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Facts
The assessee, a nursing home (KNS Memorial), received cash payments exceeding Rs. 2,00,000 against 51 bills/transactions in FY 2017-18, totaling Rs. 1,43,01,202. The Assessing Officer (AO) levied a penalty of Rs. 1,43,01,202 under section 271DA for contravening section 269ST, by treating the total medical expenses for each patient as a single transaction. The assessee argued that separate bills were issued for different medical services, and no single bill exceeded the Rs. 2,00,000 cash receipt limit.
Held
The CIT(A) deleted the penalty, finding that separate bills were issued for distinct medical services, none of which exceeded Rs. 2,00,000. The Tribunal upheld the CIT(A)'s decision, clarifying that a patient's admission and treatment do not automatically constitute a single 'event' or 'occasion' under section 269ST, especially when services are billed individually rather than as a composite package. Since no single transaction exceeded the prescribed cash limit, the penalty under section 271DA was not leviable.
Key Issues
Whether separate billings for various medical services provided to a single patient should be considered individual transactions or a single composite transaction for the purpose of cash receipt restrictions under Section 269ST of the Income Tax Act, 1961.
Sections Cited
Section 269ST of the Income Tax Act, 1961, Section 271DA of the Income Tax Act, 1961, Section 285BA(1) of the Income Tax Act, 1961, Rule 114B of the Income Tax Rules, 1962, Rule 114C of the Income Tax Rules, 1962, Rule 114D of the Income Tax Rules, 1962, Rule 114E of the Income Tax Rules, 1962
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Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the Revenue against the orders of the ld. CIT(A), NFAC, dated 18.07.2024, wherein the ld. CIT(A) has deleted the penalty levied by the Assessing Officer under section 271DA vide his order dated 8.03.2019 for the A.Y. 2018-19. The grounds of appeal
1. 1. 1. 1. 1. 1. are as under:- “1. The Ld. CIT(A) erred by facts and law by deleting the Penalty of Rs. 1,43,01,202/- as receiving of cash exceeding Rs. 2,00,000 against a single bill constitutes a violation of the provisions of section 269ST of the Income Tax Act, 1961 as no person shall receive an amount of two lakh rupees or more in aggregate from a person in a day, or in respect of a single transaction or in respect of transaction relating to one event or occasion from a person otherwise than by an account payee cheque or an account payee bank. The Ld. CIT(A) failed to consider and appreciate the facts incorporated in the assessment order.”
2. The facts of the case are that the assessee company derives income from the running of a Nursing Home. On 9.03.2018, the Directorate of Intelligence and Criminal Investigation (I&CI) carried out an inspection to check the compliance of Rule 114B, 114C, 114D and 114E of the Income Tax Rules, 1962 r.w.s. 285BA(1) of the Income Tax Act, 1961. During the course of this inspection, it was observed KNS Memorial A.Y. 2018-19 that during F.Y. 2017-18, the assessee had received cash amounting to Rs. 2,00,000/- or more against 51 bills / transactions. The total cash receipts against these 51 bills amounted to Rs. 1,43,01,202/-. The ld. AO observed that receiving of cash exceeding Rs. 20,000/- against a single bill constituted a contravention of the provisions of section 269 ST of the Income Tax Act, 1961 and therefore, he initiated penalty proceedings under section 271DA of the Act. In reply to the show cause notice issued by the AO, the assessee submitted that the hospital could not deny treatment to any patient merely on the ground that they were making payments in cash. Also sometimes, the payments did not have a PAN number and in such cases, it becomes difficult to comply with the provisions of PAN. Thus, the hospital was obliged to accept the payment in whichever mode it was made. Furthermore, it was submitted that none of the conditions stipulated under section 269 ST applied to the assessee and therefore, penalty under section 271DA could not be levied. However, the AO did not accept the arguments of the assessee and he preceded a levy a penalty under section 271DA vide his order dated 8.03.2019. While doing so, he reproduced the bills of 51 patients from whom cash in excess of Rs. 2,00,000/- had been received, so as to establish that each patient had paid more than the permissible limit against a single bill / transaction. He also rebutted the argument of the assessee with regard to insistence of payment in cash by pointing out that banking channels were available for making of payments. He also placed reliance on the statement of Sh. Nand Lal Jaiswal, Accounts Head of the assessee company where Sh. Jaiswal had admitted that due to ignorance of the relevant rules, the necessary compliances could not be done. The AO noted that the admission of the patient in the hospital and the treatment was one single, “event” and that the services provided by the hospital could not be divided into various bills. In view of these arguments, he levied a penalty of Rs. 1,43,01,202/- on the assessee.
3. Before the ld. CIT(A), it was submitted that the hospital offered different facilities to patient like MRIs, Blood Test, Surgery etc., and for each such facility, separate billing was done by the hospital. For each such facility a sales bill/receipt KNS Memorial A.Y. 2018-19 was drawn up by crediting, “sale” and debiting the, “patient” account. It was submitted that for no one transaction did the amount received by the hospital in cash ever exceed Rs. 2,00,000/- and the AO was incorrect in confusing the, “hospital registration numbers” of the patient issued by the hospital to the bills. It was submitted that hospital registration numbers were assigned to each patient for easy identification and for keeping a track of their medical records but it was neither a bill nor a receipt from transaction. It was further submitted that a survey team from the Directorate of Intelligence and Criminal Investigation (I&CI) had not examined the accounting records of the billing department. The accounts were maintained on a day-to-day basis and bills were issued to the patient for each service rendered. These sales bill having distinctive serial number were then posted in the ledger account of the patient as per the computerized software system. The ld. AO, while passing the penalty order had totally ignored the ledger accounts of the patients where it was shown that separate sales bill had been issued for each facility rendered to the patient and the same had been posted to patient accounts by debiting it. Instead, he had prepared his own ledger accounts by substituting hospital registration number of the patient for all different sales bills thus creating the impression that cash in excess of Rs. 2,00,000/- had been received against a single bill / transaction. It was, therefore, prayed that since section 269 ST was not applicable to such transactions, the penalty levied under section 271DA was bad in law and deserve to be deleted.
The ld. CIT(A) considered these arguments offered by the assessee and pointed out that the case of the assessee was not covered by clause (a) since the assessee had not received an amount of Rs. 2,00,000/- or more in aggregate from a person in a day. Furthermore, clause (c) of section 269 ST could not have any applicability in the assessee’s case since getting admitted to a hospital to undergo treatment could not be labelled as an, “event” or as, “occasion”. With respect to clause (b), the ld. CIT(A) held that it dealt with cases where Rs. 2,00,000/- or more had been received in cash in respect of a single transaction. He pointed out that the term, “transaction” should be taken to mean a clearly identifiable and separable KNS Memorial A.Y. 2018-19 accounting event which records the completion of an action or a course of action. He noted that each patient in the hospital was billed separately for every medical procedure and an accounting entry was passed after issuing a bill / receipt for that procedure. Taking the illustration of one patient, Mrs. Suryamukhi Bajpai, the ld. CIT(A) noted that the hospital registration number had been adopted as the bill number by the AO for the medical expenses borne by the patient. However, on examining the ledger account of the patient, it was observed that separate bills had been issued for each medical services rendered like anesthesia monitoring, ventilator charges, physiotherapy etc., and in no case did the bill exceed Rs. 2,00,000/-. The ld. CIT(A) noted that an advance was taken in cash / card on a particular day and then that advance was adjusted against medical services rendered after issuing a bill for that particular service. Each bill stood for a separate transaction and in every case the amount of the bill was below Rs. 2,00,000/-. By assuming that the registration number of the patient was also a bill number, the AO had considered the entire medical expenses of the patient as chargeable against a single bill, while the truth of the matter was that separate bills/receipts had been issued for each medical service availed by the patient. The ld. CIT(A) satisfied himself that separate bills had been issued against separate medical services availed and in no case did the amount of the bill exceed Rs. 2,00,000/-. Accordingly, he came to the conclusion that the ld. AO was incorrect in invoking section 269 ST and subsequently levying a penalty under section 271DA. He therefore, deleted the penalty.
