DR. SHEILA ROHATGI,KOLKATA vs. ITO, WD.22(1), KOLKATA, KOLKATA

The captioned appeal filed by the assessee, pertaining to Assessment Year 2009-10, is directed against an order passed by the Commissioner of Income Tax(Appeals)-6, Kolkata, in appeal No.216/CIT(A)-6/Kol/13-14, dated 09.11.2016, which in turn arises out of an order passed by Assessing Officer u/s 144 of the Income Tax Act, 1961, (hereinafter referred to as the “Act”), dated 28.03.2013. 2.The brief facts of the case qua the assessee are that the assessee is a medical practitioner (plastic surgeon). During the A.Y 2009-10, she ran a clinic named Calcutta Aesthetic Surgery Clinic At 34/1M Ballygunge Circular Road, Kolkata. She also attached to B. P. Poddar Hospital and Health Point and performed operation there as per requirement of the nursing homes. A survey Dr. Sheila Rohatgi A.Y. 2009-10 u/s 133A of the I.T Act was conducted at the assessee’s business premises at 34/1M, Ballygunge Circular Road, Kolkata – 700 019, on 18th February 2009. Inventory of different documents, such as receipt bills, diaries, patients profile and cash was found during the survey operation and these documents were impounded. Cash amounting to Rs.18,005/- was found in the business premises of the assessee during the course of survey. However, regular books of accounts i.e. cash book, ledger etc. were not found and accordingly it could not be verified whether the transactions resulted in the documents identified as above and cash found were part of the regular accounts. Deposition of Dr. Sheila Rohatgi was taken during the course of survey on 18.02.2009 and subsequently her statement was recorded u/s 131 of the Income Tax Act on 19.02.2009. The assessee stated inter alia that professional income during the financial year would be Rs.10 lakhs but no advance tax was offered by the assessee. The return was non-est and notice u/s 148 was issued on 22nd December 2011 and was served upon the assessee on 23rd December 2011. Then the assessee stated that the return for A.Y 2009-10 was filed on 24thJuly 2011. The Assessing Officer then informed the assessee that the return for the A.Y 2009-10 filed on 24thJuly 2011 was non-est and was requested for filing return of income in response to notice u/s 148. But no return was filed. Later on, the A.O issued notices u/s 142 on 31st December 2012 and again on 14th February 2013. The A.O based on the documents impounded during survey operation, the assessee’s statements recorded u/s 131 and the documents and explanations filed by the assessee during the assessment proceedings have been considered and based on these documents, the A.O made several additions. Page | 2 Dr. Sheila Rohatgi A.Y. 2009-10 3. Ground No.1 raised by the assessee, before us, reads as under: “1. That the CIT(A) totally erred in confirming the addition of Rs. 2,54,040/- on a/c of insufficient drawings and failed to appreciate that (a) the total drawings as per Balance Sheet is Rs. 6,66,239/- and not Rs. 3,01,019/- as taken by the A.O. and confirmed by the CIT(A),(b) correctness of drawings can be adduced from the on-line e’-filing of l.T. Returns beyond all controversies, (c) transfer of unsecured interest free loan of Rs. 3,00,000/- from the husband a/c with the CITl Bank to the appellant's a/c with Stanchart Bank on 11.12.2008, (d) assuming that Rs. 5,00,000/- spent on son's marriage is the sole responsibility of the appellant in a joint family wherein everyone well established having independent source of income there by causing an error in perception and judgment and such an addition of Rs.2,50,040/- on a/c of insufficient drawings is bad in law and on facts, cannot be sustained and has to be deleted. 3.1 Brief facts qua the issue are that the Assessing Officer made addition on account of insufficient drawings. In the balance sheet, the assessee showed drawings for the relevant financial year at Rs.3,01,019. The Assessing Officer recorded her statement under section 131 of the Act, on 19.02.2009 where the assessee deposed that she had spent Rs.5,00,000/- on her son’s marriage and household expenses during the financial year was Rs.2,50,000/-. Therefore, the AO held that as per her own admission, minimum drawings for the financial year should have been shown at Rs. 7,50,000/-. Since the assessee has shown drawings in her balance sheet at Rs.3,01,019/-, therefore insufficient drawings would be at Rs. 4,48,981 ( that is, the difference between Rs. 7,50,000/- and Rs.3,01,019 was treated by the AO as insufficient drawings). The assessee did not explain the difference amount, before the AO, and therefore AO made the addition of Rs.4,48,981/- stating that said money had been expanded by the assessee from unexplained source. 