COMMISSIONER OF INCOME TAX Vs. P.K. ASOKAN

JUDGEMENT

(1.) The connected departmental appeals filed against the orders of the Tribunal pertain to the Income-tax assessments of three Assessees and one against penalty under Section 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act') against one of the very same Assessees for the assessment year 2000-01.

(2.) We have heard Standing Counsel appearing for the Appellants and Sri Anil D. Nair, Advocate appearing for the Respondent/Assessee.

(3.) All the Assessees are specialist Doctors who are employed by a private hospital at Calicut during the relevant accounting year. In the course of survey conducted in the hospital on 25-2-2000, the investigation branch of the Income-tax Department seized accounts and have recorded the statement of three employees and the Managing Director of the hospital. It is seen from the records and statements of the Managing Director and the employees engaged in handling of the cash that cash was collected and paid to the Doctors for the service rendered by them without including the same as income of the hospital and without treating the same as income of the Doctors for the purpose of deduction of tax at source. Based on the documents seized and the consistent statement recorded by the employees, though later retracted by them, assessments were made which were confirmed in first appeal. However, in second appeal, the Assessees/ Doctors produced the assessment of the hospital completed at Mumbai. Based on this assessment order, the Tribunal has cancelled the additions in the assessments and also the penalty levied in the case of one Doctor. During hearing, a copy of the assessment order issued in the case of the hospital by the Assistant Commissioner of Income-tax at Mumbai was produced before us and we have gone through the same. The Tribunal's assumption that the income assessed in the hands of the Assessees is treated as income of the hospital, in our view, is incorrect because the same is not disclosed in the assessment order. In fact, it is evident from the assessment order of the hospital itself that their accounts were unreliable. In fact, the return filed declaring loss of Rs. 81,725 was later revised by filing another return on 27-10-2002 declaring the income as 'nil'. Even though, revised return was rejected by the Assessing Officer at Mumbai, the Assessing Officer has not cared to verify the records and statements recorded in the course of survey for the purpose of completion of assessment of the hospital. Strangely, the Assessing Officer in Mumbai has accepted the statement furnished by the authorised representative of the hospital without verifying its correctness with reference to accounts or seized documents. What is stated by the Assessing Officer at Mumbai is that Rs. 1,97,16,764 which includes the additions made in the case of the Respondents/Assessees was accounted as operation charges in the seized note book. Out of the amount of Rs. 1,97,16,764, the authorised representative accounted Rs. 1,16,88,777 towards the surgical consumables which have been accounted in the name of Doctors. Strangely, out of the three Doctors involved in these cases, two are not even Surgeons. However, the case of surgical consumables accounted in the name of Dr. P.K. Asokan is Rs. 37,93,329 and Dr. Nasser Yousuf is Rs. 21,06,918. So far as Dr. Anita Ashokan is concerned, even though she is a Gynaecologist, counsel submits that she was fairly Junior Doctor and it is not known whether she was involved in Surgery. In any case, we do no know how a hospital accounted purchase of surgical consumables in the name of Doctors, who are not even Surgeons. Strangely, the Assessing Officer at Mumbai accepted all the contentions of the hospital treating the authorised representative's statement as gospel truth. In any case, we do not find any justification for the Tribunal to interfere with the assessment orders confirmed in appeal merely based on the finding of the Assessing Officer at Mumbai in the case of hospital. In fact, the amounts assessed in the hands of the Respondents/Assessees are not found to be genuine expenditure by the Assessing Officer in the assessment of the hospital. Further, since income is not accounted and expenditure proved by the hospital, the same does not bar the assessment of the income at the hands of the Respondents/Assessees if it is proved to be their income. We are constrained to hold that the Assessing Officer, who completed the assessment of the hospital at Mumbai, did not do a responsible job because, without verifying the correctness of the statement from authorised representative, accepted it on its face value in a controversial case where the Department had unearthed unaccounted collection and distribution of money among Doctors by the hospital. Even though the Standing Counsel submitted that the finding of the Assessing Officer of the hospital at Mumbai is not binding on the Assessing Officer of the Respondents/ Assessees and the Department herein, we do not think, we should go into this because the Tribunal itself has not considered this issue. We, therefore, allow the appeals setting aside all the impugned orders with a direction to the Tribunal to reconsider the appeals after verifying the records, particularly seized accounts and the statements recorded from the employees and the Managing Director and after going through the assessment and records of the hospital/company and after giving opportunity to the Assessees and the Department.