What did the Tribunal hold?

The Tribunal held that the additions were not based on any material or evidence for the year under consideration and were made on suspicion. Therefore, the additions sustained by the CIT(A) were directed to be deleted.

The assessee appealed against the CIT(A)'s order which partly sustained additions on account of suppressed X-ray receipts and disallowed discounts. The additions were based on estimations made by the AO during a search.

What were the issues?

Whether ad-hoc estimations of suppressed X-ray receipts and disallowed discounts, without supporting evidence for the assessment year, are valid grounds for addition?

Mewar Hospital Pvt. Ltd., Udaipur vs ACIT | ITAT Jodhpur 2020

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR

Before: SHRI R.C.SHARMA & SHRI SANDEEP GOSAIN

For Appellant: Shri Amit Kothari (CA) &, Shri Abhinav Kothari (CA)

For Respondent: Shri Abhimanyu Singh

Hearing: 18/03/2020

PER SANDEEP GOSAIN, J.M.

The present appeal has been filed by the assessee against the order of

Ld. CIT(A)-II, Udaipur dated 24.09.2019 for the assessment year 2011-12 on

the grounds mention hereinbelow:-

“1. Under the facts and circumstances of the case and in law, the order dated 24.09.2010 passed by the Ld. CIT (Appeals)-II Udaipur u/s 250(6) of the Income Tax Act, 1961 is bad in law & illegal.

Under the facts and circumstances of the case and in law, Ld. CIT (Appeals)-II Udaipur has erred in affirming the order of Ld. Assistant Commissioner of Income tax, Central Circle-2, Udaipur, passed U/s

2 ITA 431/Jodh/2019 Mewar Hospital Pvt. Ltd. Vs ACIT

144 rws 144/143(3) of the IT Act, 1961 without giving reasonable opportunity being heard to the appellant therefore ex parte order passed by the Ld. AO is against the natural justice therefore action of Ld. CIT(Appeals)-II, Udaipur, is erroneous & bad in law and liable to be deleted.

Under the facts and circumstances of the case and in law, Ld. CIT (Appeals)-II Udaipur has erred in granting relief of Rs. 75,392/- only out of total addition of Rs. 3,87,730/- on account of suppression of x- ray receipt revenue based on ad-hoc estimation basis made by the Ld. AO, which unjustified, unwarranted & bad in law and liable to be deleted entirely.

Under the facts and circumstances of the case and in law, Ld. CIT (Appeals)-II Udaipur has erred in granting relief of Rs.14,11,384/- only out of total disallowance of Rs. 18,81,845/- on account of discount claimed by the appellant on ad-hoc estimation basis made by the Ld. AO, which unjustified, unwarranted & bad in law and liable to be deleted entirely.

The appellant prays for justice and the appeal deserves to be allowed.

The appellant craves leave to add, alter, amend and modify any grounds of appeal on or before the date of hearing."

At the time of hearing ground No. 1 and 2 of the appeal are not

pressed by the ld. AR of the assessee. Therefore, these two grounds are

dismissed as not pressed.

Ground No. 3 of the appeal relates to part addition sustained on

account of X-Ray receipts. We have heard the rival contentions and carefully

gone through the orders of the authorities below and found from the record

that the AO made addition for Rs. 3,87,730/- which was sustained at Rs.

3,12,338/- and relief was allowed at Rs. 75,392/- by the ld. CIT(A). The AO

observed that during the course of search, X-ray done during the period of 4

3 ITA 431/Jodh/2019 Mewar Hospital Pvt. Ltd. Vs ACIT

months from October, 2016 to January, 2017 it was found that X-Ray receipts

were for 3839 whereas X-Ray consumed was 4530, and as such there was

excess consumption of 691 films. On these hypothesis it was observed that X-

rays receipt in total was 3.87%. On these facts for the search year for

financial year 2017-18 suppression of receipts was estimated at Rs.

3,87,7301-. The CIT(A) allowed deduction for 3% on account of wastages and

allowed relief of Rs. 75,392/- and sustained balance addition of Rs.3,12,338/-.

We also found from the record that the contention of the assessee is

that the entire basis for addition was not justified. Based on the X-rays done

during the 4 months period from October, 2016 to January, 2017, cannot be

any basis for the addition in the year. Even various factors of wastages had

not been considered, error of technician, package charges, scheme charges

etc. has not been considered. Sometimes films are wasted due to calibration

& technical issues and even repeat X- Rays are done, if the same is not done

properly. The assessee also relied upon some judicial decisions in support that

the estimated addition cannot be made.

We also observe that the addition is not based upon any material or

evidence for the year under consideration and even during search nothing has

been found related to the year. There is no basis for estimation of suppression

of X-Rays. Even the technician during the search proceedings had stated that

in every bundle certain X-Rays gets damaged, and further there are various

other reasons by which X-Rays films can get damaged. There is no allegation

4 ITA 431/Jodh/2019 Mewar Hospital Pvt. Ltd. Vs ACIT

that some X-Rays having been done, and there is no receipts issued or there

is any suppression of receipts. Therefore, in view of the above facts and

circumstances of the case, we find no merit in the addition sustained by the ld

CIT(A) at Rs. 3,12,338/-, hence we direct the A.O. to delete the same.

The next issue relates to addition for discounts. From perusal of the

record, we found that the AO made addition for Rs. 18,81,845/- for discounts

which was partly deleted by the ld. CIT(A) and 25% of the disallowance to the

extent of Rs. 4,70,461/- was sustained on which the assessee is in appeal.

The AO made addition on the ground that in the search year it was found that

the appellant had claimed certain discounts which could not be verified. The

AO also observed that during search some persons accepted discount and

some did not accepted. Though there was no claim of discount during the

year, the AO estimated the discount at Rs. 18,81,845/- and made addition

thereof.

We also found that the ld CIT(A) observed that in the search year it

was observed that discounts was being allowed and in earlier year the

receipts were net of discounts. The assessee had changed the method of

account of discounts. However, on the basis of conclusion drawn in the search

year the CIT(A) observed that disallowance deserves to be made but the

same was restricted to 25% of the total addition and accordingly addition of

Rs. 4,70,461/- was sustained and balance addition was deleted.

5 ITA 431/Jodh/2019 Mewar Hospital Pvt. Ltd. Vs ACIT

We also observe that there is no claim of discount as such, and the

addition was based on estimated discounts. In case there is no claim of such

discounts the question of disallowance of any addition is uncalled for. There is

no case of suppression of receipts by showing lesser receipts. Further if the

receipts are shown net of discount the same cannot be said to be not

verifiable as the same is directly linked to the corresponding receipts. The

addition being made only on the basis of suspicion, therefore, we direct to

delete the same.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 20/03/2020.

Sd/- Sd/- (R.C.SHARMA) (SANDEEP GOSAIN) Judicial Member Accountant Member

Dated :. 20/03/2020 *Ranjan Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Jodhpur 6. Guard File (ITA No. 431/Jodh/2019) By order

Assistant Registrar ITAT Jodhpur

MEWAR HOSPITAL PVT. LTD.,UDAIPUR vs. ACIT, CENTRAL CIRCLE-2, UDAIPUR

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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