ACIT, Patiala V. Smt. Monica Verma, Patiala

ITA 1062/CHANDI/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8446 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: H R SALDI
• Keywords: Additional evidence; TDS
• Section: 143(3); 40(a)(ia); 194C; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1062/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. SMT. MONICA VERMA, CIRCLE, PROP. M/S SADBHAWANT HOSPITAL, PATIALA PATIALA PAN NO. AANPA9972E (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAI SHREE SHARMA RESPONDENT BY: SHRI H.R.SALDI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A), PATIALA DATED 9.6.2010 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2. THE ISSUE IN GROUND NOS. 1 TO 3 IS AGAINST THE O RDER OF CIT(A) IN DELETING THE ADDITION OF RS. 6,73,000/-, ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT INCLUDING THE DISALLOWANCE MA DE OF RS. 1,20,000/- FOR WANT OF PROOF OF IDENTITY OF THE PAYEE. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE WAS IN MEDICAL PROFESSION AND WAS PROPRIETOR OF M/S SADBHA WANA HOSPITAL, PATIALA. THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION HAD MADE PAYMENT ON ACCOUNT OF SALARY TO VARIOUS DOCTORS AS ENLISTED AT PAGE 2 OF 2 THE ASSESSMENT ORDER. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE TO EXPLAIN WHY THE PROFESSIONAL SERVICES PAID TO THE S AID DOCTORS BE NOT DISALLOWED AS THE SAID EXPENSES FALL U/S 194J OF TH E ACT AND THE ASSESSEE HAD FAILED TO DEDUCT TDS THEREON, THE SAID EXPENSES WERE DISALLOWABLE U/S 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER RECO RDED THE STATEMENT OF SOME OF THE DOCTORS U/S 131 OF THE ACT AS PER THE L IST AT PAGE 3 OF THE ASSESSMENT ORDER. IN REPLY, IT WAS EXPLAINED BY TH E ASSESSEE THAT THERE WAS NO SYSTEM OF ISSUE OF APPOINTMENT LETTER TO ANY EMPLOYEE IN THE ORGANIZATION AND AS SUCH NO APPOINTMENT LETTERS WER E ISSUED TO THE SAID DOCTORS. FURTHER, SUBMISSION OF THE LD. AR WAS THA T DR. TARUNDEEP AND DR. MADANJIT WERE EMPLOYEES FOR NORMAL WORKING HOUR S AND THERE WAS NO RESTRICTION ON ANY OF THE STAFF MEMBERS FOR DOING T HEIR PERSONAL PRACTICE ON OR BEFORE THE OFFICE HOURS. IT WAS FURTHER EXPL AINED THAT IN ADDITION TO THE SALARY, CONVEYANCE ALLOWANCE WAS ALSO PAID TO T HE TWO DOCTORS. IN RESPECT OF DR. MADANJIT THE EXPLANATION WAS THAT HE WAS PAID A FIXED SALARY FOR THE FIXED HOURS OF WORKING AND FOR ODD H OURS OF WORKING HE WAS PAID VISITING CHARGES BY DEDUCTING TAX AT SOURCE. DR. AMIT WAS PAID SALARY AND CONVEYANCE ALLOWANCE FOR THE YEAR. IT WAS FURTHER EXPLAINED THAT ESI AND GPF WAS DEDUCTED AND CONTRIBUTED IN RE SPECT OF SUCH EMPLOYEES WHOSE BASIC SALARY WAS BELOW THE MAXIMUM LIMIT SPECIFIED UNDER THE EPF ACT. THE SALARIES OF THE DOCTORS WERE ABOVE THE LIMITS AND HENCE NO DEDUCTION. THE PLEA OF THE ASSESSEE WAS THAT PROVISION OF SECTION 194J ARE NOT ATTRACTED IN THE CASE AND HENC E THERE IS NO DEFAULT IN DEDUCTION OF TAX. THE ASSESSING OFFICER AT PAGE 8 H AS REPRODUCED PART OF THE STATEMENT RECORDED OF DOCTOR TARUNDEEP BHATIA A ND AT PAGE 9 OF DR. MADANJIT SINGH. IN THE SAID STATEMENT THE SAID DOCT ORS HAVE ADMITTED TO HAVE RECEIVED FIXED AMOUNT AT RATE OF RS. 10,000/- PER MONTH AND RS. 800/- CONVEYANCE FROM SADBHAWANA HOSPTIAL. DR. MAD ANJIT SINGH HAD FURTHER ADMITTED TO HAVE RECEIVED CONSULTATION FEE FOR THE PATIENTS REFERRED 3 TO THE HOSPITAL WHICH WAS IN ADDITION TO THE RECEIP T OF MONTHLY SALARY OF RS. 10,000/- PER MONTH. BOTH THE DOCTORS ADMITTED TO HAVE CARRIED ON THEIR INDEPENDENT PRACTICE. THE ASSESSING OFFICE R NOTED THE ASSESSEE TO HAVE PAID PROFESSIONAL FEE TO DR. SUDHIR VERMA, THE HUSBAND OF THE ASSESSEE, FROM WHICH TDS WAS DEDUCTED. THE ASSESSI NG OFFICER DRAWING SIMILE FROM THE SAID PAYMENT BEING MADE TO DR. SUDH IR VERMA WAS OF THE VIEW THAT THE PAYMENT MADE TO THE OTHER DOCTORS EVE N AT FIXED RATE SHOULD BE TREATED AS PROFESSIONAL FEE AND HENCE THE PROVIS IONS OF SECTION 194J WERE APPLICABLE TO SUCH PAYMENTS. THE ASSESSING O FFICER FURTHER NOTED THAT IN REPLY TO SUMMONS ISSUED U/S 131 OF THE ACT, DR. RAJESH MAHESHWARI HAD CATEGORICALLY DENIED TO HAVE EVER WO RKED OR RECEIVED ANY PAYMENT FROM THE ASSESSEE AS PER HIS REPLY. THE AS SESSING OFFICER HAS REPRODUCED THE REPLY OF THE SAID DOCTOR AT PAGE 13 OF THE ASSESSMENT ORDER IN WHICH HE STATES TO HAVE HAD NO CONNECTION WITH D R. MONICA VERMA AND HAD NEVER DONE ANY JOB IN THEIR HOSPITAL NOR HAVE A NY OTHER TRANSACTION WITH HER. THE ASSESSEE DURING THE PERIOD UNDER CON SIDERATION HAD MADE PAYMENT OF RS. 1,20,000/- TO DR. MAHESHWARI AND IN VIEW OF THE DENIAL OF THE SAID PERSON, PAYMENT OF RS. 1,20,000/- WAS DISA LLOWED BEING NOT INCURRED FOR THE PURPOSE OF BUSINESS. 4. IN APPEAL, THE CONTENTION OF THE LD. AR BEFORE T HE CIT(A) WAS THAT THE STATEMENTS OF CERTAIN EMPLOYEES WERE RECORDED W HICH WERE NEVER CONFRONTED TO THE ASSESSEE NOR THE COPIES THEREOF W ERE SUPPLIED. HE CLARIFIED THAT THE SAID DOCTORS WERE AT LIBERTY TO CARRY ON THEIR PROFESSION AFTER DUTY HOURS. HE FURTHER SUBMITTED THAT PRIVA TE PRACTICE WAS EVEN ALLOWED TO VARIOUS DOCTORS EMPLOYED BY THE GOVERNME NT OF PUNJAB. THE CIT(A) ON CONSIDERATION OF THE FACTS OBSERVED THAT THE ASSESSEE HAD RETAINED SOME EMPLOYEES FOR ATTENDING TO VARIOUS AC TIVITIES AS PER FIXED SCHEDULE ON A MONTHLY SALARY THOUGH THE TERMS OF EM PLOYMENT WERE TAKEN 4 TO BE GENERAL AND NOT REDUCED INTO WRITING. REFERR ING TO THE STATEMENT OF DR. TARUNDEEP BHATIA AND DR. MADANJIT SINGH, THE CI T(A) OBSERVED THAT THOUGH THE PLEA OF THE LD. AR FOR THE ASSESSEE WAS THAT NO RELIANCE COULD BE PLACED ON SUCH STATEMENTS AS THESE WERE NEVER CO NFRONTED TO THE ASSESSEE, HOWEVER, AS NO ADVERSE INFERENCE WAS BEIN G DRAWN AGAINST THE ASSESSEE, HE WAS OF THE VIEW THAT IT WAS NOT WORTHW HILE TO PROLONG THE LITIGATION. FROM THE PERUSAL OF THE STATEMENT RECOR DED, THE CIT(A) NOTED THE DR. TARANDEEP SINGH HAD STATED IN RESPONSE TO Q UESTION NO.5 THAT HE USED TO GET FIXED RATE OF RS. 10,000/- PER MONTH AN D RS. 800/- CONVEYANCE FROM M/S SADBHAWANA HOSPITAL. THE CIT(A) HELD THA T THIS PART OF HIS STATEMENT REVEALS THE NATURE OF TIES BETWEEN THE AS SESSEE AND THE EMPLOYEE. SIMILARLY, DR. MANJIT SINGH HAVE ALSO CLE ARLY STATED TO HAVE RECEIVED MONTHLY PAYMENT OF RS. 10,000/-. THE CIT( A) OBSERVED FOR THE ABOVE SAID REASONS, THE STATEMENT RECORDED BY T HE ASSESSING OFFICER DO NOT CONVEY ANY FACT CONTRARY TO THE CLAIM OF THE ASSESSEE. THE FACT OF ASSESSEE PAYING PROFESSIONAL CHARGES TO HER HUSBAND WAS HELD NOT TO DETERMINE THE NATURE OF RECEIPTS IN THE HANDS OF TH E OTHER EMPLOYEES. FURTHER, THE DOCTORS IN RECEIPT OF SALARY WERE ALSO CARRYING ON THEIR PRIVATE PRACTICE COULD NOT BE THE BASIS FOR DISALLOWING THE SALARY AS DOCTORS WORKING IN GOVERNMENT HOSPITALS WERE ALLOWED TO CAR RY ON THEIR PRIVATE PRACTICE. RELIANCE OF THE ASSESSING OFFICER ON TH E RATIO LAID DOWN BY THE BOMBAY HIGH COURT IN CIT V DURGA KHOTE [21 ITR 222 (BOMBAY)] WAS HELD TO BE MISPLACED. THE CIT(A) FURTHER HELD THAT THERE WAS NON DEDUCTION OF PF AND ESI AS THE PARAMETER OF SALARY DID NOT REQUIRE SUCH DEDUCTION. IN VIEW OF THE ABOVE SAID FACTS AND CIRC UMSTANCES, THE ADDITION MADE BY THE ASSESSING OFFICER AT RS. 6,73,000/- WAS DELETED BY CIT(A). 5. THE GRIEVANCE OF THE REVENUE IS AGAINST THE SAID ALLOWANCE AND ALSO THE DISALLOWANCE MADE OF RS. 1,20,000/- WHICH IS PA RT OF RS. 6,73,000/- 5 BUT FOR WANT OF PROOF OF IDENTITY OF THE PERSON TO WHOM THE SAID PAYMENT WAS MADE. THE LD. DR FOR THE REVENUE HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER AND HAS NOT BROUGHT ON RECORD ANY FINDINGS CONTRARY TO THE FINDINGS OF THE CIT(A). THE LD. AR FOR THE ASS ESSEE POINTED OUT THAT NONE OF THE DOCTORS DENIED THAT THEY HAD NOT RECEIV ED THE MONTHLY PAYMENT AND NO TDS IS DEDUCTIBLE ON THE QUANTUM OF SALARY PAID. IN RESPECT OF THE COMMUNICATION OF DR. MAHESHWARI, LD. AR POINTED OUT THAT THE ASSESSING OFFICER HAS REFERRED TO THE SAID LETT ER OF THIRD PARTY, WHICH WAS NOT CONFRONTED TO THE ASSESSEE BEFORE MAKING AD DITION AND THE ASSESSEE CLAIMED TO HAVE RECEIVED THE COPY LATER AN D FILED THE COPY OF SAME BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES AS ELABORAT ED UPON BY THE CIT(A) WE FIND NO MERIT IN THE ADDITIONS MADE BY THE ASSES SING OFFICER IN VIEW OF THE CATEGORICAL ADMISSIONS OF THE DOCTORS WHOSE STATEMENTS WERE RECORDED DURING ASSESSMENT PROCEEDINGS IN WHICH THE Y ADMITTED TO HAVE RECEIVED FIXED SALARY FROM THE ASSESSEE ALONGSIDE C ONVEYANCE ALLOWANCE. THE MERE FACT THAT THE SAID DOCTORS WERE CARRYING O N THEIR PROFESSIONAL ACTIVITIES BEYOND THE FIXED HOURS WITH THE ASSESSEE DOES NOT DETERMINE THE NATURE OF THE PAYMENT MADE BY THE ASSESSEE. THE AS SESSEE HAD CLAIMED TO HAVE MADE THE PAYMENT OF SALARY TO THE SAID DOCTOR AND CLAIMED THE SAME AS DEDUCTION, WHICH IS ALLOWABLE IN THE HANDS OF T HE ASSESSEE. THERE IS NO REQUIREMENT TO DEDUCT PF & ESI AS THE SALARY PAI D WAS ABOVE THE PARAMETERS LAID IN THE ESI ACT. FURTHER, THE ASSES SEE CLAIMS TO HAVE ALSO PAID PROFESSIONAL CHARGES FOR THE SERVICES ON WHICH TDS WAS DEDUCTED AND THE SAME COULD NOT BE THE BASIS FOR DISALLOWANCE OF SALARY IN THE HANDS OF THE ASSESSEE. CONFIRMING THE ORDER OF THE CIT(A) , WE HOLD THAT THERE IS 6 NO REQUIREMENT FOR TAX DEDUCTION AT SOURCE U/S 194J OF THE ACT AND THE CLAIM OF SALARY IS ALLOWABLE IN THE HANDS OF THE AS SESSEE. 7. THE SECOND ASPECT OF THE DISPUTE IS THE SALARY P AID TO ONE DR. MAHESHWARI. SUMMONS U./S 131 OF THE ACT WAS SENT T O ONE DR. RAJESH MAHESHWARI C/O MAHESHWARI HOSPITAL, 100 FEET ROAD, BHATINDA, IN REPLY TO WHICH HE STATED THAT HE HAD NO CONNECTION WITH D R. MONICA VERMA, THE ASSESSEE BEFORE US. IN THE SAID COMMUNICATION, IT W AS FURTHER MENTIONED THAT PERHAPS IT IS DR. RAVINDER MAHESHWARI M.D. (M EDICINE) OF RAVINDRA HOSPITAL, BHATTI ROAD, BHATINDA, WHO HAD SOMETIMES WORKED WITH DR. MONICA VERMA. DR. RAVINDERS MOBILE NUMBER WAS A LSO PROVIDED. THE ASSESSING OFFICER HAS REFERRED TO THE FIRST PART OF THE REPLY TO SUMMONS U/S 131 OF THE ACT SUBMITTED BY DR. RAJESH MAHESHWA RI IN THE ASSESSMENT ORDER, HOWEVER, NO REFERENCE IS MADE TO THE SECOND PART OF THE SAID REPLY. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES AND IN T HE ABSENCE OF THE CONTRARY EVIDENCE BEING BROUGHT ON RECORD, WE FIND NO MERIT IN DISALLOWING RS. 1,20,000/- PAID AS SALARY TO DR. MA HESWARI. THE GROUND NOS. 1 TO 3 RAISED BY THE REVENUE ARE DISMISSED. 8. THE ISSUE IN GROUND NO.4 RAISED BY THE REVENUE I S AGAINST THE DELETION OF ADDITION U/S 40A(IA) OF RS. 58,000/- ON ACCOUNT OF PAYMENT TO ACCOUNTANTS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ACCOUNTANTS BEING PROFESSIONAL, THE PAYMENT TO THE SAID PERSONS IS TAX DEDUCTIBLE IN VIEW OF THE PROVISIONS OF SECTION 194J OF THE ACT. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AS THE ASSESSEE HAD ENGAG ED PART TIME ACCOUNTANT ON A FIXED SALARY AND WERE TEMPORARY EMPLOYEES. FU RTHER, THE CIT(A) HELD THAT THE RECORD KEEPERS, BOOK WRITERS AND DATA ENTRY OPERATIONS DO NOT ACT AS PROFESSIONALS. ACCORDINGLY, IT WAS HELD THA T NO TAX WAS DEDUCTIBLE AS THE PAYMENTS MADE TO THE SAID PERSONS WERE BELOW THE TAXABLE LIMIT. 7 THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELE TED WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AS THE PAYMENTS MA DE TO THE ACCOUNTANTS BEING NON PROFESSIONAL IS NOT COVERED UNDER THE PRO VISIONS OF SECITON194J OF THE ACT. THE ASSESSEE HAD INCURRED THE EXPENDIT URE ON PART TIME EMPLOYEES TO WHOM SALARY WAS PAID, WHICH IS ALLOWA BLE IN THE HANDS OF THE ASSESSEE. THE GROUND NO.4 RAISED BY THE REVENU E IS DISMISSED. 9. THE ISSUE IN GROUND NO.5 IS AGAINST THE DELETION OF ADDITION MADE U/S 40A(IA) OF THE ACT OF RS. 1,08,711/- BEING PAYM ENTS TO THREE WASHER MAN. THE ASSESSING OFFICER HAD DISALLOWED THE SAI D PAYMENT AS IT EXCEEDED RS. 50,000/- AND UNDER THE PROVISIONS OF S ECTION 194C OF THE ACT, THE ASSESSEE WAS OBLIGED TO DEDUCT TDS. THE P LEA OF THE LD. AR FOR THE ASSESSEE BEFORE CIT(A) AND EVEN BEFORE THE ASSE SSING OFFICER WAS THAT THERE WAS ONE WASHER MAN TO WHOM THE PAYMENT WAS MA DE ABOVE RS. 50,000/- AND THERE WAS NOT CONTRACT OF WASHING WITH THEM. THE ASSESSEE FURNISHED THE DETAILS OF THREE WASHER MAN TO WHOM P AYMENTS WERE MADE LESS THAN RS. 50,000/- IN TOTAL AND LESS THAN 20,00 0/- EACH ENTRY. THE CIT(A) ADMITTING THE DETAILS BEING FACTUAL IN NATUR E, DELETED THE ADDITION. THE REVENUE IS AGGRIEVED BY THE ADMISSION OF THE SA ID ALLEGED ADDITIONAL EVIDENCE. WE FIND NO MERIT IN THE STAND OF THE RE VENUE. WE UPHOLD THE ORDER OF CIT(A) IN VIEW OF THE TOTALITY OF FACTS A ND CIRCUMSTANCES AND DISMISS THE GROUND NO.5 RAISED BY THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF OCTOBER, 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND OCTOBER, 2010 RKK 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR