NAVNEET MEMORIAL HOSPITAL,,AHMEDABAD vs. THE INCOME TAX OFFICER,WARD-9(3),, AHMEDABAD

आदेश / O R D E R

PER MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-XV, Ahmedabad, vide Appeal No.CIT(A)-XV/Wd.9(3)/14/12-13 dated 13/06/2014 for the Assessment Year (AY) 2003-04, on the following grounds: 1. Though Ld. A.O. neither proved concealment nor found furnishing inaccurate particulars of income, The Ld. Commissioner of Income Tax (Appeals)-XV, Ahmedabad is not justified to confirm the penalty of Rs.1,30,000/- u/s.271(1)(c) of the Income Tax Act.

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 2 - 2. While calculating the amount of penalty., The Ld. Commissioner of Income Tax (Appeals)-XV, Ahmedabad has erred in not giving the effect of the order of honorable tribunal in quantum appeal. 3. The Ld. Commissioner of Income Tax(Appeals)-XV, Ahmedabad has erred in confirming penalty of Rs.1,30,000/- without considering the difference between amount of receipts shown in case paper and receipt shown in 3C Register which is only Rs.23,900/- out of which Rs.15,100/- duly explained

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 3 - on account of low net profit at Rs.2,56,510/- as against Rs. 6,99,335/- made by the A.O. Thereafter, a fresh opportunity of being heard was given to the assessee vide letter dated 27/02/2012 requiring the assessee to furnish its explanation if any, for levy of penalty u/s.271(1)(c) of the I.T. Act. In response thereto, the assessee vide his letter dated 02/03/2010 for the sake of convenience the relevant portion of the same is reproduced as under: “2. That in the humble submission of the assessee, it has been time and again held through various judicial pronouncements that where a claim is made or an expense claimed by the assessee in the return of income under some bonafide belief and the same is supported by cogent explanations and evidence, it is open to the taxing authorities to reject the same, but the same would not, per se, establish the guilt of furnishing inaccurate particulars of income within the meaning of S.271(1)(c) of the I. T. Act. Making an incorrect claim does not, per se tantamount to furnishing inaccurate particulars unless it is established that the assessee has acted with a malafide intention. A mere rejection of the claim of the assessee by relying upon different interpretation or on account of difference of opinion as regards the admissibility of expense or claim does not amount to concealment of the particulars of income or furnishing of inaccurate particulars of income. The admission or rejection of a claim is a subjective exercise and whether a claim is accepted or rejected has nothing to do with furnishing of inaccurate particulars of income. Merely because an expense or exemption claimed by the assessee has been disallowed or confirmed either on account of complete proof or divergence of opinion as regards its allowability, from that circumstance alone, it cannot be inferred that the assessee has consciously concealed the particulars of income or has furnished inaccurate, particulars of its income.

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 4 - The penalty proceeding being quasi criminal in nature, the entirety of circumstances must reasonably point, to the conclusion that the assessee has consciously concealed its particulars of, income or has deliberately furnished inaccurate particulars of income. The burden to prove in penalty proceeding under the I.T. Act is not of the same nature which rests on the prosecution in a criminal case. It is a burden akin to that in a civil "suit, where determination is made on the preponderance of probabilities. It is therefore, not necessary for the assessee, in order to discharge his burden, to prove his point to the hilt. 3. in a very recent decision of C1T v. Reliance petroproducts (P.) ltd. [2010] 322 1TR 158(SC) ,it has been distinctly held by the Supreme Court that in order to be covered by section 271(1)(c) of the Act, the assessee must have furnished inaccurate particulars of his income. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination, making incorrect claim tantamount to furnishing of inaccurate particulars 'Merely because an expense or exemption claimed by the assessee has been disallowed on account of divergence of opinion as regards its allowability, from that circumstance alone, it cannot be inferred that the assessee has consciously concealed the particulars of income or has furnished inaccurate particulars of its income.

It is distinctly held that mre making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate regarding the income of the assessee. Such a claim made in the return, cannot amount to furnishing inaccurate particulars The case of the Reliance Petroproducts (P) Ltd. (322 1TR 158) is, thus fully and squarely applicable to the facts of the present case."

Before discussing the assessee's submission it is worthwhile to discuss the issue which lead to addition of Rs.99,335/- on account of low net profit. As stated above, an action u/s.133A of the I.T. Act was carried on in case of the assesses. During the course of survey, it was found that the assesses was not accounting receipts in full in the books of account and also found that it is also maintaining the books of account regularly

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 5 - and accordingly additions were made in the order assessment for A. Y. 2002-2003. As stated above, on the basis of information, the assessment for A.Y.2003-04 was also reopened u/s.148 of the I.T. Act, during the course of assessment proceedings, the Assessing Officer noticed that the net profit declared by the assessee was too low. As such, details were called for which included daily-case register, cash and bank book etc. On perusal of the case register produced by the assessee in Form No.3C, the A.O. noticed certain discrepancies which are illustrated in Page No. 3 of the order of assessment, for the sake of reference, the same is reproduced as under: Sl. Name of the Date of Amount Amount No. patient discharge received as shown in 3C per case register paper(Rs.) (Rs.) 1. Ismail Vora 16/10/2002 2825 Nil 2. Ismail Vora 25/10/2002 1175 Nil 3. Tapu N. parmar 27/11/2002 2800 Nil 4. Satishbhai 26/11/2002 1600 Nil 5. Vimal T. Khanna 26/11/2002 400 Nil 6. Natwarbhai Patel 19/10/2002 3100 2600 7. Channaben Gohel 27/10/2002 1375 1275 8. Kusumben 01/11/2002 800 600 9. Kailashben Soni 08/12/2002 2900 2600 10. Ramesh M. Rawat 28/11/2002 60000 48000 11. Haribhai I Bhatt 25/11/2002 10300 83

The A.O. also noticed that the assessee could produce patients’ case papers only upto December-2002. In view of the defect noticed, the A.O. rejected the book result declared by the assessee and estimated the profit at 6.1 % as has been adopted in the immediately preceding year.

From the details produced before the A.O. as illustrated above, it was found that the assessee has not disclosed the correct receipts received from the patients and in some cases only part of such receipts are accounted for in the books of account. In some cases, the assessee has not at all accounted the receipts. It is, therefore, very clear that the addition made by the A.O. was for the failure on the part of the assessee

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 6 - to account for the receipts in the books of the assessee. The details reproduced above from the assessment order clearly indicate that the assessee has furnished inaccurate particulars of income by not accounting for the fees received from the patients. It is, therefore, very clear that the assessee is concealing the particulars of income and as such, it is a fit case for levy of penalty u/s.271(1)(c) of the I. T. Act.

A perusal of the submission made by the assessee, it can be seen that the same are general in nature. It is the submission of the assessee that time and again held through various judicial pronouncements that where a claim is made or an expense claimed by the assessee in the return of income under some bonafide belief and the same is supported by cogent explanations and evidences, it is open to the taxing authorities to reject the same, but the same would not, per se, establish the guilt of furnishing inaccurate particulars of income within the of sec.271(1)(c) of the I. T. Act. The submission made by the assessee in this respect is found to be correct. In the case of the assessee penalty was initiated not on the disallowance of expenditure but penalty was initiated on the estimation of the profit made by the A.O. As stated above, it was proved beyond any reasonable doubt that the assessee was not correctly recorded the receipts in its books of account. It is also a fact that even though the assessee was issued with a notice u/s.148 of the I.T. Act it continued to disclose the income which has already shown without making any amendments in the return of income filed. This clearly shows that the assessee has concealed its particulars of income. The assessee failed to offer any explanation for not recording the correct receipt in its books of account and also failed to offer any explanation for not producing the part of the documents for verification by the A.O. It is, therefore, obvious that the assessee has concealed its true particulars of income and thus exposed to the provisions of section 271(1)(c)of the I.T. Act.

The reliance placed by the assessee in the case of C1T Vs. Reliance Petroproducts Pvt. Ltd. reported in 322 1TR 158 [2010] [SC] is also distinguishable from the facts of the assessee's case. In that case the A.O. disallowed certain expenditure u/s. 14A of the I. T. Act on which the penal proceedings were initiated. In the case of the assessee the issue is entirely different. The assessee was found to be either not

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 7 - recording the receipts or partially recording the receipts. From the above, it is very clear that the assessee has made an attempt to conceal its true particulars of income. The assessee also failed to offer any explanation for not recording certain receipts as pointed out in the order of assessment. Had the survey action u/s.133 not been conducted on assessee the concealment of income and on reliability of books of account could not be deducted by the department. In view of the foregoing, I am of the opinion that this is a fit case for levy of penalty u/s. 271(l)(c). I, therefore, levy a penalty of Rs.1,30,000/- as against maximum penalty leviable of Rs. 2,85,009/-. This order is passed with the previous approval of the Jt.C.I.T., Range- 9, Ahmedabad vide letter No.Jt.CIT./Range.9/Pen.Approval/2011-12 dated 12/03/2012. The working of the penalty is given below for ready reference. A) Assessed income 5,71,300/- B) Tax on assessed income 209953/- C) Concealed income 258510/- D) Assessed income less concealed income 312790/- E) Tax on D: 114950/- f) Tax sough to be evaded: 95003/- G) Minimum Penalty Leviable 95003/- (100%) H) Maximum Penalty Leviable 285009/- (300%) I) Penalty Levied 1,30,000/-.”

ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 8 - net profit @ 6.1%. Being dissatisfied with the said order, assessee filed an appeal before ld. CIT(A) and ld. CIT(A) reduced net profit @ 3%, further, appeal filed before the ITAT, which also reduced estimation of net profit @ 2% of turnover. While passing the order of the penalty, ld. AO has not considered the relief granted by the ITAT. Thereafter, CIT(A) has also not considered the relief granted by the ITAT. Even though passed appeal order after deciding quantum appeal by ITAT. It is well settled principle that if there is no specific charge of either concealment of income or furnishing inaccurate particulars of income. No penalty u/s.271(1)(c) can be imposed while total income was estimated in view of the decision of ITAT. In the present case estimated income has been decided differently at different levels. In our considered opinion, in such case penalty cannot be levied.

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ITA No.2691/Ahd/2014 Navneet Memorial Hospital vs. ITO Asst.Year –2003-04 - 9 -

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XV, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 21/12/2017 (dictation-pad 4 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …26/12/2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………