1975 (11) TMI 56 - AT - Income Tax

Tribunal sets net income for assessee, dismisses interest income inclusion under Section 64.

DR. KO. VARGHESE. Versus INCOME TAX OFFICER.

The Tribunal partially allowed the assessee's appeals by setting the net income at Rs. 42,000 for each of the assessment years 1970-71 and 1971-72, ... - Issues Involved:1. Professional income estimation for assessment years 1970-71 and 1971-72.2. Interest income inclusion under Section 64 of the Income Tax Act.Issue-wise Detailed Analysis:1. Professional Income Estimation for Assessment Years 1970-71 and 1971-72:The primary issue was whether the income estimates made by the Income Tax Officer (ITO) and sustained by the Appellate Assistant Commissioner (AAC) were excessive. The ITO estimated the net income of the assessee, a paediatrician, at Rs. 94,474 for the assessment year 1970-71 and Rs. 75,000 for the assessment year 1971-72. The assessee did not maintain accounts, necessitating an estimation.The ITO's estimate was based on a gross collection figure of Rs. 1,40,588, derived from outpatient and inpatient tickets. However, the Tribunal found discrepancies in this figure. The tickets used for the estimate were not available for scrutiny, and cross-checking revealed that some receipts from the subsequent year (1971-72) were included in the 1970-71 figure. For example, Ticket No. 6440 showed Rs. 193.75 collected in 1970-71, but the ITO listed Rs. 198. Similarly, Ticket No. 6360 included payments for both 1970-71 and 1971-72.The Tribunal concluded that the gross collection figure of Rs. 1,40,588 was materially defective, as it included amounts from the subsequent year. Additionally, the ITO's justification based on the assessee's expenditures (Rs. 97,437) was not accepted. The Tribunal noted that there was no evidence to suggest that all expenditures came from the professional income of the relevant year. The assessee could have used past savings or other sources like agricultural income.Considering the facts and the status of the assessee as a renowned paediatrician practising in Kottayam, the Tribunal estimated a net income of Rs. 42,000 for each of the two years, 1970-71 and 1971-72. Consequently, the assessee's appeals were allowed in part, and the Department's cross objection was dismissed.2. Interest Income Inclusion Under Section 64:The second issue was the inclusion of interest income under Section 64 of the Income Tax Act for the assessment years 1970-71 and 1971-72. The assessee had bank deposits in the names of his wife and two minor children, which fetched interest income. The central question was whether these deposits represented the assessee's money transferred without consideration to his wife and minor children.The assessee claimed that the deposits were profits from a rubber plantation owned by a firm of six partners, of which he was the managing partner. However, the Tribunal rejected this explanation, finding it improbable and contrary to ordinary human conduct. The Tribunal noted that if the profits were from the rubber plantation, they would likely have been deposited in the name of the plantation, one of the other partners, or the managing partner himself, rather than in the names of the wife and minor children.As the explanation was rejected, the Tribunal concluded that the deposits were indeed the assessee's earnings transferred without consideration to his wife and minor children. Therefore, the inclusion of interest income under Section 64 was justified, and the assessee's appeals on this issue were dismissed.Conclusion:The Tribunal allowed the assessee's appeals in part regarding the professional income estimation, setting the net income at Rs. 42,000 for each of the two years. However, the appeals concerning the inclusion of interest income under Section 64 were dismissed, affirming the Department's stance. The Department's cross objection was also dismissed.