Unexplained expenditure: Section 69C: A. Ys. 2000-01 to 2003-04: Hospital: Search disclosed unaccounted collection of fees in the name of doctors and distribution thereof to doctors: Explanation that amount was collected and distributed to doctors: Doctors not examined: Amount not assessable in hands of hospital.

The assessee is a hospital. In the course of search, the Department discovered unaccounted collection of fees in the name of doctors and distribution thereof to doctors in the relevant period. The assessee hospital contended that it had distributed the entire amount to the doctors in whose names the collections were made and no part of the collections was retained as its income. The Assessing Officer assessed the entire amount as unexplained expenditure falling u/s. 69C. The Tribunal deleted the addition.

On appeal by the Revenue, the Kerala High Court upheld the decision of the Tribunal and held as under:

“i) Cases falling u/s. 69C are of essentially expenditure accounted as such by the assessee. The entire amount was collected without bringing it into the regular accounts and the payments were also made by the assessee without accounting for them.

ii) This was not a case of failure of the assessee to explain the expenditure. In fact the assessee, on being confronted with the accounts seized from it, conceded that the entire amounts were collected by it for payment to doctors serving the hospital. The assessee, prima facie, discharged its burden or at least shifted the burden to the Revenue when it gave particulars of payments made to the doctors.

iii) The Department should have issued notice to the doctors for confirmation of the payments and if they confirmed receipts, made assessments on doctors and if they denied the receipts, proceeded against the assessee and direct it to prove assessment of the amount u/s. 69C. Since this exercise had not been done, the addition u/s. 69C was not justified. ”