RECEIPT BOOKS DIFFERENCE 1998-99 66 29 100** 62 11 607 4 17 493 1999-00 34 44 875 33 18 718 1 26 157 ------------- 5 43 650 ======= (** INCLUDES ADDITIONAL FEE OF RS.2 43 800/- OFFERED) THE LEARNED A.R REITERATED THE CONTENTIONS MADE BEF ORE LEARNED CIT(A) AND SUBMITTED THAT THE ASSESSEE HAD VOLUNTARILY OFF ERED ADDITIONAL FEE OF RS.5 43 650/- IN HIS REGULAR RETURN OF INCOME. ALT ERNATIVELY HE SUBMITTED THAT THE ADDITION IF ANY CONFIRMED SHOULD BE TELE SCOPED AGAINST THE AMOUNT OF RS.5.00 LAKHS VOLUNTARILY OFFERED BY THE ASSESSEE. THE LEARNED D.R HOWEVER STOOD BY THE ORDER OF LEARNED CIT(A). 10.2 THERE CANNOT BE ANY DISPUTE THAT THE BLOCK ASSESSMENT PROCEEDING AND REGULAR ASSESSMENT PROCEEDING ARE TWO INDEPENDE NT PROCEEDINGS. HENCE ANY AMOUNT THAT WAS OFFERED IN THE REGULAR A SSESSMENT PROCEEDINGS CANNOT BE TAKEN COGNIZANCE OF IN THE BLOCK ASSESSME NT PROCEEDINGS. IN THE RECEIPT BOOKS SEIZED BY THE DEPARTMENT THERE WAS S UPPRESSION OF FEE RECEIPTS AS DETAILED BELOW: APRIL 1998 - RS.31 465/- OCTOBER 1998 - RS.13 050/- NOVEMBER 1998 - RS.34 385/- JULY 1999 - RS.12 000/- -------------- RS.90 900/- ======= THUS THE ACTUAL SUPPRESSION OF FEE RECEIPTS NOTICED FROM THE RECEIPT BOOKS SEIZED BY THE DEPARTMENT WAS RS.90 900/- ONLY. THE ASSESSING OFFICER HAS EXTRAPOLATED IT FOR 17 MONTHS BY TAKING MEAN OF THE ABOVE SAID FOUR AMOUNTS. NOW THE ASSESSEE SUBMITS THAT HE HAS ADOP TED THE CORRECT FEE IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 11 OF 16 RECEIPTS WHILE FILING THE RETURN OF INCOME FOR THE ASST YEARS RELEVANT TO THE FINANCIAL YEARS 1999-2000 AND 2000-01. HOWEVER WE NOTICE THAT THE SAID RETURNS OF INCOME HAVE BEEN FILED SUBSEQUENT TO THE DATE OF SEARCH AND HENCE THE SAME CANNOT BE TAKEN COGNIZANCE OF. HOWE VER IT IS EQUALLY TRUE THAT THE ASSESSING OFFICER WAS NOT SURE WHETHER THE ASSESSEE HAD FOLLOWED SUCH KIND OF SUPPRESSION THROUGH OUT THE PERIOD OF 17 MONTHS AND WHETHER SUCH SUPPRESSION WAS ON THE SAME ORDER. HENCE HE H AS ESTIMATED SUCH SUPPRESSION BY TAKING THE MEAN OF FOUR MONTHS. TH US THERE IS NO ATTEMPT EITHER ON THE PART OF THE ASSESSEE OR THE ASSESSING OFFICER TO QUANTIFY THE ACTUAL DIFFERENCE IF ANY BETWEEN THE RECEIPT BOOK S AND THE BOOKS OF ACCOUNT AND THE ASSESSING OFFICER HAS ONLY ESTIMATE D THE SUPPRESSION FOR 17 MONTHS. THE ASSESSEE IS NOW AGITATED ON THE ESTIMA TE MADE BY THE ASSESSING OFFICER. HOWEVER AS STATED EARLIER THE ASSESSEE HAS ALSO NOT QUANTIFIED THE ACTUAL DIFFERENCE. HENCE IN OUR VI EW ESTIMATE OF SUCH KIND OF SUPPRESSION IS INEVITABLE IN THIS KIND OF SITUAT ION. CONSIDERING THE CIRCUMSTANCES OF THE MATTER STATED ABOVE WE ARE OF THE VIEW THAT THE ADDITION ON ACCOUNT OF SUPPRESSION OF FEE RECEIPTS MAY BE SUSTAINED TO THE EXTENT OF RS.2.50 LAKHS AND IN OUR VIEW THE SAME W OULD MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. THE ORDER OF LEARNE D CIT(A) ON THIS ISSUE IS ACCORDINGLY SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO SUSTAIN ADDITION OF RS.2.50 LAKHS IN THE PLACE OF RS.3 86 3 25/-. THE ASSESSEE HAS SOUGHT FOR TELESCOPING OF THIS ADDITION AGAINST THE OFFER OF RS.5.00 LAKHS MADE BY HIM IN HIS BLOCK RETURN. WE ARE DEALING WI TH THE SAME IN THE SUBSEQUENT PARAGRAPH. 11. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSE E RELATES TO THE ADDITION OF RS.7 81 415/- PERTAINING TO DEFICIT CASH BALANCES. ON VERIFICATION OF DAY BOOKS MAINTAINED FOR THE HOSPITAL FOR THE FINANCIAL YEARS 1989-90 TO 1999- 2000 IT CAME TO LIGHT THAT THERE WERE DEFICIT CASH BALANCES ON MANY DATES EXCESS BALANCES WERE BROUGHT FORWARD AND THERE WERE INTRODUCTION OF CASH BALANCES WITHOUT ANY DESCRIPTION. THE ASSESSING OFF ICER WORKED OUT SUCH DIFFERENCES YEAR WISE AS GIVEN BELOW: IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 12 OF 16 FINANCIAL YEAR AMO UNT 1999-2000 20 886 1998-99 4 21 195 1996-97 19 085 1995-96 1 48 803 1994-95 79 658 1993-94 20 207 1991-92 71 581 -------------- 7 81 415 ======= THE ASSESSING OFFICER TREATED THE SAID DIFFERENCES AS THE UNDISCLOSED INCOME OF THE ASSESSEE. 11.1 DURING THE COURSE OF HEARING THE LEARNED A .R DID NOT CONTEST THIS ADDITION BUT ONLY SOUGHT TELESCOPING OF THE ADDITIO N IF ANY MADE ON ACCOUNT OF SUPPRESSION OF FEE RECEIPTS (DISCUSSED I N THE PRECEDING PARAGRAPH) AGAINST THE DEFICIT CASH BALANCES DISCUS SED ABOVE. WE FIND FORCE IN THIS PLEA OF THE ASSESSEE. THE FEE RECEIPT S SUPPRESSED BY THE ASSESSEE WOULD REDUCE THE DEFICIT CASH BALANCE IF THE SAME IS BROUGHT INTO THE BOOKS AND HENCE THERE IS MERIT IN THE SAID CLAI M OF THE ASSESSEE. HOWEVER THE SUPPRESSED FEE RECEIPTS PERTAIN TO THE FINANCIAL YEAR 1998-99 AND 1999-2000 AND HENCE THE TELESCOPING COULD BE RE STRICTED ONLY IN RESPECT OF THESE TWO YEARS. IN THE EARLIER PARAGRA PHS WE HAVE SUSTAINED THE ADDITION RELATING TO THE SUPPRESSION OF FEE REC EIPTS TO THE EXTENT OF RS.2.50 LAKHS. APPROXIMATELY THE SAME WORKS OUT TO RS.1 76 500/- FOR THE FINANCIAL YEAR 1998-99 AND RS.73 500/- FOR THE FINA NCIAL YEAR 1999-2000 IF IT IS DISTRIBUTED ON TIME BASIS. THE CASH DEFICIT FOUND IN THE FINANCIAL YEAR 1999-2000 WAS ONLY RS.20 886/-. HENCE THE TELESCOP ING FOR FINANCIAL YEAR 1999-2000 CAN BE GIVEN ONLY TO THE EXTENT OF RS.20 886/-. HOWEVER THE AMOUNT OF RS.1 76 500/- PERTAINING TO THE FINANCIAL YEAR 1998-99 COULD BE FULLY TELESCOPED. ACCORDINGLY THE TELESCOPING THAT CAN BE ALLOWED FOR THE TWO FINANCIAL YEARS CITED ABOVE WORKS OUT TO RS.1 9 7 386/- AND WE ORDER THAT THE TELESCOPING BENEFIT BE GIVEN TO THE EXTENT CITED ABOVE. ACCORDINGLY THE ADDITION TO BE MADE ON ACCOUNT OF D EFICIT CASH BALANCE IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 13 OF 16 WORKS OUT TO RS.5 84 029/- ONLY AND WE ORDER ACCORD INGLY. THE ORDER OF LEARNED CIT(A) ON THIS ISSUE STANDS MODIFIED ACCORD INGLY. 12. THE ASSESSEE IS ALSO CONTESTING THE FOLLOWI NG THREE ADDITIONS THAT WERE SUSTAINED BY THE LEARNED CIT(A). D. LALITHA - RS.95 000/- GIFT RECEIVED - RS.1 52 000/- LOAN FROM HUF - RS.4 00 000/- LOAN FROM P.LAKSHMI - RS. 2 00 000/- LOAN FROM N.LAKSHMI RS. 30 343/- ALL THESE FIVE ITEMS HAVE BEEN FOUND RECORDED IN TH E BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE EVEN PRIOR TO THE DATE O F SEARCH. THE DEPARTMENT HAS NOT SEIZED ANY ADVERSE INCRIMINATING MATERIAL PERTAINING TO THESE AMOUNTS. HENCE THESE FIVE ITEMS FALL OUTSID E THE SCOPE OF BLOCK ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER MA Y MAKE ANY INQUIRY ONLY IN THE COURSE OF REGULAR ASSESSMENT PROCEEDING S AS HELD BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF DEPUTY CIT V RADH E DEVELOPERS INDIA LTD (329 ITR 1). IN SUPPORT OF THIS PREPOSITION THE AS SESSEE HAS RELIED UPON THE DECISION OF HYDERABAD BENCH OF ITAT IN THE CASE OF ESSEM INTRAPORT SERVICES (P) LTD REFERRED (SUPRA) WHEREIN SIMILAR VIEW HAS BEEN EXPRESSED. ACCORDINGLY WE SET ASIDE THE ORDER OF LEARNED CIT(A ) ON THESE FIVE ISSUES AND DIRECT THE ASSESSING OFFICER TO DELETE THESE FI VE ADDITIONS. 13. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE PERTAINS TO THE ADDITION OF RS.7 60 000/- RELATING TO THE EDUCATIONAL EXPENSES. THE ASSESSEE ADMITTED IN THE STATEMENT RECORDED FROM HIM ON 30-8-2001 THA T HE PAID A SUM OF RS.7.00 LAKHS FOR ADMITTING HER DAUGHTER IN A MEDIC AL COLLEGE AND ALSO A SUM OF RS.60 000/- FOR ADMITTING HIS SON IN AN ENGI NEERING COLLEGE. ACCORDINGLY THE ASSESSING OFFICER TREATED BOTH THE AMOUNTS AS THE UNDISCLOSED AMOUNT OF THE ASSESSEE. THE ASSESSEE SU BMITTED THAT HER DAUGHTER RECEIVED A SUM OF RS.4.00 LAKHS ON SALE OF A SHOP TO HER UNCLE NAMED SHRI P.BHIMA RAO AND THE SAME WAS UTILIZED TO PART FINANCE HER EDUCATIONAL EXPENSES. THE ASSESSEE ADMITTED A SUM OF RS.5.00 LAKHS IN HIS IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 14 OF 16 BLOCK RETURN AND IT WAS SUBMITTED THAT THE SAME WAS ALSO UTILIZED FOR EDUCATIONAL EXPENSES. IT WAS CLAIMED THAT THE SAID S HRI P.BHIMA RAO HAS DECLARED RS.4.00 LAKHS IN HIS BLOCK RETURN. IN VIE W OF THE ABOVE SAID SUBMISSIONS THE LEARNED CIT(A) REMANDED THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR MAKING NECESSARY VERIFICATION OF SUBMISSIONS CITED ABOVE. 13.1 THE LEARNED A.R SUBMITTED THAT THE ASSESSI NG OFFICER AFTER MAKING NECESSARY VERIFICATION OF THE BLOCK RETURN OF SHRI P.BHIMA RAO CITED ABOVE HAS GIVEN CREDIT OF RS.4.00 LAKHS AGAINST THE UNDIS CLOSED INCOME OF THE ASSESSEE. THE ASSESSEE HAS PLACED A COPY OF THE RE LEVANT ORDER IN PAPER BOOK III FILED IN ITSSA NO.25/V/04. HE FURTHER SUBM ITTED THAT THE ADDITION OF RS.60 000/- RELATING TO THE EDUCATIONAL EXPENSES OF THE SUM IS NOT WARRANTED AS THE SAME WAS SPENT AFTER THE BLOCK PERIOD. IN SUPPORT OF HIS CONTENTIONS HE INVITED OUR ATTENTION TO THE PH OTO COPY OF THE FEE RECEIPT DATED 01-12-2000 PLACED AT PAGE NUMBER 4 O F THE PAPER BOOK-III FILED IN ITSSA NO.25/V/04. ACCORDINGLY HE SUBMITTED THAT THE EDUCATIONAL EXPENSES SHOULD BE REDUCED TO RS.7.00 LAKHS. HE FU RTHER SUBMITTED THAT THE ASSESSEE HAS EXPLAINED SOURCES TO THE TUNE OF R S.9.00 LAKHS (I.E. RS.5.00 LAKHS DISCLOSED IN THE BLOCK RETURN AND RS. 4.00 LAKHS RECEIVED FROM SHRI P.BHIMA RAO) AND HENCE THE BALANCE AMOUNT OF R S.2.00 LAKHS SHOULD BE TELESCOPED AGAINST THE ADDITIONS IF ANY THAT MA Y BE CONFIRMED. 13.2 WE HAVE CAREFULLY CONSIDERED THIS ISSUE. O N A PERUSAL OF FEE RECEIPT PERTAINING TO THE SON OF ASSESSEE WE NOTICE THAT T HE ASSESSEES SON HAS BEEN ADMITTED IN GMR INSTITUTE OF TECHNOLOGY AND THE SAID FEE RECEIPT WAS CLAIMED TO BE I YEAR FEE. IF THAT BE THE CASE NO AD DITION OF RS.60 000/- IS WARRANTED IN THE BLOCK ASSESSMENT PROCEEDING. THE SAID FEE RECEIPT WAS NOT EXAMINED BY THE ASSESSING OFFICER AND ACCORDING LY WE FEEL THAT THE ISSUE PERTAINING TO RS.60 000/- NEEDS REEXAMINATION IN THE LIGHT OF THE FEE RECEIPT NOW PRODUCED BEFORE US. ACCORDINGLY WE SE T ASIDE THE SAME TO THE FILE OF ASSESSING OFFICER FOR MAKING NECESSARY EXAM INATION WITH A DIRECTION IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 15 OF 16 TO DELETE THE ADDITION OF RS.60 000/- IF IT FALLS O UT SIDE THE BLOCK PERIOD. OTHERWISE THE ADDITION OF RS.60 000/- SHALL BE SUS TAINED. 13.3 WITH REGARD TO THE EDUCATIONAL EXPENSES OF T HE DAUGHTER OF THE ASSESSEE THE ASSESSEE HAD EXPLAINED SOURCES TO THE TUNE OF RS.9.00 LAKHS AS STATED ABOVE AS AGAINST THE ACTUAL AMOUNT OF RS .7.00 LAKHS. AS PER THE DIRECTION OF THE LEARNED CIT(A) THE ASSESSING OFFI CER HAS VERIFIED THE RECORD PERTAINING TO SHRI P.BHIMA RAO AND HAS ACCOR DINGLY REDUCED RS.4.00 LAKHS FROM THE UNDISCLOSED INCOME BY PASSING AN ORD ER DATED 31.3.2005 UNDER SECTION 154 OF THE ACT. THUS THE ASSESSEE IS LEFT WITH AN EXCESS AMOUNT OF RS.2.00 LAKHS (RS.9 LAKHS LESS RS.7 LAKHS ). HENCE THIS EXCESS AMOUNT OF RS.2.00 LAKHS IS ELIGIBLE FOR DEDUCTION A GAINST THE OTHER ADDITIONS THAT WERE CONFIRMED BY US AS THE ASSESSEE IS IN PO SSESSION OF THIS AMOUNT WHICH HE COULD HAVE UTILIZED FOR HOSPITAL PURPOSES. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO DEDUCT THE ABOVE SAID EXCE SS AMOUNT OF RS.2.00 LAKHS AGAINST THE ADDITION MADE TOWARDS DEFICIT CAS H BALANCES. 14. THE LAST ISSUE IN THE APPEAL OF THE ASSESSEE PERTAINS TO THE ADDITION OF RS.72 630/- CLAIMED AS THE INCOME OF HUF OF THE ASS ESSE. IT WAS CLAIMED THAT THE HUF OF THE ASSESSEE WAS RUNNING A CLINICAL LABORATORY BY NAME SAGAR DURGA LAB. ON VERIFICATION IT WAS FOUND THA T THERE WAS NO CONCERN BY THAT NAME IN THE ADDRESS GIVEN BY THE ASSESSEE. ACCORDINGLY THE ASSESSING OFFICER TREATED THE INCOME DISCLOSED FOR THE ASSESSMENT YEAR 1999-2000 IN THE STATUS OF HUF AS THE UNDISCLOSED INCOME OF THE ASSESSEE. THE LEARNED CIT(A) ALSO SUSTAINED THE SAID ADDITION . 14.1 WE NOTICE THAT THE ASSESSING OFFICER HAS M ADE THE ADDITION ONLY FOR THE REASON THAT THE INVESTIGATING WING COULD NOT LO CATE THE OFFICE OF THE CONCERN BELONGING TO THE HUF. THE HUF OF THE ASSES SEE HAS FILED ITS RETURN OF INCOME FOR THE EARLIER ASSESSMENT YEARS ALSO I. E. FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99. HOWEVER THE ASSESSING OFFICER HAS ACCEPTED THOSE TWO RETURNS BUT PROCEEDED TO TREAT THE INCOM E DISCLOSED IN THE ASSESSMENT YEAR 1999-2000 ONLY AS THE UNDISCLOSED I NCOME OF THE IT(SS)A NOS.25 & 27 OF 2004 DR.P.VISWESWARA RAO VI SAKHAPATNAM PAGE 16 OF 16 ASSESSEE. EXCEPT THE REPORT OF INVESTIGATION WING THE DEPARTMENT DID NOT UNEARTH ANY MATERIAL TO SUGGEST THAT THERE WAS NO C ONCERN BY NAME SAGAR DURGA LAB. HENCE WE DO NOT FIND ANY REASON TO INCLU DE THE INCOME FROM HUF THAT TOO PERTAINING TO THE ASSESSMENT YEAR 199 9-2000 ONLY IN THE COMPUTATION OF UNDISCLOSED INCOME OF THE ASSESSEE. IN THE ABSENCE OF ANY INCRIMINATING MATERIAL THE ASSESSING OFFICER MAY C ARRY OUT NECESSARY INQUIRIES IN THE REGULAR ASSESSMENT PROCEEDINGS. I N VIEW OF THE ABOVE WE SET ASIDE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION OF RS.72 63 0/-. 15. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED AND THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 18-01-2011 COPY TO 1 DR. P. VISVESWARA RAO PROP. SAGAR DURGA HOSPITAL 15-3-7 KRISHNA NAGAR VISAKHAPATNAM - 530002 2 THE ACIT CIRCLE-1 VISAKHAPATNAM 3 4. THE CIT CENTRA HYDERABAD THE CIT(A)-I VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM