CONCEALMENT PENALTY - CONCURRENT ACT OF CONCEALMENT - GOLDEN RULE ON DOCTRINE OF CONTINUITY - ADVANTAGE ASSESSEE
Introduction
1. Penalty is a hot subject. The AO can initiate penalty in one stroke by issuing such direction in the assessment order and that shall be sufficient to denote his satisfaction after insertion of sub-section (1B) in section 271 w.r.e.f. 1.4.1989. There are situations where the concealment could be collective or universal in nature, meaning thereby that the assessment order may showcase identical addition or disallowance in more than one year or successive years. Whether in such cases it would be possible to levy penalty in each of the years on a continuing basis or only in the initial year? More importantly, whether it is possible to levy penalty for concurrent offense of concealment under the Income-tax law? The doctrine of continuity offers an answer to this.
Chennai Bench of the ITAT applied the doctrine of continuation in the case of Dr. Bapuji Cherukuri v. Dy. CIT
2. In an interesting ruling of the Hon'ble Chennai ITAT in Dr. Bapuji Cherukuri v. Dy. CIT [2013] 33 taxmann.com 406 the bench applied the fundamental general rule on the doctrine of continuity to get advantage to the assessee, who in this case was slapped with concealment penalty in the six assessment years in concurrence for concealment on identical nature of undisclosed income. In this case the assessees being more than one doctor working in the Apollo Hospitals Ltd., were found to have not disclosed certain amounts received from the Hospital. In other words, the source of income was not doubted in this case but it was the fact of not accounting for such amounts in the returns of income.
Brief facts of the case
3. The department during the survey in respect of the hospital found that it had collected moneys from the patients and had not accounted for the same in their books. The hospital clarified that it had retained 10% of the unaccounted money in the form of provision for infrastructural facilities and the balance of 90% had been paid to the concerned doctors, including the assessees. This statement from the hospital led to reopening of the cases of the doctors who admitted of such non-declaration of incomes.
On the subject of penalty they pleaded that they had omitted to add such sums in their returned incomes as they were led by the genuine impression that all the amounts received by them from the hospital were included in the certificate issued by the hospital. In other words, these were sums on which the hospital did not deduct tax. Against alleged non-deduction of tax at source the hospital stated that it only acted as a collecting agent on behalf of the doctors.
The department failed to tax the hospital as per the decision of the Delhi Bench of the ITAT in Asstt. CIT v. Indraprastha Medical Corpn. Ltd. [2009] 33 SOT 261 (Delhi). In this case it had been the claim of the assessee that it provided only secretarial and chamber services (similar to infrastructural services) to the doctors and the hospital merely collected the fees on behalf of the respective doctors/consultants and that such fee was paid to doctors on a daily basis without any retention. Further, the hospital only charged Rs. 100 for the new patient's registration. It was also found that the cash receipts as professional fee were issued in the name of the doctors. The judgment went on to hold that there was no relationship of the service provider and service recipient between the consultants and the assessees. One wonders how facts could differ in the two cases, viz, one before Chennai Bench and the other before the Delhi Bench where one was citing some retention of 10% and the other was not retaining anything. Nonetheless, the doctor's statement in Chennai case played a role sufficient to nab the hospital under the law for non-deduction of tax at source.
Analysis of the case of Dr. Bapuji (supra)
4. The present facts in the case of Dr. Bapuji (supra) almost point to the fact that the doctors never did account for their share of income in their original returns of income, for which reason it was most desirable to impose a liability upon the hospitals for non-deduction of tax at source, especially on the basis of statement given by the doctors stating the genuine impression held by them of such amounts forming part of the certificate of tax deduction issued by the hospital. Had the hospital considered such amounts for tax withholding there would have been no concealment. Hope that in the next stage of litigation wisdom will prevail over technicalities in the matter of tax deduction at source.
On the subject of penalty in Dr. Bapuji case (supra) the Bench observed that the assessees-doctors who had been continuing with the practice of concealing identical nature of income for six years in concurrence could not be subjected to penalty in all the six assessment years. Taking note of the common rule on the Doctrine of Continuity in this case the Bench held that it was a case of collective concealment and confirmed penalty for the first year instead of for all six years involved. Conceptually, continuity implies some kind of unity in distinction to plurality, for which reason the act of concealment of identical income in six years is considered as one and the same act and more precisely, is referred to as collective concealment in all the six assessment years.
Conclusion
5. The principle of continuity (PC) is a rule of universal application. Therefore, in case of repeated additions of the same type of income an assessee can press for invoking of Doctrine of Continuity and Concurrence and get over with penalty in the successive years. This decision is laudable one and is going to unburden the task of revenue as well as of the assessee in general and save precious time and efforts of the Courts. At the same time it is expected of the CBDT to issue a direction in this regard to the AOs not to press demands in cases of concealment of a collective nature.
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