M/s. Akash Hospital, JODHPUR V. ITO, NAGAUR

CO 31/JODH/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8377 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-01-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 23-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Depreciation
• Section: 69C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 224/JU/2011 ASSESSMENT YEAR: 2004-05 THE INCOME-TAX OFFICER VS. M/S AKASH HOSPITA L WARD - 2 TELI ROAD - LADNU N NAGAUR DIST. NAGAUR PAN NO . AAKFS 3258 L (APPELLANT) (RESPONDENT) CO NO. 31/JU/2011 [A/O ITA NO. 224/JU/2011 ASSESSMENT YEAR: 2004-05] M/S AKASH HOSPITAL VS. THE INCOME-TAX OFFICER TELI ROAD LADNUN WARD - 2 DIST. NAGAUR NAGAUR PAN NO. AAKFS 3258 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA JAIN DEPARTMENT BY : SHRI G.R. KOKANI DATE OF HEARING : 31.01.2013 DATE OF PRONOUNCEMENT : 06.02.2013 2 ORDER PER N.K.SAINI, A.M. THE APPEAL FILED BY THE DEPARTMENT AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), JODHPUR, DATED 11.3.2011 FOR A.Y. 2004- 05. 2. IN THE DEPARTMENTAL APPEAL IN ITA NO. 224/JU/201 1, THE FIRST ISSUE VIDE GROUND NOS. 1 AND 2 RELATES TO THE DELETION OF ADDITION OF RS. 4,63,785/-. 3. FACTS OF THE CASE IN BRIEF, ARE THAT THE A.O. MA DE THE IMPUGNED ADDITION BY OBSERVING THAT NO ENTRIES IN R ESPECT OF EXPENDITURE OF HOSPITAL BUILDING AFTER 23.10.200 3 WERE MADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-FIRM. HOWEVER, ON PERUSAL OF BILLS AND VOUCHERS SUBMITTED BY THE PARTNERS, THE A.O. FOUND THAT TOTAL EXPENDITURE AMO UNTING TO RS. 4,63,785/- WAS PAID AFTER 23.10.2003. HE, THEREFORE, CONSIDERED THE SAID EXPENDITURE AS UNEXP LAINED AND ADDED THE SAME U/S 69C OF THE ACT. 3 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) AND SUBMITTED THAT THE ASSESSEE-FIRM WAS ENGAGED IN THE OPERATION AND MANAGEMENT OF HOSPITAL AND THE FOUR PARTNERS CONTRIBUTED CAPITAL OF RS. 8.35 LAKHS EACH BEFORE 23.10.2003. IT WAS FURTHER SUBMITTED THAT THE CONST RUCTION OF THE HOSPITAL BUILDING WAS COMMENCED IN THE YEAR 2001- 02 AND COMPLETED BEFORE 2003. IT WAS FURTHER STATE D THAT THE BUSINESS OF THE ASSESSEE COMMENCED AFTER CONSTR UCTION OF THE HOSPITAL BUILDING AND THE EXPENDITURE ON THE CONSTRUCTION OF THE HOSPITAL BUILDING WAS SHARED BY THE PARTNERS EQUALLY IN THEIR INDIVIDUAL CAPACITY AND W AS DULY RECORDED IN THEIR RESPECTIVE BOOKS OF ACCOUNT AND W AS DISCLOSED IN THE RETURN OF INCOME FILED BEFORE THE A.O. IT WAS CONTENDED THAT THERE WERE CERTAIN EXPENSES INCU RRED BEFORE 23.10.2003 BUT WERE PAID AFTER THE SAID DATE OR ACCOUNTS WERE SUBMITTED TO THE PARTNERS ON LATER DA TE. HOWEVER, THE TOTAL SUM WAS INCLUDED IN THE TOTAL CO ST OF CONSTRUCTION OF RS. 33.60 LAKHS. THE LD. CIT(A) FO RWARDED THE EVIDENCES SUBMITTED BY THE PARTNERS IN THE FORM OF RETURN OF INCOME, INCOME AND EXPENDITURE ACCOUNT, C APITAL 4 ACCOUNT, BALANCE SHEET FOR THE A.Y. 2002-03 TO 2004 -05 TO THE A.O WHO VIDE HIS REPORT DATED 22.10.2010 MENTIO NED THAT ALL THOSE EVIDENCES WERE PRODUCED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS BUT NO COGNIZANCE WAS TAK EN BY THE THE THEN A.O. WHILE PASSING THE ORDER U/S 143(3 ) OF THE ACT. 5. THE LD. CIT(A), AFTER CONSIDERING THE REMAND REP ORT OF THE A.O. OBSERVED THAT NO ADVERSE COMMENTS WERE GIV EN BY THE A.O. IN SPITE OF THE FACT THAT PROPER EVIDENCES TO EXPLAIN THE COST OF CONSTRUCTIONS OF HOSPITAL BUILD ING TO THE EXTENT OF RS. 33.60 LAKHS WERE PROVIDED IN THE PAPER BOOK FOR VERIFICATION OF THE A.O. HE, THEREFORE, H ELD THAT THE A.O. WAS AGREED AND SATISFIED WITH THE SUBMISSI ONS AND EVIDENCES FURNISHED BY THE ASSESSEE WITH REGARD TO THE ADDITION OF RS. 4,63,783/-. ACCORDINGLY, HE DELETED THE SAID ADDITION. NOW THE DEPARTMENT IS IN APPEAL. 6. THE LD. D.R. SUPPORTED THE ORDER OF THE A.O WHIL E THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISS IONS 5 MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED TH AT THE A.O. HIMSELF WAS SATISFIED WITH REGARD TO THE EXPEN DITURE INCURRED BY THE ASSESSEE FOR CONSTRUCTING THE HOSPI TAL BUILDING. THEREFORE, THE LD. CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE A.O. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, IT APPEARS THAT THE EVIDENCES RELATING T O THE COST OF CONSTRUCTION INCURRED BY THE PARTNERS OF TH E ASSESSEE-FIRM WERE FURNISHED TO THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT NO COGNIZANCE WAS TAK EN BY HIM. HOWEVER, LATER ON, WHEN THE SAME DOCUMENTS WER E FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A), HE SOUGHT COMMENTS OF THE A.O. AND HIS REMAND REPORT WHEREIN THE A.O. ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND A GREED WITH THE SUBMISSIONS AND EVIDENCES SUBMITTED BY THE ASSESSEE WITH REGARD TO THE ADDITION OF RS. 4,63,78 5/-. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE IMPUGNED ADDITION. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 6 8. NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE DELE TION OF ADDITION OF RS. 4,52,000/- MADE BY THE A.O. U/S 68 OF THE ACT. 9. FACTS RELATING TO THIS ISSUE ARE THAT THE A.O. D URING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT T HE ASSESSEE HAD ACCOUNTED FOR IN FIXED ASSETS AND DEPRECIATION CHART FOR BUILDING ACCOUNT A SUM OF RS . 27,90,000/- AFTER REDUCING SALE CONSIDERATION FOR S EVEN SHOPS AMOUNTING TO RS. 6,70,000/- AS ON 23.01.2003. HE OBSERVED THAT THE ASSESSEE HAD SHOWN LAND ACCOUNT A T RS. 2,55,000/- IN THE BALANCE SHEET AS ON 31.3.2004. H E FURTHER OBSERVED THAT THE TOTAL EXPENDITURE FOR COS T OF CONSTRUCTION OF HOSPITAL BUILDING WAS CLAIMED TO HA VE BEEN INCURRED BY THE PARTNERS BEFORE 23.10.2003 AND BUIL DING ACCOUNT WAS DEBITED WHILE PARTNERS ACCOUNT WAS CRED ITED BY RS. 33,60,000/-. THE A.O, ON PERUSAL OF BOOKS OF ACCOUNT FOUND CREDITORS FOR MACHINERY TO THE EXTENT OF RS. 1,75,000/- AND CREDITORS FOR BUILDING OF RS. 2,77,0 00/-. HE ASKED FOR NAMES AND ADDRESSES OF THE CREDITORS B UT NO 7 EXPLANATION WAS FURNISHED BY THE ASSESSEE. HE, THE REFORE, ADDED THE CREDITORS U/S 68 OF THE ACT. THE ASSESSE E CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT WHILE MAKING ADDITION OF RS. 2,77,000/-, THE A.O. H AD NOT APPRECIATED THE FACTS OF THE CASE THAT THE EXPENDIT URE IN RESPECT OF LAND AND CONSTRUCTION COST WAS MADE BY T HE PARTNERS. IT WAS FURTHER STATED THAT AT THE TIME O F PREPARATION OF BOOKS OF ACCOUNT, THE LAND ACCOUNT W AS DEBITED BY RS. 2,55,000/-, CONSTRUCTION ACCOUNT WAS DEBITED BY TOTAL SUM OF RS. 33,60,000/- AND SUNDRY EXPENSES WERE DEBITED BY RS. 2,000/- WHICH MADE THE TOTAL OF RS. 36,17,000/-. IT WAS FURTHER STATED TH AT IN RESPECT OF AMOUNT OUTSTANDING IN THE HANDS OF THE P ARTNERS ON ACCOUNT OF COST OF LAND AND SUNDRY EXPENSES TOTA LING TO RS. 2,77,000/-, THE SAID AMOUNT WAS CREDITED TO FOU R PARTNERS ACCOUNT WHICH INCLUDED IN TOTAL OF RS. 8,3 5,000/- IN EACH ACCOUNT AND SEPARATE ENTRY FOR OUTSTANDING EXPENSES ON ACCOUNT OF BUILDING WAS PASSED MENTIONI NG RS. 2,77,000/-. THE ENTRIES PASSED WERE EXPLAINED AS U NDER: 8 PARTICULARS CREDITS DEBITS SHRI MAHESH KUMAR SHARMA RS. 8,35,000/ - - SHRI SABIR ALI LAKHA RA RS. 8,35,000/ - - SHRI BHAGCHAND BARADIYA RS. 8,35,000/ - - SHRI PRAMOD KUMAR RATHI RS. 8,35,000/ - - CREDITS FOR BUILDINGS RS. 2,77,000/ - - COST OF LAND - RS. 2,55,000/ - COST OF CONSTRUCTION - RS. 33,60,000/ - SUNDRY EXPENDITURE - RS. 2,000/ - TOTAL RS.36,17,000/ - RS.36,17,000/ - IT WAS ACCORDINGLY SUBMITTED THAT THERE WAS NO LOAN RECEIVED BY THE FIRM AND NO ADDITION U/S 68 COULD H AVE BEEN MADE. AS REGARDS CREDITORS FOR MACHINERY, THE ASSESSEE SUBMITTED THAT THE ASSESSEE PURCHASED ONE MACHINE FROM ERBIS ENG. CO. LTD VIDE BILL NO. 69 DA TED 30.4.2003 FOR RS. 5.10,000/- AND PAYMENT OF RS. 40, 000/- AND RS. 1,25,000/- WAS MADE ON 27.10.2003 AND RS. 3,45,000/- ON 2.11.2003. BUT AN INADVERTENT ERROR W AS COMMITTED WHILE MAKING ENTRIES IN THE BOOKS OF ACCO UNT ON 5.11.2003 AS THE DEBIT SIDE OF ENTRY WAS SHORT BY R S. 40,000/- AND THIS MISTAKE WAS DUE TO CREDITING THE 9 CREDITORS FOR MACHINERY ACCOUNT BY RS. 1,35,000/- I NSTEAD OF RS. 95,000/-. IT WAS EXPLAINED THAT THE ASSESSEE WRONGLY RECOGNIZED THE CREDITORS FOR MACHINERY RELATING TO MACHINERY PURCHASED FROM THE COMPANY TWICE FOR RS. 40,000/- AS THE SAME WAS EARLIER RECOGNIZED ON 24.10.2003. CONSEQUENTIAL EFFECT WAS THAT CASH WAS WRONGLY INCREASED TO RS. 40,000/- AND THIS MISTAKE WAS LATER ON RECTIFIED ON 13.11.2003 BY DEBITING CREDIT OR FOR MACHINERY ACCOUNT AND CREDITING CASH ACCOUNT BY RS. 40,000/-. IT WAS ACCORDINGLY SUBMITTED THAT CASH C REDIT ENTRIES IN RESPECT OF MACHINERY AND LAND WERE PROPE RLY EXPLAINABLE. THEREFORE, ADDITION OF RS. 4,52,000/- WAS REQUESTED TO BE DELETED. 10. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DELETED THE ADDITION BY OBSERVING IN P ARAS 6.3 AND 6.4 OF THE IMPUGNED ORDER WHICH READ AS UNDER: 10 6.3. I HAVE GONE THROUGH THE FACTS OF THE CASE AND IT IS OBSERVED THAT IN THE BALANCE SHEET AS ON 31.3.2004, THE APPELLANT HAS SHOWN CAPITAL ACCOUNT OF PARTNERS AT RS. 7,62,112/- OF EACH PARTNERS AFTE R REDUCING SHARE OF LOSS OF RS. 72,888/-. AND IN THE ASSET SIDE, LAND ACCOUNT AT RS. 2,55,000/- AND BUILDING ACCOUNT AT RS. 26,50,500/- AFTER CLAIM OF DEPRECIATION OF RS. 1,39,500/- OUT OF RS. 27,90,000 /-. ON PERUSAL OF CASH BOOK AS ON 24.10.2003, IT IS NOTICED THAT CASH BOOK WAS DEBITED AT RS. 8,35,000/ - IN EACH PARTNERS ACCOUNT AND RS. 2,77,000/- IN BUILDING ACCOUNTS AND IN THE CREDIT SIDE IN ACCOUNT OF BUILDING A SUM OF RS. 33,60,000/- AND IN ACCOUNT OF LAND RS. 2,55,000/-. TOTAL OF CREDIT SIDE OF CASH BOOK OF THOSE TWO ENTRIES WAS MADE AT RS. 36,15,000/- WHEREAS DEBIT SIDE OF THE CASH OF THESE TWO ENTRIES WAS MADE AT RS. 36,17,000/-. THIS DIFFERENCE IS ON ACCOUNT OF RS. 2,000/- BEING AVAILABLE IN ORIENTAL BANK OF COMMERCE AND SINCE THERE ARE NO CREDITS EITHER IN THE FORM OF CASH OR CHEQUE FROM ANY PARTY , THEREFORE, NO ADDITION ON ACCOUNT OF RS. 2,77,000/- IS REQUIRED TO BE MADE AND THE CASH BOOK ENTRIES ON 24.10.2003 ARE TALLIED WITH EACH OTHER. I, THEREFO RE, DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 2,77,000/-. 11 6. SIMILARLY, ON PERUSAL OF CASH BOOK DATED 24.10.2003, 5.11.2003 AND 13.11.2003, IT IS FOUND THAT ENTRIES ARE MADE IN DEBIT SIDES AND CREDIT SID ES AT THE TIME OF GIVING ADVANCE AND AGAIN AT THE TIME OF RECEIPT OF MACHINERY AGAIN ENTRIES WERE MADE IN THE ACCOUNTS. LOOKING INTO THE TOTALITY OF ALL ENTRIES, I HOLD THAT THERE WAS NO CASH CREDIT BY INTRODUCTION OF CASH OR CHEQUE OR LIABILITY FROM AN Y PARTY. THEREFORE, NO ADDITION U/S 68 IS REQUIRE TO BE MADE. ACCORDINGLY, I DIRECT THE A.O. TO DELETE ADDITION OF RS. 1,75,000/-. THE CORRECT AMOUNT WAS RS. 1,75,000/- WHEREAS IN THE ASSESSMENT ORDER THE A.O. MENTIONED RS. 2,75,000/-. THEREFORE, THE A.O. SHALL REDUCE BY RS. 2,75,000/- THE GROUND OF APPEA L IS PARTLY ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 11. THE LD. D.R. STRONGLY SUPPORTED THE ORDER OF TH E A.O WHILE THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). 12 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. I N THE PRESENT CASE, IT IS NOTICED THAT THE LD. CIT(A), ON PERUSAL OF CASH BOOK AS ON 24.10.2003, FOUND CASH BOOK WAS DEBITED AT RS. 8,35,000/- IN EACH PARTNERS ACCOUNT AND RS. 2,77,000/- IN BUILDING ACCOUNTS AND IN THE CREDIT S IDE IN ACCOUNT OF BUILDING A SUM OF RS. 33,60,000/- AND IN ACCOUNT OF LAND RS. 2,55,000/-. ACCORDING TO HIM, TOTAL IN CREDIT SIDE OF CASH BOOK OF THOSE TWO ENTRIES WAS M ADE AT RS. 36,15,000/- WHEREAS IN DEBIT SIDE OF THE CASH O F THESE TWO ENTRIES WAS MADE AT RS. 36,17,000/- AND THIS DIFFERENCE WAS ON ACCOUNT OF RS. 2,000/- BEING AVAI LABLE FROM ORIENTAL BANK OF COMMERCE AND SINCE THERE WERE NO CREDITS EITHER IN THE FORM OF CASH OR CHEQUE FROM A NY PARTY, THEREFORE, NO ADDITION U/S 68 WAS REQUIRED T O BE MADE. THE LD. CIT(A) ACCORDINGLY, DIRECTED THE A. O. TO DELETE THE ADDITION OF RS. 1,77,000/-. SINCE NOTHIN G CONTRARY TO THE FINDINGS OF THE LD. CIT(A) IS BROUG HT ON RECORD, WE DO NOT SEE ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. 13 13. AS REGARDS THE CROSS OBJECTION, THE LD. COUNSEL FOR THE ASSESSEE, AT THE TIME OF HEARING OF THE CASE, STATE D AT BAR THAT HE HAS INSTRUCTIONS NOT TO PRESS THE CROSS OBJ ECTION. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 14. IN THE RESULT, THE APPEAL OF THE DEPARTMENT AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. [ORDER PRONOUNCED IN THE COURT ON 06.02.2013] SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 6 TH FEBRUARY, 2013 VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR ITAT, JODHPUR