The DCIT(OSD), Circle-9, Ahmedabad V. Siddhi Vinayak Hospital, Ahmedabad

ITA 114/AHD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0455 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Depreciation; Income from undisclosed sources; Deemed to accrue or arise in india
• Section: 69C; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R.MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.114/AHD/2013 ( % & '& / ASSESSMENT YEAR : 2009-10) DCIT (OSD) CIRCLE-9 AHMEDABAD % / VS. M/S.SIDDHI VINAYAK HOSPITAL B/H.BALVATIKA, KANKARIA AHMEDABAD 380 008 ./ ./ PAN/GIR NO. : ABAFS 6354 G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A.K.PANDEY, SR.D.R. / RESPONDENT BY : SHRI M.K.PATEL WITH SHRI JAYESH C.SHAREDALAL / DATE OF HEARING : 12/03/2013 !'# / DATE OF PRONOUNCEMENT : 22/3/313 $% / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF LD.CIT(A)-XV, AHMEDABAD DATED PASSED FOR A.Y. 20 09-10 AND THE GROUNDS RAISED ARE AS FOLLOWS:- 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER TO TREAT THE DISCLOSURE OF UNACCO UNTED INCOME AMOUNTING TO RS.75,00,000/- AS PROFESSIONAL INCOME AS AGAINST THE SAME IS U/S.69 OF THE ACT. ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 2 - 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER TO ALLOW THE REMUNERATION TO PART NER AT RS.42,06,897/- & IN DIRECTING TO DELETE THE DISALLO WANCE OF RS.15,58,570/- MADE ON ACCOUNT OF REMUNERATION IN RESPECT OF UNACCOUNTED INCOME TAXED U/S.69 OF THE A CT. 3) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON THE UNACCOUNTED EXPENDITURE FOR RENOVATION, WHICH IS NO T PERMITTED UNDER PROVISION TO SECTION 69C OF THE ACT . 2. THE MAIN ISSUE WHICH HAS BEEN CONTESTED IN THE L IGHT OF THE ABOVE GROUNDS IS WHETHER THE DISCLOSURE OF UNACCOUNTED IN COME DURING THE COURSE OF SURVEY IS TO BE TREATED AS PROFESSIONAL/B USINESS INCOME FOR THE PURPOSE OF COMPUTATION OF REMUNERATION TO PARTNERS AS PRESCRIBED UNDER THE PROVISIONS OF SECTION 40(B)(V) OF THE IT ACT. IN THIS REGARD, FACTS EMERGING FROM THE CORRESPONDING ASSESSMENT ORDER WE RE THAT THE FIRM HAD FILED THE INCOME AT RS.65,53,830/- AFTER THE SU RVEY; WHICH WAS CONDUCTED U/S.133A ON 18/3/2009. THE ASSESSEE-FIRM IS RUNNING A HOSPITAL, THEREFORE ENGAGED IN THE BUSINESS OF MEDI CAL PROFESSION. ADMITTED FACTUAL POSITION IS THAT A STATEMENT OF ON E DR.ABHEY KHANDEKAR WAS RECORDED U/S.131 OF THE ACT AND HE HAD DISCLOSE D AN AMOUNT OF RS.75 LACS TO BE TAXED FOR THE YEAR UNDER CONSIDERA TION. THE AO HAS NOTED THAT THE MEDICAL INCOME SHOWN AS PER P&L ACCO UNT AT RS.2,18,80,411/- WHICH WAS INCLUSIVE OF THE DISCLOS ED AMOUNT OF RS.75 LACS AND AFTER CLAIMING THE EXPENDITURE OF RS .1,49,61,234/- THE ASSESSEE HAS COMPUTED THE PROFIT OF RS.73,89,530/-. IT WAS FURTHER NOTED BY THE AO THAT IF THE ABOVE DISCLOSED AMOUNT WAS TO BE EXCLUDED, THEN THE NET RESULT WOULD BE IN NEGATIVE FIGURE. THE AS SESSEE HAS TRIED TO ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 3 - SUBVERT THE ADDITIONAL INCOME DISCLOSED BY CLAIMING HUGE EXPENDITURE. IN COMPLIANCE, THE ASSESSEE HAS REITERATED THAT TH E AMOUNT DISCLOSED WAS THE BUSINESS INCOME SINCE SOME OF THE RECEIVABLES W ERE NOT DISCLOSED IN THE BOOKS OF ACCOUNTS AND IN THIS CONNECTION THE RE PLY OF THE ASSESSEE WAS AS UNDER:- 1. REASONS FOR NOT DISALLOWING EXPENSES:- WE DESIRE TO STATE AND/OR SUBMIT, IT IS NOT CORRECT TO SAY THAT THE ASSESSEE HAS NOT DISCLOSED RS.2702914/- SHOWN AS RE CEIVABLE. THE BALANCE OF RS.4797086/- IS SHOWN AS INCOME FROM BUS INESS. IN FACT TOTAL RS.7500000/- IS INCOME FROM BUSINESS, IN THIS CONNECTION KINDLY REFER TO NOTE NO.7 ANNEXURE H WHICH READS AS UNDER: THE INCOME TAX DEPARTMENT HAD CONDUCTED SURVEY ON 18/03/09 AND THE ASSESSEE THROUGH ITS PARTNER DECLARED INCOM E OF RS.7500000/-. ON VERIFICATION OF BOOKS OF ACCOUNT, IT IS FOUND THAT THE FOLLOWING INCOMES WERE SHOWN AS RECEIVABLES AND NOT ADJUSTED TO PROFIT AND LOSS ACCOUNT. SR.NO. PARTICULARS AMOUNT (RS.) 1 DUE BILLS 148506/- 2 OPD BASED DIALYSIS 159800/- 3 OPD BASED PATHOLOGY 60262/- 4 OPD BASED RADIOLOGY 510640/- 5 ADVANCE REFUND AMOUNT (OLD) 1823706/- TOTAL 2702914/- THE BALANCE OF RS.4797086/- IS SHOWN AS INCOME FROM BUSINESS AND OTHER SOURCE. THE SAME GENERATION OF CASH IS A DJUSTED AGAINST THE BUILDING WHICH IS SHOWN AS ADDITION AND DEPRECIATION IS CLAIMED THEREON. 2. REASON FOR NOT COMPUTING INCOME ON THE BASIS OF LAST 3 YEARS:- IT APPEARS THAT YOUR OBSERVATION IS FACTUALLY INCOR RECT BECAUSE FROM THE ENCLOSED STATEMENT AFTER DEDUCTION OF DEPR ECIATION FROM EXPENSE AND DEDUCTION OF UNDISCLOSED INCOME BEING E XTRA ORDINARY ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 4 - ITEM FROM INCOME FOR A.Y. 2009-10. RATIO OF INCOME TO EXPENSE IS 88% IN PREVIOUS YEAR 2008-09 I.E. A.Y. 2009-10. WH ILE THE SAME IS 90% IN PREVIOUS YEAR 2007-08 I.E. A.Y. 2008-09 A ND IS 89% IN PREVIOUS YEAR 2006-07 I.E. A.Y. 2007-08. 2.1. HOWEVER, THE AO WAS NOT CONVINCED AND HELD THA T AS PER THE STATEMENT, THE IMPUGNED AMOUNT WAS DISCLOSED AS UN ACCOUNTED INCOME EARNED FROM UNKNOWN SOURCES, HENCE THE SETTING OFF OF EXPENSES AGAINST THE DISCLOSED AMOUNT WAS NOT TO BE ALLOWED. ACCORD ING TO HIM, THE DEEMING PROVISIONS ARE TO BE APPLIED AND IN SUPPORT PLACED RELIANCE ON FAKIR MOHMED HAJI HASAN VS. CIT 247 ITR 290 (GUJ.). FINALLY, THE OFFERED AMOUNT OF RS.75 LACS WAS TAXED IN THE HANDS OF THE ASSESSEE. THE AO HAS ALSO RECASTED THE P&L ACCOUNT AND AFTER EXCL UDING THE DISCLOSED AMOUNT HE HAS ARRIVED AT THE FIGURE OF LOSS OF RS.1 ,10,270/-. FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT AS PRESCRIB ED UNDER EXPLANATION-3 TO SECTION 40(B)(V) HE HAS HELD THAT THE REMUNERATION TO THE PARTNERS WAS TO BE PROVIDED FROM THE PROFIT WHI CH WAS FOUND TO BE EXCESSIVELY PROVIDED BY AN AMOUNT OF RS.24,98,327/- . THE SAID AMOUNT WAS ACCORDINGLY TAXED. 