Estimated Addition On Suppressed Professional Receipts Based

Estimated Addition On Suppressed Professional Receipts Based On Third-Party Statements Without Account Rejection Is Unsustainable

Issue

Validity of Reassessment Addition Based on Estimation: Whether an addition made on account of alleged suppression of professional receipts—calculated purely on estimated hospital consultation charges and manager statements without rejecting the assessee’s books of account or bringing independent corroborative evidence on record—is legally sustainable under Section 68 read with Sections 28(i) and 148.

Facts

Assessee’s Profile & Return: The assessee is an individual consultant doctor attached to Apollo Hospitals who filed a return of income declaring professional receipts.
Initiation of Reassessment: Pursuant to information received from the Investigation Wing following a search operation at Apollo Hospitals, the Assessing Officer (AO) reopened the assessment under Section 148 for AY 2014–15.
Basis of Addition: The AO estimated consultation fees from internal hospital records and relied on a statement recorded from the hospital manager to allege that the assessee suppressed professional income, subsequently making an addition.
Lack of Discrepancy or Corroboration:
- The AO did not bring any independent documentary material on record to substantiate the actual receipt of unrecorded cash or higher fees.
- The assessee produced books of account and bank statements during the proceedings.
- The AO failed to point out any specific errors or discrepancies in the books or bank accounts and did not reject the books of account.

Decision

Addition Held Unsustainable (In favor of Assessee): Held YES. The addition made purely on estimated consultation charges and third-party statements, without corroborative evidence or rejection of books, is unsustainable and ordered to be deleted. [Para 7.5]
Failure to Prove Income Suppression: In the absence of independent material or demonstrated discrepancies in the audited/maintained books, uncorroborated estimates cannot form the basis of a tax addition. [Para 7.5]

Key Takeaways

Rejection of Books of Account is Mandatory: The AO cannot make additions toward estimated income or alleged suppressed receipts without formally rejecting the assessee’s books of account under Section 145(3).
Third-Party Statements Require Independent Corroboration: Statements of third parties (such as hospital managers or aggregators) and unverified third-party estimates cannot be solely relied upon without independent corroborative evidence linking the assessee to unrecorded receipts.

IN THE ITAT CHENNAI BENCH ‘A’

Srinivasan Bhaskar

ACIT

Manu Kumar Giri, Judicial Member
and Inturi Rama Rao, Accountant Member

IT APPEAL No 1036 (Chny) OF 2026
[Assessment year 2014-15]

JULY 14, 2026

R.S. Balaji, Adv. for the Appellant. Ms. Anshu Sharawat, Addl. CIT for the Respondent.

ORDER

Manu Kumar Giri, Judicial Member.-This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) ADDL/JCIT (A), Panaji dated 30.12.2025 for the Assessment Year 2014-15.

2. In the instant appeals, the registry has noted the delay of 361days in filing the captioned appeal. We have gone through the condonation petition along with affidavit filed, we find that the reasons given by the assessee are sufficient cause for delay in filing the captioned appeals. Hence, we condone the delay and admit the appeals for adjudication.

2.1 Grounds of appeal raised by the assessee are as under:

“1.

The Assessee is an Individual working as Consultant Doctor at Apollo Hospitals and filed his Return of Income for the Assessment year 2014-15 on 20.09.2014 vide acknowledgement No. 360180121200914 along with Tax Audit Reports.

On the basis of Search in a third party premises, the appellant case was re-opened, Notice U/s. 148 issued and assessment was completed u/s. 143(3) r.w.s. 147 of the act on 29. 12. 2019 by way of additions of Rs. 17,10,700/- In the head of Income from Profession. These additions were made purely on the basis of unverified statements gathered by the Investigation wing of IT Dept. and the same being not put any verification by the Ld.AO.

Aggrieved by the arbitrary proceedings of the Ld.AO, the appellant has steps in to the office of the First appellate authority and the CIT (appeals) has dismissed the same on 30.12.2025 without touching the merits of the case. The Ld. CIT (appeals) failed to see that these additions were made only on the basis of a third party information and not from my own books of accounts, which was submitted before the Ld. Assessing Officer.

The Ld. CIT (A) failed to note that the Ld. AO wrongly assumed jurisdiction u/s. 147 of the act, based on statement of one Ms. Subhadra, Manager (Operations) of Apollo Hospital, who had no locus standi nor access to the authentic data or records of patients to give such statement and without having any valid material to form a belief that income had escaped assessment and thus, the notice u/s. 148 of the is ab initio void.

The alleged Information produced by Subhadra was not an official statement, no cross examination and no personal hearing opportunity was provided to me and it is against the Precedents laid by Hon’ble Supreme Court as in the case of Andaman Timbers v. CCE Kolkata -II (15 SCC 785 ) and the decision of Hon’ble Bombay High Court in the case of HR Metha v. ACIT in ITA No.58 of 2001.

The Ld. AO and the Ld. CIT (A) failed to consider that the followup patients and many categories of patients were not charged by the appellant doctor.

The co-ordinate Bench of this Honble ITAT has already discussed the identical facts in ITA No. 852 & 853 of 2020 and quashed the assessment proceedings.

For that the balance of convenience and merit of this appeal is lying in favour of the appellant.

For these and other grounds that may be adduced at the time of hearing the appellant prays that the Hon’ble ITAT be pleased to allow the appeal and render justice”.

3. The assessee is an individual and a Consultant Doctor attached to Apollo Hospitals. The return of income for the Assessment Year 2014-15 was filed on 20.09.2014 declaring professional income along with the Tax Audit Report.Subsequently, the assessment was reopened u/s. 147 of the Income-tax Act, 1961 on the basis of information received from the Investigation Wing consequent to a search conducted in the premises of Apollo Hospitals. Notice u/s. 148 was issued and assessment was completed u/s. 143(3) read with section 147 on 29.12.2019 by making an addition of Rs.17,10,700/- towards alleged suppression of professional receipts.

3.1 The basis of the addition was the statement of one Ms. G. Subhadra, Manager (Operations), Apollo Hospitals, recorded during the course of search proceedings and certain data allegedly collected from the hospital. The Assessing Officer estimated the consultation fees receivable by the assessee on the basis of the number of patients reflected in the hospital records and compared the same with the professional receipts disclosed by the assessee.

4. Aggrieved, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A), however, dismissed the appeal. Hence, the assessee is in further appeal before the Tribunal.

5. Before us, the ld.Authorised Representative (AR) submitted that the issue involved in the present appeal is squarely covered in favour of the assessee by the decisions of the Coordinate Bench of the Tribunal in the case of G. Ananthasubramaniam v. ITO [IT Appeal No. 2505 (Chny) of 2024, dated 15.01.2025], wherein the Tribunal followed its earlier decision in Dr. Sreenivasulu Reddy Ponnaluru v. ACIT [IT Appeal Nos. 673 to 678 (Chny) of 2022, dated 20.09.2022].

5.1 The ld.AR submitted that the additions in the present case have also been made solely on the basis of the statement of Ms. G. Subhadra and estimated data collected by the Investigation Wing without any corroborative material. It was further submitted that despite repeated requests, neither the statements relied upon nor the material collected u/s. 133(6) was furnished to the assessee. No opportunity of cross-examination was afforded. The assessee had produced the books of account, bank statements, Form 26AS and a certificate issued by the Senior Vice-President (Finance), Apollo Hospitals explaining that the out-patient database included several categories of patients who were either not billed or not charged, including review patients and patients under various schemes.

6. The ld. Departmental Representative (DR) relied upon the orders of the lower authorities. She vehemently read out para 8.2(c) of AO’s order and para 7.3 of ld.CIT(A)’s order and pleaded for the dismissal of the appeal.

7. We have heard the rival submissions and perused the material available on record.The undisputed facts reveal that the impugned addition has been made entirely on the basis of information received from the Investigation Wing pursuant to the search conducted in Apollo Hospitals. The Assessing Officer (AO) has estimated the professional receipts of the assessee by applying the consultation fee allegedly collected from the statement of Ms. G. Subhadra with reference to the number of out-patients reflected in the hospital records.

7.1 We find that an identical issue arising out of the very same search in Apollo Hospitals has already been examined by the Coordinate Bench of this Tribunal in the case of Dr. Sreenivasalu Reddy Ponnaluru (supra). The Coordinate Bench, after extensively analysing the statement of Ms. G. Subhadra, held that she merely collected certain data and had no personal knowledge regarding the consultation fee actually charged by each consultant doctor. The Tribunal further recorded that the consultation fees of non-employee doctors were neither collected by the hospital nor accounted for in its books and that the figures referred to by Ms. Subhadra were only estimates without any physical verification or supporting evidence.

7.2 The Coordinate Bench further held that several categories of patients, including review patients and patients covered under special schemes, were either charged concessional fees or were not charged at all. The certificate issued by the Senior Vice-President (Finance), Apollo Hospitals also confirmed that the out-patient list maintained by the Information Technology Department included several non-billed and non-charged patients. Consequently, the Tribunal held that the additions made merely on estimated consultation charges without any corroborative evidence were unsustainable and deleted the additions.

7.3 We further find that the aforesaid decision has subsequently been followed by another Coordinate Bench in the case of G. Ananthasubramaniam(supra), wherein the Tribunal again held that once the statement of Ms. G. Subhadra had already been held to possess no evidentiary value for making additions in the hands of consultant doctors, similar additions based solely on such statement could not survive. The Coordinate Bench in the case of G. Ananthasubramaniam(supra) held as under:

4. We have heard the rival submissions and perused the orders of the lower authorities. We have benefit of going through the order of the co-ordinate bench referred supra. We find that when impugned order dated 29.07.2024 was passed, the order of the co-ordinate benchdated 20.09.2022 in the case of Dr.Sreenivasalu Reddy Ponnaluru[ITA Nos.673-678/Chny/2022]was very much available with the department/revenue. We are also surprised of the fact that why the ld. CIT(A) did not enquire about status and fate of other searched persons. In this case, while reopening the assessment, revenue relied upon the information and statement made during the search by the Ms. Subhadra but while disposing of the appeal the ld. CIT(A) did bother to get the information or status of the cases of the searched persons.This was the minimum step required from the Ld. CIT(A). We find that the appellant is a 92 years old senior citizen and his auditor Mr. V. Narayanan has died on 20.12.2020 during Covid-19 pandemic therefore, instead of remanding back to the ld. CIT(A) for adjudication afresh, we are inclined to decide the appeal seeing the age (92Yrs) and peculiar circumstances of this case.

5. The order of the co-ordinate bench dated 20.09.2022 in the case of Dr.Sreenivasalu Reddy Ponnaluru [ITA Nos.673-678/Chny/2022] in similar circumstances held as under:

”5. From facts, it emerges that the Doctor is an ENT specialist working as a consultant Doctor in Apollo Hospital. Based on search findings on Hospital, the consultation fee of the Doctor has been estimated and differential fee has been added to his professional income. The whole basis of the addition is statement of Smt. Subhadra G., the relevant portion of which read as under: –

Q.3. please provide the consultation fees charged by the doctors using Apollo hospital premises from the period 01-04.2009 to till date?

Ans: Total number of doctors is 225 (approx.). The seven doctors of nephrology department are permanent employees of Apollo hospitals working on guaranteed income. Rest of the doctors fix their own consultation fees. I took over the job of managing outpatient services in the year 2012. Out of my own interest I collected the datas regarding consultation fees charged by the doctors. I have provided a hard copy of the fees charged by the doctors in the year 2012 (Annexure 1). I have signed the same and authenticated it. The data was collected in the month of October 2012. We collected the fees charged by the doctors again in June 2015 (Annexure 2). It reflects the changes in fees collected between October 2012 and June 2015. It may not reflect the present fees charged by the doctors. But in 98% of the doctors, the fees may not have changed.

Q4. Please provide me the details of number of outpatients treated in this hospital from the year 2009?

Ans: I have asked our IT team to collect the details and I will be submitting the same by today as softcopy.

Q5 Whether the cash collection is routed through the books of accounts of Apollo hospitals. If not why?

Ans: The fees collected by the employed doctors of Apollo hospitals (i.e.) 7 doctors in the nephrology department are booked in the accounts of Apollo hospitals. The fees collected by the remaining doctors are not booked in our accounts. The nonemployee doctors have their discretion to fix their fees. They pay monthly rent of Rs.13,800 p.m. presently. In case of part-time Doctors, the rent is charged on an hourly basis. The fees charged by the non-employee doctors are not booked in the accounts of Apollo hospitals even before I took over. I am continuing the same procedure. Dr. Satyabhama, Director of Medical Services only has the final say regarding the fees of non-employee doctors and whether or not to book the same in the accounts of Apollo hospitals.

Q6 Please provide the details of consultation fees received by the doctors for the consultations to patients in Apollo from 01-04-2009 to September 2012?

Ans: As per the statement of Mrs. Sashikala, my predecessor, the for OPD consultation fees was between Rs.450-500. There is no possibility for any doctor to charge above this rate but there is no physical evidence available with us as proof. We will be able to provide the list of patients who were offered consultation during the period 01-04-2009 to September 2012 as a soft copy.

Upon perusal of above statement, it could be gathered that the Manager (Operations) merely act as data collector and has no idea about the exact fee charged by the Doctor from each of the patient. Further, she is not authorized to collect fees for non-employee Doctors. The fee is directly collected by the assessee’s staff and such fee is not accounted for in the Hospital’s books of account. Such category of doctors has discretion to fix their own fees and they merely pay monthly rent to the Hospital. The fees so collected by them are not booked in the books of Apollo Hospital. The range of fees being charged is only an estimated one and there is no physical evidence available before her. It could also be seen that apart from this statement, there is no corroborative evidence on record to support the working of Ld. AO. The estimate has been made merely on abstract figures.

6. It could also be seen that as per the submission of the assessee all out patients were not charged. The certain category of patients and review patients would not be charged if they visit within 15 days of first consultation. The fee prescribed by Apollo Hospitals for Master Health Check-up patients is Rs.150/- only. This being the case, the assessee Doctor cannot be expected to charge substantially higher amount as considered by Ld. AO and therefore, the estimation as made by Ld. AO could not be upheld.

7. We find that the whole basis of addition is the statement of Ms. Subhadra G. who does not possess any concrete data except abstract figures of number of patients. There is no corroborative evidence to support that so much of fees has been collected by the assessee from the patients. The assessee has also placed on record the certificate issued by Senior Vice-President (Finance) which clearly states that “the out-patient list maintained by the Information Technology Department of Apollo Hospitals includes several types of nonbilled or non-charged patients also”. The same supports the submissions of the assessee.

8. Pertinently, the assessee is a regular Income Tax Payer and works only in Apollo Hospital. His income averages to more than Rs.50 Lacs per year which could be tabulated as under:

…………………………………………………………………………

Based on above tabulation, it could not be accepted that the assessee would attempt to conceal income as estimated by Ld. AO. The Hon’ble Supreme Court in the case of CIT v. Odeon Builders (P) Ltd (SC) has held that no addition can be made on the basis of third-party information gathered by the Investigation Wing of the Department. 9. Considering the facts and circumstances of the case, the impugned additions are not sustainable in law and therefore, we delete the impugned additions for all the years. Though the assessee has taken grounds challenging the validity of assessment proceedings also, however, these grounds have not been urged during hearing before us. Accordingly, no findings have been rendered on these grounds”.

6. In the co-ordinate bench order referred supra, the third party statement of the Ms. G. Subhadra has been diluted and given no credence. Hence, respectfully, following the order of the co-ordinate bench dated 20.09.2022 in the case of Dr.Sreenivasalu Reddy Ponnaluru [ITA Nos.673-678/Chny/2022], we also delete the impugned addition of Rs.7,56,700/-.

7. In the result, appeal filed by the assessee is allowed.

7.4 The facts before us are indistinguishable from those considered by the Coordinate Benches. In the present case also, the AO has not brought on record any independent material to establish that the assessee had actually received professional receipts over and above those disclosed in the books of account. No incriminating material was found from the assessee. The books of account produced by the assessee have not been rejected. No discrepancy has been pointed out in the books or bank accounts maintained by the assessee. The addition has been made only by adopting estimated consultation charges on the basis of third-party information.

7.5 Respectfully following the binding decisions of the Coordinate Benches in Dr. Sreenivasalu Reddy Ponnaluru (supra) and G. Ananthasubramaniam (supra), we hold that the impugned addition of Rs.17,10,700/- is unsustainable in law. Accordingly, the same is directed to be deleted.

7.6 Since the appeal succeeds on merits by following the binding precedents of the Coordinate Benches, we do not consider it necessary to adjudicate the other legal grounds challenging the validity of reopening u/s.147/148 and the assumption of jurisdiction. Those grounds are left open.

7.7 In the result, the appeal filed by the assessee is allowed.