Dr. Shri. Gurunath S. Wachche, Solapur V. Income-tax Officer, Ward - 1 (2), Solapur

ITA 1444/PUN/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8747 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 29-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, ‘SMC’ PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI C.M. GARG, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1444/PUN/2019 िनधा रण वष / Assessment Year : 2010-11 Gurunath Shankarappa Wachche, Plot No.13, S.No.316, Vishal Nagar, Jule Solapur, Solapur 413 001 PAN : AALPW9544N Vs. ITO, Ward-1(2), Solapur Appellant Respondent आदेश / ORDER PER R.S.SYAL, VP : This appeal by the assessee arises out of the order passed by the CIT(A)-9, Pune in relation to the assessment year 2010-11. 2. The first ground is against the confirmation of disallowance of Rs.3,92,620/-. Briefly stated, the facts of the case are that the assessee is a Doctor by profession. He filed a return declaring total income of Rs.5,36,610/-. Gross receipts consisted of OPD and X-Ray fees at Rs.1,74,580/- and Operation and visit fees of Rs.7,33,837/- in addition to income from bank interest and dividend etc. The assessee was required to produce books of account as required to be statutorily Assessee by : Shri Pramod Shingte Revenue by : Shri M.G. Jasnani & Shri S.P. Walimbe Date of hearing : 10-11-2021 Date of pronouncement : 11-11-2021 ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 2 maintained under the Income-tax rules. The assessee submitted that the books were not correctly maintained but cash receipt book serially numbered was kept. The AO observed that the assessee had shown withdrawals only at Rs.20,482/- for the whole year, which were too low considering the fact that the assessee was a renowned orthopedic surgeon of Solapur. The AO further noted that although the assessee was maintaining two clinics at different places, but a common Cash receipt book was claimed to have been used for issuing receipts from both the clinics. In view of these facts, the AO inferred that the cash receipt book was prepared in a single sitting for scrutiny compliance only. The AO observed that if the amount of Operation and visit fees of Rs.7,33,837/- received by the assessee from outside hospitals was excluded, then there would be net loss of Rs.4,68,384/- from OPD and services provided from two clinics. The assessee was called upon to substantiate the figures of OPD and X-Ray fees. The assessee could not furnish any details of X-Rays done or X-Ray registers bearing name of patients and other requisite details. No details of patients availing such services were furnished. Considering these facts, the AO rejected the books of account by invoking provisions of section 145(3) of the Act and proceeded to estimate total gross receipts from ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 3 OPD and X-Ray. In this regard, the assessee submitted that cost of single X-Ray film was around Rs.30/-. Applying such rate to total expenses of X-Ray films debited in the Income & Expenditure account, the AO worked out number of X-Ray films consumed during the year at 1576. After allowing wastage at 10%, the net X-Ray films were taken at 1418. As the assessee was charging flat sum of Rs.150/- for each X-Ray service and OPD consulting charges were in the range of Rs.100 to Rs.150/- per patient, the AO estimated the amount of receipt from X-Rays at Rs.2,12,700/- (1418 x 150) and OPD charges in respect of the patients who had availed X-Rays at Rs.1,77,250/- (1418 x 125). For the patients who had not availed any X-Ray facility, the assessee admitted that roughly 50% of patients coming for OPD did not undergo X-Ray. The AO computed OPD fees from such patients at Rs.1,77,250/- (1418 x 125). Thus, the total amount of professional receipts from OPD and X-Rays was computed at Rs.5,67,200/- (2,12,700 +1,77,250+1,77,250). After reducing the amount shown by the assessee in his Income and Expenditure account towards OPD and X-Ray fees, the AO worked out difference of Rs.3,92,620/- and added the same to the assessee’s total income. In view of the fact that the assessee had shown meager annual ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 4 withdrawals at Rs.20,482/-, the AO held that the additional income of Rs.3,92,620/- computed by him was spent by the assessee in meeting his day-to-day needs. The ld. CIT(A) countenanced the assessment order on this count, against which the assessee has come up in appeal before the Tribunal. 3. We have heard the rival submissions and gone through the relevant material on record. It is manifest that the assessee did not maintain books of account as mandated under the Income-tax Rules. The assessee, being, a professional was supposed to maintain books as per the prescribed format, which he did not. Though the assessee was having two clinics, he allegedly kept only one cash receipt book for both of them. We fail to appreciate as to how a person having two clinics, situated distantly from each other, will have only one cash receipt book. Notwithstanding the above, the assessee declared only Rs.20,482/- as withdrawals for the year which means that monthly expenditure of Rs.1,706/-. It is totally incomprehensible that a Doctor who is a renowned surgeon maintaining two clinics and also having a reasonably good life standard will be leading his life on a monthly petty outgo of Rs.1,700/-. In view of the fact that the assessee did not maintain books of account as statutorily required and further that the ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 5 defects noted above refuse to vouch for the accuracy of the secondary record maintained, we are satisfied that the books of accounts were rightly rejected by the AO. 4. Coming to the estimation of income, we find that the AO, in the absence of the assessee furnishing any reasonable basis for the computation of gross receipts, rightly proceeded with the expenditure incurred on X-Ray films as a base figure and thereafter extrapolated the amount of professional receipts which the assessee would have ordinarily earned therefrom. In our considered opinion, there is no infirmity in the order passed by the AO and as approved in the first appeal on this count. We, therefore, uphold the addition of Rs.3,69,620/-. This ground is dismissed. 5. The second ground is against the confirmation of addition of Rs.2,76,407/-. The facts apropos this ground are that the assessee was constructing a residence-cum-hospital building at Solapur. On enquiry, the assessee furnished details of investment made in the building at Rs.80,29,402/- incurred for the financial years 2009-10 to 2012-13 with the construction still in progress. The AO made a reference to the Departmental Valuation Officer (DVO) for determining the amount of investment in the property. The latter ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 6 estimated the amount of investment in the building at Rs.1,19,76,000. By appropriating the additional amount of investment at Rs.31,31,871/- (Rs.1,19,76,000 – Rs.88,44,129) to the four years, the AO worked out proportionate excess investment for the year and made addition of Rs.4,47,544/-. The ld. CIT(A) restricted the addition to Rs.2,76,407/-. 6. We have heard the rival submissions and gone through the relevant material on record. It is apparent from the assessment order that the construction commenced in the year under consideration and continued beyond the financial year 2012-13, in which the assessment was completed after obtaining the report from the DVO. The assessment year under consideration is 2010-11, which is the first year of the commencement of the construction. The only basis for making the addition is the report dated 24-12-2012 furnished by the DVO valuing the amount of investment in the building at Rs.1.19 crore up to that date. Admittedly, the building was incomplete as on that date. The year under consideration is the first year of commencement of construction of the building, which continued beyond four years. The Chandigarh Bench of the Tribunal in DCIT Vs. Nabha Solvex (P) Ltd. (1994) 48 TTJ 408 (Chandigarh) has held that no addition can be ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 7 made on account of valuation of construction where construction is not complete in the previous year. The Hon’ble Madras High Court in the case of CWT Vs. S. Venugopala Konar and others (1977) 109 ITR 52 (Mad.) laid down similar proposition in the context of Wealth Tax Act by holding that “incomplete construction has no market value”. That was a case in which the assessee incurred certain amount of construction work during the period of four years. The total cost of construction was estimated by the DVO at a higher level, which was spread over the period of 4 years of construction. It was on account of such difference that the penalty was imposed, which came to be finally deleted by the Tribunal. Affirming such deletion of penalty, the Hon’ble High Court observed that “In respect of any incomplete construction, normally there cannot be any market value as on successive valuation dates on the basis of the progress in the construction work and the only manner in which the value of such incomplete construction, as on different valuation dates, could be arrived at was by finding out the actual amount spent on the construction as on the different valuation dates”. In view of the foregoing discussion, we are satisfied that the addition made by the ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 8 AO towards proportionate excess investment, cannot be sustained. The same is ordered to be deleted. 7. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 11 th November, 2021. Sd/- Sd/- (C.M. GARG) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 11 th November, 2021 Satish आदेश की ितिलिप अ ेिषत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. थ / The Respondent; 3. The CIT(A)-9, Pune 4. 5. 6. The Pr.CIT-6, Pune DR, ITAT, ‘SMC’ Bench, Pune गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No.1444/PUN/2019 Gurunath Shankarappa Wachche 9 Date 1. Draft dictated on 10-11-2021 Sr.PS 2. Draft placed before author 10-11-2021 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *