ACIT, Jaipur V. SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARCH LTD., Jaipur

ITA 167/JPR/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2186 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA
• Assessee Lawyers: MANISH AGGARWAL CA DHK
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 167/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, JAIPUR. CUKE VS. M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARCH LTD., H-1 CHITRANJAN MARG, C-SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCS 9729 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI MUKESH VERMA (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGGARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03.04.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 10/04/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE REVENUE DIRECTED AGAINST THE OR DER OF LD. CIT (A)-4, JAIPUR DATED 22.12.2016 PERTAINING TO ASSESSMENT YEAR 2012 -13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS . 35,90,595/- ON ACCOUNT OF DISALLOWANCE OF INTEREST. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS . 4,72,778/- ON ACCOUNT OF BOGUS PURCHASES. THE APPELLANT CRAVES, LEAVE OR RESERVES THE RIGHT TO AMEND, ALTER, ADD, OR FOREGO ANY GROUND(S) OF APPEAL AT AN Y TIME BEFORE OR DURING THE HEARING OF THIS APPEAL 2 ITA NO.167/JP/2017 M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARC H LTD. 2. BRIEFLY STATED THE FACTS ARE THAT THE SEARCH & S EIZURE OPERATION U/S 132(1) OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT ON 08/06/2 011, AT THE DIFFERENT PREMISES OF THE JAIPUR HOSPITAL GROUP. SUBSEQUENTLY, IN ORDE R U/S 143(3) AND 153B(B) OF THE ACT, WAS FRAMED VIDE ORDER DATED 21/03/2014. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF BOGUS PURCHASE OF RS. 5,56,210/- AND DISALLOWANCE THE INTEREST OF RS. 35,90,595/-. AGGR IEVED BY THIS ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CON SIDERING THE SUBMISSIONS DELETED BOTH THE ADDITIONS. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE THIS HONBLE TRIBUNAL. 3. GROUND NO. 1 IS AGAINST DELETION OF DISALLOWANCE OF INTEREST EXPENDITURE. LD. DEPARTMENTAL REPRESENTATIVES SUBMITTED THAT THE CIT (A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. HE SUPPORTED THE ORDER OF THE ASS ESSING OFFICER. 3.1 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSIONS A MADE IN THE WRITTEN SUBMISSIONS. THE RELEVANT CONTENTS O F THE WRITTEN SUBMISSIONS ARE REPRODUCED AS UNDER:- HERE THE LD. AO HAD DISALLOWED INTEREST PAID BY TH E ASSESSEE ON THE BORROWED FUNDS, B6Y ALLEGING THAT THERE WERE CERTAI N INTEREST FREE ADVANCES AND NON-BUSINESS INVESTMENT MADE BY THE ASSESSEE OU T OF THE FUNDS SO BORROWED AND ACCORDINGLY HE MADE THE DISALLOWANCE B Y APPLYING INTEREST RATE OF 13% ON SUCH ADVANCES, THOUGH AFTER REDUCING THE VALUE OF FUNDS ALREADY AVAILABLE WITH THE ASSESSEE IN THE SHAPE OF SHARE C APITA, RESERVES & SURPLUSES; BUT WITHOUT PROPERLY APPRECIATING THE RE AL NATURE OF INVESTMENT/ ADVANCE MADE AND FURTHER IGNORING THE FACT THAT, TH E ASSESSEE WAS HAVING AT ITS DISPOSAL SAMPLE AMOUNT OF OTHER INTEREST FREE F UNDS (DULY APPEARING IN THE FINANCIAL STATEMENTS OF ASSESSEE). MOST IMPORTANTLY , IT IS SUBMITTED THAT, THE LD. AO HAD MISERABLY FAILED TO PROVE ANY SORT OF NE XUS BETWEEN BORROWED FUNDS AND THE ALLEGED INTEREST FREE ADVANCE AND INV ESTMENTS MADE BY THE ASSESSEE, ESPECIALLY WHEN THE ASSESSEE WAS HAVING A T ITS DISPOSAL SUFFICIENT AMOUNT OF FUND TO MEET OUT ALL THE CONCERNED ADVANC ES/INVESTMENTS. 