3.2 Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the ld CIT(A). Regarding inadequate drawings for household Page | 3 Dr. Sheila Rohatgi A.Y. 2009-10 purposes of Rs.4,48,981/-,the ld CIT(A) observed that the assessee had disclosed drawing ofRs.3,01,019/- in her balance sheet. However, household expenses during the financial year were not less than Rs.2,50,000/- as per the assessee's statement u/s. 131 recorded on 19.02.2009. Further, as per the statement of the assessee, Rs.5,00,000/-had been spent on her son's marriage during the relevant financial year. Thus,total expenses amounted to Rs.7,50,000/- ( Rs. 2,50,000 + Rs.5,00,000) as against which drawings for the purpose of household expenses of Rs.3,01,019/- only were declared by the assessee. Therefore, CIT (A) observed that the AO was right in making the addition of Rs. 4,48,981/- ( that is, should be drawings Rs. 7,50,000 – Rs.3,01,019/-). The assessee submitted before the CIT(A), that he had incurred expenses usingcredit card of Rs.1,94,941/- also. The ld. CIT(A) noted that credit cardexpenses of Rs.1,94,941/- have also been declared, by the assessee in her balance sheet, which have not been considered by theAO. Therefore, the ld CIT (A) directed the AO to give credit for the credit card expenses of Rs.1,94,941/- and balance amount of Rs. 2,54,040/- ( that is Rs. 4,48,981 - Rs. 1,94,941/-) has been confirmed by the ld CIT(A), for which the assessee is in appeal before us. 3.3 The ld Counsel of the assessee has submitted before us that the A.O. had passed the order u/s. 144 taking the drawings figure for Rs. 3,01,019/-. He estimated family expenses Rs. 2,50,000/- as also son's marriage expenses of Rs. 5,00,000/- and added back Rs. 4,48,981/- (that is, Rs.7,50,000 – Rs.3,01,019) on a/c of insufficient drawings. During the appellate proceedings, it was pointed out by the assessee that the personal drawings as per Balance Sheet was at Rs. 6,66,239/- and not Rs. 3,01,019/- which was pointed out by Page | 4 Dr. Sheila Rohatgi A.Y. 2009-10 the AO. The assessee had unsecured, interest free loan Rs.3,00,000/- transferred from the husband’s ClTl BANK to her a/c with Stanchart on 11.12.2008 for thispurposes before the marriage. While confirming the addition made by the A.O. the CIT(A) allowed partial relief of Rs. 1,94,941/- on a/c of Credit Card payment, out of Rs.4,48,981/- and confirmed the balance of Rs. 2,54,040/-. The ld counsel stated that as per Balance Sheet of the assessee, as on 31st March, 2009, the total drawings is at Rs.6,66,239/- ( pb.1). The assessee also took the unsecured loan of Rs.3,00,000/- from her husband which is getting reflected in the liability side of the assessee`s balance sheet, (vide pb 1). The assessee also shown credit card expenses at Rs.1,94,641/- which is also part of drawings. The ld. counsel also explained us the figures which he had filed on-line e-filing of returns, as follows:- Capital A/c Balance as on 31.3.08 1,96,60,713/- Add: Surplus for the year 08-09 65,50,261/- 2,62,10,974/- Less: Total Drawings for the year 08-09 8,24,388/- Closing balance on 31.03.2009 2,53,86,586 Details of drawings: Personal 6,66,239/- Other Adjustment 1,58,149/- Total 8,24,388 The ld. Counsel submitted that all details cited above were there in the Income Tax Return filed by the assessee u/s 139(1) for A.Y. 2008-09 and for A.Y.2009- 10. Therefore, the AO as well as the CIT(A) has failed to verify these details. It is Page | 5 Dr. Sheila Rohatgi A.Y. 2009-10 crystal clear that all details were there in the Income Tax Return filed by the assessee as well as in the Balance-sheet and Profit & Loss Account submitted by the assessee. Thus, the total drawings of the assessee is at Rs.6,66,239/- ( pb.1). The assessee also took the unsecured loan of Rs.3,00,000/- from his husband which is getting reflected in the liability side of the assessee`s balance sheet. Therefore, the total drawings of the assessee is at Rs.9,66,239(Rs.6,66,239 + Rs. 3,00,000) which is more than the amount estimated by the AO. The AO estimated the drawings of the assessee at Rs 7,50,000/- which is less than Rs.9,66,239/-. However, Rs.3,00,000/- is not a drawings but it is the loan taken by the assessee from her husband for son`s marriage. A part amount was used by the assessee for her son`s marriage, out of her drawings Rs.6,66,239/-. Therefore, the assessee had sufficient funds for Son`s marriage and to run the family and hence the addition confirmed by ld CIT(A) needs to be deleted. 3.4 Having heard the assessee and perused the materials available on record, we note that assessee has submitted Balance-sheet before us on 31st March, 2009 and Profit & Loss Account for the year ending, on 31st March 2009 which relates to A.Y 2009-10. The assessee also submitted before us the return of income filed under section 139(1) for the Assessment Year 2008-09 and 2009-10, where the opening balance of capital as on 01.04.2008 is shown at Rs.1,96,60,712/-, profit for the assessment year 2009-10 is shown at Rs.65,50,264/- and drawings is shown at Rs.6,66,239/-. The assessee also took a loan of Rs.3,00,000/- which is getting reflected in the liability side of assessee`s balance sheet. We are of the view that total funds available to the assessee was at Rs.9,66,239 ( Rs.6,66,239+Rs.3,00,000), which was sufficient Page | 6 Dr. Sheila Rohatgi A.Y. 2009-10 for her son`s marriage and for family and in fact, which is more than the amount estimated by the AO. The Assessing officer as well as the ld CIT(A) failed to correlate the figures in the balance sheet of the assessee with the return of income filed by the assessee. The Ld counsel also pointed out that other family members were also contributing towards her son`s marriage. Therefore, based on the above discussion, the addition confirmed by the ld CIT(A) at Rs.2,50,040/- needs to be deleted. Accordingly, we delete the addition of Rs.2,50,040/-. 3.5 In the result, the appeal filed by the assessee on ground No.1, is allowed.

Ground No.2 raised by the assessee, before us, reads as under: “2.That the CIT(A) was totally unjustified in confirming the addition of Rs. 8,39,920/- asundisclosed professional fees on the basis of documents impounded u/s. 133A without evenconsidering that the same was already included in the gross professional fees of Rs.9,22,226/-disclosed in the Return, without going into the facts and merits of the case resulting induplication of entries, causing a factual error in judgment and hence, such high- pitchedaddition cannot be sustained and has to be deleted.” 4.1 The brief facts qua the issue are that the A.O. made addition on account of professional fees at Rs.8,39,920/- as the assessee did not provide any explanation about this expenses. The Assessing Officer noted on verification of the statement of the assessee vis–a-vis impounded documents, it was seen that consultancy charges as well as operation charges received from many other patients have not found place in the statement. The AO noted that the names of the patients from whom the assessee had received fees but failed to disclose the same as her income. Therefore, the AO prepared two annexures, viz: Annexure-B containing the details of fees received but assessee had failed to disclose and Annexure-C containing the details of fees received from patients on their 2nd visit but shown as nil. Therefore, the AO made addition of Rs.8,39,920/-. 4.2 Aggrieved form the addition of Rs. 8,39,920/- the assessee filed an appeal before the ld CIT(A), who has confirmed the addition made by AO. Before the ld. CIT(A), the assessee explained that undisclosed professional fees of Rs.8,39,920/-. The details like bills number, name of patient, nature of charges and amount of charges have been listed in variousannexure to the assessment Page | 7 Dr. Sheila Rohatgi A.Y. 2009-10 order. Duringtheappellate proceedings, before the CIT(A), the assessee claimed that professional fees of Rs.2,26,385/- from others (including consultation) disclosed as a part of total professional fees of Rs.9,22,226/- credited to the income and expenditure account were also included in the professional fees of Rs.8,39,920/- added by the AO. The ld. CIT(A) observed that, the assessee has not show many specific nexus between the individual undisclosed professional charges listed bythe AO and the charges which might have been disclosed by the assessee, if any. Therefore, ld. CIT(A) rejected the explanation submitted by the assessee. The assessee has also pointed out two itemsrepeated twice in the AO's list of undisclosed professional fees. One is in respect of one Pratap Singh, but the amounts have been included on the basis of two differentimpounded files of documents. Similarly, two equal payments in respect of one MayaJaiswal on two different dates could be for various reasons like two