The ACIT, Vapi Circle, Vapi V. M/s. Nadkarni Hospital & Test Tube Baby Centre, Vapi

ITA 1619/AHD/2009

• Counselvise Citation: 161920514 RSA 2009
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWAL SR D R SHRI T
• Assessee Lawyers: CENTRE VAPI PAN AACFND
• Keywords: Rejection of books of accounts; Unexplained investment
• Section: 69; 145

Judgement Text

, , . .. . . .. . , , , , . .. .!' !' !' !' !' !' !' !' , #$ #$ #$ #$ # % # % # % # % IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE SHRI G.C.GUPTA, HONBLE V.P. & SHRI A.MOHAN ALANKAMONY, HONBLE A.M.) . ITA NO. 1619/AHD./2009 : ' &' - 2006-2007 ACIT, VAPI CIRCLE, VAPI.. ( () /APPELLANT) -VS- NADKARNI HOSPITAL & TEST TUBE BABY CENTRE, VAPI .. ( *+() /RESPONDENT ) (PAN : AACFN4420D) () , - # / APPELLANT BY : SHRI SAMIR TEKRIWAL, SR.D.R. *+() , - # / RESPONDENT BY : SHRI TUSHAR P. HEMANI, A.R. '. , /0$ / DATE OF HEARING : 15/11/2011 1!& , /0$ / DATE OF PRONOUNCEMENT : 10/02/2012 #2 #2 #2 #2 / ORDER PER SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER OF THE LD. CIT (A), VALSAD IN APPEAL NO. CIT(A)/VLS /203/08-09/732 DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2006-07 PASSED UN DER SECTION 250 R.W.S.143(3) OF THE I.T. ACT . 2. THE GROUNDS RAISED WERE TWO-FOLDS, NAMELY: (I) THE CIT (A) ERRED IN DELETING THE DISALLOW ANCE MADE ON ACCOUNT OF EXCESS CONSUMABLES OF RS.11,00,000/- & (II) THE CIT (A) ALSO ERRED IN DELETING THE DI SALLOWANCE OF RS.6 LAKHS MADE ON ACCOUNT OF RENOVATION OF AN ASSET. 3. THE ISSUES, IN BRIEF, ARE THAT THE ASSESSEE FI RM (THE ASSESSEE IN SHORT) ENGAGED IN THE BUSINESS OF RUNNING A HOSPITA L HAVING A CONCEPTION UNIT AND RESEARCH CENTRE. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, ITA NO.1619-AHD-09 2 THE AO NOTICED THAT THE ASSESSEE HAD DEBITED IN THE PROFIT AND LOSS ACCOUNT THE HOSPITAL CONSUMABLE EXPENSES OF RS.1,11 ,62,924/- ON CASH BASIS. IT WAS SEEN THAT INVOICES OF CONSUMABLE SHO W THE PURCHASES IN LAST FINANCIAL YEAR I.E., 2004-05 AND THAT INVOICE OF DECEMBER 2004 WAS BOOKED IN THE EXPENSES OF APRIL, 2005 VIDE ENTRY SH EET DATED 5.12.2008. ON BEING QUERIED TO PRODUCE EVIDENCE/DATE OF CONSUM PTION OF THIS MATERIAL ETC., IT WAS PLEADED BY THE ASSESSEE THAT NO STOCK REGISTER WAS MAINTAINED AND ALSO NO INVENTORY OF SUCH ITEMS WAS TAKEN AT THE YEAR END. IN THE ABSENCE OF ABOVE DETAILS, ACCORDING TO THE AO, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF MONTH-WISE PURC HASE FOR CONSUMABLES AND NUMBER OF IN-PATIENTS AND OUT-PATIE NTS AND COMPARISON WITH THE CORRESPONDING LAST YEARS FIGURES. IT WAS OBSERVED THAT THERE WAS A BIG VARIATION WHEN PER PATIENT AVERAGE EXPENS ES WERE CALCULATED FOR EACH MONTH. ACCORDING TO THE AO, FOR THE MONTH OF OCTOBER 2005, AGAINST 549 PATIENTS, THE EXPENDITURE SHOWN WAS RS. 10.34 LAKHS WHICH WORKS OUT TO BE RS.18884.03 PER PATIENT AND FOR THE MONTH OF MARCH, 2006 AGAINST 738 PATIENTS, THE EXPENDITURE SHOWN WA S ONLY RS.6.26 LAKHS AND THE AVERAGE WORKED OUT TO RS.848.88 PER P ATIENT. ON BEING QUERIED, ACCORDING TO THE AO, IT WAS EXPLAINED THAT THE EXPENSES WERE BOOKED ON THE DATE OF PAYMENT I.E., CASH SYSTEM OF ACCOUNTING ETC. AS THE ASSESSEE COULD NOT ESTABLISH THE PROPER ACCOUNT ING OF SUCH HUGE CONSUMABLE ITEMS, THE CORRECTNESS OR COMPLETENESS O F THE ACCOUNTING, THE AO WAS OF THE VIEW THAT THE INCOME, PROFIT AND GAINS WERE NOT PROPERLY ACCOUNTED FOR IN ITS BOOKS OF ACCOUNT. AS THE BOOKS OF ACCOUNTS DID NOT DISCLOSE THE TRUE STATE OF AFFAIRS