GANGA DEEP MEDICARE SERVICES PRIVATE LIMITED,NEW DELHI vs. ACIT CIRCLE-10(1), NEW DELHI

This appeal by the assessee is preferred against the order of the NFAC, Delhi dated 24.05.2021 pertaining to Assessment Year 2017-18.

The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 1,94,26,453/- made by the Assessing Officer u/s 68 of the Income-tax Act, 1961 [the Act, for short].

Briefly stated, the facts of the case are that the assessee filed its return of income electronically on 30.10.2017 declaring total income of Rs. 1,55,27,690/-. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.

The assessee is a company running a small hospital at Allahabad.

The Assessing Officer formed a belief that qua Specified Bank Notes [Cessation of Liabilities] Act, 2017 and Specified Bank Notes [Deposit of confiscated notes] Rules 2017, the legal tender character of the bank notes in denominations of Rs. 500/- and 1000/- issued by the Reserve Bank of India till November 8, 2016 were withdrawn and, therefore, deposit made by the assessee needs to be explained.

The assessee was specifically asked to provide details regarding source of cash deposits in the bank account during the period 09.11.2016 to 31.12.2016.

In its reply, the assessee explained that cash deposit in the bank accounts were out of cash receipts during ordinary course of operation of the hospital. Details of trends followed since A.Y 2015-16 in all the bank accounts were furnished.

The Assessing Officer was of the opinion that the assessee has deliberately shown high cash sales during the months of August 2016, September 2016 and October 2016.

In furtherance of his enquiry, the Assessing Officer examined Shri Manish Prakash, being Director of the company, whose statement was recorded and is exhibited in the assessment order at pages 10 to 14.

In his efforts to make addition, the Assessing Officer further analyzed the capacity of the doctor in seeing OPD patients and after assuming certain facts, came to the conclusion that the assessee has completely failed to prove the identity, credit worthiness and genuineness of the transaction in light of section 68 of the Act and made addition of Rs. 1,94,26,453/-

The assessee strongly agitated the matter before the ld. CIT(A) but without any success.

Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidences brought on record duly considered.

The undisputed fact is that the Assessing Officer has not pointed out any specific defect in the books of account maintained by the assessee. It is not the case of the Assessing Officer that the expenses have been inflated or receipts have been suppressed. On the contrary, the Assessing Officer has simply doubted the receipts during the months of August, September and October 2016.

In our considered opinion, the assessee could not have premonition of withdrawal of Rs. 500/-/Rs. 1000/- currency notes on 08.11.2016 by the Government of Indian which prompted it to start inflating hospital receipts in earlier months.

We are of the considered view that the assessee could not have foreseen what would happen on 08.11.2016 and, therefore, it cannot be said that the assessee was inflating its hospital receipts in earlier months. Further, as mentioned elsewhere, the Assessing Officer has not pointed out any specific defect in the books of account of the assessee. Cash deposited in the bank by the assessee during demonetization period was out of cash in hand available with it.

In our humble opinion, the Assessing Officer has considered the inflated availability of cash in hand only on the basis of surmises and conjectures, which is not tenable in the eyes of law. The Assessing Officer himself has analyzed the availability of cash in hand, monthly hospital receipts and monthly cash balances. Merely because cash receipts were on the higher side would not mean that the assessee has failed to explain the source of cash deposit in its bank accounts.

Observations of the Assessing Officer at Para 4.5 of his order show that there is complete lack of application of mind when the Assessing Officer alleges that the assessee has failed to prove the identity, credit worthiness, when, for availability of cash in hand generated out of day to day business operations do not require any identity or credit worthiness of the patients.

Considering the facts of the case in totality, additions made by the Assessing Officer are unjustified. We, accordingly, direct the Assessing Officer to delete the impugned addition.

In the result, the appeal of the assessee in is allowed.