ITO, Kalimpong, Kalimpong V. Dorjee Namgyal Lepcha, Kalimpong

ITA 1400/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7982 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 14-08-2009
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Keywords: Depreciation; Revenue expenditure
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : B BENC H : KOLKATA [ BEFORE SHRI B.R.MITTAL, HONBLE J.M. & SHRI C. D. RAO, HONBLE A.M .] I.T.A.NO. 1400 (KOL) OF 2009 : ASSESSMENT YE AR 2006-07 I.T.O., KALIMPONG -VS- DORJEE NAMGYAL LEPCHA, KALIMPONG [APPELLANT] (PAN: ACFPL 4839B) [RESPONDENT] APPELLANT BY : SHRI PIYUSH KOLHE RESPONDENT BY : SHRI SUBHAS AGARWAL O R D E R O R D E R O R D E R O R D E R PER SHRI C.D.RAO, A.M . THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE C.I.T.(A), SILIGURI DATED 11.05.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APP EAL READS AS UNDER: THE LD. C.I.T.(A), SILIGURI HAS ERRED IN DIRECTING THE A.O. TO TREAT THE NET PROFIT OF THE ASSESSEE AT THE RATE OF TEN PERCE NT OF THE GROSS RECEIPTS OF RS.14,36,628/- WITHOUT CONSIDERING THE FACT THAT THE TOTAL EXPENDITURE INCURRED WAS DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE GROSS RECEIPT WAS DETECTED AS A RE SULT OF SURVEY U/S.133A OF THE I.T.ACT, 1961. 3. BRIEF FACTS OF THIS CASE IS THAT THE ASSESSEE IS THE OWNER OF A NURSING HOME NAMED AS M/S. ADARSH NURSING HOME. A SURVEY UNDER S ECTION 133A OF THE I.T.ACT, 1961 WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE AND THE FROM THE BOOKS IMPOUNDED DURING THE COURSE OF SURVEY IT WAS FOUND THAT THE GROSS RECEIPT OF THE ASSESSEE DURING THE YEAR WAS OF RS.35,30,089/- WHER EAS THE ASSESSEE IN HIS PROFIT & LOSS ACCOUNT HAS SHOWN GROSS RECEIPTS TO THE TUNE O F RS.20,93,461/- ONLY. CONSIDERING THE TOTAL REVENUE EXPENDITURE BEING FOUND TO BE DUL Y RECORDED IN THE BOOKS OF ACCOUNTS, THE DIFFERENCE IN GROSS RECEIPT OF RS.14, 36,628/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. BEING AGGRIEVED WITH THE OR DER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), SILIGURI . THE LD. CIT(A), SILIGURI DIRECTED THE AO TO TREAT THE INCOME OF THE ASSESSEE AT THE R ATE OF TEN PERCENT OF THE SUPPRESSED 2 RECEIPT OF RS.14,36,628/- WITHOUT CONSIDERING THE F ACT THAT THE ASSESSEE HAD NO SUCH EXPENSES WHICH WERE NOT DEBITED IN THE PROFIT AND L OSS ACCOUNT. 4. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFO RE US. 5. AT THE TIME OF HEARING OF THE APPEAL, THE LD. DR , APPEARING ON BEHALF OF THE REVENUE, BY POINTING OUT THE OBSERVATIONS MADE BY T HE LD. CIT(A) AT PAGE NO.3, CONTENDED THAT BASED ON THOSE OBSERVATIONS, THE DEC ISION OF THE LD. CIT(A) IS NOT JUSTIFIABLE IN THE FACTS OF THE CASE. HE FURTHER PO INTED OUT THAT THE FACTS ON WHICH THE LD. CIT(A) HAS DISPOSED OFF THE APPEAL FOR THE IMME DIATELY PRECEDING ASSESSMENT YEAR IS QUITE DIFFERENT WHEN COMPARED TO THE FACTS OF TH E PRESENT CASE. THEREFORE, HE REQUESTED TO SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE THAT OF THE A.O. 6. ON THE OTHER HAND, THE LD. A.R., APPEARING ON BE HALF OF THE ASSESSEE, HAS FILED THE COMPUTATION OF INCOME AS ATTACHED TO THE INCOME -TAX RETURN, TRADING AND PROFIT & LOSS A/C. FOR THE YEAR ENDING 31.03.2006 AND PROFIT & LOSS A/C. FOR THE YEAR ENDING 31.3.05 AND THE APPELLATE ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2005-06. BASED ON THESE DOCUMENTS, HE CONTENDED THA T THE LD. CIT(A) IS JUSTIFIABLE 7. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE CONSIDER IT FIT TO EXTRACT THE ORDERS OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2005-06 AS WELL AS THE ORDER OF THE LD. CIT(A) FOR THE IMPUGNED ORDER WHICH ARE AS UNDER: CIT(A)S ORDER FOR THE A.Y. 2005-06 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE L D. AR AND ALSO PERUSED THE ASSESSMENT ORDER. IT IS A CASE WHERE NO RETURN SHOWING TAXABLE INCOME WAS FILED BY THE ASSESSEE BEFORE ISS UING NOTICE U/S.148 OF THE ACT. EVEN FOR THE IMMEDIATELY PRECEDING YEAR, N O INCOME FROM NURSING HOME WAS SHOWN. THEREFORE, THE P&L A/C AND BALANCE SHEET FILED ALONGWITH THE RETURN U/S.148 CANNOT BE ACCEPT ED AS SACROSANCT. APPARENTLY NO BOOKS OF ACCOUNTS WAS FOUND AT THE TI ME OF SURVEY. THE AR FAILED TO PRODUCE THE LIST OF THE DOCTORS TO WHO M PAYMENT OF OPERATION CHARGES CLAIMED TO HAVE BEEN MADE. THE AR ALSO FAILED TO FURNISH ANY SUCH DOCUMENT OR INFORMATION AT THE TIM E OF HEARING OF THE APPEAL. THEREFORE, THE FINDING OF THE AO ON THE BAS IS OF IMPOUNDED 3 DOCUMENTS DETERMINING THE NET INCOME OF THE ASSESSE E SHOULD NOT BE DISTURBED. SHE HAS RIGHTLY INVOKED THE PROVISION OF SEC.145(3) OF THE I.T. ACT. WHILE SHE HAS DETERMINED THE NET PROFIT @15%, IT IS OBVIOUS THAT SHE HAS CONSIDERED ALL ALLOWABLE EXPENSES INCLUDING THE DEPRECIATION AND INTEREST. SHE HAS MENTIONED THE SAME IN THE LAS T PARA OF HER ORDER. HOWEVER, THE NET PROFIT ESTIMATED @15% ON THE GROSS TURNOVER IS SEEMS TO BE ON THE HIGHER SIDE. CONSIDERING THE FACT OF T HE CASE AND THE OTHER RELEVANT ISSUES, FOR THE SAKE OF JUSTICE, THE NET P ROFIT IS RESTRICTED TO 08.0% OF THE GROSS TURNOVER AS AGAINST 15% ESTIMATE D BY THE LD. AO. CIT(A)S ORDER FOR THE A.Y. 2006-07 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE L D. AR AND ALSO PERUSED THE ASSESSMENT ORDER. IT IS A CASE WHERE TH E SUPPRESSED TURNOVER WAS DETERMINED ON THE BASIS OF THE IMPOUND ED DOCUMENTS INVENTORISED DURING THE SURVEY OPERATION. THE LD. A R FAILED TO ESTABLISH HIS CLAIM THAT THE EXCESS AMOUNT WAS RECEIPTS ON BE HALF OF THE OPERATING SURGEONS TO WHOM THE AMOUNT WAS HANDED OVER SUBSEQU ENTLY. HE FAILED TO PROVIDE THE NAMES, ADDRESS, PAN AND OTHER INCOME -TAX PARTICULARS. THE AR FAILED TO PRODUCE THE LIST OF THE DOCTORS TO WHOM PAYMENTS OF OPERATION CHARGES CLAIMED TO HAVE BEEN MADE. THE AR ALSO FAILED TO FURNISH ANY SUCH DOCUMENT OR INFORMATION AT THE TIM E OF HEARING OF THE APPEAL. ON THE OTHER HAND, THE AO FOUND THAT THE RE CEIPTS SHOWN IN THE DOCUMENTS WERE ON ACCOUNT OF PATHOLOGY TEST, X-RAY, USG, ECG, BIOPSY, ENDOSCOPY AND BED CHARGES ETC. THEREFORE, T HE FINDING OF THE AO ON THE BASIS OF IMPOUNDED DOCUMENTS DETERMINING THE GROSS TURNOVER OF THE ASSESSEE SHOULD NOT BE DISTURBED. HOWEVER, IT CANNOT BE SAID THAT ACTUALLY ALL SUPPRE SSED RECEIPT CONSTITUTES NET INCOME OF THE ASSESSEE. IT CANNOT B E RULED OUT THAT WITHOUT INCURRING ANY EXPENDITURE, INCOME COULD EAR NED THAT SUPPRESSED INCOME. THE LD. AO HAS ASSESSED THE INCOME AT RS.16 ,33,684/- ON GROSS RECEIPT OF RS.35,30,089/-. IN THAT CASE, THE NET PR OFIT RATE WOULD BE 46.28% WHICH IS AN IMPOSSIBLE PROPOSITION. IT IS TH US FAIR THAT THE NET INCOME TO BE TREATED AS SUPPRESSED INCOME OF THE AS SESSEE. IN VIEW OF THE ABOVE FACT AND FOLLOWING THE RATIO OF MY ORDER IN CASE THE ASSESSEE FOR A.Y. 2005-06 IN APPEAL NO.20/CIT(A)/SLG/08-09, THE AO IS DIRECTED TO REAT THE NET PROFIT OF THE ASSESSEE AS SUPPRESSE D NET INCOME ON SUPPRESSED TURNOVER. AS PER THE ASSESSMENT ORDER, T HE ASSESSEE HAS DISCLOSED GROSS RECEIPT OF RS.20,93,461/- AND NET I NCOME WAS RS.1,97,056/- WHICH MEANS THE PERCENTAGE OF NET PRO FIT WAS AT THE RATE OF 9.41%. THEREFORE, CONSIDERING THE FACT OF THE CASE AND FINDINGS OF THE LD. AO AND THE DECISION GIVEN IN AFORESAID APPEAL, TO MEET THE END OF JUSTICE, THE AO MAY TREAT 10%(TEN) OF THE SUPPRESSE D RECEIPTS OF RS.14,36,628/- AS UNDISCLOSED INCOME OF THE ASSESSE E. THUS, THE ADDITION 4 TO THE EXTENT OF RS.1,43,662/- IS CONFIRMED. WHILE DOING SO, NO FURTHER EXPENDITURE INCLUDING DEPRECIATION AND INTEREST SHA LL BE ALLOWED . 7.1 ON PERUSAL OF THE ABOVE TWO ORDERS, WE ARE OF T HE CONSIDERED OPINION THAT WHEN ONCE THE LD. CIT(A) HAS RECORDED THE FINDING THAT THE AR FAILED TO PRODUCE THE LIST OF THE DOCTORS TO WHOM PAYMENTS OF OPERATION CHARGES C LAIMED TO HAVE BEEN MADE. THE AR ALSO FAILED TO FURNISH ANY SUCH DOCUMENT OR INFO RMATION AT THE TIME OF HEARING OF THE APPEAL. ON THE OTHER HAND, THE AO FOUND THAT TH E RECEIPTS SHOWN IN THE DOCUMENTS WERE ON ACCOUNT OF PATHOLOGY TEST, X-RAY, USG, ECG, BIOPSY, ENDOSCOPY AND BED CHARGES ETC. THEREFORE, THE FINDING OF THE AO ON TH E BASIS OF IMPOUNDED DOCUMENTS DETERMINING THE GROSS TURNOVER OF THE ASSESSEE SHOU LD NOT BE DISTURBED, THEN IT IS NOT JUSTIFIED ON THE PART OF THE LD. CIT(A) TO FOLLOW H IS ORDER IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 AND DIRECT THE AO T O ADOPT THE 10% OF THE SUPPRESSED RECEIPTS OF RS.14,36,628/-. IN OUR CONSIDERED OPINI ON, AS CONTENDED BY THE LD. DR, THE FACTS OF THE PRESENT CASE ARE NOT IDENTICAL WITH TH AT OF THE ONE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. HOWEVER, IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO PROVIDE ONE MORE OPPORTUNITY TO THE ASSESSEE TO ESTABLISH THAT AGAINST THE DIFFERENCE OF RECEIPTS OF RS.14,36,628/- WHETHER THE ASSESSEE HAS INCURRED ANY SPECIFIC EXPENDITURE OTHER THAN THE ONE RECORDED IN THE PROF IT & LOSS A/C. WE ORDER ACCORDINGLY. 8. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE COURT ON 05.03.2010 SD/- SD/- [B.R.MITTAL] [C.D.RAO] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 05-03-2010 COPY FORWARDED TO : 1. DORJEE NAMGYAL LEPCHA, KALIMPONG 2. I.T.O., KALIMPONG , 3. CIT(APPEAL), KOLKATA 4. CIT, KOLKATA 5. D.R., ITAT, KOLKATA. TRUE COPY, BY ORDER DY. REGISTRAR, ITAT, KOLKATA MST