DR. DESH BHUSHAN JAIN,NEW DELHI vs. ACIT, CIRCLE- 61(1), NEW DELHI

O R D E R PER N. K. CHOUDHRY, JM:

This appeal has been preferred by the Assessee against the order dated 29.06.2018 impugned herein, passed by the ld. Commissioner of Income tax (Appeals)-20, New Delhi (in short “Ld. Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short “the Act”), for the assessment year 2014-15.

2 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT 2. In this case the return of income by declaring total income of Rs. 49,33,417/- was filed by the Assessee on dated 9.2.2016, which was selected for scrutiny . The AO issued the notice u/s 143(2) of the Act, in response to which the Assessee attended the Assessment proceedings from time to time and filed the necessary details/ information/ documents etc., as required by the Assessing Officer. The Assessee also produced the books of account and vouchers, which were examined on test-check basis by the Assessing Officer and resulted into making of additions, mentioned below:

Heads Individual Delhi Disallowance Account Hospital Drivers Salary Rs. 60,000/- 50% of the expenses claimed Repair & Rs. 59,371/- -do- Maintenance Depreciation Rs. 1,04,841/- 100% of the expenses claimed Electricity Rs. 1,35,130/- Rs. 26,667/- 100% of the expenses Expenses claimed in individual account and 10% of the expenses claimed in the case of Delhi hospital Car Insurance Rs. 1,809/- 10% of the expenses claimed Telephone Rs. 3,057/- 10% of the expenses Expenses claimed Salary & Rs. 65,714/- 10% of the expenses Wages claimed Professional Rs. 45,412/- 10% of the expenses Charges paid claimed Total Rs. 3,64,379/- Rs. 1,37,793/-

3 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT the disallowances/additionsmade by the Assessing Officer, against which the Assessee has preferred the instant appeal.

That the learned CIT(A) has erred both on facts and in law in 1. confirming a disallowance of Rs. 31,533/- out of an adhoc estimated disallowances made under the heads ‘Electricity Expenses’ (Rs. 26,667/-) and Car Insurance (Rs. 1809/-) and Telephone Expenses (Rs. 3,057/-) of Delhi Hospital incurred by the assessee which sum had been incurred wholly and exclusively for the purpose of the profession and were fully verifiable. The expenditure since had been incurred for earning professional income, could not have been disallowed by making an estimated disallowance. 1.1 That in any case and without prejudice the disallowance sustained is highly excessive.

2. That the learned CIT(A) has further erred in sustaining a disallowance of Rs. 1,19,372/- being an adhoc disallowances made representing 50% of driver’s salary (Rs. 60,000/- and 50% repairs and renewals (Rs. 1,18,743/-) disregarding the fact that the entire expenditure had been incurred for the purpose of earning professional income. The learned CIT(A) while upholding the disallowance made has also failed to appreciate that the assessee had benefit of other cars in the family where no such expenditure incurred has been even claimed. 2.1 That in any case and without prejudice the disallowance sustained is highly excessive.

3. That the learned CIT(A) has further erred in sustaining a disallowance of Rs. 1,35,130/- out of the expenditure incurred under the head ‘electricity expenses’ which expenditure had been incurred wholly and exclusively for the purpose of assessee’s profession.

4. That the learned CIT(A) has further erred in sustaining a disallowance of Rs. 1,04,841/- out of claim of depreciation, disregarding the fact that the aforesaid deprecation had been claimed only in respect of ‘professional depreciable assets’ which assets had wholly and exclusively been used for the 4 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT assessee’sprofession. There being no justification to have sustained any such disallowance, the same deserves to be deleted.

5. That in any case and without prejudice to each of the aforesaid ground, the disallowance sustained are wholly excessive.

5. Let us decide the appeal by ground wise.

6. Ground no. 1: By ground no. 1, the Assessee raised the issue that the learned Commissioner has erred on the facts and in law in sustaining the disallowancesof Rs. 31,533/- in respect of adhoc estimated disallowances made by the Assessing Officer under the heads Electricity Expenses (Rs. 26,667/-), Car Insurance (Rs. 1809) and Telephone Expenses (Rs. 3057) of Delhi Hospital and the professional expenses incurred by the Assessee exclusively for the purpose of the profession.