differentinstallments of payment or two separate procedures in respect of the same treatment. The ld CIT(A) observed that the assessee has also vaguely taken two contentions against listing of first visit aftersecond visit of a patient or discrepancy in mentioning of the number of the visit but notexplained it properly. In conclusion, the assessee has taken vague contentions but notexplained properly her objections with the support of the relevant documents. Therefore, ld. CIT(A) rejected the assessee`s explanations and the addition of Rs.8,39,920/- was confirmed, therefore the assessee is in appeal before us. 4.3. The Ld. Counsel for the assessee has submitted before us that Ld. CIT(A) was totally unjustified in confirming the addition of Rs.8,39,920/- as undisclosed professional fees on the basis of documents impounded u/s.133A without considering that the same was already included in the gross professional fees of Rs.9,22,226/- as disclosed in the return of income. The ld CIT(A) confirmed the addition made by AO without going into the facts and merits of the case. The Ld. Counsel submitted that assessee is an aesthetic (Plastic) surgeon. She showed her professional receipts of Rs.9,22,226/-. On the basis of survey conducted u/s.133A, further addition of Rs.8,39,920/- was made by the A.O. It was further explained that said income were already included in the professional income declared by the assessee. That is, the professional receipts of Rs.9,22,226/- includes Rs.8,39,920/- The CIT(A) did not go through the merits and factual findings. The Ld. Counsel submitted that the assessee has already explained before the Ld. CIT(A) that professional fees of Rs.2,26,385/- from others Page | 8 Dr. Sheila Rohatgi A.Y. 2009-10 (including consultation) disclosed as a part of total professional fees of Rs.9,22,226/- credited to the income and expenditure account were also included in the professional fees of Rs.8,39,920/- added by the AO. Therefore, ld counsel submitted before us that based on the factual position discussed above, the addition of Rs.8,39,920/- should be deleted. 4.4 Having heard the rival submissions and perused the materials available on record, we are of the view that the assessee had already submitted before the Ld. CIT(A), the bills number, name of patient, nature of charges etc. The ld. CIT(A) did not find and fault in these details.The amount of charges have been listed in variousannexure to the assessment order. The ld Counsel submitted before us that the professional fees of Rs.2,26,385/- from “others” (including consultation) disclosed as a part of total professional fees of Rs.9,22,226/- credited to the income and expenditure account were also included in the professional fees for Rs.8,39,920/-. The ld. CIT(A) held that the assessee has not shownany specific nexus between the individual undisclosed professional charges listed bythe AO and the charges which might have been disclosed by the assessee, if any. The said belief of the ldCIT(A) is based on surmise and conjecture. Therefore, the Ld. CIT(A) rejected the submissions of the assessee and confirmed the addition made by the AO based on surmise and conjecture. But we are of the view that AO as well as CIT(A) failed to find out any mistake in the details given and explanations submitted by the assessee. The assessee explained that Professional fee of Rs. 9,22,226/- includes Rs. 8,39,920/-. The ld AO as well as ldCIT(A) failed to find any mistake in the said explanation. The assessee explained that professional fees of Rs.2,26,385/- from others (including consultation) disclosed as a part of total professional fees of Rs.9,22,226/- credited to the income and expenditure account were also included in the professional fees of Rs.8,39,920/- added by the AO. The assessee has discharged its primary onus to establish the nexus between the figures but the Revenue has failed to find any mistake that why this nexus established by the assessee, is wrong. The Ld. CIT(A) rejected the explanations Page | 9 Dr. Sheila Rohatgi A.Y. 2009-10 of the assessee without any basis. Therefore, we are of the view that the assessee has established the nexus between the individual undisclosed professional charges and the charges which might have been disclosed by the assessee. Therefore, based on the factual position discussed above, we delete the addition made by the Ld. CIT(A). Accordingly, we delete the addition of Rs.8,39,920/-. 4.5 In the result, the appeal filed by the assessee on Ground No.2, is allowed.

Ground No.3 raised by the assessee, before us, reads as under: “3.That the CIT(A) was totally unjustified in enhancing the additions to Rs. 68,000/- being 100% on a/c of advertisement u/s.37(1) as against Rs. 34,000/- being 50% disallowance by the A.O.and failed to appreciate the guidelines issued by the Indian Medical Council on this issueauthorizing such expenses under certain circumstances and hence, the action of the CIT(A) iscontraryto such exception clauses, cannot be sustained and has to be deleted.” 5.1 The brief facts qua the issue are that the A.O disallowed the advertisement expenses at Rs.34,000/- stating that the same is in personal nature. In the income and expenditure account, the assessee debited Rs.3,77,392/- on account of advertisement which includes Rs.68,000/-, paid to Mr. Ashok Diwan towards monthly programme of various clubs. The assessee produced the biil of advertisement before the AO, but the AO held that out of Rs. 68,000/-, an estimate of 50% of the claim should be disallowed, being the same is in personal nature. Accordingly, the AO disallowed Rs. 34,000/-. 5.2 Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A), who has enhanced the addition at Rs.68,000/-.The CIT(A) observed that AO had disallowed advertising expenses of Rs.34,000/- being 50% of the expenses of Rs.68,000/- claimed by the assessee. According to the AO, thepayments had been made for various monthly programmes of various clubs. Theassessee in her written submission explained during the appellate proceedings thatthe expenses had been incurred on advertisements which were for cosmetic surgery inthe name of "The Calcutta Aesthetic Surgery Clinic". It Page | 10 Dr. Sheila Rohatgi A.Y. 2009-10 was stated that the purposewas very clear i.e., for expansion of client base and maximum solicitation amongst theelite class of people. The ld. CIT(A) observed that these expenses are in violation of regulations of Medical Council of India (MCI) and the expenses have to be fully disallowed in accordance with section 37(1) of the Act. Therefore, ld. CIT(A) directed the AO to enhance the disallowance of advertisement expenses to Rs.68,000/-. Aggrieved by the said order of CIT(A), the assessee is in appeal before us. 5.3. The Ld. Counsel for the assessee has submitted before us that the Ld. CIT(A) was totally unjustified in enhancing the additions to Rs.68,000/- being 100% on account of advertisement U/s 37(1) as against Rs.34,000/- being 50% disallowance by the A.O.and failed to appreciate the guidelines issued by the Indian Medical Council on this issueauthorizing such expenses under certain circumstances and therefore, the action of the Ld. CIT(A) to enhance the addition from Rs.34,000/- to Rs.68,000 is arbitrary and contrary to the law. The Ld. Counsel further submitted that the assessee spent Rs.68,000/- on account of advertisement. The AO made 50% i.e. Rs.34,000/- disallowance on estimate basis. The ld CIT(A) held that assessee did the violation of regulations of Medical Counsel of India (MCI) therefore these advertisement expenses should be disallowed. But, in fact, the assessee did not make any violation of regulations of Medical Counsel of India (MCI). The Ld. CIT(A) did not go into the merits of the case and, therefore, he failed to give a definite conclusion. The Ld. Counsel pointed out, vide Paper Book Page 21, wherein he explained guidelines of advertisement in respect of medical services which are quoted as below: “An institution run by a physician for a particular purpose such as a maternity home, nursing home, private hospital, rehabilitation centre or Page | 11 Dr. Sheila Rohatgi A.Y. 2009-10 any type of training institution etc. may be advertised in the lay, press, but such advertisements should not contain anything more than the name of the institution, type of patients admitted, type of training and other facilities offered and the fees.” The Ld. Counsel therefore, pointed out that advertisement is permitted as an institution but not as an individual capacity. He has also shown the copy of the advertisement which is on Paper Books Page 28. The Ld. Counsel, therefore, submitted that expenditure done by the assessee were not for violation of any law and it is not penal in nature. The advertisement expenses incurred by the assessee by an institution run by her is allowed for particular purpose. The advertisement expenses were incurred by the assessee in the name of “THE CALCUTTA AESTHETIC SURGERY CLINIC”, which is an institution is run by a physician, that is, by assessee. Therefore, the assessee has incurred advertisement expenses within the parameters of the medical rules. 5.4 Having heard the rival submissions and perused the materials available on record, we are of the view that the assessee has incurred advertisement expenses within the parameters of the rules and regulations of the medical services. This advertisement is not tantamount to the violation of any act. The assessee did advertisement as per the guidelines of medical services. It is clearly mentioned that in respect of medical services an institution run by a physician for a particular purpose such as a maternity home, nursing home, private hospital, rehabilitation centre or any type of training institution etc. may be advertised in the lay, press, but such advertisements should not contain anything more than the name of the institution, type of patients admitted, type of training and other facilities offered and the fees etc. The assessee in this case has incurred advertisement expenses within the parameters as explained above. Therefore, based on the above discussion, we are of the view that the Page | 12