3 ITA NO.167/JP/2017 M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARC H LTD. ATTENTION OF THE HONBLE BENCH IS INVITED TO THE FA CT THAT, SIMILAR DISALLOWANCES BY MAKING IDENTICAL ALLEGATIONS UNDER EXACTLY SIMIL AR CIRCUMSTANCES WERE ALSO MADE IN IMMEDIATELY PRECEDING ASSESSMENT YEARS (I.E . IN AY 2010-11 AND AY 2011-12) WHERE SUCH DISALLOWANCES WERE FULLY DELETE D BY THE LD. CIT(A) AND SUCH ORDERS WERE UPHELD BY THIS HONBLE BENCH VIDE ORDERS DATED 05/06/2015 IN ITA NOS. 718 & 719/JP/2014 (ASSESSEES APPEALS) AND 803 & 804/JP/2014 (DEPARTMENTAL APPEAL) (COPY ENCLOSED), WHEREIN IT H AS BEEN OBSERVED A UNDER: (PAGE 20 PARA 3.10) 3.10 APROPOS REVENUE APPEALS ABOUT RELIEF IN RESP ECT OF CLAIM OF INTEREST U/S 36(1) (III); FROM THE FINANCIAL STATEM ENTS AND ASSESSEES SUBMISSION FOLLOWING FACTS CLEARLY EMERGE FROM THE RECORD:- (I) THE ASSESSEE HAD AT ITS DISPOSAL SUFFICIENT AVAIL ABLE FUNDS IN THE FORM OF SHARE CAPITAL, RESERVES AND OTHER INTEREST FREE FUNDS ETC. WHICH ARE MORE THAN ALLEGED ADVANCES INVESTMENTS. (II) THE NATURE OF SUCH ADVANCES/INVESTMENTS AS EXPLAINE D AND CONSIDERED BY LD. CIT(A) LEAVE NO ROOM FOR ANY DOUBT THAT THE ALLEGED ADVANCED/INVESTMENTS WERE FOR THE PURPOSES OF ASSES SEES HOSPITAL AND MEDICAL PROFESSIONS. IN VIEW OF THE ABOVE FINDINGS AND OBSERVATIONS, NO DISALLOWANCE OF INTEREST U/S 36(1)(III) IS JUSTIFIED. IN THE YEAR UNDER APPEAL, LD. CIT(A) HAS DELETED TH E DISALLOWANCE BY FOLLOWING THE ORDERS OF HIS PREDECESSOR WHICH ORDERS WERE FUR THER UPHELD BY THE HONBLE BENCH, THUS IN THE CIRCUMSTANCES THE ORDER PASSED B Y THE LD. CIT(A) DELETING THE DISALLOWANCE DESERVES TO BE UPHELD. FURTHER IT IS SUBMITTED THAT WHILE MAKING THE DISAL LOWANCE, THE LD. AO HAS COMMITTED A GROSS ERROR IN CONSIDERING ONLY THE AMO UNT OF RS. 531.38 LACS AS INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE FOR MAK ING CONCERNED ADVANCES/INVESTMENT AND LEAVING OUT/ SKIPPING OTHER INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE TO MEET OUT THESE ADVAN CES/ INVESTMENTS WHICH ARE GROUPED UNDER THE HEAD CURRENT LIABILITIES TO TALING TO RS. 428.55 LACS. DETAILS OF WHICH IS AS UNDER: PARTICULARS AMOUNT (LACS) SUNDRY CREDITORS FOR GOODS AND EXPENSES 18.58 ADVANCES FROM PATIENTS 18.70 OTHER PAYABLES 86.71 4 ITA NO.167/JP/2017 M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARC H LTD. OUTSTANDING LIABILITIES EXPENSES 302.63 LONG TERM ADVANCES FROM PATIENTS 1.93 TOTAL 428.55 FROM ABOVE IT IS AMPLY EVIDENT THAT THE ASSESSEE HA D SUFFICIENT, INTEREST FREE FUNDS AVAILABLE WITH IT, AND IF THE SAME IS ADDED T O SHARE CAPITAL AND RESERVE& SURPLUS, ALREADY CONSIDERED BY THE LD. AO, THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE COMES TO RS. 959. 93 LACS WHICH IS MORE THAN THE TOTAL ALLEGED NON-BUSINESS ADVANCES/ASSETS /INVESTMENTS OF R. 723.19 LACS (WRONGLY APPEARING AS 797.35 LACS IN THE ASSES SMENT ORDER). THUS THERE IS NO QUESTION OF APPLICATION OF INTEREST BEARING F UNDS IN NON-BUSINESS ADVANCES/ASSETS/INVESTMENTS. 3.2 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS GIVEN A FI NDING ON FACT BY OBSERVING AS UNDER:- THE ASSESSEE, OWN FUND, WHICH NON-INTEREST BEARING AS ON 31/03/2012 IS AS UNDER: SHARE CAPITAL ISSUED AND SUBSCRIBED RS. 415.75 LAKHS RESERVE AND SURPLUS RS. 115.63 LAKHS RS. 531.38 LAKHS FURTHER, TOTAL ADVANCES MADE BY THE ASSESSEE DURING THE YEAR ARE AS UNDER: LOANS AND ADVANCES AMOUNT INVESTMENT IN LANDS 1,55,45,014.00 ADVANCES TO GANPATI PLASTIFAB LTD. 15,00,000.00 SHRAMA MEMORIAL HOSP. & RESEARCH INSTITUTE (LAND) 4,46,041,00 SHARMA MEMORIAL HOSP. & RESEARCH INSTITUTE (ADVANCE) * 3,17,44,419.00 SHREY ASSOCIATES 20,00,000.00 BLS PROJECTS (P)LTD 11,90,000.00 SILVERING ROADWAYS 6,50,000.00 SHARMA NURSING HOME & BONE HOSP.(P) LTD 2,77,290.00 SHARMA HOSPITAL (P) LTD 1,36,431.00 NON - CURRENT INVESTMENTS IN SHARES OF VARIOUS 31,46,000 5 ITA NO.167/JP/2017 M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARC H LTD. COMPANIES NON - CURRENT INVESTMENTS IN IMMOVABLE (LAND AT KALWAR ROAD) 1,56,84,000.00 TOTAL 7,23,19,195.00 IT IS PERTINENT TO MENTION HERE THAT ADVANCES MADE TO M/S SHARMA MEMORIAL HOSP. & RESEARCH INSTITUTE (ADVANCE) AMOUN TING TO RS. 3,17,44,419/= IS COVERED BY AFOREMENTIONED DECISION OF HONBLE I TAT JAIPUR IN ASSESSEES OWN CASE(SUPRA). THEREFORE, TH E BALANCE AMOUNT OF RS. 4,05,74,776/= (7,23,19,195 3,17,44,419) IS FULLY COVERED BY INTEREST FREE FUND AVAILABLE WITH IN FORM OF SHARE CAPITAL & RESERVE AND SURPLUS OF RS. 531.38 LAKHS AS ON 31.03.2012 (REFERENCE BALANCE SHEET & ASSESSMENT ORDER PG 12) IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CAS E AS DISCUSSED ABOVE, ADDITION MADE OF RS. 35,90,595/= I S HEREBY DELETED. ASSESSEES APPEAL IN GR NO 1 TO 1.1 STAND S ALLOWED. THE ABOVE FINDING OF FACT IS NOT CONTROVERTED BY TH E REVENUE. THEREFORE, THIS GROUND OF THE REVENUES APPEAL IS REJECTED. 4. GROUND NO. 2 IS AGAINST DELETION OF ADDITION OF RS. 4,72,778/- MADE ON ACCOUNT OF BOGUS PURCHASES. 4.1 THE LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL. 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) HAS DECIDED THIS I SSUE BY OBSERVING AS UNDER- THEREFORE IN VIEW OF FACTS & CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING AFOREMENTIONED DECISION F HONBLE JAIPUR ITAT, AO IS DIRECTLY TO RESTRICT THE DISALLOWANCE TO 15% OF UNVERIFIABLE PU RCHASES, RS. 5,56,210/- IN AY 2012-13. THIS WILL TRANSLATE INTO ADDITION OF R S. 83,432/- IN AY 2012-13. ASSESSEES APPEAL IN GR. NO. 2 TO 2.5 IN AY 2012-13 ARE PARTLY ALLOWED. 6 ITA NO.167/JP/2017 M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARC H LTD. THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE TRI BUNAL IN ITA NO. 718 & 719/JP/2014. THIS FACT IS NOT CONTROVERTED BY THE REVENUE. THEREFORE, TAKING A CONSISTENT VIEW, WE DO NOT SEE ANY REASON TO INTERF ERE INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 167/JP/2017 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 10TH DAY OF APRIL 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 10/04/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CENTRAL CIRCLE-1, JAIP UR. 2. THE RESPONDENT- M/S. SHARMA EAST INDIA HOSPITAL S AND MEDICAL RESEARCH LTD., JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 167/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 7 ITA NO.167/JP/2017 M/S SHARMA EAST INDIA HOSPITALS AND MEDICAL RESEARC H LTD.