2.2. THERE IS AN ANOTHER OBSERVATION OF THE AO THAT THE AMOUNT OF RS.75 LACS WAS CLAIMED TO HAVE BEEN INVESTED IN TH E BUILDING, ON WHICH THE ASSESSEE HAS COMPUTED DEPRECIATION @ 5% AT RS.3 ,75,000/- WHICH WAS ALSO TAXED IN THE HANDS OF THE ASSESSEE. 3. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE T HE FIRST APPELLATE AUTHORITY WHO HAS GIVEN HIS FIRST OBSERVATION THAT THE DISCLOSED AMOUNT OF RS.75 LACS WAS TO BE TREATED AS BUSINESS INCOME I N THE HANDS OF THE ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 5 - ASSESSEE. THE LD.CIT(A) HAS DISTINGUISHED THE CA SE LAW CITED BY THE AO. LD.CIT(A) HAS PLACED RELIANCE ON (I) M/S.FASHI ON WORLD VS. ACIT (IN ITA NO.1634/AHD/2006 ITAT AHMEDABAD B BENCH ) AND (II) DY.CIT VS. M/S.SHAH KHODIDAS & CO. (IN ITA NO.531/A HD/2008 ITAT AHMEDABAD B BENCH). AN OBSERVATION WAS MADE, QUO TE IN THE CASE OF SURVEY FOR THE DISCLOSURE HELD THAT SINCE THE DISCL OSURE IS INTERLINKED WITH THE ONLY EARNING APPARATUS OF APPELLANT DULY DISPLA YED BY BUSINESS ASSET, THE SAME CAN ONLY BE CONSIDERED UNDER THE BUSINESS INCOME. UNQUOTE. IT WAS CONCLUDED THAT THE DISCLOSED INCOME WAS TO B E ASSESSED AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE. TH E CONSEQUENCE OF THE SAID OBSERVATION WAS THAT WHILE COMPUTING THE PARTN ERS REMUNERATION U/S.40(B) OF THE ACT, THE DISCLOSED AMOUNT WAS TAKE N INTO ACCOUNT TO COMPUTE THE BOOK PROFIT OF THE ASSESSEE. THE OT HER CONSEQUENCE OF THE VIEW TAKEN BY THE LD.CIT(A) WAS ON THE DISALLOWANCE OF DEPRECIATION BY THE AO. LD.CIT(A) HAS DIRECTED TO ALLOW THE DEPREC IATION BECAUSE THE AMOUNT IN QUESTION WAS CAPITALIZED AND CLAIMED TO H AVE BEEN INVESTED TOWARDS RENOVATION OF THE HOSPITAL BUILDING. BEING AGGRIEVED, NOW THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT THE ISSUE IN HAND THAT AN ADDITIONAL INCOME DI SCLOSED DURING THE COURSE OF SURVEY IS TO BE TREATED AS BUSINESS INCOM E OR NOT; HAS NOW BEEN SETTLED IN FAVOUR OF THE ASSESSEE. IN THIS REGARD, OUR ATTENTION HAS BEEN ON AN ORDER OF THE ITAT B BENCH AHMEDABAD PRONOUNCED IN THE CASE OF ACIT VS. M/S.AMIR YASINI SAIYED (CROSS-APPEALS) IN ITA NO.2916/AHD/2006 FOR A.Y. 2003-04 (BY REVENUE) AND ITA ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 6 - NO.2947/AHD/2006 (BY ASSESSEE) DATED 12/06/09, WHER EIN THE DECISION OF FAKIR MOHMED HAJI HASAN VS. CIT 247 ITR 290 (GUJ .) HAS BEEN CONSIDERED AND THEREAFTER IT WAS HELD THAT WHILE CO MPUTING THE BOOK PROFIT