(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S. 62‑‑‑Income Tax Rules, 1982, Rr. 28 & 29‑‑‑Assessment on production of accounts, etc.‑‑‑Assessee a medical practitioner‑‑ Assessing Officer rejected declared receipts on the ground that complete identifying particulars of the patients were lacking, corollary of which was that the declared receipts remained unverifiable being mostly on cash basis‑‑‑Validity‑‑‑Since the assessee was maintaining books of accounts and had a history of acceptance of declared receipts, the cash receipts and the cheques received in a day were deposited in the Bank, the declared receipts could not be rejected merely on conjectures and surmises unless a finding of fact was recorded that on verification, the books of accounts disclosed some defects or discrepancies which could not be reasonably explained‑‑‑Once a particular method of accounting had been adopted and found helpful determining profit on the basis of such accounting system, the declared receipts could not be rejected in absence of any glaring defects or discrepancy pointed out therein‑‑ Assessee's declared receipts merited to be accepted in circumstances.

(1984) 51 Tax 11 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc,‑‑‑Book results could not be disbelieved on suspicion unless proved otherwise by adducing substantial material on record, which should be more than mere suspicion.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc. ‑‑‑Assessing Officer was not fettered by the technical rules of evidence and pleadings and he was entitled to act on material which might not be accepted as an evidence in a Court of law.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑While formulating the assessment the Assessing Officer was not vested with the powers to make pure guesswork and also to make assessment without reference to any evidence or any material at all.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑Cash receipts‑‑ Estimation of receipts‑‑‑To receive cash from the patients on extending medical services to them was a hard fact of life but if such receipts were corroborated with other enforceable material evidence then there hardly arises any justification to estimate the receipts.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑Method of accounting‑‑‑Once the Assessing Officer in the previous years having, accepted method of accounting adopted by the assessee and having found it possible to deduce and determine the receipts, therefrom, he could not reject the same in the subsequent assessment year.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 24 & 62‑‑‑Deductions not admissible‑‑‑Entertainment account‑‑ Disallowance‑‑‑ Expenses on entertainment evolved 1.5 % of the total declared receipts‑‑‑Assessing Officer was directed to delete the entire addition as claim was reasonable.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 24 & 62‑‑‑Deductions not admissible‑‑‑Advertisement account‑‑ Verifiable expenses‑‑ ‑Addition restricted by the First Appellate Authority in advertisement account against disallowed items stood deleted by the Appellate Tribunal as the claim was open to verification but the Assessing Officer had not put any endeavour to verify the same.

Zulfiqar Khan for Appellant.

Mustafa Ashraf, D.R. for Respondent.

Date of hearing: 20th October, 2004.

ORDER

This appeal at the instance of the assessee‑appellant is directed against the order passed by CIT(A) Zone‑I, Lahore, dated 10‑3‑2004 in respect of assessment year 2001‑2002.

2. The precise question which has been posed for my consideration is as to whether the declared receipts can be raised on the ground that those were mostly on cash basis and the addresses provided in cash receipts were not complete. The relevant facts leading for disposal of the issue in hand are that the appellant, who is a plastic surgeon had disclosed receipts of 804,06,000 as a result thereof net loss was d4clared at Rs.48I,592. To support the returned version, books of accounts as are prescribed under Rules 28 and 29 of the Income Tax Rules, 1982 were produced for examination of the Assessing Officer who objected that as complete identifying particulars of the patients were lacking corollary of which was that the declared receipts remained unverifiable being mostly on cash basis. Also objected that the declared receipts too were low. Thus, the declared receipts were bound to be estimated. Before drawing any adverse inference, the appellant was confronted with the proposed treatment. The explanation tendered by the assessee in compliance to the notice issued under section 62, could not convince the Assessing Officer and he proceeded to estimate receipts at Rs.40,00,000. At tile first appellate stage, the Appeal Commissioner restricted the receipts to Rs. 38,00,000 considering the factum that those were excessively estimated. This dispensation has compelled the assessee‑appellant to come up in further appeal before the Tribunal.

3. Mr. Zulfiqar Khan the learned counsel for the assessee vehemently contended that as the Assessing Officer, having not found any glaring defects in the books of accounts produced by the appellant, could not have resorted to estimate receipts on the basis of surmises and conjectures. In furtherance of the submission, a case‑law cited as (1984) 51 Tax 11 (H.C. Kar) whereby it was held that the Tribunal was not at all 'justified in confirming rejection .of declared receipts for the reason that the details were not available, was relied upon. It was, thus, prayed by the learned AR that following the principle laid down in the said judgment, the declared receipts may be accepted. Conversely the learned DR supported the impugned appellate order by contending that the declared receipts were rightly discarded by the Assessing Officer as those were made on cash basis and full identifying particulars of the patients were not recorded on receipts books, thus the impugned appellate order may be maintained.

4. On going through the divergent views expressed by the rival parties in appeal, I am of the considered view that the book results can not be disbelieved on suspicion unless proved otherwise by adducing substantial material on record which can be more than mere suspicion. In the present case, the cash receipts were not found to be verifiable by the Assessing Officer and because of that fact the declared receipts were estimated. To my mind the Assessing Officer is not fettered by the technical rules of evidence and pleading that he is entitled to act on material which may not be accepted as a evidence in a Court of law. It is also equally clear that while formulating the assessment the Assessing Officer is not vested with the powers to make pure guesswork and also to make assessment without reference to any evidence or any material at all. No doubt that the appellant is maintaining receipt book for receiving cash and cheques issued by the patients which contain complete names and addresses narrated by them besides mentioning fee charged from them. It is also important to mention here that the entire cash receipts collected in a day or the cheques received' from the patients are duly deposited by the appellant in the bank through Bank vouchers.

5. Suffice it to observe that it is not the case of the respondent department that the appellant was maintaining any separate register and cash receipts. To receive cash from the patients on extending medical services to them is a hard fact of life but if such receipts are corroborated with other enforceable material evidence then there hardly arises any justification to estimate the receipts.

6. It is, imperative to point out here that the assessee is maintaining the same set of books in the year under appeal as were maintained by him in the past when his declared receipts had been accepted by the department. It is settled law that once the Assessing Officer in the previous year having accepted method of accounting adopted by the assessee and having found it possible to deduce and determine the receipts, he cannot reject the same in the subsequent assessment years.

7. Since, the assessee is maintaining the books of accounts as are prescribed under rules 28 and 29 of the Income Tax Rules, 1982 coupled with it he has a history of acceptance of the declared receipts, the cash receipts and the cheques received ,in a day are deposited in the Bank, I am, therefore,, persuaded to maintain that the declared receipts could not be rejected merely on conjectures and surmises unless a finding of fact is recorded that on verification, the books of accounts disclose some defects or discrepancies which cannot be reasonably explained. It is also held that once a particular method of accounting has been adopted and found it possible to determine profit on the basis of such accounting system, the declared receipts cannot be rejected in absence of any glaring defects or discrepancy pointed out therein. In the given scenario, it can be safely held that the assessee's declared receipts certainly merits acceptance thereof and it is so ordered.

8. Next contention of the assessee pertains to the disallowances made in entertainment account and advertisement account. Perusal of the facts depicts that expenses on entertainment evolves 1.5 % of the total H declared receipts. Since, the claim is reasonable, the Assessing Officer is, therefore, directed to delete the entire addition made thereunder. In advertisement account, this was the assessee's contention that the entire expenses incurred on, advertisement are subjected to verification and as such warrant allowance thereof in its totality. On going through the details of expenses furnished before me, the addition so restricted by the First Appellate Authority in advertisement account amounting to Rs.50,000 against disallowed at Rs.71;000 also stands deleted being the claim was open to verification and the Assessing Officer has not put any endeavour to verify the same.

9. This would result into disposal of the assessee's appeal in respect of assessment year 2001‑2002.

C.M.A./328/Tax.(Trib.)Order accordingly.