Dr. Sandeep Kumar Gupta, New Delhi V. ITO, New Delhi

ITA 1792/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61748 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURJANI MOHANTY
• Assessee Lawyers: R MITTALAR
• Keywords: Depreciation; Initiation of penalty proceedings
• Section: 80C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI A.N.PAHUJA, ACCOUNTANT MEMBER ITA N O. 1792/DEL/2011 ASSESSMENT YEAR : 2007 - 08 DR.SANDEEP KUMAR GUPTA, C-526, SARASWATI VIHAR, NEW DELHI. PAN : AAEPG5899P. VS. INCOME TAX OFFICER, WARD-37(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.MITTAL,AR. REVENUE BY : SMT.SURJANI MOHANTY,.DR. DATE OF HEARING 07-06-2012 DATE OF PRONOUNCEMENT 29-06-2012 ORDER A.N.PAHUJA: THIS APPEAL FILED ON 13 TH APRIL, 2011 BY THE ASSESSEE AGAINST AN ORDER DATED 5 TH JANUARY, 2011 OF THE LD. CIT(A)-XXVIII, NEW DELHI , RAISES THE FOLLOWING GROUNDS:- 1. WHETHER THE LEARNED CIT(A) IS JUSTIFIED TO REJE CT THE BOOKS OF ACCOUNTS U/S 145(3) WHICH WERE ACCEPTED BY THE ASSE SSING OFFICER? 2. WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN ESTIM ATING THE NET PROFITS OF THE ASSESSEE DISREGARDING ALL THE EXPEND ITURE GENUINELY AND BONAFIDE CLAIMED BY THE ASSESSEE WHEN THE ASSES SEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS WHICH WERE NOT DISPUTED BY THE LEARNED ASSESSING OFFICER AND WERE SUBJECT TO T AX AUDIT? 3. WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN CONFI RMING THE DISALLOWANCE OF EXPENDITURE ON CANTEEN AMOUNTING TO ` .69,213/-, MISCELLANEOUS EXPENDITURE AMOUNTING TO ` .8,469/-, EXPENDITURE ON CONSUMABLE GOODS AMOUNTING TO ` .91,293/-, GENERAL EXPENSES AMOUNTING TO ` .27,482/- EVEN AFTER ALL THE RELEVANT BOOKS OF ITA NO.1792/DEL/2011 2 ACCOUNTS AND SUPPORTING DOCUMENTS WERE PRODUCED BEF ORE THE LEARNED CIT(A) AND WERE DULY OBSERVED BY CIT(A) IN PARA 5 ON PAGE 3 OF THE IMPUGNED ORDER? 4. WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN ADDI NG TO THE ESTIMATED PROFITS A PORTION OF DISALLOWED EXPENDITU RE ON ACCOUNT OF PERSONAL USE AND NON-PRODUCTION OF SUPPORTING VOUCH ERS AMOUNTING TO DOUBLE TAXATION ON ARBITRARY BASIS? 5. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS FACTS IN ISSUING DIRECTIONS TO ADDL.CIT RANGE-37 TO CONSIDER INITIATING PENALTY PROCEEDING UNDER SECTION 271D AGAINST DR.IL A GUPTA FOR APPARENT VIOLATION OF SECTION 269SS WITHOUT PROPERL Y AND JUDICIOUSLY CONSIDERING THE FACTS OF THE CASE. THE DIRECTIONS WERE ISSUED JUST FOR FURTHER HARASSMENT OF THE ASSESSEE. 6. THAT THE ASSESSEE CRAVES LEAVE TO ADD/ALTER ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT E-RETURN DECLARING INCOME OF ` `7,72,149/- FILED ON 30.10.2007 BY THE ASSESSEE, A PRACTICING SURGEON, WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), I SSUED ON 19 TH SEPTEMBER, 2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (AO' IN SHORT) NOTICED THAT THE ASSESSEE DEBITED AN AMOUNT OF ` ` 1,42,084/- ON ACCOUNT OF EXPENDITURE ON CANTEEN. TO A QUERY BY THE AO, T HE ASSESSEE DID NOT PRODUCE ALL THE BILLS AND VOUCHERS IN SUPPORT OF THE EXPEND ITURE. SINCE THE EXPENDITURE BOOK DID NOT TALLY WITH THE RECEIPTS FROM THE VISIT ORS, THE AO DISALLOWED A SUM OF ` `69,213/-. LIKEWISE, THE AO DISALLOWED AN AMOUNT O F ` ` 8,469/- OUT OF MISCELLANEOUS EXPENSES OF ` ` 13,719/-, ` ` 91,293/- OUT OF TOTAL EXPENDITURE ON CONSUMABLE GOODS AT ` ` 4,32,575/- AND ` ` 27,482/- OUT OF GENERAL EXPENSES OF ` ` 43,208/-.BESIDES, THE AO DISALLOWED 1/10 TH OF CAR & TELEPHONE EXPENSES AS ALSO DEPRECIATION ON CAR. 3. ON APPEAL, THE LD. CIT(A) ASKED THE ASSESSEE TO PRODUCE THE RELEVANT BOOKS OF ACCOUNT ALONGWITH BILLS AND VOUCHERS. SIN CE THE ASSESSEE DID NOT PRODUCE CERTAIN BILLS/VOUCHERS AS MENTIONED IN PARA 5 OF THE IMPUGNED ORDER, THE LD. CIT(A) SHOW CAUSED THE ASSESSEE AS TO WHY PROVI SIONS OF SECTION 145(3) OF ITA NO.1792/DEL/2011 3 THE ACT BE NOT INVOKED AND NET PROFIT ESTIMATED AT THE RATE OF 20% OF PROFESSIONAL RECEIPTS. IN RESPONSE, THE ASSESSEE REPLIED THAT T HEIR CASE WAS NOT COVERED BY THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THA T CASH PAYMENTS WERE MADE TO CERTAIN SUPPLIER OF GOODS IN SPECIAL CIRCUMSTANCES, SUPPLIERS BEING NEW AND PURCHASES MADE IN EMERGENCY. WHILE ENCLOSING COPIE S OF EXPENDITURE VOUCHERS(SIX) REFERRED TO IN RESPECT OF BILLS IN PA RA 5 OF THE IMPUGNED ORDER, THE ASSESSEE SUBMITTED THAT SINCE EMPLOYEES AND WORKERS SIGNED ON THE WAGES/SALARY REGISTER, THEREFORE, ADDITIONAL SIGNAT URES WERE NOT TAKEN ON CASH VOUCHERS WHILE ALL THE PROFESSIONAL RECEIPTS WERE E NTERED IN THE BOOKS. IN THE LIGHT OF THESE SUBMISSIONS, THE LD. CIT(A), WHILE R EFERRING TO RULE 6F OF THE INCOME-TAX RULES, 1962 AND OBSERVING THAT COPIES OF BILLS UNDER RULE 6F(2)(IV) WERE NOT PRODUCED NOR PATIENT REGISTER, SALARY AND WAGES REGISTER OR INVENTORIES OF OPENING AND CLOSING STOCK AND THE ASSESSEE HAVIN G NOT MAINTAINED/PRODUCED ALL THE BOOKS AND VOUCHERS PRESCRIBED IN RULE 6F, I NVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND CONCLUDED IN THE FOLL OWING TERMS:- 16. IN VIEW OF THE ABOVE FACTS, THE PROVISIONS OF SECTION 145(3) ARE APPLICABLE. THE BOOKS OF ACCOUNT AND BILLS ETC . REQUIRED UNDER RULE 6F ARE NOT MAINTAINED. A LARGE NUMBER OF THE EXPENSES CLAIMED ARE NOT BACKED BY CORRESPONDING BILLS. REG ARDING PROFESSIONAL RECEIPTS, THE APPELLANT HAS NOT PRODUC ED ANY RECORD SUCH AS BILLS AND RECEIPTS. AS DISCUSSED ABOVE, TH E APPELLANT WAS ASKED TO EXPLAIN WHY PROVISIONS OF SECTION 145(3) B E NOT INVOKED AND NET PROFIT ESTIMATED HOWEVER, HE HAS ONLY STATE D THAT THESE PROVISIONS ARE NOT APPLICABLE WITHOUT REBUTTING THE DEFICIENCIES DISCUSSED ABOVE. IN VIEW OF THESE FACTS, THE PROVI SIONS OF SECTION 145(3) ARE APPLICABLE IN THIS CASE AND THE NET PROF IT IS REQUIRED TO BE ESTIMATED. 17. AS DISCUSSED ABOVE THE APPELLANT WAS ASKED TO F ILE THE DETAILS OF NET PROFIT RATE SHOWN IN THE LAST FIVE Y EARS. IN RESPONSE THE APPELLANT HAS FILED THE FOLLOWING CHART AND STA TED AS FOLLOWS: A.Y. NET PROFIT AS PER PROFIT & LOSS A/C. ( ` ). INCOME FROM OTHER SOURCES ( ` ) NET PROFIT FROM PROFESSION( ` ) TURNOVER ( ` .) NET PROFIT RATIO 2007-08 884,725.99 63,363.50 821,362.49 9,016,474.5 0 9% ITA NO.1792/DEL/2011 4 2006-07 824,778.67 65,201.80 759.576.87 8,260,556.1 0 9% 2005-06 600,829.04 63,854.55 536,974.49 6,645,029.0 0 8% 2004-05 525,707.08 51,236.11 474,470.97 2,048,125.8 7 23% 2003-04 575,863,77 112,719.00 463,144.77 1,661,604. 00 28% NOTE : 1. THE ASSESSEE WAS WORKING AS A CONSULTING DOCTOR IN HIS SARTHAK CLINIC AND VISITING CONSULTANTS IN VARIOUS HOSPITAL TILL FINANCIAL YEAR 2003-04. HOWEVER, HE VENTURED INTO BIMAL HOSPITAL FROM F.Y. 2004-05 ONWARDS WHEREBY HIS TURNOVER INCR EASED EXPONENTIALLY BUT ALSO DUE TO HUGE RUNNING AND MAIN TENANCE COSTS OF THE HOSPITAL THE NET PROFIT RATIO REDUCED SUBSTA NTIALLY BUT STILL HE WAS ABLE TO GENERATED HIGHER PROFIT AS COMPARED TO PRIOR YEARS. 18. THE ABOVE CHART SHOWS THAT IN A.Y. 2003-04 AND 2004-05, THE APPELLANT WAS WORKING AS A CONSULTANT DOCTOR IN SARTHAK CLINIC. FROM A.Y. 2005-06 ONWARDS, HE TOOK OVER THE MANAGEM ENT OF BIMAL HOSPITAL IN ADDITION TO HIS CONSULTANCY IN SA RTHAK CLINIC. SINCE THE NATURE OF BUSINESS OF CONSULTANCY IN A PR IVATE CLINIC AND THE BUSINESS OF RUNNING A HOSPITAL ARE DIFFERENT WI TH DIFFERENT RATES OF NET PROFIT, THEY ARE TO BE CONSIDERED SEPARATELY . IN A.Y. 2003-04 AND 2004-05 THE APPELLANT WAS ONLY WORKING AS A DOC TOR IN HIS PRIVATE CLINIC. THE AVERAGE NET PROFIT RATE IN THE SE TWO YEARS IS 25.5%. THEREFORE, THIS IS THE RATE TO BE ADOPTED I N REGARD TO THE RECEIPTS FROM CONSULTANCY IN SARTHAK CLINIC. IN TH E COPY OF P&L ACCOUNT FILED BY THE APPELLANT, THESE RECEIPTS ARE SHOWN AT RS.32,27,702/-. AT THE RATE OF 25.5%, THE NET PROF IT WORKS OUT TO RS.8,23,064/-. IN ADDITION TO THIS, HE HAS ALSO SH OWN INCOME FROM BANK INTEREST OF RS.3,451/-, DIVIDEND RS.5,002/- AN D INTEREST FROM PPF RS.54,911/-. NO EXPENDITURE HAS BEEN CLAIMED I N RESPECT OF THESE RECEIPTS. THEREFORE, THESE RECEIPTS TOTALING RS.63,364/- IS TO BE ADDED TO THE NET PROFIT FROM SARTHAK CLINIC. TH E NET PROFIT FROM SARTHAK CLINIC THUS AMOUNTS TO RS.8,86,428/- (82306 4 + 63364). 19. REGARDING INCOME FROM BIMAL HOSPITAL, THE APPEL LANT HAS SHOWN NET PROFIT RATE OF 9% IN THE IMMEDIATELY PREC EDING YEAR. CONSIDERING THE FACTS, THE NET PROFIT FROM BIMAL HO SPITAL IS ESTIMATED AT 9% OF THE GROSS RECEIPTS. IN BIMAL HO SPITAL, THE APPELLANT HAS SHOWN GROSS RECEIPTS OF RS.57,88,772/ -. AT 9%, THE NET PROFIT AMOUNTS TO RS.5,20,989/-. THE TOTAL NET PROFIT FROM SARTHAK CLINIC AND BIMAL HOSPITAL AMOUNTS TO RS.14, 07,417/- (8,86,428 + 5,20,989). ITA NO.1792/DEL/2011 5 20. AS THE PROFIT HAS BEEN ESTIMATED AS PER ABOVE D ISCUSSION, THE OTHER DISALLOWANCE MADE BY THE A.O. EXCEPT DISA LLOWANCES TOWARDS PERSONAL USE CONSIDERED IN PARA 3 ABOVE, AR E NOT REQUIRED. THE A.O. HAS ALSO DISALLOWED DONATION OF RS.2,601/- BUT NO REASON FOR THIS DISALLOWANCE HAS BEEN GIVEN THEREFORE, IT IS NOT REQUIRED TO BE CONSIDERED SEPARATELY. THE DISALLOWANCES TOWARD S PERSONAL USE ARE TO BE ADDED TO THE NET PROFIT ESTIMATED ABO VE BECAUSE THEY ARE OVER AND ABOVE THE INCOME ESTIMATED. THE DISAL LOWANCES TOWARDS PERSONAL USE AMOUNT TO RS.55,149/- (24604 _ + 22983 + 7562). THIS AMOUNT IS TO BE ADDED TO THE NET PROFI T ESTIMATED ABOVE. THE GROSS TOTAL INCOME THUS AMOUNTS TO RS.1 4,62,566/- (14,07,417 + 55,149). AFTER REDUCING THE DEDUCTION U/S 80C AND 80-D ALLOWED BY THE A.O. AMOUNTING TO RS.1,07,815/- , THE TOTAL INCOME AMOUNTS TO RS.13,54,751/-. THE TOTAL INCOME COMPUTED BY THE A.O. IS RS.9,92,701/-. THE INCOME IS THUS ENHA NCED BY RS.3,62,050/-. AS DISCUSSED ABOVE, THE APPELLANT H AS BEEN ASKED IN THE COURSE OF APPELLATE PROCEEDINGS ON 24.12.10 WHY THE PROVISIONS OF SECTION 145(3) BE NOT INVOKED AND NET PROFIT ESTIMATED AT 20% OF RECEIPTS. THE REPLY FILED BY THE APPELLA NT HAS DULY BEEN CONSIDERED. THUS, NECESSARY OPPORTUNITY TO THE APP ELLANT HAS BEEN GIVEN IN TERMS OF SECTION 251(2) FOR SHOWING CAUSE AGAINST ENHANCEMENT OF INCOME. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST UPHOLDING OF DISALLOWANCE OUT OF CANTEEN EXPENSES, MISCELLANEOUS EXPENDITURE, EXPENDITURE ON CONSUMABLE GOODS AND GENERAL EXPENSES AND REJECT ION OF BOOKS OF ACCOUNTS, HAVING RECOURSE TO PROVISIONS OF SEC. 145(3) OF THE ACT AND ESTIMATION OF NET PROFITS. THE LD. AR ON BEHALF OF THE ASSESSEE WHIL E INVITING OUR ATTENTION TO AFFIDAVITS DATED 6.6.2012 OF SHRI R.MITTAL, CA AND DR. ILLA GUPTA SUBMITTED THAT THE ALL THE BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODUCE D BEFORE THE AO AND THE LD. CIT(A) AND THUS, OBSERVATIONS OF THE LD. CIT(A) IN PARA 5(7),5(8),5(9),PARA 7 & PARA 10 OF THE IMPUGNED ORDER ARE NOT CORRECT AND ARE DENIED..ON THE OTHER HAND, THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A) IN THE IMPUGNED ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FINDINGS OF THE L D. CIT(A), ESPECIALLY IN PARA 10 OF THE IMPUGNED ORDER ,THE ASSESSEE DID NOT PRODUCE RELEVANT REGISTERS, BILLS AND VOUCHERS OR INVENTORIES BEFORE THE LD. CIT(A),RESU LTING IN REJECTION OF BOOK RESULTS AND ESTIMATION OF NET PROFITS. NOW THE LEARNED AR ON BEHALF OF THE ASSESSEE FILED AN AFFIDAVIT OF SHRI R.MITTAL, CHARTERED ACCOUNTANT THAT ALL THE BOOKS OF ACCOUNT ITA NO.1792/DEL/2011 6 AS PRESCRIBED IN RULE 6F WERE PRODUCED BEFORE THE L D. CIT(A) AND DENIED THE OBSERVATIONS OF THE LD. CIT(A) IN PARA 5(7),5(8),5( 9),PARA 7 & PARA 10 OF THE IMPUGNED ORDER. ANOTHER AFFIDAVIT WAS FILED OF DR. ILA GUPTA MENTIONING THAT PROFESSIONAL CHARGES WERE PAID IN CASH ON 20 TH JUNE, 2006- ` 2850/-, 26 TH FEBRUARY, 2007- ` 20,000/- AND 31 ST MARCH, 2007- ` 20,000/- FOR HIRE CHARGES OF OT INCLUDING COST OF CONSUMABLE ITEMS TO DR. SANDEEP K UMAR GUPTA I.E. THE ASSESSEE.. SINCE THE LD. DR DID NOT PLACE ANY MATE RIAL BEFORE US, CONTROVERTING THE AVERMENTS IN THESE AFFIDAVITS AND MERELY SUPPOR TED THE FINDINGS OF THE LD. CIT(A) ,AFTER DISCUSSION WITH BOTH THE REPRESENTAT IVES, WE CONSIDER IT APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) ON THE ISS UES RAISED IN GROUND NOS.1 TO 4 IN THE APPEAL BEFORE US AND RESTORE THESE ISSUES TO HIS FILE FOR DECIDING THE MATTER AFRESH IN ACCORDANCE WITH LAW, AFTER VERIFYI NG THE GENUINENESS OF AVERMENTS MADE IN THE AFORESAID TWO AFFIDAVITS AND ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE RED ECIDING THE APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER AFTER CROSS EXAM INING SHRI R MITTAL,CA & DR. ILLA GUPTA, KEEPING IN MIND, INTER ALIA, THE MANDAT E OF PROVISIONS OF SEC. 250(6) OF THE ACT. THE LD. CIT(A) IS FREE TO UNDERTAKE ANY INDEPENDENT ENQUIRIES, FOUND NECESSARY IN THE CASE AND SHALL ALSO EXAMINE ALL TH E RELEVANT BOOKS OF ACCOUNTS AND VOUCHERS. THE ASSESSEE IS ALSO DIRECTED TO PROD UCE ALL THE BOOKS OF ACCOUNTS AND VOUCHERS ,PARTICULARLY THOSE MENTIONED IN THE AFFIDAVIT OF THE CA BEFORE THE LD. CIT(A) FOR EXPEDITIOUS DISPOSAL OF T HE CASE. WITH THESE OBSERVATIONS, GROUND NOS. 1 TO 4 IN THE APPEAL ARE DISPOSED OF. 6. GROUND NO.5 IN THE APPEAL RELATES TO INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT. SINCE MERE INITIATI ON OF PENALTY PROCEEDINGS IS NOT APPEALABLE, ACCORDINGLY, THIS GROUND IS DISMISS ED. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND NO.6 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS DISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. ITA NO.1792/DEL/2011 7 9. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT FO R STATISTICAL PURPOSES. SD/- SD/- ( G.C.GUPTA ) ( A.N.PAHUJA ) VICE PRESIDENT ACCOUNTA NT MEMBER VK. COPY FORWARDED TO: - 1. APPELLANT : DR.SANDEEP KUMAR GUPTA, C-526, SARASWATI VIHAR, NEW DELHI. 2. RESPONDENT : INCOME TAX OFFICER, WARD-37(4), NEW DELHI. 3. CIT CONCERNED 4. CIT(A)-XXVIII,NEW DELHI 5. DR, ITAT,G BENCH, NEW DELHI 6. GUARD FILE. ASSISTANT REGISTRAR