DR PALLAB GHOSH,KOLKATA vs. I.T.O WD - 55(1),KOLKATA, KOLKATA

A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 3 12. For that the interest u/ s. 2348 & 234C amounting to Rs.3,40,211/- and Rs.5,278/ - respectively charged mechanically is wrong & illegal. 13. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.”

Shri Soumitra Choudhury, Ld. Advocate appeared on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative appeared on behalf of Revenue.

4. The assessee in the year under consideration has introduced capital in the form of cash on 01.04.2007 in his capital account. On question by AO about source of capital introduction, the assessee submitted that it is arising out of past savings of 22 years. He further submitted that the aforesaid amount has been shown in the personal statement of balance sheet. However, AO disregarded the plea of assessee by observing that:- a) The drawing from the balance-sheet of assessee is not reflecting. b) There was no point to keep such huge money for such a long time in the form of cash though assessee is maintaining personal bank account. c) Assessing Officer also observed that assessee has also introduced cash as capital in his firm in the earlier years; A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 4 In view of the above, Assessing Officer disallowed the same u/s 69A of the Act and added the introduction of cash of ₹3,89,550/- to the total income. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that there was drawings in the earlier years and this investment is arising out of such drawings. However, Ld. CIT(A) disregarded the plea of the assessee and confirmed the order of AO by observing as under:- “The submission of the A/R, grounds of appeal

and assessment order were duly considered. Appellant has shown introduction of Rs.3,89,550/- out of past savings in past 22 years. It is a afterthought story. Why he has not keep all these part savings in bank A/c in this world of modernized banking? Appellant is a educated person to handle banking transactions. Hence, AO was right in adding a sum of Rs.3,89,550/- u/s. 69A of Income Tax Act. Appeal of appellant is dismissed on this issue.” Aggrieved by this order, assessee has come up in appeal before us.

6. Before us Ld AR filed paper book which is running pages from 1 to 71 and stated that assessee has shown drawing for ₹ 15,88,171/- which beginning from AYs 2004-05 to 2007-08 respectively. He in support of assessee’s claim has submitted the year-wise details of drawings which is placed on page 13 of the paper book. Ld. AR stated that issue may be decided on merit. On the other hand, Ld. DR vehemently supported the order of Authorities Below.

7. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that assessee has shown introduction of capital in the form of cash as on 01.04.2007 for ₹ 3,89,550/- and assessee claimed that such introduction of cash made out of past savings from several years. However, Authorities Below disregarded the argument of assessee and accordingly the addition was made u/s 69A of the Act. Now the issue before us arises so as to whether the addition made by the Authorities Below u/s. 69A of the Act is justifiable in the facts and circumstances of the facts of the case. In this regard, we find that admittedly the drawing was made by the assessee in the earlier years but the question arises whether the same drawings was introduced as capital in the year under consideration. On perusal of assessment order we find that the assessee has introduced cash as capital in the earlier years as detailed under : A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 5 S.No. Financial Year Amount (Rs.) 1. 2002-03 Rs. 2,18,613.00 2. 2003-4 NIL 3. 2004-05 Rs. 9,00,000.00 4. 2005-06 Rs. 9,10,000.00 The assessee has shown the drawings in the earlier years as under : 1. 2002-03 No information 2. 2003-4 Rs. 1,32,263.00 3. 2004-05 Rs. 1,79,145.00 4. 2005-06 Rs.10,32,676.00 5. 2006-07 Rs. 2,44,087.00 From the above, it is clear that the assessee has withdrawn and introduced the capital in the earlier years. On verification of the drawing and capital introduction, we find that there was hardly any surplus fund available to the assessee for infusion of fresh capital. The assessee must also be spending money on actual personal expenses. In view of above we are of the view that the assessee failed to explain the sources of cash with supporting evidence. Therefore the ground of appeal of the assessee is dismissed.

8. Next issue raised by assessee in this appeal in grounds No. 3 to 5 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the addition of ₹4,39,560/- u/s 40(a)(ia) of the Act.

9. The assessee, in the year under consideration has claimed certain expenditures towards the payment of several doctors amounting to ₹4,39,560/-. On such payment the assessee did not deduct any TDS u/s 194J of the Act. On question by AO for non- deduction of TDS on the aforesaid payments assessee submitted that gross receipt in the financial year 2006-07 was less than prescribed limit as specified u/s. 44AB of the Act. Therefore, the provision of TDS as specified u/s. 194J of the Act is not applicable. However, AO observed that the gross receipt of assessee for the financial year 2006-07 exceeded the limit as prescribed u/s. 44AB of the Act. Therefore, the ITA No.659/Kol/2013 A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 6 provisions of TDS for the financial year 2007-08 are very much applicable upon the assessee. Thus the AO disallowed the sum of ₹4,39,560/- on account of non- deduction of TDS and added the same to the total income of assessee.

10. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that no fees to the doctors were payable at the end of the financial year and therefore no TDS required to be deducted in terms of ITAT order Special Bench in the case of M/s Marilyn Shipping & Transpors vs. ACIT, Raange-1, Visakhapatnam in relating to assessment year 2005-06 reported in 136 ITD page 23 & 146 TTJ page 1. However, Ld. CIT(A) sustained the addition made by AO by observing as under:- “The submission of A/R, grounds of appeal

and assessment order were duly considered. The AO disallowed a sum of Rs.4,39,560/- for non-deduction of TDS on professional fees. Appellant relied on the order of Hon'ble ITAT Special Bench judgement M/s Merilyn Shipping & Transports vs. ACIT, Range- 1, Vishakhapatnam ITA No. 477/Viz/2008, as nothing is payable, addition should be deleted. But the operation of the aforesaid judgment has been stayed by Hon'ble High Court of Andhra Pradesh till further orders. Hence, disallowance made by AO u/s 40(a)(ia) of Rs.4,39,560/- is sustained.” Aggrieved by this, assessee has come up in appeal before us.

11. Before us Ld. AR reiterated same submissions as made before Ld. CIT(A). Further he submitted that the money receipt from nursing home is less than prescribed limit as specified u/s. 44AB of the Act. Ld. AR further submitted that the receipt shown in the financial year 2006-07 is of ₹7.50 lacs only. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

12. We have heard the rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that the payments made to the doctors were disallowed by Authorities Below on account of non-deduction of TDS u/s. 194J of the Act. To this issue, argument placed by Ld. AR for the assessee before us was that the gross receipt of assessee in the immediate proceeding financial year was less than as prescribed limit u/s 44AB of the Act. However on perusal of the submission of the assessee we find that the assessee has shown income from two sources (1) medical professional receipts (2) Nursing home receipts. The receipts from both the sources are of Rs. 14,34,833/- only in the A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 7 immediate preceding financial year 2006-07. In our view for the applicability of the provisions of section 44AB of the Act and 194J of the Act, the gross receipts from both the sources shall be clubbed. Accordingly we find that the gross receipts for the tax audit for the FY 2006-07 is of more than Rs. 10 lacs so it is clear that the assessee was liable for tax audit for the FY 2006-07, consequently the TDS provisions will be applied for the year under consideration. Hence the assessee has defaulted in the TDS deduction on the professional payment to doctors, therefore the deduction for the same shall not be allowed. Hence the ground of appeal of the assessee is hereby dismissed.

13. Next issue in this appeal of assessee raised in Ground No.6 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of ₹6,56,835/- u/s 41(1) of the Act.

and assessment order were duly considered. The AO added a sum of Rs.6,56,835/- u/s. 41(1) of Income Tax Act. The issue has been dealt by the AO in detail in assessment order. Appellant in A.Y. 2008

09. Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 8 the assessment proceeding could not verify the creditors. These creditors are 2- 3 years old and their genuineness could not be established before AO. Appellant has taken a plea that I have disclosed these creditors u/s. 41(1) in A.Y 2010-11 and A.Y 2011-12. From the disclosure of appellant it is clear that these creditors are unexplained. Hence, A.O was right in treating the sum of Rs.5,56,835/- as unexplained sundry creditors and adding u/s 41(1) of Income Tax Act as fake creditors having no liability of appellant. The addition made u/s. 41(1) to the tune of Rs.6,56,835/- is sustained.”

Aggrieved by this, assessee has come up in appeal before us.

18. Next issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of AO by sustaining the addition of ₹ 84,000/- u/s 23(4)(b) of the Act.

19. Assessee is owner of two individual properties - first property is located at 52, Ripon Street, Kolkata comprising of ground floor plus 3 floors and second property is a flat at Highland Park, Kolkata. Accordingly, AO issued notice to assessee vide letter No.999 dated 02.12.2010 for making the addition of rental income u/s. 23(4)(b) of the Act on notional basis. In compliance thereto, assessee submitted that the building located at Ripon Street is used for the purpose of business and also rental income is derived from such property. The flat located at Highland Park is also used for ITA No.659/Kol/2013 A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 9 residential purpose of assessee. The AO deputed an Inspector for physical verification of immovable property of assessee. The said Inspector, in turn submitted his report that assessee is running its nursing home at the ground and first floor of building located at Ripon Street and second floor of the building has been rented out and assessee is earning rental income of ₹1,200/- per month. The third floor of the said building is used by assessee for his residential purpose. Accordingly, AO observed that the flat located at Highland Park is not used for residential purpose and he worked out market rate on notional basis @ ₹10,000/- p.m. Therefore, AO added the notional rent in the hands of assessee.

and assessment order were duly considered AO has dealt with the issue in details. I do not find any discrepancy in the order of AO on this issue. Hence, addition made by AO on this issue of Rs.84,000/- u/s 23(4)(b) is sustained.” Aggrieved by this, assessee has come up in appeal before us.

21. Before us Ld. AR stated that flat located at Highland Park is exclusively used for residential purpose of assessee and the third floor of the building located at Ripon Street is part and parcel of the nursing home which is running from ground and first floor of said building. The third floor is used by assessee for the purpose of rest when the assessee is tired after performing tedious professional duties for which third floor cannot be said to be used for the purpose of his residence purpose. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

22. We have heard rival contentions of both the parties and perused the materials available on record. At the outset we find that the learned AR has not brought anything on record to demonstrate that the flat at high land park is used for the purpose of assessee residence. In the absence of any documentary evidence we find no A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 10 infirmity in the order of ld. CIT(A). Hence this ground of appeal of the assessee is dismissed.

23. Next issue raised by assessee in Ground No.8 is that Ld. CIT(A) erred in confirming the order of AO by sustaining of ₹38,940/- on account of non-availability of supporting evidence.

and assessment order were duly considered AO disallowed a sum of Rs.38,940/- on account of rent and taxes as no bills were produced as supporting evidences and none of the bills pertain to the assessment year under consideration. I agree with the views of AO and hence addition made of Rs.38,940/- on account of disallowance of municipal taxes is sustained.” Aggrieved by this, assessee has come up in appeal before us.

26. Before us Ld. AR for the assessee reiterated same submissions as made before Ld. CIT(A) and further stated that the supporting evidence to justify the expenditure incurred on the rates and taxes were not available at the time of assessment proceedings. However, these documents are now available with assessee. Accordingly, AR prayed to restore the issue to the file of Assessing Officer for fresh adjudication. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

27. We have heard rival contentions of both the parties and perused the materials available on record. The limited issue in the instant case relates to disallowance of expenditure claimed by assessee under the head “rates and taxes” on account of non- availability of supporting evidence. The view taken by AO was subsequently upheld A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 11 by Ld. CIT(A). But Ld. AR before us pleaded that supporting evidence was not available at the assessment proceedings as well as appellate stage. But the documents are now available. Accordingly, Ld. AR requested before the Bench to restore the same to the file of AO for fresh adjudication. However, AR did not produce any supporting evidence for our reference. As the Ld. AR failed to bring supporting evidence, we are not inclined to restore this issue to the file of AO. Had there been supporting evidence available with the assessee, in our view, it should have been submitted now before us. As no relevant document has been submitted before us, Therefore we uphold the order of Ld. CIT(A) and this ground of assessee is dismissed.

28. Next issue raised by assessee in ground No. 9 is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of ₹22,996/- on account of non-availability of supporting evidence in assessee’s profit and loss account for the year ended on 31.03.2008. The assessee has claimed following expenditure:- Sl.No Head of expenditure Amount 1 Doctor’s refreshment 46,890 2 General charges 25,524 3 Accounting charges 18,000 4 General charges 12,564 5 Accounting charges 12,000 1,14,978 At the time of assessment proceedings, assessee submitted ledger copy of the aforesaid expenditures but failed to provide supporting evidence in support of his claim. Assessing Officer also observed that the payment for the aforesaid expenditure has been made through cash and only self-made vouchers have been maintained. Accordingly, AO has disallowed 20% of the aforesaid expenses and added a sum of ₹22,996/- to the total income of assessee.

29. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that AO has disallowed the expenditure on ad hoc basis. The assessee prayed to restrict the disallowance to 5% of such expenditure. However, Ld. CIT(A) A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 12 disregarded the claim of assessee and confirmed the order of AO by observing as under:- “The submission of the A/R, grounds of appeal and assessment order were duly considered AO disallowed 20% of various expenses of Rs.1,14,978/- in the absence of proper bills and vouchers. This has been mentioned in audit report, disallowance of 20% of such expense is quite reasonable. Hence, addition made of Rs.22,996/- is therefore sustained.” Aggrieved by this, assessee has come in appeal before us.

30. Before us Ld. AR reiterated same submissions as made before Ld. CIT(A) and he stated that issue may be decided on merit. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

31. We have heard rival contentions of both the parties and perused the materials available on record. Admittedly the assessee failed to furnish the evidence in support of the expenditure claimed in the profit and loss account before the AO and the learned CIT(A). Indeed the onus lies on the assessee to justify the expenses claimed in the P&L account. However in the absence of any documentary evidence then the lower authorities can also refer such amount of expenditure claimed in the earlier years before making the disallowance for the purpose of comparison and to check the consistence. As such we find no reference was made to the earlier year expenditure claimed by the assessee. Therefore in the interest of Justice and fair play we’re inclined to limit the disallowance at the rate of 10% of such expenditure. Hence this ground of the assessee is partly allowed.

32. Next issue raised by assessee in ground No.10 is that Ld. CIT(A) erred in confirming the order of AO by sustaining disallowance of ₹28,000/- on account of accrued interest on taxable HFC Bond.

Aggrieved by this, assessee has come up in appeal before us.

Aggrieved by this, assessee has come up in appeal before us. A.Y. 2008-09 Dr. P. Ghosh Vs. ITO Wd-55(1) Kol. Page 15 40. Before us Ld. AR for the assessee reiterated same submissions as made before Ld. CIT(A). He drew our attention at pages 35 to 39 of the paper book where detailed bank statement showing the foreign travel expense was placed. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.

From the above observation of AO, it is clear that the aforesaid foreign travelling expenses were incurred from the disclosed bank account. Therefore, in our considered view, the question of incurring expense from undisclosed income does not arise.