SUKVINDER SINGH TURNA,HALDWANI vs. INCOME TAX OFFICER, UTTRAKHAND

The facts in brief that the assessee is an individual and during the relevant year derived income from running of a hospital namely “M/s. Turna Max Multi Specialty Hospital”, remuneration and interest from the partnership firm “M/s Karan Construction” and income from agricultural operations. The assessee filed its return of income on 29.09.2008, declaring total income of Rs.3,66,860/-and agricultural income of Rs.5,88,300/-. The assessee also claimed deduction of Rs.5,63,793/- u/s 80IB(11B) of the Act for operating and maintaining a hospital in rural area. In the case of the assessee, a survey u/s 133A of the Act was conducted on 29.02.2008. In survey proceedings, the assessee surrendered a sum of Rs.5 lac to cover up the deficiency/omissions. This amount of Rs.5 lacs has been disclosed by the assessee as income from other sources in the return of income filed. The case was selected for compulsory scrutiny and notice u/s 143(2) of the Act was issued. In the course of assessment proceeding, the AO noticed that the assessee has constructed a hospital between 1st October, 2004 and 31st March, 2008 in a rural area but did not fulfill one of the conditions of section 80IB(11B) of the Act of having at least 100 beds for the patients and therefore, in the assessment order passed u/s 143(3) of the Act on 23.11.2010, he disallowed the claim of deduction.

Aggrieved, the assessee filed an appeal before the ld. CIT(A). In the course of appellate proceedings before the ld. CIT(A), the assessee filed certain additional evidences. The AO submitted a detailed remand report on the evidence furnished by the assessee. A copy of the remand report was sent to the assessee by the ld CIT(A) for his comment. The remand report and the rejoinder of the assessee have been reproduced by the CIT(A) in his order. After detailed analysis of the submission of the ld AO and the assessee, the ld CIT(A) upheld the disallowance of deduction by holding that the assessee did not acquire 100 beds on or before 31.03.2008. Aggrieved, the assessee is before us.

At the time of hearing, the learned Authorised Representative (in short „AR‟) of the assessee submitted that the assessee constructed a hospital in rural area between 1st October, 2004 and 31st March, 2008 as per the conditions (i) of the section 80IB (11B) of the Act, which was found functioning with 34 beds at the time of Survey conducted on 29.02.2008 (one month before end of the relevant previous year) by the Income-tax Department and 80 beds have been added thereafter on 16th March, 2008 . Further, he urged that the assessee has already submitted a bill no. 217 dated 16/03/2008 in support of purchase of 80 beds from M/s Kisan Agriculture Workshop during assessment proceedings, a copy of which has been filed at page no. 98 of the paper book, however by mistake, this bill was entered under the head „Building Account‟ rather than under the head „Furniture and Fixture Account‟ in books of account. Further, he submitted that advance payments of Rs.15,000/- and Rs.18,000/- were made in cash to M/s Kisan Agriculture Workshop on 28-12-2007 and 16-02-2008 ( i.e. before the date of survey) and final payment of Rs. 15,000 was made on 16-03-2008 ( i.e. after the date of survey). Further, he submitted that the advance payments made before the date of survey are out of the undisclosed income of Rs. 5.00 lakhs declared by the assessee in return of income. The ld AR argued further that the fact that the hospital had 100 beds during the concerned year is also supported by the Certificate of Medical Officer-in-charge of the Community Health Centre, Sitarganj (i.e. concerned area), a copy of which has been filed at page no. 97 of the paper book of the assessee. He further argued that the AO can‟t ignore the evidentiary value of the same merely on the ground that same was undated and submitted during the assessment proceedings without confronting the assessee at that point of time and also stated that any such certificate was not requirement of the provisions of law. The ld. AR further submitted that the inspector of the income tax office has also visited the hospital during the assessment proceeding and he also reported of having beds more than 100 at the time of physical inspection. He further argued that the report of the inspector can‟t be used for rejection of the claim of the assessee, rather, it was in favour of the assessee. Further, the ld. AR stated that the building of the hospital was already completed and the during assessment proceeding the assessee has submitted the lay out plans of the 100 beds, which also substantiated the claim of the assessee. Further he argued that the AO has not raised any doubt either on the lay out plans or the copy of the bills of the M/s. Kisan Agriculture Workshop filed by the assessee.

The ld AR finally concluded his arguments that in view of submission made above as well as the submission made before the CIT(A) and the evidences submitted in support of existence of the 100 beds, the assessee has discharged his burden of proof and therefore, the assessee is eligible for the said deduction.

On the other hand, the learned Sr. Department Representative (in short „DR‟) supported the order of the lower authorities and argued that at the time of survey only 34 beds were found and the survey was conducted just month before the end of the relevant previous year. He further argued that inconsistencies were found in the building account during the course of assessment proceeding and copy of building account filed during appellate proceedings and an undated certificate from the medical officer was not having evidentiary value. He further mentioned that the assessee has shown purchase of 100 beds, however no bills of mattress and bed sheets have been shown and therefore the claim of the assessee of having 100 beds in the hospital is fully substantiated and therefore, the action of the CIT(A) may be sustained.

We have heard the rival submission and perused the material on record and the orders of the lower authorities. We find that the sole issue of dispute in this case is whether the assessee was having 100 beds as on 31.3.2008 or not. We find that assessee and the AO both are agreed that at least 34 beds were available as on date of survey i.e. 29.2.2008. The assessee has claimed that the bills of purchase of 80 beds was filed in the course of assessment proceedings, however, the AO in his assessment order has mentioned that no such receipt from 'Lohar' was filed. Later on, in remand proceedings the AO has admitted that the Bill is placed on assessment folder. We find that