The Department is aggrieved at this deletion of penalty and has accordingly come in appeal before us. Sh. R.R.N. Shukla, Sr. DR (hereinafter referred to as the DR) appearing on behalf of the Revenue drew our attention to the AO’s comments / statement of facts accompanying the appeal. It was submitted that the AO had clearly pointed out that the assessee had received the cash exceeding Rs. 2,00,000/- against a single bill which constitutes a contravention of the provisions of section 269 ST of the Income Tax Act, 1961. It was submitted that when a patient was admitted to a hospital, he had to undergo various procedures. KNS Memorial A.Y. 2018-19 All these procedures were taken into account and finally at the time of discharge, one composite bill was issued to the assessee for payment. Since, one composite bill was issued to the assessee and the amount exceeded Rs. 2,00,000/- then in all such cases, the hospital was obliged to accept the amounts in mode other than cash. The failure to do so clearly brought them in violation of section 269 ST and therefore, the penalty levied upon the assessee was justified.
On the other hand, Sh. K.R. Rastogi, C.A. (hereinafter referred to as the AR) supported the orders of the ld. CIT(A) and pointed us to the details of bills of the patient Mrs. Suryamukhi Bajpai which had been analyzed by the ld. CIT(A) and also by the AO in the assessment order. The ledger account of the said patient was contained on pages 40 and 41 of his paper book and the bills issued to the patient were contained on pages 42 to 73 of the paper book. The ld. AR pointed out that perusal of the ledger account would reveal that the hospital had rendered various services to the said patient and for each of the services that had been rendered, a separate bill had been drawn up. None of these bills were in excess of Rs. 2,00,000/-. Therefore, when the final bill of dues was drawn up at the time of discharge, the details of all these bills were included and adjusted against the advances already made. The balance was to be paid by the patient. It was prayed that since each of the bills was for a separate service therefore, the violation of section 269 ST had to be viewed in the context of the service rendered and not in the context of the composite ledger account because some patients may require more services and some patient may require less. It was submitted that the ld. CIT(A) had correctly appreciated the issue at hand and granted relief to the assessee and his orders may therefore, be upheld and the deletion of the penalty may be confirmed.
We have duly considered the facts and circumstances of the case. We are in agreement with the ld. CIT(A) that the admission of a patient to a hospital for treatment cannot be regarded as one event or occasion, as the terms, “event” and “occasion” are to be given their common place meanings and would not be KNS Memorial A.Y. 2018-19 attracted to the admission in a hospital. It is further noted that in the present case, there is no allegation that any amount of Rs. 2,00,000/- has been received from a person in aggregate in a day. Thus, the issue to be examined is whether the admission and a treatment of a patient is to be treated as a single transaction or whether they are to be treated as separate transactions, depending upon the services availed. On many occasions, there are situations where the hospital offers a composite package for the provision of a medical service and such packages include entire gamut of services delivered by a hospital in the course of rendering such treatment including stay, food, tests, consultations, surgeries, medicines etc,. Such composite packages could be considered to be a single transaction. However, in the present case, where it is found that the patients are billed in respect of each individual service provided to the patients and there is no fixed rate for the rendering of a particular type of treatment, it cannot be said that the final statement of account represents a single bill relating to a single transaction so as to attract the provisions of section 269 ST. During the course of the medical treatment, as is obvious from the specimen copies of the bills issued to patient Mrs. Suryamukhi Bajpai, the patients are offered several services. Each service is billed separately and is offered depending upon requirements. In view of the fact that the services are billed separately and do not form a part of a package, they cannot be held to cumulatively held to constitute a single transaction so as to attract the provisions of section 269 ST. Accordingly, we uphold the orders of the ld. CIT(A) and hold that in view of the fact that in each case separate bills have been issued against medical services availed and in no case, does the amount of the bill exceed Rs. 2,00,000/-, penalty under section 271DA is not leviable upon the assessee for collection of the balance amount in a ledger account which reflect the advances and expenditure incurred on a patients’ treatment during the course of stay in the hospital. Such a violation would only be there if the amount received was in excess of Rs. 2,00,000/- in aggregate from a person in a day, but since there is no such allegation by the ld. AO in the course of the penalty order, the penalty cannot be upheld on the logic that the medical treatment constitutes a single event or that