Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘A’, NEW DELHI
Before: SH. AMIT SHUKLA & SH. O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘A’, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA No.4578/Del/2015 Assessment Year: 2011-12 DCIT, Vs. Sh. Sirish Kumar, Circle – Najibabad, Prop. Shree Hospital, Kiratpur Najibabad Road, Bijnor. PAN :APJPK1955N (Appellant) (Respondent) And C.O. No.65/Del/2016 [In ITA No.4578/Del/2015] Assessment Year: 2011-12 Sh. Sirish Kumar, Vs. DCIT, Prop. Shree Hospital, Circle – Najibabad, Kiratpur Road, Bijnor. Najibabad PAN :APJPK1955N (Appellant) (Respondent) Department by Sh. Ravi Kant Gupta, Sr.DR Assessee by Sh. Paramjeet Singh, CA
Date of hearing 02.08.2018 Date of pronouncement 24.09.2018 ORDER PER O.P. KANT, AM: This appeal by the Revenue and cross objections by the assessee have been preferred against the order dated 24/04/2015 passed by the Ld. Principal Commissioner of Income Tax (OSD)(Appeals), Moradabad [in short ‘the Ld. CIT(A)’] for
2 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 assessment year 2011-12. The grounds raised in appeal are reproduced as under:
“1. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on facts of the case by deleting addition of Rs 3,86,200/-made u/s 68 on account of the fact that the assessee failed to furnish satisfactory explanation regarding the introduction of cash of Rs. 3.86,200/- in cash book. 2. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on facts of the case by deleting addition of Rs 70,55,330/- made on account of understated receipts from ICICI Lombard General Insurance Co Ltd ignoring that addition of Rs. 70,06.830/- was made on the basis of form 26AS and the assessee has miserably failed to reconcile his income declared with the statement 26AS. 3. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on facts of the case by deleting addition of Rs 48,500/- made on account of non- declaration of receipts from MD India Healthcare Services (TPA) Private Limited without bringing any evidence whatsoever to prove that the said income was offered for taxation. 4. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on facts of the case by deleting addition of Rs 7 lacs as made u/s 68 of the IT. Act on account of the fact that creditworthiness of the alleged lender could not be established. 5. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on facts of the case directing the AO to verify the actual date of payment of SBI Life Insurance premium & allow the claim u/s 80-C of Rs 27,000/- ignoring that the assessee failed to furnish receipts for claim made u/s 80-C during the assessment as well as appellate proceedings . 6. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on facts of the case in deleting the disallowance of depreciation of Rs 30,975/- as claimed on New High Frequency X-ray machine since
3 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 no evidence whatsoever brought on record as to prove the use of impugned machine in the fag end of year. 7. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law deleting various disallowances under various heads of Rs. 13, 03, 021/- i.e. (disallowance out of computer expenses of Rs 10.000/- , Equipment Repair expenses of Rs 1,25,000/-, Electricity expenses of Rs 72,600/-, Hospital Maintenance expenses of Rs 1.00.000/-, Invertor Battery of Rs 2,13,000/-, Car running expenses & car depreciation of Rs 38,610/-, Staff salary expenses of Rs 3,18,150/-, CT Scan expenses of Rs 78,016/-, Ultra sound & X-ray consumable of Rs 1,44,975/-, Washing expenses , Pathology expenses and Motor Cycle expenses of Rs 1,08,263/-, Staff welfare expenses of Rs 7,286/-, Mobile & telephone expenses of Rs 7,415/-, Generator expenses of Rs 79,706/-) ignoring the fact that the assessee did not produce supporting bills and vouchers in respect of expenses claimed . 8. The Ld. Pr. Commissioner of Income Tax (OSD) (Appeals), Moradabad has erred in law and on the facts of the case in deleting the addition of Rs 1.00,000/- made u/s 69C of I.T. Act 1961 without appreciating the fact that the assessee could not substantiate low withdrawals made for the household expenses. 9. That the appellant craves leave to add or amend any one or more of the grounds of appeals, as stated above, as and when need to do so arises with the prior permission of the Court.” The Grounds raised in cross objection by the assessee are 2. reproduced as under: “1. That Revenue has not filed appeal against the second ground raised by the assessee before CIT(A) regarding not giving proper opportunity of hearing. That the Ld. Assessing Officer did not allow adequate time to the assessee to collect and furnish requisite details and completed the assessment in a hurried manner at the fag end of the limitation period. The above ground raised by the assessee has been decided in favour of the assessee by CIT(A). Therefore,
4 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 A.O. has not right to file an appeal against various additions deleted by CIT(A). 3. Briefly stated facts of the case as culled out from the orders of the lower authorities are that the assessee is a practicing doctor and was running a hospital in the name of ‘Shree Hospital’ at Kirtapur Road, Bijnaur. For the year under consideration, the assessee filed return of income on 30/09/2011, declaring total income of Rs.14,14,056/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued 01/08/2012 and complied with. The scrutiny assessment under section 143(3) of the Act was completed on 27/03/2014 at assessed income of Rs.1,10,39,570/- after making various additions/disallowance. Against said assessment order, the assessee preferred appeal before the Ld. CIT(A), who partly allowed the appeal. Aggrieved, the Revenue is in appeal before the Tribunal and the assessee has filed cross objection, raising the respective grounds as reproduced above. 4. We have heard both the parties and perused the relevant material on record. First, we take up the cross objection filed by the assessee. In the sole ground, the assessee has raised the issue that the Revenue has not filed any appeal on the finding of the Ld. CIT(A) of not providing proper opportunity of being heard to the assessee. 5. We find that the assessee in the appeal filed before the Ld. CIT(A) raised the issue of not providing adequate opportunity to the assessee to collect and furnish the requisite details. The assessee also raised the issue that the assessment was completed