FOR THE PURPOSE OF COMPUTATION OF REMUNERATI ON TO PARTNERS AS PRESCRIBED U/S.40(B)(V) OF THE ACT, THE DISCLOSED/O FFERED AMOUNT IS TO BE TAKEN INTO ACCOUNT; RELEVANT PORTION IS REPRODUCED BELOW:- 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE CONT ROVERSY CENTERS AROUND COMPUTING BOOK PROFIT FOR THE PURPOSE OF ALL OWING REMUNERATION TO THE PARTNERS. ACCORDING TO THE LEARNED DR THE EN TIRE SUM OF RS.45,50,000/- DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SURVEY IS DEEMED INCOME AND NOT BUSINESS INCOME AND, THEREFOR E, IT WOULD NOT BE AVAILABLE FOR WORKING OUT BOOK PROFIT; WHEREAS THE CASE OF THE ASSESSEE IS THAT IT HAS DECLARE THE ENTIRE SUM AS BUSINESS I NCOME WITHOUT CLAIMING ANY EXPENDITURE AGAINST IT AND, THEREFORE, THE ENTI RE SUM WOULD BE AVAILABLE FOR WORKING OUT BOOK PROFIT U/S 40(B) (EX PLANATION 3 THEREUNDER). IN OUR CONSIDERED VIEW IT IS THE PRER OGATIVE OF THE ASSESSEE TO DECLARE A PARTICULAR FIGURE AS ITS INCOME IN THE RETURN OF INCOME FILED BY IT. ANY STATEMENT GIVEN DURING THE COURSE OF SUR VEY PRIOR TO FILING OF RETURN WILL NOT HAVE ANY RELEVANCE OR EFFECT UNLESS THERE IS MATERIAL EVIDENCE AVAILABLE TO SHOW THAT THE INCOME DECLARED IN A STATEMENT GIVEN DURING THE COURSE OF SURVEY IS NOT SUPPORTED BY THE EVIDENCE FOUND DURING THE COURSE OF SURVEY. THE AO HAS FOUND DURIN G THE COURSE OF SURVEY CERTAIN EXPENSES OUTSIDE THE BOOKS. THEREFOR E, SUCH EXPENSES ARE DECLARED AS INCOME BUT WERE TREATED BY THE ASSESSEE AS BUSINESS INCOME WHEN THE RETURN OF INCOME WAS FILED. FOR TREATING C ERTAIN AMOUNT AS DEEMED INCOME THE CONDITION LAID DOWN U/S 68, 69, 6 9A, 69B AND 69C OF THE ACT SHOULD BE SATISFIED. UNDER SECTION 69C OF T HE ACT AN INVESTMENT WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT CAN B E TREATED AS UNEXPLAINED INVESTMENT. IF THE ASSESSEE HAS FILED R ETURN OF INCOME DECLARING SUCH OUTGOING AS INCOME HAS TAKEN SUCH IN VESTMENT IN THE BOOKS OF ACCOUNT OF THE RELEVANT PREVIOUS YEAR, AS IN THE PRESENT CASE AND ALSO THE ASSESSEE HAS SHOWN THIS INVESTMENT IN THE BALANCE SHEET FILED ALONG WITH THE RETURN, THEN IT CAN NOT BE SAI D THAT OUTGOING IS NOT RECORDED IN THE BOOKS OF ACCOUNT. SECTION 69A OF TH E ACT EMPOWERS THE AO TO TREAT THE INVESTMENT IN MONEY, BULLION, JEWEL LERY, VALUABLE ARTICLES AS DEEMED INCOME WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. SECTION 69B OF THE ACT TREATS AMOUNT OF IN VESTMENT NOT FULLY ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 7 - DISCLOSED IN THE BOOKS AS DEEMED INCOME. SECTION 69 C OF THE ACT TREATS AN EXPENDITURE INCURRED DURING ANY FINANCIAL YEAR A S DEEMED INCOME IF THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION OR EXP LANATION OFFERED BY THE ASSESSEE IS NOT FOUND SATISFACTORY. IN ALL THES E PROVISIONS OUTGOING HAS TO BE COMPARED WITH BOOKS OF ACCOUNT AND RETURN OF INCOME FILED. IF THE BOOKS OF ACCOUNT OR RETURN OF INCOME SHOWS RECE IPT OF MONEY OR RECEIPT OF INCOME AND OUTGOING IS EXPLAINABLE FROM SUCH INCOME, THEN IT CANNOT BE SAID THAT INVESTMENT IS DEEMED INCOME OF THE ASSESSEE. IT WOULD HAVE BEEN DIFFERENT MATTER IF OUTGOING IN THE FORM OF EXPENSES OR INVESTMENTS ARE NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT AND ALSO IN THE RETURN OF INCOME FILED BY THE ASSESSEE. IN THE PRESENT CASE, THE OUTGOING FOUND DURING THE COURSE OF SURVEY ARE EXPL AINABLE WITH THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF IN COME FILED BY IT AFTER SURVEY. THE QUESTION OF TREATING ANY PART OF RS.45, 50,000/- AS DEEMED INCOME U/S 69 OR 69A OR 69B OR 69C OF THE ACT DOES NOT ARISE. IN FACT, IN THE RETURN OF INCOME FILED BY THE ASSESSEE, NO EXPE NDITURE/INVESTMENT IS CLAIMED BY IT. THE AO HAS ALSO NOT TAXED ANY EXPEND ITURE AS DEEMED INCOME U/S 69C. THEREFORE, THE ARGUMENT OF THE AO T HAT THE DISCLOSED INCOME OF RS.45,50,000/- CANNOT BE CONSIDERED AS BO OK PROFIT IN COMPUTING REMUNERATION IS NOT ACCEPTABLE. AS A RESU LT, WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE REVENUE AND TH E SAME IS DISMISSED. 4.1. FEW OTHER DECISIONS OF THE TRIBUNAL HAVE ALSO BEEN REFERRED AS FOLLOWS:- SR.NO. IN THE CASE OF.. REPORTED IN. / IN ITA NO. 1. THE DCIT VS. M/S.SHREE LABDHI PRINTS 3258/AHD/2011 FOR A.Y. 2003-04 ITAT C BENCH AHMEDABAD ORDER DATED 18/5/2012 2. CIT VS. S.K.SRIGIRI & BROS. (2008) 298 ITR 13 (KAR) 3. ITO VS. JAMNADAS MULJIBHAI (2006) 99 TTJ 197 (RAJKOT) ITA NO.114/AHD/ 2013 DCIT(OSD) VS. M/S.SIDDHI VINAYAK HOSPITAL ASST.YEAR 2009-10 - 8 - 4.2. IN THIS MANNER, ALL THE GROUNDS OF THE REVENUE ARE HEREBY DEALT WITH BY TAKING A CONSISTENT VIEW ALREADY TAKEN IN N UMBER OF DECISIONS BY THE HONBLE COURTS AS WELL AS BY THE RESPECTED CO-O RDINATE BENCHES. RESULTANTLY, ALL THE GROUNDS OF THE REVENUE BEING I NTERLINKED, ARE HEREBY DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. SD/- SD/- ( &..'# ) ( ' ' ( ) $ )* $ ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/ 3 /2013 &.., .*../ T.C. NAIR, SR. PS ') * +,- .'-' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , -. / / CONCERNED CIT 4. / () / THE CIT(A)-XV, AHMEDABAD 5. 234 **-., -.#, 5'$,$ / DR, ITAT, AHMEDABAD 6. 467 8 / GUARD FILE. ')% / BY ORDER, 2 * //TRUE COPY// // 0 ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION DATED 14.3.13 (DICTATION-PAD 11 PAGES ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15.3.13 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S ..22.3.13 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.3.13 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER