2015 (2) TMI 1202 - AT - Income Tax

Tribunal Upholds Revenue's Appeal, Dismisses Assessee's Objections

The Assistant Commissioner of Income-tax, Circle-1, Kollam. Versus The Travancore Diagnostics Pvt. Ltd. and vice-versa

The Assistant Commissioner of Income-tax, Circle-1, Kollam. Versus The Travancore Diagnostics Pvt. Ltd. and vice-versa - TMI Issues Involved:1. Deletion of portion of addition made towards suppression of collections.2. Non-service of notice under sections 142(1) and 143(2).3. Validity of proceedings initiated under section 147.4. Quantification of unaccounted income.Detailed Analysis:1. Deletion of Portion of Addition Made Towards Suppression of Collections:The Revenue contested the deletion of a portion of the addition made towards the suppression of collections by the CIT(A). The Tribunal noted that during a survey, it was found that the assessee had not maintained copies of the bills issued to patients, leading to an inference of suppressed receipts. The CIT(A) had restricted the addition to Rs. 3,37,755 based on the difference between the actual collections found during the survey and the collections recorded in the books. The Tribunal upheld this approach, emphasizing that the CIT(A) had made a reasonable estimation based on available evidence.2. Non-Service of Notice Under Sections 142(1) and 143(2):The assessee argued that the reassessment proceedings were invalid due to the non-service of notice under sections 142(1) and 143(2). The Tribunal found that the assessee's authorized representative had participated in the assessment proceedings, which indicated that the assessee was aware of the proceedings. The Tribunal held that the participation of the assessee's representative negated the argument of non-service of notice. The Tribunal also noted that a questionnaire under section 142(1) had been issued and responded to by the assessee, further validating the proceedings.3. Validity of Proceedings Initiated Under Section 147:The assessee contended that the proceedings under section 147 were invalid due to the lack of valid material indicating suppression of income. The Tribunal observed that the original return was processed under section 143(1) without scrutiny. The reasons recorded for issuing the notice under section 148 included findings from a survey indicating suppressed receipts. The Tribunal held that these reasons were specific, definite, and relevant, justifying the reassessment proceedings. The Tribunal cited the Supreme Court judgment in ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. to support the validity of the reassessment proceedings.4. Quantification of Unaccounted Income:The Revenue argued that the entire suppressed collection should be considered as income. The Tribunal noted that the CIT(A) had restricted the addition to Rs. 3,37,755 based on actual collections found during the survey. The Tribunal, however, found that the CIT(A)'s estimation was too conservative. The Tribunal held that the suppressed collections should be estimated for the entire year based on the actual suppressed collections found during the survey. The Tribunal estimated the suppressed collections for the Kottarakkara lab at Rs. 10,13,265 and for the Kollam lab at Rs. 13,22,311, totaling Rs. 23,35,576 for the assessment year 2009-10. For the assessment year 2010-11, the Tribunal estimated the suppressed collections at Rs. 28,97,354, considering a 24% increase in declared receipts from the previous year. The Tribunal concluded that these amounts should be added to the returned income without further deductions for expenses, as all expenses were already accounted for in the regular books.Conclusion:The Tribunal partly allowed the Revenue's appeals, increasing the addition towards suppressed collections, and dismissed the assessee's cross objections. The reassessment proceedings were upheld as valid, and the quantification of unaccounted income was revised based on a realistic estimation of suppressed collections.