5 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 in a hurried manner at the fag end of the limitation period. Before the Ld. CIT(A), the assessee submitted that after issue of formal notice under section 143(2) in August, 2012, detailed query letter was issued only on 14/02/2014 and 14/03/2014 and the assessee made compliance to the extent possible on 23/03/2014 and 24/03/2014 and the assessment was completed on 27/03/2014. Thus, according to the assessee no adequate opportunity was allowed to him. The Ld. CIT(A) though concurred with the submission of the assessee but didn’t give any finding affecting the legality of assessment. 6. The Ld. counsel supported the finding of the Ld. CIT(A) on the issue in dispute and submitted that in absence of any appeal filed by the Revenue on this issue, the appeal filed by the Revenue on the other ground should not be allowed to be admitted. The Ld. DR, on the other hand, opposed the submission of the Ld. AR and submitted that Ld. CIT(A) has only made observations and no specific finding has been given by him. 7. Having heard both the parties, we find that in the assessment order there is reference of notice under section 142(1) dated 14/02/2014 and 14/03/2014, calling for certain details from the assessee. In the assessment order, there is also reference of 142(1) dated 14/08/2013, while dealing with the addition under section 68 of the Act, amounting to Rs.3,86,200/-. There is also reference that the assessee was provided sufficient time to furnish the evidences as to receipt of cash of Rs.3,86,200/-, however, no evidence was submitted by the assessee. In view of the observation of the Assessing Officer, the allegations of the assessee that assessment proceedings were
6 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 taken up at the fag end of the limitation are not based on the proper appreciation of correct facts. The assessee has not brought before us a copy of the complete order sheet of the Assessing Officer, in support of his allegation that enquiries have been made only at the fag end of the limitation period of the assessment. We are not aware as after issue of first notice under section 143(2) of the Act in August 2012, how many times the matter got adjourned on the request of the assessee. The assessee has made the allegation of not providing sufficient opportunity of being heard before the Ld. CIT(A) and the Ld. CIT(A) gave his finding as under: “I have considered the ground of appeal and perused the assessment order. It is noticed that the AO made query vide notice dated 14.03.2014 and completed the assessment on 27.03.2014. This itself suggests that the Assessing officer has not given proper opportunity of being heard to the appellant and the assessment has been made in a fair and not in a partisan manner. Although it is part of their duty to ensure that no tax which is legitimately due from the assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighed against the assessee. It is impossible to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee, they should be deemed to have exercised it in..a proper- and judicious manner - CIT v. Simon Carves Ltd. [19761 105 ITR 212 (SC). Officers should not do things in unreasonable manner - In administering a tax law irritation to the assessee is inevitable; an officer is bound to do his duty irrespective of the susceptibilities of the assessees or even at the risk of hurting their amour propre. But this would not justify the officers functioning under the Act doing things in an unreasonable way actually I agree with the appellant’s grievance raised through the Ground of Appeal. Other Grounds are individually dealt with hereunder on merits.” We find that Ld. CIT(A) in his finding on this ground merely 8. advised as how an quasi-judicial authority i.e. the Assessing Officer should function while completing the assessment. He has
7 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 not given any finding on the legality of the assessment order. The above observation of the Ld. CIT(A) are also not based on correct appreciation of the facts. In such circumstances, we do not find any reason for the Revenue to challenge the said observation of the Ld. CIT(A) of not providing opportunity of being heard to the assessee. Further, we note that in the impugned order, there is no reference of calling for any comment of the Assessing Officer on this issue by the Ld. CIT(A). The Ld. CIT(A) has made observation on this issue without providing opportunity of being heard to the Assessing Officer, which is in violation of the principle of natural Justice i.e. “Audi Alteram Partem”. The Ld. CIT(A) himself has provided sufficient opportunity of being heard to the assessee and the assessee is not aggrieved against the same. In view of the above facts and circumstances, we do not find any reason for the Revenue to challenge the aforesaid observations of the Ld. CIT(A) and accordingly, the cross objections filed by the assessee are dismissed. 9. Now we take up the appeal of the Revenue. In the first ground, the Revenue has challenged deletion of the addition of Rs.3,86,200/- made by the Assessing Officer under section 68 of the Act. 9.1 The facts qua the issue in dispute are that the Assessing Officer noted credit of Rs.3,86,200/- on 27/11/2010 in the cashbook relating to “Shree Hospital”. It was explained by the assessee that said cash was received from his grandfather after his death and recorded in cash book on 27.11.2010. According to the Assessing Officer, in view of the rituals and mourning period in the family, it was unbelievable that on the death itself the
8 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 alleged cash would had been introduced in the cashbook. The Assessing Officer asked the assessee to explain with cogent reason that his grandfather was keeping so much cash-in-hand with him and adduce the evidence in support thereof. The Assessing Officer also observed withdrawals by the assessee of Rs.8000/- and Rs.41,000/- on 20/12/2010 and 22/12/2010 respectively from the IDBI bank account No.44,679/-. According to the Assessing Officer, if the cash of Rs.3,86,200/-was available with the assessee on 27/11/2010, then there was no necessity of making withdrawal in cash from the said bank account. The Assessing Officer on 14/03/2014 further called for original vouchers of cash entry between the period from 26/11/2010 to 28/11/2010 and also bank statement of his grandfather from 01/04/2010 to 27/11/2010. Though the assessee affirmed that his grandfather did not leave any ‘Will’ and also was not having bank account, but he failed to produce the original vouchers desired by the Ld. Assessing Officer. In view of the observations, the Ld. Assessing Officer held that the introduction of Rs.3,86,200/- in the cashbook was unexplained cash credit liable to added u/s 68 of the Act. 9.2 The Ld. CIT(A) deleted the addition by observing as under: “I have considered the ground of appeal and perused the assessment order. It is notices that the AO made query vide notice dated 14.03.2014 and completed the assessment on 27.03.2014. The AO in the order mentioned that cash of Rs. 3,86,200/ was introduced in the cash book on 27.11.1010. The date of death of grandfather was also 27.11.2010. The AO further mentioned that the registration of death was made on 07.08.11 when the death took place on 27.11.2010. The AO concluded that there was inordinate delay in getting the registration of
9 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 death. It is seen that the books of account of the appellant were duly audited u/s 44AB of the Act and no adverse comment on the same were made by the AO. The claim of the appellant’s counsel that such gifts were treated exempt u/s 5 of the erstwhile Gift-tax Act. and the amount does not at all represent income of the assessee, is found in order. As such the addition made by the AO is not reasonable and the same is deleted. 9.3 Before us, the Ld. DR submitted that the assessee has not discharged his burden under section 68 of the Act. He submitted that the assessee did not furnish any ‘Will’ of his grandfather or did not produce any witness to claim that such an amount was given to the assessee by his grandfather at the time of his death. He also submitted that availability of the said cash amount with his grandfather was not supported by any withdrawal from his bank accounts. According to him, the Ld. Assessing Officer was justified in holding the said amount as unexplained. 9.4 On the other hand, the Ld. counsel of the assessee submitted that the assessee belongs to a reputed big business family and thus raising doubt on the availability of cash of Rs.3,86,200/- with his grandfather is unwarranted and no further evidence are required to substantiate the claim of receipt of sum in question from his grandfather. 9.5 We have heard the rival submission and perused the relevant material on record. We find that before the Assessing Officer the assessee failed to produce original vouchers of introducing cash of Rs.3,86,200/-on 27/11/2010 in the books of accounts of the assessee firm. The assessee also failed to produce bank statement of his grandfather. The assessee also did not produce any will of the grandfather of giving him the said sum. Before the Ld. CIT(A), the assessee claimed that gifts are treated
10 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 as exempt under section 5 of the erstwhile gift tax act and the amount did not represented income of the assessee. The Ld. CIT(A) found this claim in order. The Ld. CIT(A), however, did not given reasons as to why said amount did not represent income of the assessee. Before us also the Ld. counsel has not produced any copy of the will of the grandfather of the assessee to support the claim of the assessee that said money was given to him by his grandfather. Though the Ld. counsel claimed that the assessee belong to a big reputed business family, but he failed to produce balance sheet or statement of affairs of assets and liability of the grandfather of the assessee to support the said claim. In our opinion, the claim of the assessee of receipt of money from the grandfather is without any supporting evidences and the assessee has failed to discharge his onus under section 68 of the Act. Accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute and restore that of the Assessing Officer. The ground No. 1 of the appeal of the Revenue is accordingly allowed. 10. In ground No. 2, the Revenue has challenged the addition Rs.70,06,830/- deleted by the Ld. CIT(A). This addition was for difference in receipt of the assessee as appearing in form No.26AS and receipt shown by the assessee in the return of income filed. The Assessing Officer found difference of Rs.70,06,830/- in respect of receipt from the ICICI Lombard General Insurance Co. Ltd. (in short ‘the ICICI Lombard’). The Assessing Officer has recorded that the Central Government of India was running a health scheme, namely, “Rashtriya Swasthya Bima Yojna Policy” for the persons below the poverty line (BPL). According to the scheme, a BPL card holder was entitled to get free treatment up
11 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 to Rs.30,000/- in hospitals approved by the government. The hospital run by the assessee i.e. ‘Shree Hospital’ was also approved by the government India for the said scheme and in the financial year corresponding to the assessment year in consideration, the assessee got payments for treating the BPL card holders from the ‘ICICI Lombard’. 10.1 According to the Assessing Officer as per Individual Transaction Statement (ITS), available on the database of the Income Tax Department, receipts amounting to Rs.1,21,92,422/- were credited by the ‘ICICI Lombard’ in favour of the assessee and a tax of Rs.12,18,336/- was deducted. This ITS information was in possession of the Assessing Officer only. 10.2 The information in relation to tax deducted at source and amount credited to a payee is also available in form No. 26AS, maintained on the data base of the Income Tax Department. The information in form No. 26AS is fetched from the form No. 26Q filed by the tax-deductors on the portal of Income-tax Department maintained by the NSDL. There is a option available for the assessee to view and print the information available in form no. 26AS. On being asked , the assessee furnished information of tax deducted and amount credited from the ‘ICICI Lombard’ appearing in form No. 26AS , according to which, receipt from the said entity was recorded at Rs.1,21,75,422/-. Thus, there was a minor difference in the amount recorded in ITS and form No. 26AS, so the Assessing Officer took the amount received by the assessee from the ‘ICICI Lombard’ at Rs.1,21,92,422/-. The Assessing Officer has reproduced in the assessment order, date- wise amount credited and tax deducted by the ‘ICICI Lombard’ in
12 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 the assessment order. According to the assessee, he treated 603 BPL card holders, raising bills of Rs.58,27,189/- on the ‘ICICI Lombard’ and against which, he received payment of only Rs.50,33,318/- as against amount of Rs.1,21,92,422/- claimed by the Assessing Officer. 10.3 In view of the discrepancy in the amount received from the ‘ICICI Lombard’ ,recorded in income tax database and the amount declared by the assessee in the return of income, the Assessing Officer asked the assessee to furnish copy of TDS certificates issued by the ‘ICICI Lombard’ and copy of all bank statements maintained by the assessee. According to the Assessing Officer, the assessee did not furnish bank statement of HDFC bank account and thus the claim of the assessee of amount received of Rs.51,85,592/- from ‘ICICI Lombard’ could not be verified. Thus, the Assessing Officer made addition for the difference amount of Rs.70,06,830/-(Rs.1,21,92,422 – Rs.51,85,592). 10.4 Before the Ld. CIT(A), the assessee submitted that he maintains regular books of accounts on day to day basis which had not been rejected by the Assessing Officer. The assessee also submitted that form No. 26AS was not correct and the assessee received only sum aggregating Rs.51,85,592/- from the ‘ICICI Lombard’, which was duly recorded in the books of accounts as well as bank accounts of the assessee. 10.5 The assessee submitted that form No. 26AS is not having any authentic base as it depicts the figures furnished by the tax deductor in form No. 26Q. According to the assessee, the correctness of Form No. 26Q which form basis for incorporation of the figures in 26AS is not open to verification because it is
13 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 submitted by the tax-deductor to the NSDL and whatever figures are filled in form No. 26Q, whether correct or wrong are imported in form No. 26AS. According to the assessee, there are numerous examples where correct figures have not been given in form No. 26Q, due to which credit for TDS has not been allowed to various assessee(s). The assessee submitted that in many cases due to wrong posting of the PAN, figure of the TDS appeared in the name of other assessee, instead of correct assessee and thus figures given in form No. 26AS cannot be relied upon. 10.6 The Ld. CIT(A) accepted the contention of the assessee and observed that in form No. 26AS total TDS of Rs.12,22,762/-has- been mentioned, whereas in the return of income the assessee has claimed TDS of Rs.5,19,052/-. According to Ld. CIT(A) this fact strengthen the submission of the assessee that figures reported in form No. 26AS was not correct. The Ld. CIT(A) observed that the Assessing Officer asked the assessee to file an affidavit in support of the claim but did not make any independent enquiry from the ‘ICICI Lombard’. The Ld. CIT(A) held that the Assessing Officer had not brought on record any material to reject the claim of the assessee and accordingly, he deleted the addition. 10.7 Before us, the Ld. DR submitted that before the Assessing Officer the assessee has not filed complete statements of the bank accounts maintained by the assessee and thus total amount received from the ‘ICICI Lombard’ could not be verified. He also submitted that the assessee did not furnish any affidavit or certificate in support of his claim of receipt of amount from the ‘ICICI Lombard’. The Ld. DR submitted that the assessee was
14 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 required to disclose the receipt from the party in view of the mercantile method of accounting followed. In view of the above arguments, he submitted that the Assessing Officer was justified in making addition on the basis of receipts appearing in form No. 26AS. 10.8 The Ld. Counsel, on the other hand, supported the finding of the Ld. CIT(A), however he submitted that issue in dispute maybe restored to the file of the Assessing Officer for verification of the receipt from the ‘ICICI Lombard’ from the bank statements . 10.9 We have heard the rival submission and perused the relevant material on record. As far as the issue in dispute of difference in the amount due from the ‘ICICI Lombard’ is concerned, the fact that assessee rendered services, is not in dispute. There are two issues involved in the ground raised. First issue is whether the amount receivable from the ICICI Lombard or the amount received, should be charged to tax. According to the Assessing Officer, the assessee is following mercantile method of accounting and, therefore, the amount which is receivable corresponding to the patients treated by the assessee should be charged to tax. Whereas according to the assessee, the amount which is received should only be taxed. In our opinion, if the assessee is following mercantile method of accounting, then the amount which is receivable corresponding to the patients treated should be charged to tax and if the assessee is following cash method of accounting, then the amount received during the year into consideration would be charged to tax. The second dispute is in respect of the amount which was received or receivable from the party. The Assessing Officer has taken the figure of amount
15 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 received or receivable as appearing in the database of the income tax Department, whereas the claim of the assessee that it has taken the figure as appearing in the bank accounts. In our opinion, the number of patients treated by the assessee during the year under consideration and corresponding bill amount accepted by the ICICI Lombard and credited to the account of the assessee can be verified from the accounts of the ‘ICICI Lombard. If according to the assessee the information supplied by the ‘ICICI Lombard’ i.e. the Tax deductor in form No. 20 6Q is not found to be correct, then correctness of the same can be verified from the ‘ICICI Lombard’. The Assessing Officer asked the assessee to furnish a affidavit or certificate from the ICICI Lombard, however, the assessee failed in to do the same. The Ld. CIT(A) has mentioned in his finding that the Assessing Officer insisted the assessee to furnish certificate from the ICICI Lombard regarding the amount credited but no independent enquiry was made by the Ld. A.O. from the ICICI Lombard. We find that the Ld. CIT(A) himself has also not made any such attempt to carry out independent enquiry or remanded the matter to the Assessing Officer for carrying out any such enquiry. In the aforesaid facts and circumstances, we feel it appropriate to restore the matter to the file of the Assessing Officer with the direction to carry out independent enquiry from the ‘ICICI Lombard’ for verification of the amount credited to the assessee and tax deducted at source thereon. Accordingly, ground No. 2 of the appeal is allowed for statistical purposes. 11. In ground No. 3, the Revenue has challenged deletion of Rs.48,500/- on account of non-declaration of receipt from M/s
16 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 MD India Healthcare services (TPA ) Private Limited. According to the Assessing Officer, the said amount of receipt is appearing in form No. 26AS, whereas, the assessee has not shown any receipt from the said party in the return of income filed. The Ld. CIT(A) deleted the addition following the reasoning given while deleting the addition in respect of the ‘ICICI Lombard’, which has been discussed by us while dealing ground No. 2 of the appeal of the Revenue. 11.1 The Ld. DR submitted that in view of the no receipt shown from the said party in the return of income filed as against receipt of Rs.48,500/- in the form No.26AS, the Assessing Officer was justified in making addition, whereas the Ld. counsel submitted that issue in dispute maybe restored to the file of the Assessing Officer for verification. 11.2 We have heard the rival submission and perused the relevant material on record. We find that in the ground raised, the issue in dispute is a matter of verification whether the assessee rendered any services to that party and bill was raised and any such receipts are recorded in return of income filed. In our opinion, the issue in dispute in the present ground is identical to the issue in dispute raised in ground No. 2 relating to the receipt from the ‘ICICI Lombard’, which has been restored to the file of the learned Assessing Officer. In order to have consistency in our finding, we feel it appropriate to restore this issue also to the file of the Ld. Assessing Officer for carrying out verification as directed while deciding the ground No. 2 of this appeal. Accordingly, the ground No. 3 of the appeal is also allowed for statistical purposes.
17 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 12. The ground No. 4 relates to addition of Rs. 7 lakhs made under section 68 of the Act by the Assessing Officer and deleted by the Ld. CIT(A). The assessee shown receipt of unsecured loan of Rs. 7 lakhs from his father Sh. Rajendra Kumar. On perusal of copy of bank statement of Sh. Rajendra Kumar, the Assessing Officer noticed that the amount debited in the bank statement of Sh. Rajendra Kumar were not getting tallied with the amounts credited to his name in the books of accounts of the assessee . The Assessing Officer also observed that total of debit entries in the bank account was of Rs.6 Lakhs, whereas total amount received from him was shown as Rs. 7 lakhs. The confirmation filed by the father of the assessee, was also found to be undated. Though, Sh. Rajendra Kumar mentioned his PAN number in the confirmation, however on further questioning, the authorised representative of the assessee admitted that no return of income was filed by the father of the assessee. The Ld. Assessing Officer observed that, Sh. Rajendra Kumar is a retired government pensioner and he retired on 30/06/2006. According to the learned Assessing Officer, the person got retired so many years ago and was surviving only on pension, could not be in position to extend loan of Rs. 7 lakhs to the assessee. The Assessing Officer held that creditworthiness of Sh. Rajendra Kumar, remained to be proved and thus, alleged loan of Rs. 7 lakhs was held as unexplained cash credit under section 68 of the Act. The Ld. CIT(A) deleted the addition holding that the learned AO has not brought on record any material evidence to suggest that the explanation as furnished was bogus.
18 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 12.1 The Ld. DR relying on the finding of the learned Assessing Officer submitted that the creditworthiness of Sh. Rajendra Kumar was not substantiated by the assessee and thus action of the Assessing Officer was justified. He submitted that Ld. CIT(A) has ignored the finding of facts brought on record by the Assessing Officer. 12.2 The Ld. counsel of the assessee, on the other hand, relied on the finding of the Ld. CIT(A) and submitted that there was no discrepancy of the amount in the entries in the bank account and entries in the books of accounts of the assessee. Alternatively , he submitted that matter maybe restored to the learned Assessing Officer for a limited purpose of verification and reconciliation of the entries in bank account and books of accounts. 12.3 We have heard the rival submissions and perused the relevant material on record. In respect of receipt of money from Sh. Rajendra Kumar, the Assessing Officer has brought on record the discrepancies in respect of the entries in bank account and the entries in the books of accounts of the assessee. The Assessing Officer has also doubted the creditworthiness of Sh. Rajendra Kumar. We find that the Ld. CIT(A) did not give his finding on the discrepancy in the amount of the alleged loan appearing in the bank account and recorded in the books of accounts of the assessee. For deciding genuineness of the transaction, it is essential that entries of bank account and books of account should at least are tallied. In view of no finding given by the Ld. CIT(A) on the discrepancy of amount recorded, we feel it appropriate to restore the issue in dispute to the file of the Assessing Officer for verification of the amount of loan given and
19 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 entered in the bank account of the lender as well as receiver with the amount recorded in the books of accounts of the assessee. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. We find that, the Ld. CIT(A) has also not commented on the lack of creditworthiness of Sh. Rajendra Kumar. Sh. Rajendra Kumar, had retired in the year 2006 and is surviving on pension. He has also not filed return of income for the year under consideration and thus his creditworthiness has not been established by the assessee. Since, we have directed the Assessing Officer to verify the discrepancy of the amount received, we also direct the assessee to produce all necessary evidence in support of the creditworthiness of Sh. Rajendra Kumar and direct the Assessing Officer to decide the issue of creditworthiness of Sh. Rajendra Kumar in accordance with law. The ground No. 4 of the appeal is accordingly allowed for statistical purposes. 13. In ground No. 5, the Revenue has challenged the direction of the Ld. CIT(A) to the Assessing Officer for verifying the actual date of payment of SBI Life Insurance Premium and allow the claim under section 80C of Rs.27,000/-. According to the Assessing Officer, the assessee did not file any evidence of receipt in support of the payment, however, the Authorised Representative of the assessee submitted that payment to SBI Life Insurance premium was made vide cheque dated 31/12/2012, which was held by the Ld. AO as not falling in the year under consideration. Before the Ld. CIT(A), the assessee submitted that the actual date of cheque is 31/12/2010 and same is found entered in the books of accounts. In view of the submission of the
20 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 assessee, the Ld. CIT(A) directed the Assessing Officer to verify the actual date of payment of premium to SBI life insurance and allow the claim accordingly. 13.1 Before us, the Ld. DR relied that no proof of payment has been filed by the assessee either before the Assessing Officer or before the Ld. CIT(A) and, therefore, the finding of the Ld. CIT(A) is not justified. 13.2 The Ld. counsel, on the other hand, submitted that the Ld. CIT(A) has directed to allow subject to verification of the payment and, therefore, there was nothing wrong in the said direction of the Ld. CIT(A). 13.3 We have heard the rival submission and perused the relevant material on record. The issue in dispute is limited to as when the payment has been made to the SBI life insurance for premium. The contention of the Revenue is that no proof of payment has been filed by the assessee either before the Assessing Officer or before the Ld. CIT(A). We find that the assessee claimed before the Ld. CIT(A) that the payment has been made by cheque on 31/12/2010 as against the date of cheque recorded by the Assessing Officer as 31/12/2012. In view of the claim of the parties in respect of the date of cheque issued for payment of premium to SBI life insurance, the Ld. CIT(A) directed the Assessing Officer to allow the deduction under section 80IC subject to verification of the payment. We do not find anything unjustified in the direction of the Ld. CIT(A). If the cheque payment has been made during the year into consideration, the assessee is entitled to the deduction. In our opinion, there is no infirmity in the finding of the Ld. CIT(A) on the issue in dispute,
21 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 accordingly, we dismiss the ground No. 5 of the appeal of the Revenue. 14. In ground No. 6, the Revenue has challenged deletion of disallowance of depreciation of Rs.30,975/- in respect of new high-frequency x-ray machine. The Assessing Officer observed that, the machine was purchased for a sum of Rs.4,13,000/- vide invoice dated 26/03/2011 from Mohali (Punjab) and depreciation of Rs.30,975/- has been claimed by the assessee. According to the Assessing Officer, neither date of putting to use the x-ray machine in the year under consideration nor any evidence in support thereof was furnished by the assessee despite raising a specific query and then, he disallowed the depreciation of Rs.30,975/-. The Ld. CIT(A) deleted the disallowance observing that no sufficient opportunity of being heard was provided to the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: “I have considered the issue perused the explanation of the appellant’s counsel and also the assessment order. The case is that the appellant / assessee purchased the New High Frequency X-Ray Machine, in the last week of the relevant financial year, and made test check of the same during the year itself. It was a compact machine and did not require time for its installation. The assessing officer ha£ not denied this fact. I have also considered the' judicial pronouncement i.e In CIT v. Viswanath Bhaskar Sathe (1937) 5 ITR 621 the Bombay High Court held that, when the machinery is kept ready for use it can be said that, it is used for the purpose of business. The word "used" in section 10(2) (vi) of the Indian Income- Tax Act, 1922 should be understood in a wide sense so as to embrace passive as well as active user. The above decision was followed by the Patna High Court in CIT v. Dalmia Cement LTD. (1945) 13 ITR 415 wherein it was held that, the word "used" in section 10(2) (vi) of the Indian Income Tax Act should be understood in a wide sense so as to embrace passive as well as active user and consequently depreciation may be allowable in certain cases even though the machinery was not in use or was kept idle. The above decisions were followed by the Allahabad High Court in Niranjan Lai Ram Chandra v. CIT (1963) 49 ITR 177. In Capital Bus Service (P.)
22 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 Ltd. v. CIT (1980) 123 ITR 404 the Delhi High Court held that, the allowance for normal depreciation does not depend upon the actual working of the machinery. It is sufficient if the machinery in question is employed by the assessee for the purpose of the business and for no other business and it is kept by him. ready for actual use. The only objection of the AO is that the appellant has not brought on record any evidence and date of put to use of machinery. Here it may not be out place to refer my earlier observation in para 4 of the order. In the circumstances and facts of the case and keeping in mind the detailed explanation of the counsel for the appellant, the action of the AO in making a disallowance of depreciation is not maintainable and the same is deleted.” 14.1 The Ld. DR submitted before us that no evidence whether the machine was kept ready for actual use by the assessee or installation of machine etc. are filed by the assessee before the Ld. CIT(A) and therefore Ld. CIT(A) was not justified in deleting the addition relying mainly on the various decisions cited by the assessee, in absence of any evidences. 14.2 The Ld. counsel of the assessee, on the other hand, supported the finding of the Ld. CIT(A) 14.3 We have heard the rival submissions and perused the relevant material on record. It is settled law that depreciation is allowable even if the machine in question is employed by the assessee for the purpose of business and it is kept ready for actual use. In the instant case, the assessee was required to substantiate with evidences when the machine was received by the assessee and when same was installed. The Ld. CIT(A) has deleted the addition without verifying the said evidences. In view of the above facts and circumstances, we feel it appropriate to restore this issue to the file of the Ld. Assessing Officer for verifying the claim of the assessee with the direction to the assessee to produce all the necessary evidence in support of its claim of receipt of the machine or installation or put to use during
23 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 the year under consideration. It is needless to mention that assessee shall be afforded adequate opportunity of being heard. The ground No. 6 of the appeal of the Revenue is accordingly allowed for statistical purposes. 15. In ground No. 7, the Revenue challenged deletion of disallowances under various heads of Rs.13,03,021/-. The Revenue has raised the issue that disallowances have been deleted ignoring the fact that the assessee did not produce supporting bills and vouchers in respect of the expenses claimed. The disallowances made by the Assessing Officer consisted of following: head of expenses Total amount claimed Amount disallowed Computer expenses 39,036 10,000 Equipment repair 1,86,000 1, 25,000 Electricity expenses 1,53,669 72,600 Hospital maintenance 2,27,988 1,00,000 expenses Inverter battery 2,13,000 2,13,000 expenses Car running expenses 67,350 + 1,25,702 38,610 and car depreciation Staff salary expenses 12,72,600 3,18,150 CT scan expenses 2,34,050 78,016 Ultrasound Annexure-A 2,89,950 1,44,975 renewable Washing expenses, 1,08,263 21,653 pathology expenses and motorcycle expenses Staff welfare expenses 72,864 7,286 Mobile on telephone 27,324 7,415 expenses Generator expenses 79,706
15.1 In respect of computer expenses, the Assessing Officer examineed vouchers of two expenses amounting to Rs.5,850/- and Rs.5,700/- on tests check basis and found that same were incurred in cash for the purpose of purchase of computer printer.
24 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 According to the assessee, same was replacement charges whereas according to the Assessing Officer the expenditure was in the nature of capital expenditure. Thus, the Assessing Officer made disallowance of Rs.10,000/-. 15.2 Similarly, under the head ‘equipment repair’, the Assessing Officer examined two expenses of Rs.10,000 and Rs.1,00,000/-. The Assessing Officer found that expenditure Rs.10,000/- was incurred through cheque as against claim of the assessee of having incurred in cash. Similarly against expenses of Rs. 1 lakh, the name of the payee was not found in the bank statement. The assessee furnished the name of the party as Zenith Medical Systems Private Limited for service contract but the Assessing Officer noticed that said expenses was for service contract for the period from 1/02/2011 to 31/01/2012 and, thus, only period of two months was falling in the year under consideration. Assessing Officer also noticed that no TDS was deducted on the said payment. The Assessing Officer observed that out of the 12 debits under the head equipment repairs, 9 were incurred in cash. In view of the observations, the Assessing Officer disallowed a sum of Rs.1,25,000/-. 15.3 In respect of electricity expenses the Assessing Officer examined 3 bills mounting to Rs.21,430, Rs.36,516/- and Rs.72,600/- on tests check basis. The assessee furnished copy of only 2 bills of Rs.21,430/- and Rs.36,516/- but failed to produce the bill supporting amount of Rs.72,600/-. This expenditure of Rs.72,600/- was claimed by the assessee to be incurred in cash. In absence of the supporting bill, the Assessing Officer disallowed the sum of Rs.72,600/-.
25 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 15.4 In respect of ‘Hospital maintenance’ expenses also the Assessing Officer examined 3 bills on tests check basis and found discrepancies. In respect of bill of Rs.50,000/- in the ledger account, it was shown as paid through IDBI account on 23/04/2010, whereas in the supporting voucher it was shown as paid in cash on 22/04/2010. The Assessing Officer observed that sufficient cash was not available in the cashbook either on 22/04/2010 or 23/04/2010. Similar observations were made in respect of payment of Rs.30,000/-. According to the Assessing Officer, expenses made in cash exceeding Rs.20,000/-were not allowable in view of provisions of section 40A(3) of the Act. In view of the discrepancies, the Assessing Officer made disallowance of Rs.1 lakh out of the expenses incurred under the head Hospital maintenance expenses. 15.5 Similarly, the Assessing Officer observed discrepancies in expenses incurred under the head inverter battery expenses. The vouchers made have been observed as “Kuchha Receipts” on plain paper form 2 different persons but signature having made by the one person. The Assessing Officer also found overwriting on the amount of expenditure. The Assessing Officer disallowed entire expenditure of Rs.2,13,000/-. Further, disallowance under car running expenses and depreciation was made at the rate of 1/5th of the total expenses in view of the supporting expenses and no logbook maintained by the assessee for use of the car. Disallowance of Rs.3,18,150/- was made by the Assessing Officer out of staff salary expenses in view of the increase in expenses as compared to last year, incurring entire expenses in cash and non-production of salary register. The Assessing Officer
26 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 disallowed expenses of Rs.78,016/- out of CT Scan expenses in view of the failure of the assessee to furnish photocopy of bills on tests check basis. Disallowance out of Ultrasound and X-ray consumable amounting to Rs.1,44,975/- was made in absence of supporting vouchers. 15.6 Similarly, disallowance out of washing expenses, pathology expenses and motorcycle expenses amounting to Rs.1,08,263/- was made in absence of vouchers. Disallowance out of staff welfare expenses of Rs.7,286/- and mobile telephone expenses of Rs.7,415/- was also made in view of the similar observations. Disallowance of Rs.79,706/-has been made out of generator expenses in view of the bills without name of the seller and purchase of diesel of 202.59 litres on 31/03/2011, which according to the Assessing Officer was in the nature of prepaid expenses. The total disallowance of Rs.13,03,021/-made by the Assessing Officer has been deleted by Ld. CIT(A), observing as under: “I have considered the issue, perused the assessment order. It is a fact that the assessing officer has not pointed out any specific item of expenditure which was not incurred for the purposes of business. The accounts of the appellant were got audited u/s 44AB and the AO has not made a adverse comment on the. audited accounts. The claim of the counsel that the appellant’s case is covered by a decision delivered by the jurisdictional ITAT i.e. ITAT Delhi in the case of The India Thermit Corp. Ltd,... vs Assessee IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH "H" DELHI ]in I. T. Appeal No. 277 (Agra) of 2009, is in order. Looking into the entirety of the circumstances as have been discussed in the foregoing paras of the order, the disallowances as made by the AO are not sustainable and these aggregating to Rs.13,03,021/ are deleted.”
27 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 15.7 Before us, the Ld. DR submitted that the Assessing Officer has pointed out various anomalies and discrepancies in the vouchers or the bills maintained by the assessee in respect of the expenses and no ad-hoc disallowances have been made. He submitted that in view of the failure of the assessee to produce supporting bills and voucher, the Assessing Officer was justified in making disallowance. He submitted that the Ld. CIT(A) has deleted the disallowance without verifying the bills or vouchers in support of the expenses claimed. 15.8 On the other hand, the Ld. counsel claimed that the Assessing Officer has made ad hoc disallowances and therefore Ld. CIT(A) was justified in deleting the same. 15.9 We have heard the rival submissions and perused the relevant metal on record. We find that the Ld. CIT(A) has deleted the disallowance without verifying the discrepancies raised by the Assessing Officer in the assessment order in respect of various expenses. The Ld. CIT(A) has relied on the decision of the Tribunal in the case of India Thermit Corporate Ltd. (supra) wherein disallowance made on ad-hoc basis, has been deleted. But in the instant case, we find that the Assessing Officer has made disallowance under some heads of expenses corresponding to bills or vouchers not found and thus the decision relied upon by the Ld. CIT(A) is not squarely applicable to the facts of the instant case. In our opinion, the Ld. CIT(A) was required to examine the claim of the assessee of incurring of the expenses along with supporting vouchers subject to opportunity to the Assessing Officer for verification. In our view, the action of the Ld. CIT(A) is not justified. The issue needs verification at the hand of
28 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 Ld. CIT(A), but we have already restored the matter to the ld. AO on some other grounds and thus to avoid multiplicity of proceedings before different authorities, we feel it appropriate to restore this issue to the file of the Assessing Officer for examination of the claim of the assessee of expenditure afresh. The assessee is directed to produce all the necessary evidence including bills and vouchers in support of the expenses to justify its claim. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The ground of the appeal is accordingly allowed for statistical purposes. 16. The ground No. 8 of the appeal relates to addition of Rs. 1 lakh made by the Assessing Officer towards low household withdrawal under section 69C, which has been deleted by the Ld. CIT(A). The Assessing Officer observed that the assessee incurred only expenses of Rs. 94,000 towards the household withdrawal. According to the Assessing Officer, in view of the living standard of the family and the inflation, the withdrawals were not sufficient. The assessee explained that his wife also shown withdrawal of Rs.60,000/- and his father was also having pension income. The Assessing Officer observed that out of the withdrawal the assessee also incurred life insurance premium of Rs.15,851/- in cash on 28/02/ 2011, and thus according to him the withdrawals were not sufficient and he made addition of Rs.1,00,000/- against low household withdrawal. The Ld. CIT(A) deleted the addition observing as under: “I have carefully perused the assessment order and gone through the reply of the appellant. It is seen that the father of the appellant was a retired employee and other members of the family were also assessed to tax. The
29 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 same was admittedly brought to the notice of the A.O. The AO has not made any verification regarding the withdrawals made by the other family members. It is also noticed that the A.O. did not point out any expenditure on which the provisions of section 69C were attracted in the case of the assessee. In the circumstances of the case, this addition is also not reasonable and the addition of Rs.1,00,000/- is accordingly deleted.” 16.1 Before us, the Ld. DR relying on the order of the Assessing Officer submitted that the household withdrawal shown by the assessee were insufficient to meet the expenditure of the family looking to their standards of living. The Ld. counsel on the other hand relied on the finding of the Ld. CIT(A) and submitted that the Assessing Officer has not pointed out any specific expenditure under section 69C and made disallowance simply an estimated basis, which is not justified. 16.2 We have heard the rival submissions and perused the relevant material on record. We find that the assessee has shown withdrawal of Rs.94,000/-, his wife has shown withdrawal of Rs.60,000/- and the assessee also explained that his father, who is pensioner has also contributed to family expenses. On the other hand, the Ld. Assessing Officer has merely estimated addition of Rs. 1 lakh without any evidence of incurring amount by the assessee towards household expenses exceeding the expenses debited. In our opinion, addition cannot be made merely on estimate basis without any evidences. In our view, the Ld. CIT(A) is justified in deleting the addition. Accordingly ground of the appeal is dismissed.
30 ITA No.4578/Del/2015 & C.O. No.65/Del/2016 17. In the result, the appeal of the Revenue is allowed partly for statistical purposes and the cross objection of the assessee is dismissed. Order is pronounced in the open court on 24th Sept., 2018.
Sd/- Sd/- AMIT SHUKLA O.P. KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24th September, 2018. RK/-(D.T.D.) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR
Asst. Registrar, ITAT, New Delhi