6.1 The Assessee has claimed that since expenditure mentioned above have been incurred for earning professional income, therefore, could not have been disallowed by making an estimated disallowance. In the alternate the Assessee submitted that in any case and without prejudice to the rights and claim of the Assessee, the disallowance sustained is highly excessive. We observe that the Assessing Officer disallowed 10% of the electricity expenses and made the addition of Rs. 26,667/- in the case of the proprietorship firm i.e. Delhi Hospital on the ground that the electricity bills have different addresses and are in the names of different persons and the CA number of the electricity bills claimed in the individual P&L A/c and of Delhi Hospital is the same.

6.2 Before the learned Commissioner it was claimed by the Assessee that the electricity bills are in the name of Mr. Raj Krishan Jain Charitable Trust of 5 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT Temple nursing home, wherefrom theAssessee is maintaining his professional office and the electricity bill is also shared by the Assessee.

6.3 The learned Commissioner considered the contention of the Assessee and came to the conclusion that the plea of the Assessee is not convincing and the Assessing Officer has rightly made the addition on account of electricity as the bills were in different names of a trust and even if the Assessee is sitting there for professional income, there is no justification for incurring such high electricity expenses and for want of evidences the addition made by the Assessing Officer on this account is confirmed.

6.4 We have given thoughtful consideration to the issue in respect of disallowance under the head electricity expenses. The Assessee being a doctor in his individual capacity is entitled to claim the electricity expenses in proportionate to the electricity used by him exclusively and not as entire expenses of the hospital as allowance. Hence, the issue qua electricity expenses is remanded to the file of the Assessing Officer to determine afresh by taking into consideration proportionate use by the Assessee, suffice to say onus of the same would be on the Assessee. Resultantly Ground no. 1 to the effect of electricity expenses of 26,667/-, is allowed for statistical purposes.

6.5 Coming to other aspect of Ground no. 1,which pertains to disallowances on account of car insurance expenses and telephone expenses. The Assessing Officer made an ad hoc addition of Rs. 18,097/-and Rs. 30,571/- qua car insurance expenses and telephone expenses@ 10% of the total amount spent on these expenses on account of personal use of the expenses. We observe from the Assessment order, wherein while disallowing the expenses @ 10%, the AO has held that possibility of use of these

6 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT expenses for non-business/ personal purpose could not be ruled out. The Ld. Commissioner upheld the said disallowance on the ground that for want of evidences, the addition on this account is confirmed. We find that the addition under challenge has been made by the Assessing Officer only on the presumption that use of these expenses for the purpose of non- business/personal purposecould not be ruled out without mentioning any particular defect and/or document to controvert the claim of the Assessee. Consequently, the addition made by the Assessing Officer and confirmed by the learned Commissioner qua car insurance and telephone expenses stands deleted. Resultantly, Ground No. 1 with regard to the car insurance and telephone expenses stands allowed.

7.1 We observe from the assessment order, wherein the Assessing Officer disallowed 50% of the total amount of Rs. 2,38,743/- which include Rs. 1,20,000/- as driver‟s salary and Rs. 1,18,743/- as repairs & maintenance having been paid in cash by the Assessee. The Assessing Officer while disallowing the same, thoroughly considered the P&L Accounts of M/s VardhmanPharma and M/s Delhi Hospital wherein also the Assesseehas claimed the said expenses and held that even the Assessee could not substantiate that all these expenses were exclusively for business purpose.

7.2 The Ld. Commissionerin appeal affirmed the aforesaid disallowance

7 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT qua car insurance and telephone expenses by observing as under “TheAssessee on the other hand has given written submissions and claimed that the Assessee has already disallowed expenses on his own and not claimed driver’s salary in any other proprietary concern. Further, the Assesseehas totally failed to substantiate the claim that the expenses debited in individual account was incurred in relation to earning his professional income in personal capacity. …………………………………… ……………………………………. …………………………………….It is apparent that the appellant has claimed expenses in individual capacity which is definitely not related to firm the professional income. The appellant totally failed to substantiate this claim that the expenses debited in the individual account was incurred in relation to earning his professional income in personal capacity. “

7.3 We have given thoughtful consideration to the peculiar facts and circumstance. With regard to the driver‟s salary, the authorities below held that the Assesse has also claimed the said amount in the P&L Accounts of M/s VardhmanPharma and M/s Delhi Hospital, whereas the Assessee has claimed that the Assessee itself had disallowed expenses on his own and not claimed driver‟s salary in any other proprietary concern, therefore, claim made by the Assessee is just opposite to the determination by the authorities below,hence we deem it appropriate to remand the issue qua driver‟s salary to the file of the Assessing Officer for decision afresh, after taking into consideration the P&L accounts of M/s VardhmanPharma and M/s Delhi Hospital and if the Assessee has not claimed the driver‟s salary in those account then the same can be allowed as expenses. Consequently ground No. 2 qua driver’s salary is partly allowed for statistical purposes .

7.4 With regard to disallowance of expenses on account of repair and maintenance charges, the Assesse only submitted that neither in the 8 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT preceding yearsnor in the laters year the said disallowance has been made thereforethe same is liable to be deleted. We are not impressed by the contention of the Assessee as every year is a distinct year having its own peculiar facts and circumstances and cannot be equated on the similar footing. Consequently ground No. 2 is partly disallowed.

8.1 Before the Ld. Commissioner, it was claimed by the Assessee that the electricity bills are in the name of Raj Krishan Jain Charitable Trust temple nursing home where the Assesse is maintaining his professional office and the electricity bills is also shared by the Assesse. The Ld. Commissioner affirmed the aforesaid addition on the reason that regarding the electricity expenses, the plea of the appellant is not convincing and the AO has rightly made the addition on this account as these bills were in the different name of the trust and even if appellant is sitting there for professional income, there is no justification for incurring such high electricity expenses and for want of evidences , the addition made by the AO on this account is confirmed.

9 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT 8.2 The Assesse before us claimed that there is no element of personal expenses in the expenditure incurred by the Assessee and the premises from wherethe Assessee is carried on its profession are totally separate and independent and as such the disallowance of Rs. 135130/- made on account of electricity is wholly untenable and there can be no element of personal expenses.

We observe that the Assessee has failed to controvert the findings of the AO to the effect that CA No. (CA 10036908) claimed in the individual account of the Assesse has the same CA No. as of the electricity bills claimed in the P&L Account of Delhi Hospital. The bills are in the name of different persons and of different addresses, therefore, it is clear that the bills provided by AR are not the expenses incurred by the Assesse wholly and exclusively for the business purpose. Considering the peculiar facts and circumstances as the claim made by the Assessee before us and the Ld. Commissioner is exactly just opposite to the determination made by the AO and even the Ld. Commissioner upheld the said disallowance for the want of evidences, thus we are inclined to remand this issue also to the file of the AO for decision afresh, suffice to say the onus would be upon the Assessee to establish the said claim qua electricity expenses of Rs. 1,35,130/-. Resultantly, the Ground No. 3 stands allowed for statistical purposes.

8. Ground no. 4: By way of ground no. 4 the Assesseehas claimed that the learned Commissioner has erred in sustaining a disallowance of Rs. 1,04,841/- qua claim of depreciation by disregarding the fact that the aforesaid depreciation had been claimed only in respect of professional depreciable assets which have been used wholly and exclusively for the Assessee‟s profession and therefore, there was no justification to sustain any 10 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT such disallowance. Whereas the Assessing officer disallowed the same by holding that vide note sheet entry dated 26.10.2016 the Assessee was asked as to why the Assessee has claimed depreciation in his individual profit and loss account when the same had been claimed in the P & L Accounts of M/s VardhmanPharma and M/s Delhi Hospital to which authorized representative could not furnish any satisfactory reply. The Assessing Officer further held that it is important to note that the Assessee has claimed depreciation in the P & L A/c of his two partnership concerns M/s VardhmanPharma and M/s Delhi Hospital and could not explain as to why the claim of depreciation in the individual P & L A/c of the Assessee should be allowed.

8.2 In appeal, the learned Commissioner broadly considered the claim of the Assessee and observations made by the Assessing Officer and came to the conclusion that the Assessee has totally failed to substantiate his claim that the expenses debited in the P & L a/c was incurred in relation to earning his professional income in personal capacity.

8.3 We observe that the assesse before us as well has failed to controvert the findings of the authorities below to the effects that Assessee could not furnish any satisfactory reply as to why the Assessee has claimed the said depreciation inindividual when the same has already been claimed in the P & L Accounts of his two partnership concerns M/s VardhmanPharma and M/s Delhi Hospital, hence we do not find any substance in the claim of the present claim of the Assessee. Even otherwise we do not find any reason and/or material to controvert the findings of the authorities below, specifically by the Assessing Officer. Consequently Ground no. 4 is dismissed.

11 ITA 5238/Del/2018 Dr. DeshBhushan Jain Vs. ACIT