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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Applicant) (Responent) : Shri O.T. Bajaj, AR Assessee by Revenue by : Shri Jamesh Kurian, CIT-DR सुनवाई क� तार�ख/Date of Hearing : 05/09/2022 घोषणा क� तार�ख /Date of Pronouncement: 07/09/2022 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld.Commissioner of Income-Tax-4, Ahmedabad [hereinafter referred to as “ld.CIT”] dated 5.3.2018 passed under section 263 of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the Asst.Year 2013-14.
As transpires from orders of the authorities below, the ld.CIT had found the assessment order passed by the Assessing Officer (AO )in the present case to be erroneous on account of the fact that he had allowed the claim of expenses of the assessee pertaining to medical dispensary without examining the same, the assessee
2 being a doctor, despite the facts demonstrating that the assessee had returned no income from the said dispensary and on the contrary had claimed huge expenses amounting to Rs.29,82,279/- on account of the same. The entire claim of the assessee therefore was allowed by the AO, as per the Ld.CIT, without examining this issue despite glaring facts raising doubts with respect to the said claim of the assessee. As per the ld.CIT the assessment order was erroneous causing prejudice to the Revenue. This aspect was confronted to the assessee during the revisionary proceedings, but he submitted a brief reply stating that no income on account of dispensary being run by the assessee is accounted for, since he is running free service there. The ld.CIT found no merit in this contention, noting that no evidence had been filed by the assessee in support of the same. Therefore, taking note of the fact that return of the assessee was selected for complete scrutiny for the reason that large amount had not been credited to the profit & loss account and the AO having not examined the issue of no income being shown by the assessee from a dispensary run by him, and on the contrary, claimed huge expenses for the same, he held the assessment order to be erroneous causing prejudice to the Revenue .The Ld.CIT set aside the assessment order directing him to make a fresh assessment on the issue after making proper inquiries and verification .The relevant finding of the ld.CIT at para 4 to 7 and 10 of the order is as under: “4. I have considered the matter and the submissions of the Ld. A.R. for the assessee carefully. The brief facts of the case are that the assessee had filed its return of income on 20.09.2013 thereby declaring his total income at Rs. 14,09,090/-. The return was selected for "Complete scrutiny" under CASS with the following reasons :- i) Large amount not credited to Profit & loss account as per schedule A-OI 5. The Assessing Officer (A.O.) completed the assessment by passing an order u/s.143(3) of the Act on 31.12.2015, assessing total income at Rs.14,17,470/-with addition of Rs.8,375/- on account of disallowance u/s 14A of the I.T. Act, 1961.
6. Assessee has not shown any income from dispensary but had claimed huge ase-ises in the said account, most of the items are not allowable as not related to his income generating activities. Further, the assessee has not submitted any evidence in support of its contention that any free services have been provided by him at the dispensary and camps which resulted into the inflow of patients for surgery carried out at Rajasthan Hospital, if any. Hence self service contention does not have any substance. Assessee also failed to submit any specific reply whatsoever on the points raised in the above referred notice u/s 263. Being it a complete scrutiny, A.O. was required to examine the veracity of expenditure claimed with its nexus to the income offered in his return, which was not done by the Assessing Officer. Thus, the A.O. failed to carry out inquiry or verification in respect of expenses claimed for making a just and fair assessment of income of the assessee.
7. The Assessing Officer has, therefore, incorrectly accepted the facts submitted by you and passed the order u/s 143(3) on 31.12.2015. The assessment order is erroneous in so far as it is 'prejudicial to the interest of Revenue'. …. …. …. … 9. Even after the insertion of Explanation 2 to Section 263(1) of the I.T. Act the scope of initiation of proceedings u/s. 263 of the I.T. Act has been widened and the case of the assessee is squarely falls under the said - Explanation. I, therefore, propose to revise the said order u/s 263 of the Act, 1961.
I, therefore, hold that the assessment order dated 31.12.2015 passed by the A.O. u/s. 143 (3) of the Act in the case of the assessee is erroneous in such as it is prejudicial in the interest of the revenue by reason of failure by the A.O. to make proper inquiry regarding the claim of expenditure which were not in nexus with income offered for the year. I, therefore, set aside the assessment order u/s.!43(3) dated 31.12.2015 in the case of the assessee for the A.Y.2013-14 and direct the A.O. to make a fresh assessment after making proper enquiries and verification about the nexus of the expenses as noted above with the income offered in this regard. Accordingly, the allowability of the expenses has to be verified.”
Before us, the contentions of the ld.counsel for the assessee was that there is no illegality in the order of the AO since he had examined all relevant issues during the assessment proceedings and the fact was that the assessee had returned net profit at 28% in the impugned year which was commensurate with that returned in the earlier assessment yea. He contended therefore that there was palpably no error in the order of the AO having accepted the 4 returned income of the assessee as such without inquiring into the issue of claim of dispensary expenses.
The ld.DR on the other hand relied on the finding of the ld.CIT.
We have heard both the parties, and we do not find any merit in the contention of the ld.counsel for the assessee. The contention of the Ld.Counsel for the assessee that the assessment order was not erroneous since the claim of dispensary expenses was examined during the assessment proceedings, we find, is only substantiated before us with some notices issued to the assessee during assessment proceedings, which were placed before us at paper book page no.114 to 118. The ld.counsel for the assessee only referred to these notices before us without pointing out where exactly the queries regarding the claim of expenses relating to the dispensary expenses were raised in the said notices. Further, he has not pointed out any reply filed by the assessee in response to query, if any, with regard to the expenditure claimed relating to the dispensary run by the assessee. Therefore, this contention of the ld.counsel for the assessee that issue was examined during the assessment proceedings, we find, it without any basis at all and is therefore rejected.
As for the other contention of the ld.counsel for the assessee that there was no illegality in the order of the AO since the assessee had been consistently returning such 28% of net profit from his medical profession including dispensary income, we find is neither here nor there. The ld.counsel for the assessee has made this claim for the first time before us. This claim was not made before the ld.CIT. Further, no evidence has been filed to support his contentions that the assessee had been returning profit at a 5 consistent rate in all the years. Therefore, this claim of the assessee, we also find, is baseless and is also rejected.
In view of the above, we do not find any infirmity in the order of the Ld.CIT holding the assessment order passed by the AO, allowing claim of dispensary expenses without conducting any inquiry despite the facts demonstrating no income being earned by the assessee from the same, as erroneous and prejudicial to the Revenue.
The ld.CIT, we hold, has rightly restored the issue to the AO to examine afresh. The assessee is at liberty to make whatever contentions and arguments he wishes to rely upon in support of his claim before the AO.
In view of the above, appeal of the assessee is dismissed. Order pronounced in the Court on 7th September, 2022 at Ahmedabad.