AND CORR ECT INCOME, THE AO, THEREFORE, TOOK A STAND THAT HE WAS NOT SATISFIED W ITH THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS AND, ACCORDINGLY, REJE CTED THE BOOKS RESULTS U/S 145 OF THE ACT. ON THE BASIS OF AVERAG E CONSUMPTION PER PATIENT OF MARCH, 2006 WORKED OUT TO RS.65.01 LAKHS (AVERAGE ITA NO.1619-AHD-09 3 CONSUMPTION RS.848.88 AS NUMBER OF PATIENTS BEING 7 659), THE AO TOOK A VIEW THAT THE ASSESSEE HAD CLAIMED EXCESS OF RS.4 6,61,370/- (1,11,62,942/- 65,01,572/-) AND TAKING INTO ACCOU NT THE MARGIN OF ERROR IN THE METHOD OF APPROXIMATION AND A LENIENT VIEW, A SUM OF RS.11 LAKHS WAS DISALLOWED. 4. ON APPEAL, AFTER CONSIDERING THE ASSESSEES CON TENTIONS BACKED WITH VARIOUS CASE LAWS AS RECORDED IN HER IMPUGNED ORDER , THE CIT (A) HAD OBSERVED THUS: 6.3 IT CAN NOT BE DENIED THAT THE BOOK RESULT OF THE AP PELLANT IS RELIABLE AS THE AO HAS NEITHER PINPOINTED ANY SPECI FIC DEFECT NOR LOCATED ANY PURCHASE OR INCOME TRANSACTION OUTSIDE THE BOOKS. IT IS NOT A CASE WHEREIN ANY INCOME OR EXPENDITURE IS NOT SUPPORTED BY FORMAL PROOF. THE AO HAS MADE ADDITION ON ALLEGED INFLATION OF EXPENSES UNDER THE HEAD HOSPITAL CONSUMABLES AND M EDICINES BASED ON HIS WORKING OF AVERAGE CONSUMPTION PER PAT IENT WITHOUT ACTUALLY JUSTIFYING WITH REASON THAT WHERE EXACTLY IS THE NECESSITY TO WORK OUT THE AVERAGE CONSUMPTION WHEN THE APPELLANT HAS CLAIMED THE EXPENDITURE ON CASH BASIS AFTER MAINTAINING PRO PERLY THE BILLS FOR EACH PURCHASE. THE AO HAS NOT PIN-POINTED THAT ANY PARTICULAR PURCHASE IS INFLATED. EVEN THE ADDITION MADE BY TH E AO BASED ON THE COMPARATIVE CONSUMPTION OF MEDICINES AND HOSPIT AL CONSUMABLES IS NOT SUSTAINABLE AS THE AO HAS TAKEN INTO CONSIDERATION THE OPD PATIENTS IN WHOSE CASE NO MED ICINES OR HOSPITAL CONSUMABLES ARE CONSUMED. I AM THEREFORE INCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT IN ABSENCE OF ANY SPECIFIC DEFECT, THE REJECTION OF ACCOUNTS BASED ON ALLEGED EXCESS CONSUMPTION OF HOSPITAL CONSUMABLES WILL NOT HOLD W ATER. THE FACTS OF THE APPELLANTS CASE DO DERIVE SUPPORT FROM THE DECISION IN CASE OF PUSHPANJALI DYING & PRINTING MILLS P. LTD V. CIT REPORTED IN 72 TTJ 886 (ITT AHMEDABAD) AS THE RATIO HAS BEEN LAID DOWN THAT MERE LOW YIELD DOES NOT WARRANT AN ADDITION IN THE TRADI NG ACCOUNT. IN THE INSTANT CASE THE AO HAS NEITHER BROUGHT OUT THAT TH E APPELLANT DID NOT FOLLOW THE METHOD OF ACCOUNTING CONSISTENTLY AS PER PROVISIONS OF SUB-SECTION 1 NOR THE ACCOUNTING STANDARDS AS NOTIF IED BY SUB- SECTION 2 TO SEC. 145. THERE IS NO PLAUSIBLE REAS ON TO DISAGREE WITH THE VIEW OF THE AR OF THE APPELLANT THAT THE NUMBER OF PATIENTS IN OPD SHOULD BE IGNORED IF AT ALL THE AVERAGE CONSUMP TION IS TO BE WORKED OUT. IN THAT CASE, THE AVERAGE CONSUMPTION OF HOSPITAL ITA NO.1619-AHD-09 4 CONSUMABLES FOR BOTH THE YEARS WORKS TO A CLOSELY C ONSISTENT FIGURE. I AM, THEREFORE, OF THE CONSIDERED VIEW THAT THE AP PELLANTS BOOKS OF ACCOUNT DISCLOSE TRUE AND FAIR VIEW OF STATE OF APP ELLANTS AFFAIRS AND AS SUCH THERE ARE NO MATERIAL DEFECTS WHICH COULD L EAD TO REJECTION OF BOOKS OF ACCOUNTS AND IN SUCH CIRCUMSTANCES AND THE AO IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 145(3) OF THE ACT. THE ADDITION OF RS.11,00,000/- MADE BY THE AO ON AN EST IMATE BASIS BY DISALLOWING THE PART OF THE TOTAL EXPENDITURE OF RS .1,11,62,942/- INCURRED ON HOSPITAL CONSUMABLES IS DELETED 4.1 WITH REGARD TO THE DELETION OF RS.6 LAKHS (GROU ND NO.2), ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT ON HOSPITAL ETC., THE ISSUE, IN BRIEF, WAS THAT DURING THE VERIFICATION OF THE DETAILS FUR NISHED BY THE ASSESSEE, THE AO NOTICED THAT AS PER THE BALANCE SHEET, ASSES SEE HAD SHOWN A NEW ENTRY IN THIS YEAR AS LAND AT SURAT AT A VALU E OF RS.1.67 CRORES PURCHASED AFTER MONTHS OF THE PREVIOUS YEAR. HOWEV ER, BALANCE SHEET DOES NOT MENTION OF ANY BUILDING. ON BEING QUERIED THE ASSESSEE AND ALSO SIMULTANEOUS COLLECTION OF DETAILS FROM MUNI CIPAL AUTHORITIES OF SURAT, THE AO NOTICED THAT THE ASSESSEE HAD INVESTE D RS.1.67 CRORES DURING THE YEAR FOR A LAND AND A BUILDING ON IT. A CCORDING TO THE AO, THE PROPERTY WAS PURCHASED BY THE ASSESSEE VIDE MOU DT. 24.1.2006 AND THE BARODA GUJARAT GRAMIN BANK GOT VALUED IT AT RS.2,09 ,18,000/- BY GOVERNMENT REGISTERED VALUER AND THE SAME VALUER ES TIMATED THE COST OF RENOVATION AND REPAIRS REQUIREMENT AT RS.12 LAKH S FOR THE CONVERSION OF THE PROPERTY TO HOSPITAL USE. SUBSEQUENTLY, THE SAME VALUER ON 3.3.2006 GAVE A PROGRESS CERTIFICATE, ACCORDING TO WHICH, ADDITIONAL EXPENDITURE OF RS.22 LAKHS WAS REQUIRED FOR CONVERT ING THE BUILDING FOR HOSPITAL USE. ACCORDING TO THE AO, THE ASSESSEE HA D NOT SHOWN ANY EXPENSES IN THE BUILDING AFTER ITS PURCHASE UP-TO T HE END OF FINANCIAL YEAR. ON OATH, SHRI JASHVANT SHAH, PARTNER OF M/S. MEGH CONSTRUCTION ADMITTED THAT HE HAD DONE WORK FOR RS.6 LAKHS IN F. Y 05-06 (AFTER THE SALE OF THIS PROPERTY WAS OVER) AND ABOVE THE PRICE GIVEN IN MOU DATED ITA NO.1619-AHD-09 5 24.1.2006. IN COMPLIANCE TO THE AOS QUERIES, IT W AS SUBMITTED BY THE ASSESSEE THAT FOR THE WORK DONE BY M/S. MEGH CONST RUCTION, PAYMENT OF RS.6 LAKHS WAS MADE THROUGH D.D.NO.584963 ON 2.8.20 06 AND THAT THOSE EXPENSES HAVE BEEN ACCOUNTED FOR ON CASH BASI S AND AS SUCH NO EXPENSE WAS BOOKED IN F.Y. 2005-06, BUT, THE SAME W AS BOOKED IN THE FINANCIAL YEAR 2006-07. IT WAS, FURTHER, SUBMITTED THAT IT WAS ESTABLISHED THAT THE EXTRA WORK WAS CARRIED OUT FROM 15.2.2006 TO 15.4.2006. IT WAS INSISTED THAT THE WORK WAS DONE FOR ONLY OF RS.6 LA KHS AND ALSO THE PAYMENT MADE WAS ACCOUNTED FOR IN THE F.Y. 2006-07 ON CASH BASIS. 4.2 HOWEVER, REJECTING THE ASSESSEES CONTENTION, THE AO TOOK A STAND THAT THE WORK OF REPAIR AND RENOVATION OF THE BUILD ING WAS ESTIMATED AT RS.12 LAKHS FROM THE DATE OF PURCHASE I.E., 15.2.20 06 TO 31.3.2006 ON THE BASIS OF ESTIMATION GIVEN BY THE VALUER AND THE COMPLETION REPORT OF THE SURAT CORPORATION. ACCORDINGLY, AN ADDITION O F RS.6 LAKHS WAS MADE U/S 69 OF THE ACT. 4.3 AFTER EXAMINING THE VARIOUS DETAILS FURNISHED D URING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT (A) RECORDED HER FIN DINGS AS UNDER: 7.3AFTER LOOKING INTO THE TOTALITY OF THE FA CTS, I FIND THAT THE APPELLANT FIRM HAS REFLECTED TOTAL INVESTMENT O F RS.165.48 LACS IN ITS BOOKS OF ACCOUNTS FOR THE CAPTIONED PROPERTY, O UT OF WHICH, RS.79.58 LACS HAVE BEEN PAID IN THE YEAR UNDER APPE AL AND THE SAME HAS BEEN FULLY SUBSTANTIATED BY DOCUMENTARY EV IDENCES AS WELL AS THE BILLS AND VOUCHERS AND PAYMENTS THROUGH BANKING CHANNEL AND, THEREFORE, THERE IS A MISCONCEPTION AT THE END OF THE AO THAT THE APPELLANT HAS INCURRED ANY COST TO THE TUNE OF RS.6 LACS OUTSIDE THE BOOK. IT HAS NOT BEEN DISPUTED BY THE AO THAT THE APPELLANT HAS AGREED FOR THE UNFINISHED BUILDING AT A COST OF RS.1 CRORE AS PER THE MOU SIGNED WITH M/S. MEGH CONSTRUC TION AND, THEREFORE, THE COST OF CONSTRUCTION AS BOOKED APPEL LANTS MERITS CONSIDERATION AS IT HAS INCURRED EXTRA COST OF RENO VATION OF RS.65.48 LACS OVER AND ABOVE RS.1 CRORE PAID TO M/S. MEGH CO NSTRUCTION. EVEN FORM (SIC) FROM THE STATEMENT RECORDED ON OATH OF JASHVANT ITA NO.1619-AHD-09 6 SHAH, ONE CAN MAKE OUT THAT HE HAS ENDORSED THE FAC T THAT APPELLANT HAS PAID HIM CONSIDERATION OF RS.106 LACS (RS.100 LACS AS PER MOU AND RS.6 LACS FOR EXTRA WORK). THUS THERE IS NO PLAUSIBLE REASON TO IGNORE THE SUBMISSION OF THE APPELLANT TH AT THE FACT REMAINS THAT IT HAS INCURRED TOTAL EXPENDITURE OF R S.79.58 LACS IN THE YEAR UNDER CONSIDERATION AND THE BALANCE OF RS.85.9 0 (LACS) IN THE SUBSEQUENT YEAR SO AS TO SUBSTANTIATE ITS CLAIM TH AT NO COST HAS BEEN INCURRED OUTSIDE THE BOOKS. I DO NOT FIND ANY MERITS IN THE OBSERVATIONS OF THE AO AND HIS FINDING BASED ON ASS UMPTION DERIVED FROM THE VALUERS REPORT WHICH ONLY ENVISAGED THE C OST OF RENOVATION. SINCE THE AO HAS NOT BROUGHT OUT ON RECORD WITH COG ENT EVIDENCES THAT ANY COST OF EVEN EXTRA PENNY HAS BEEN INCURRED OUTSIDE THE BOOKS DURING THE YEAR UNDER REFERENCE. I AM INCLIN ED TO AGREE WITH THE CONTENTION OF THE APPELLANT. THE ADDITION OF R S.6,00,000/- MADE ON THE BASIS OF THE ASSUMPTION IS THEREFORE DELETED .. 5. AGGRIEVED, THE REVENUE HAS COME UP WITH THE PRE SENT APPEAL. IT WAS THE CONTENTION OF THE REVENUE THAT AS PER BALAN CE SHEET, THE ASSESSEE HAD SHOWN A NEW ASSET IN THIS YEAR AS LAN D AT SURAT AT A VALUE OF RS.1.67 CRORES PURCHASED AFTER SIX MONTHS OF THE PREVIOUS YEAR. HOWEVER, IT WAS SUBMITTED THAT, THE BALANCE SHEET D ID NOT MENTION ANY BUILDING. ON PERUSAL OF THE DETAILS ON REQUISITIO N OF LOCATION OF THE ASSET, COPIES OF RELEVANT DOCUMENTS AND ON PHYSICAL INQUIR Y, IT WAS NOTICED THAT A HOSPITAL BUILDING WAS SITUATED AT THE SAID ADDRES S OF THE ASSET. ON FURTHER ENQUIRIES, THE MUNICIPAL AUTHORITIES CONFIR MED THAT APPROVAL FOR CONSTRUCTION OF THE SAID BUILDING WAS GIVEN ON 16. 2.04 AND ON 15.2.2005 THE PART WORK WAS COMPLETED AND PART OCCUPANCY CERT IFICATE WAS OBTAINED AND FINAL WORK WAS COMPLETED ON 15.4.2006. 5.1. IN COMPLIANCE TO QUERIES, THE ASSESSEE ADMITTE D THAT THE WORK WAS IN PROGRESS AT THE END OF THE YEAR UNDER ASSESSMENT AND, SUBSEQUENTLY, THE COMPLETION OF THE BUILDING WAS MADE IN JANUARY, 2007. IT WAS, HOWEVER, CONTENDED BY THE REVENUE THAT THE SAID BUI LDING WAS PURCHASED BY THE ASSESSEE ON 20.2.2006 AND THE GUJA RAT BARODA ITA NO.1619-AHD-09 7 GRAMIN BANK HAD GOT THE BUILDING VALUED AT RS.2.09 CRORES BY A GOVERNMENT APPROVED VALUER WHO ON THE SAME DAY ESTI MATED THE COST OF RENOVATION AND REPAIR REQUIREMENTS AT RS.12 LAKHS F OR CONVERSION OF THE PROPERTY TO HOSPITAL USE AND LATER ON THE SAME VALU ER GAVE A PROGRESS CERTIFICATE DT.3.3.2006, ACCORDING TO WHICH, THE AD DITIONAL EXPENDITURE OF RS.22 LAKHS WAS REQUIRED FOR CONVERTING IT TO HOSPI TAL USE. IT WAS, FURTHER SUBMITTED THAT THE WORK OF THE BUILDING WAS GOING O N FROM 15.2.05 TO 15.4.06 AND THE ASSESSEE HAD NOT SHOWN ANY EXPENDIT URE AFTER THE PURCHASE AND UP-TO THE END OF THE FINANCIAL YEAR. THE PARTNER OF MEGH CONSTRUCTION, ON OATH, HAD STATED THAT THE WORK OF RS.6 LAKHS WAS DONE IN FY 2005-06 AND THE PAYMENT WAS BY AS DD ON 2.8.2 006 WHICH WAS ACCOUNTED ON CASH BASIS IN THE FINANCIAL YEAR 2006- 07. 5.2 IN CONCLUSION, IT WAS SUBMITTED BY THE REVENUE THAT BRUSHING ASIDE THE ASSESSEES EXPLANATION, THE AO ESTIMATED THE RE NOVATION EXPENDITURE AT RS.12 LAKHS FROM THE DATE OF PURCHAS E OF ASSET AND AFTER GIVING DUE CONSIDERATION FOR THE EXPENDITURE OF RS .6 LAKHS BOOKED IN THE FINANCIAL YEAR 2006-07, MADE AN ADDITION OF RS.6 LA KHS U/S 69B OF THE ACT. 5.3 ON THE OTHER HAND, THE LD. A R IN HIS SUBMISSIO N MAINTAINED IN RESPECT OF (I) DISALLOWANCE ON ACCOUNT OF EXCESS CO NSUMABLES OF RS.11 LAKHS AS UNDER: THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING CASH S YSTEM OF ACCOUNT AND THE EXPENDITURE OF HOSPITAL CONSUMABLES HAVE BEEN CLAIMED ON CASH BASIS I.E., ON ACTUAL PAYMENT OF SU CH ITEMS; THAT IT HAD PROVIDED COMPLETE DETAILS OF PURCHASE OF HOSPIT AL CONSUMABLES AND MEDICINES TO THE AO ALONG WITH THE PARTIES NAME S, ADDRESSES, SAMPLE BILLS; AND THAT THE AO WAS NOT JUSTIFIED IN CORRELATING THE ITA NO.1619-AHD-09 8 HOSPITAL CONSUMABLES WITH THE NUMBER OF PATIENTS. IT WAS, FURTHER, CLAIMED THAT IF AT ALL HOSPITAL CONSUMABLES WITH TH E NUMBER OF PATIENTS WERE TO BE COMPARED, THEN ONLY IN-PATIENTS WERE TO BE TAKEN INTO CONSIDERATION AS NO CONSUMABLES WERE USE D FOR OPD PATIENTS AS OPD PATIENTS GENERALLY COME ONLY FOR EXAMINATION/CONSULTATION AND BUY THE MEDICINES PRES CRIBED FROM THE MEDICAL SHOPS ELSEWHERE; AND THAT THE ASSESSEE HAD GIVEN A WORKING CORRELATING HOSPITAL CONSUMABLES WITH IN-PA TIENTS [SEE: PAGE 7 OF THE CIT (A)S ORDER]. IT WAS, THEREFORE, CONTENDED THAT THE AVERAGE CONSUMPTION PER IN-PATIENT COMES TO RS.1287 5/- FOR THE FY 2005-06 AS COMPARED TO RS.12943/- IN THE FY 2004 -05. IT WAS, ACCORDINGLY, CONTENDED THAT NO INPUT AND OUTPUT RAT IO AS IN THE CASE OF MANUFACTURING CONCERN CAN BE MADE APPLICABLE TO THE HOSPITAL. AS FAR AS THE ALLEGED DEFECTS IN THE BOOKS OF ACCOU NTS, IT WAS CLAIMED THAT THE ASSESSEE HAD PROPERLY MAINTAINED B OOKS OF ACCOUNTS, BILLS FOR PURCHASES, EXPENSES AND PROPER EVIDENCES FOR INCOME AND EXPENDITURE AS PER THE PROVISIONS OF S.4 4AA R/W RULE 6F OF I.T. RULES AND THAT THE BOOKS OF ACCOUNTS WERE S UBJECTED TO AUDIT AS PER THE PROVISIONS OF S.44AB OF THE ACT. IT WAS, FURTHER, CONTESTED THAT THE AO HAD NOT PIN-POINTED ANY PURCH ASE OR THE INCOME WERE FROM OUTSIDE THE BOOKS OF ACCOUNT. IT WAS CLAIMED BY THE ASSESSEE THOUGH IT WAS NOT MANDATORY FOR THE ME DICAL PROFESSIONAL FIRMS TO MAINTAIN STOCK RECORDS, THE A SSESSEE HAD MAINTAINED INVENTORY OF THE MEDICINES AND THE CONSU MABLES HELD ON THE LAST OF THE FINANCIAL YEAR. RELIES ON THE CASE LAWS: (I) PUSHPANJALI DYEING & PRINTING MILLS PVT. LTD V. CIT 72 TTJ 886; & (II) ITA NOS.498 & 872/AHD/2009. ITA NO.1619-AHD-09 9 5.4 WITH REGARD TO THE DISALLOWANCE OF RS.6 LAKHS O N ACCOUNT OF RENOVATION OF ASSET, IT WAS THE CLAIM OF THE ASSESS EE THAT THE LAND IN QUESTION WAS PURCHASED FROM ONE DAVAR FOR A CONSIDE RATION OF RS.80 LAKHS; THAT IN A SEPARATE MOU WITH SHRI JASHVANT SH AH FOR ACQUISITION OF THE BUILDING AT RS.1 CRORE AND RS.6 LAKHS FOR RENOV ATION OF THE SAME WHICH WAS CONFIRMED BY THE SAID SHAH ON OATH; AND T HAT THE FULL CONSIDERATION PAID WAS THROUGH CHEQUES/DD AND TO SU BSTANTIATE THE SAME, BANK ACCOUNTS AND LEDGERS ALONG WITH BILLS, VOUCHERS AND OTHER RELEVANT DETAILS WERE FURNISHED BEFORE THE AO. IT WAS FURTHER CLAIMED THAT THE AO PRESUMED ON A WRONG NOTION THAT THE RENOVA TION WORK TO THE TUNE OF RS.12 LAKHS HAVE BEEN CARRIED OUT DURING TH E PREVIOUS YEAR, OUT OF WHICH RS.6 LAKHS REMAINED UNACCOUNTED FOR. IT W AS, FURTHER, CLARIFIED THAT THE ESTIMATION OF RENOVATION OF RS.12 LAKHS BY THE BANK VALUER WAS ONLY FOR A LIMITED PURPOSE OF OBTAINING FINANCE FRO M THE BANK WHICH CANNOT BE THE YARDSTICK TO ARRIVE AT SUCH A CONCLUS ION OF THE AO. IT WAS VOUCHED THAT THE EXPENSES INCURRED FOR THE PURPOSE OF LAND, COST OF BUILDING AND FOR RENOVATION HAVE BEEN ACCOUNTED FOR ON PAYMENT BASIS FROM TIME AND TIME AS PER THE ACCOUNTING POLICY FOL LOWED BY THE ASSESSEE. IT WAS CLAIMED BY THE ASSESSEE THAT TH E AO HAD ERRONEOUSLY ALLEGED THAT THE ASSESSEE MADE UNEXPLAINED INVESTME NTS IN SURAT PROPERTY WHICH WAS, IN FACT, DISCLOSED IN THE BALA NCE SHEET AS WELL AS IN AUDIT REPORT UNDER THE HEAD, THOUGH BY OVER-SIGHT, AS LAND AT SURAT IN STEAD OF HOSPITAL AT SURAT. LN CONCLUSION, THE A SSESSEE ADMITTED ITS MISTAKE IN MENTIONING THE SURAT PROPERTY AS LAND A T SURAT INSTEAD OF HOSPITAL AT SURAT IN ITS BALANCE SHEET AS WELL AS IN THE AUDIT REPORT. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE REVENUE AS WELL AS THE ASSESSEES A.R. WE HAVE ALS O PERUSED THE ITA NO.1619-AHD-09 10 RELEVANT CASE RECORDS AND THE BRIEFS OF THE REVENUE AND THE ASSESSEE AS WELL. 6.1 AT THE OUTSET, WE OBSERVE THAT THE REJECTION OF BOOK RESULTS HAS BEEN RESORTED TO U/S 145 OF THE ACT ON A CLUMSY GRO UND AS THE AO HAD NEITHER IDENTIFIED ANY SPECIFIC DEFECT NOR ANY PURC HASES OR INCOME TRANSACTION BEING OUTSIDE THE BOOKS OF THE ASSESSEE . ANOTHER GLARING EXAMPLE OF FUTILE EXERCISE ON THE PART OF THE REVEN UE WAS TO RESORT TO WORK OUT THE AVERAGE CONSUMPTION ON THE ALLEGED INF LATION OF EXPENSES UNDER THE HEAD HOSPITAL CONSUMABLES AND MEDICINE BASED ON THE AOS WORKING ON AVERAGE CONSUMPTION PER PATIENT WHEN THE ASSESSEE ITSELF HAD CLAIMED THE EXPENDITURE ON CASH BASIS AFTER MAI NTAINING THE BILLS FOR THE PURCHASES MADE. ANOTHER SALIENT FEATURE NOTICE D IN THE IMPUGNED ASSESSMENT ORDER WAS THAT THE AO HAD NOT SPECIFICAL LY IDENTIFIED WHICH PARTICULAR PURCHASE WAS INFLATED TO DRIVE HIM TO CO ME TO SUCH A CONCLUSION. AS RIGHTLY EMPHASIZED BY THE CIT (A), THE AO MADE THE ADDITION ON THE BASIS OF COMPARATIVE CONSUMPTION OF MEDICINES AND HOSPITAL CONSUMABLES WHICH, IN OUR CONSIDERED VIEW, WAS NOT ON A SOUND FOOTING SINCE THE AO HAD TAKEN INTO ACCOUNT THE OPD PATIENTS FOR WHOM NEITHER ANY MEDICINES NOR HOSPITAL CONSUMABLES WERE USED (CONSUMED). 6.2 TAKING INTO ACCOUNT ALL THESE RELEVANT FACTORS AND ALSO THE AO HAD FAILED TO TRACE OUT ANY SPECIFIC DEFECT IN THE MAIN TAINING OF THE BOOKS, THE REJECTION OF BOOKS OF A/C OF THE ASSESSEE MERELY ON THE BASIS OF ASSUMED EXCESS CONSUMPTION OF HOSPITAL CONSUMABLES, IN OUR CONSIDERED VIEW, WILL NOT WITHSTAND THE TESTIMONY OF LAW. 6.3 AT THIS JUNCTURE, WE WOULD LIKE TO RECALL THE R ECENT FINDINGS OF THE EARLIER BENCH IN THE CASE ITO V. MANSI PRINTS PVT. LTD IN ITA NOS.498 AND ITA NO.1619-AHD-09 11 872/AHD/2009 DATED 20.5.2011 IN A SIMILAR ISSUE WHE REIN IT HAS BEEN OBSERVED: 5 THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSES SEE HAS FURNISHED DETAILS OF OPENING AND CLOSING STOCK QUAN TITATIVE DETAILS AS DESIRED AT THE ASSESSMENT STAGE. IT IS MERELY STAT ED THAT THE ASSESSEE DID NOT MAINTAIN DAY TO DAY STOCK REGISTER IN RESPECT OF CONSUMABLES. THE LEARNED CIT (A) CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE CLEARLY NOTED THAT THE ON LY REASON FOR REJECTING THE BOOKS OF ACCOUNTS IS NON-MAINTENANCE OF STOCK REGISTER AND DAY TO DAY REGISTER OF CONSUMABLES. THE LEARNE D COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE MAINTAIN ED STOCK REGISTER AS WELL AS QUANTITATIVE DETAILS OF THE OPE NING AND CLOSING STOCK AND THE DETAILS HAVE BEEN MENTIONED IN THE TA X AUDIT REPORT. HE HAS POINTED OUT AT PAGE 48, 84 AND 85 OF THE PAP ER BOOK IN THIS REGARD TO SHOW THAT THE ASSESSEE MAINTAINED DAY TO DAY STOCK REGISTER. FOR THE CONSUMABLES, IT WAS EXPLAINED T HAT THE ITEMS ARE MORE THAN HUNDRED IN NUMBERS WHICH ARE USED FREQUEN TLY, THEREFORE, DAY TO DAY REGISTER CANNOT BE MAINTAINED. IT WOULD , THEREFORE, SHOW THAT THE ASSESSEE MAINTAINED COMPLETE RECORD AND DA Y TO DAY STOCK REGISTER IN RESPECT OF OTHER ITEMS EXCEPT THE CONSU MABLES. QUANTITATIVE DETAILS OF OTHER ITEMS ARE ALSO MAINTA INED. IT WAS ALSO ACCEPTED THAT THE ASSESSEE STARTED NEW BUSINESS IN THE LAST YEAR; THEREFORE BOOK RESULTS CANNOT BE COMPARED WITH THE LAST YEAR. THE ASSESSEE ALSO EXPLAINED THAT MAIN REASON FOR FALL I N GP WAS BECAUSE OF CENVAT CREDIT, INCREASE IN SALARY AND WA GES AND PRICE HIKE IN COLOUR AND CHEMICALS. THE ASSESSEE ALSO D EMONSTRATED BEFORE THE AO THAT IN CASE CENVAT IS ADDED BACK, TH E GP RATE OF THE ASSESSEE WOULD ENHANCE. IT WAS CONTENDED THAT THE ASSESSEE MAINTAINED PROPER BOOKS OF ACCOUNTS IN WHICH NO DEF ECTS HAVE BEEN POINTED OUT BY THE AO. THE AO ACCEPTED PART OF THE CONTENTION OF THE ASSESSEE BUT NOTED THAT EVEN AFTER CONSIDERING CENVAT THERE WAS A FALL IN GP BY 3.03% IN COMPARISON TO LAST YEA R. THE LEARNED CIT (A) CONSIDERING THE TOTALITY OF THE FACTS AND C IRCUMSTANCES RIGHTLY NOTED THAT THE AO HAS NOT BROUGHT ANY OTHER MATERIA L ON RECORD FOR REJECTING THE BOOKS RESULTS. THE HONBLE DELHI HI GH COURT IN THE CASE OF SMT. POONAM RANI 326 ITR 223 HELD THAT ABSENCE OF STOCK REGISTER ALONE NOT A GROUND TO INFER THAT ACCOUNTS ARE INACCURATE OR INCOMPLETE. IT MAY PUT THE AO ON GUARD AGAINST THE FALSITY IN THE RETURN AND PERSUADE TO CAREFULLY SCRUTINIZE THE BOO KS OF ACCOUNTS. THE HONBLE DELHI HIGH COURT IN THE CASE OF BINDLES APPARELS 332 ITR 410 HELD THAT NO DAY TO DAY STOCK REGISTER, BOOKS CANNOT BE REJECTED. CONSIDERING THE DETAILS NOTED IN THE TAX AUDIT REP ORT, IT IS ITA NO.1619-AHD-09 12 CLEAR THAT THE ASSESSEE MAINTAINED PROPER STOCK REG ISTER AND MAINTAINED QUANTITATIVE DETAILS OF ALL THE ITEMS EX CEPT THE CONSUMABLES AND THAT THE AO HAS NOT BROUGHT ANY OTH ER MATERIAL ON RECORD TO JUSTIFY REJECTION OF BOOK RESULTS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE LEARNED CIT (A) ON PR OPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RI GHTLY DELETED THE ADDITION 6.4 YET ANOTHER FINDING, THE EARLIER BENCH IN THE C ASE OF PUSHPANJALI DYEING & PRINTING MILLS (P) LTD V. JCIT - 72 TTJ 8 86, HAD OBSERVED THAT: AFTER CAREFUL CONSIDERATION ON ALL ABOVE FACTS, CO NTENTIONS, OBSERVATIONS AND SUBMISSIONS, WE HOLD THAT MERE LOW YIELD AND EXCESS EXPENDITURES ON ELECTRICITY DO NOT WARRANT A N ADDITION IN THE TRADING ACCOUNT. WHEN REASONS FOR LOW G.P. AND EXCE SS EXPENDITURE ON ELECTRICITY HAVE BEEN SATISFACTORILY EXPLAINED B Y THE ASSESSEE, THE ELECTRICITY CONSUMPTION ALONE IS NOT AN ASPECT BY W HICH A PERSON CAN EARN TAXABLE INCOME OR PROFIT. WE DO NOT FIND A NY MATERIAL ON RECORD TO JUSTIFY THE CONCLUSION REACHED UPON BY TH E AO FOR REJECTION OF BOOKS OF ACCOUNTS WHEN THE ASSESSEE MAINTAINED C OMPLETE BOOKS OF ACCOUNTS IN ACCORDANCE WITH THE PROVISIONS OF IT ACT, FURTHER SAME WERE AUDITED BY AUDITOR AND NO ADVERSE OBSERVATIONS WERE POINTED OUT BY THE AUDITOR. IN THESE CIRCUMSTA NCES, THE LOWER AUTHORITIES OF REVENUE WERE NOT JUSTIFIED IN MAKING /CONFIRMING THE ADDITION . 6.5 IN VIEW OF THE ABOVE DELIBERATIONS AND ALSO IN CONFORMITY WITH THE FINDINGS OF THE EARLIER BENCHES (SUPRA), WE DO NOT FIND ANY INFIRMITY ON THE FINDING OF THE CIT (A) WHICH REQUIRES OUR INTERVENT ION AT THIS STAGE. IT IS ORDERED ACCORDINGLY. 6.6 THE OTHER GRIEVANCE OF THE REVENUE IS BEING DEL ETION OF ADDITION OF RS.6 LAKHS ON ACCOUNT OF UNEXPLAINED INVESTMENTS. 6.7 THE SUBMISSIONS OF RIVAL PARTIES WERE DULY CONS IDERED AND ALSO PERUSED THE REASONING OF THE CIT (A) IN DELETING TH E ADDITION MADE BY THE AO. ITA NO.1619-AHD-09 13 6.8 AS A MATTER OF APPRECIATION OF FACTS, THE ISSUE , IN BRIEF, WAS THAT THE ASSESSEE REFLECTED THE TOTAL INVESTMENT TO THE TUNE OF RS.1.65 CRORES IN ITS BOOKS OF ACCOUNT FOR THE PROPERTY UNDER DISPUTE , OUT OF WHICH, RS.79.58 LAKHS HAVE BEEN SPENT DURING THE YEAR UNDE R CONSIDERATION. THE AMOUNTS SO SPENT HAS BEEN FULLY ACCOUNTED FOR A ND TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE HAD PRODUCED DOCUMENTARY EV IDENCES WHICH HAVE BEEN VOUCHED BY THE CIT (A) IN HER IMPUGNED OR DER UNDER CHALLENGE. MOREOVER, THE PAYMENTS HAVE BEEN EFFECT ED THROUGH BANKING CHANNELS WHICH BELIED THE REVENUES ASSUMPTION THAT THE ASSESSEE OUGHT TO HAVE INCURRED THE SUBJECTED ADDITION OF RS .6 LAKHS OUTSIDE ITS BOOKS OF ACCOUNT. NO DOCUMENTARY PROOF WORTH THE N AME HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO NAIL THE ASSESS EE ON THIS POINT. THE REVENUE HAD ALSO ACKNOWLEDGED THAT THE ASSESSEE HAD AGREED FOR THE ACQUISITION OF THE UNFINISHED BUILDING FOR RS. 1 CRORE AS PER THE MOU WITH M/S. MEGH CONSTRUCTION. THE ASSERTION OF THE ASSESSEE HAS ALSO BEEN STRENGTHENED BY THE AFFIRMATION OF JASHWNT SHA H THAT THE ASSESSEE HAD PAID A CONSIDERATION OF RS.1 CRORE AS PER MOU A ND ANOTHER RS.6 LAKHS FOR THE RESIDUAL WORK. THE SEQUENCE OF EVENT S NARRATED ABOVE CANNOT BE BRUSHED ASIDE. THE ASSESSEES EXPLANATIO N THAT IT HAD INCURRED A TOTAL EXPENDITURE OF RS.79.58 LAKHS DURI NG THE YEAR UNDER CONSIDERATION AND THE BALANCE OF RS.85.90 LAKHS WA S IN THE FOLLOWING YEAR WHICH SUBSTANTIATE THAT THERE WAS NO ANY POSSI BILITY OF HAVING INCURRED ANY EXPENDITURE OUTSIDE ITS BOOKS OF ACCOU NT. 6.9 IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT THE ESTIMATION OF RENOVATION OF THE EXISTING BUILDING FOR RS.12 LAKHS BY THE BANKS VALUER, AS POINTED OUT BY THE ASSESSEE, WAS PRESUMABLY ONLY FOR A LIMITED PURPOSE OF AVAILING BANK LOAN WHICH CANNOT BE TAKEN TO ITS FACE VALUE TO COME TO A CONCLUSION THAT THE ASSESSEE HAD INCURRED EXPENDITURE DURING ITA NO.1619-AHD-09 14 THE YEAR UNDER CONSIDERATION TO THE EXTENT OF RS.12 LAKHS. IT IS A COMMON PRACTICE TO INFLATE THE ESTIMATION OF VALUE OF A BUILDING, FACTORY, PLANT AND MACHINERY ETC., SO AS TO AVAIL THE MAXIMU M LOAN FROM THE BANK(S) BASED ON SUCH ESTIMATION. AS SUCH, IN THE INSTANT CASE, ESTIMATION ON RENOVATION OF RS.12 LAKHS BY THE BANK VALUER SHOULD NOT BE A DECISIVE FACTOR TO ARRIVE AT A CONCLUSION AS D ID BY THE AO. 6.10 IN TAKING INTO ACCOUNT ALL THE RELEVANT FACTS AND ALSO THE CIRCUMSTANCES OF THE ISSUE AS DISCUSSED ABOVE, WE A RE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUSTIFIED IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE WHICH DOESNT REQUIRES OUR INTERVENTION AT THIS STAGE. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 3 #2 , 1!& 4' ' 10 / 02 /201 2 ! 5 , . SD/- SD/- (G.C.GUPTA) (A.MOHAN ALANKAMONY) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10/02/2012 #2 #2 #2 #2 , ,, , */6 */6 */6 */6 7#6&/' 7#6&/' 7#6&/' 7#6&/'- -- - 1. () 2. *+() 3. / < 4. <- - 5. 6? */' , , @ 6. B C3 #2 #, D/ , @ TALUKDAR/ SR. P.S. ITA NO.1619-AHD-09 15