Dy. Commissioner of Income Tax-6, Kanpur V. M/s P.P.M Medical Resarch & Trauma Centre Pvt. Ltd., Kanpur

ITA 203/LKW/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4679 (ITAT-LUCKNOW)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 10-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 43B; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 203/LKW/2015 ASSESSMENT YEAR: 2011 - 12 DY. CIT - 6 KANPUR V. M/S P.P.M. MEDICAL RESEARCH & TRAUMA CENTRE PVT. LTD. 127/194, W - I, SAKET NAGAR KANPUR T AN /PAN : AADCP7350G (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. AMIT NIGAM, D.R. RESPONDENT BY: NONE DATE OF HEARING: 18 01 201 6 DATE OF PRONOUNCEMENT: 03 03 201 6 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS: - 1. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.3,31,560/ - ON ACCO UNT OF PAYMENT MADE TO SUPPLIERS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE DETAILS OF SUPPLIERS AND RELATED BILLS AND VOUCHERS DURING THE ASSESSMENT PROCEEDINGS. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FA CTS IN ALLOWING THE RELIEF OF RS.1,79,000 / - ON ACCOUNT OF UNPAID LIABILITY OF BONUS WITHOUT APPRECIATING THE FACT THAT THE : - 2 - : ASSESSEE HAS NOT PAID BONUS DURING THE YEAR AND THE SAME IS DISALLOWABLE U/S.43B. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERR ED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.40,89,974/ - ON ACCOUNT OF PAYMENT 'MADE TO M/S AGRIMA MEDICOS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS MADE CASH PAYMENT EXCEEDING RS.20,000/ - WHICH WAS NOT ALLOWABLE U/S 40A(3). 4. THE COMMISS IONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.10,91,901/ - ON ACCOUNT OF CASH PAYMENT OF SALARY AND WAGES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT FURNISH THE DETAILS OF SUCH EMPLOYEES TO WHOM THES E PAYMENTS WERE MADE. 2 . APROPOS GROUND NO.1, IT IS NOTICED THAT THE ASSESSING OFFICER HAS DISALLOWED RS.3,31,560/ - UNDER SECTION 40A(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') FOR NON - PRODUCTION OF DETAILS OF SUPP LIERS AND BILLS & VOUCHERS, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE EXPENDITURE DEBITED DURING THE YEAR CAN ONLY BE CONSIDERED FOR DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT; WHEREAS THIS EXPENDITURE OF RS.3,31,560/ - IS DEBI TED TO THE PROFIT AND LOSS ACCOUNT FOR ASSESSMENT YEAR 2010 - 11 UNDER THE HEAD REPAIRS AND MAINTENANCE OF BUILDING . THE SAME AMOUNT IS SHOWN AS LIABILITY IN THE BALANCE SHEET ENDING ON 31.3.2010. THIS LIABILITY HAS BEEN PAID DURING THE YEAR AND NO SEPAR ATE EXPENDITURE OF RS.3,31,560/ - WAS DEDUCTED DURING THE YEAR. THE PAYMENT MADE IN CASH FOR REPAIR AND MAINTENANCE IS DULY REFLEC TED IN THE CASH BOOK AND LEDGER . IT WAS ALSO CONTENDED BEFORE THE LD. CIT(A) THAT THE RETURN OF INCOME FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 11 HAS BEEN SCRUTINIZED BY THE ASSESSING OFFICER AND EXPENDITURE DEBITED UNDER THE HEAD REPAIR AND MAINTENANCE BUILDING HAS NOT BEEN DISALLOWED. : - 3 - : THEREFORE, REDEMPTION OF SUCH LIABILITY MADE DURING THE YEAR IN CASH CANNOT ATTRACT THE PROVISIONS OF SECTION 40A(3) OF THE ACT. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION. 3 . NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT WHEN PAYMENT OF EARLIER DEBTS ARE MADE IN CASH, THE SAME CAN BE DISALLOWED UNDER SECTION 40A(3) OF THE ACT, BUT THIS ASPECT WAS NOT EXAMINED BY THE LD. CIT(A) AND HE HAS DELETED THE ADDITION HAVING OBSERVED THAT FOR THE OLD LIABILITIES , THE PROVISIONS OF SECTION 40A(3) OF THE ACT CANNOT BE INVO KED. 4 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER O F THE LD. CIT(A). 5 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT SECTION 40A(3) OF THE ACT DEAL S WITH THE PAYMENTS W HERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND R UPEES . BUT THE PROVISIONS OF SUB - SECTION (3A) OF SECTION 40A OF THE ACT DEALS WITH OLD LIABILITY INCURRED BY THE ASSESSEE FOR ANY EXPENDITURE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR , THE ASSESSEE MAKES PAYMENT IN RESPECT THEREOF, OTHERWISE THAN BY AN AC COUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, THEN THE PAYMENT SO MADE SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION , IF IT EXCEEDS RS.20,000/ - . IF THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE WAS DEBITED T O THE PROFIT AND LOSS ACCOUNT FOR ASSESSMENT YEAR 2010 - 11, BUT IT WAS PAID DURING THE IMPUGNED ASSESSMENT YEAR IS ACCEPTED , EVEN THEN TH E ASSESSING OFFICER CAN EXAMINE THE NATURE OF : - 4 - : PAYMENT IF IT EXCEEDS A PARTICULAR LIMIT. BUT THE LD. CIT(A) HAS NOT APPR ECIATED THE PROVISIONS OF SUB - SECTION 3A OF SECTION 40A OF THE ACT AND DELETED THE ADDITION . FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) AS UNDER: - GROUND NO.3 RELATES TO DISALLOWANCE OF RS.3,31,560/ - UNDER SECTION 40A(3). THE ASSESSING OFFICER HAS DISALLOWED RS.3,31,560/ - UNDER SECTION 40A(3) FOR NON - PRODUCTION OF DETAILS OF SUPPLIER AND BILLS AND VOUCHERS. THE A.R. OF THE ASSESSEE HAS SUBMITTED THAT THE EXPENDITURE DEBITED DURING THE YEAR CAN ONLY BE CONS IDERED FOR DISALLOWANCE UNDER SECTION 40A(3), WHEREAS THIS EXPENDITURE OF RS.3,31,560/ - IS DEBITED TO PROFIT AND LOSS ACCOUNT FOR ASSESSMENT YEAR 2010 - 11 UNDER THE HEAD REPAIRS AND MAINTENANCE BUILDING AND ON ACCOUNT OF NON - PAYMENT, THE SAME AMOUNT IS SHOW N AS LIABILITY IN THE BALANCE SHEET ENDING ON 31.3.2010. THIS LIABILITY HAS BEEN PAID DURING THE YEAR AND NO SEPARATE EXPENDITURE OF RS.3,3,1,560/ - IS DEBITED DURING THE YEAR. THE PAYMENT MADE IN CASH IS DULY REFLECTED IN CASH BOOK AND LEDGER OF REPAIR A ND MAINTENANCE ARE MAINTAINED. THE A.R. OF THE ASSESSEE HAS VEHEMENTLY ARGUED THAT THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 HAS BEEN SCRUTINIZED BY THE ASSESSING OFFICER AND THE EXPENDITURE DEBITED UNDER REPAIRS AND MAINT ENANCE BUILDING HAS NOT BEEN DISALLOWED. REDEMPTION OF SUCH LIABILITY MADE DURING THE YEAR IN CASH CANNOT ATTRACT THE PROVISIONS OF SECTION 40A(3). THIS DISALLOWANCE IS BEYOND THE STRETCH OF IMAGINATION OF PROVISIONS OF SECTION 40A(3). ACCORDINGLY, THE ADDITION NEEDS TO BE DELETED. 6 . SINCE THE LD. CIT(A) HAS NOT APPLIED HIS MIND TO THESE PROVISIONS AND HAS NOT EXAMINED THE NATURE OF PAYMENT WHETHER IT WAS MADE ON ACCOUNT OF BUSINESS EXIGENCIES OR UNDER ANY EXCEPTIONAL CLAUSE, WE ARE OF THE VIEW THAT LET THE MATTER SHOULD GO BACK TO THE LD. : - 5 - : CIT(A) FOR ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SECTION 40A(3A) OF THE ACT. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO HIS FILE FOR RE - ADJUDICATION OF THE ISSUE. 7 . APROPOS GROUND NO.2, THE ASSESSING OFFICER HAS DISALLOWED RS.1.79 LAKHS UNDER SECTION 43B OF THE ACT AS UNPAID BONUS LIABILITY, AS IT IS NOTED THAT THE LIABILITY OF BONUS OF RS.2.90 LAKHS AND RS. 6 LAKHS WHEREAS THE PAYMENT IS MADE ONLY FOR RS.7.16 LAKHS , THEREBY THE DISALLOWANCE WAS OF RS.1.79 LAKHS, AGAINST WHICH AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT HE HAS DEBITED EX - GRATIA AND BONUS TO OTHER OF RS.6 LAKHS AND RS.2.95 LAKHS IS INCLUDED IN THE AMOUNT OF RS.7.16 LAKH S AS SALARY TO DIRECTORS. AS THESE TWO AMOUNTS WERE NOT PAID AT THE END OF THE YEAR I.E. 31.3.2011, THE SAME IS REFLECTED IN OTHER LIABILITY IN SCHEDULE 10 OF THE BALANCE SHEET. IT WAS FURTHER CONTENDED THAT THE PAYMENTS HAVE BEEN MADE BEFORE FILING OF T HE RETURN OF INCOME, THEREFORE, DISALLOWANCE IS UNCALLED FOR. THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACT THAT BONUS PAYMENT OF RS.7.16 LAKHS WAS MADE BEFORE FILING OF THE RETURN OF INCOME. THE ADVANCE PAYMENT OF RS.1.16 LAKHS PAID TO STAFF HAS WR ONGLY BEEN TAKEN AS BONUS BY THE ASSESSING OFFICER, THEREBY, THE TOTAL BONUS HAS BEEN TAKEN BY THE ASSESSING OFFICER AT RS.7.16 LAKHS. THE LD. CIT(A) RE - EXAMINED THE DETAILS OF PAYMENTS AND WAS CONVINCED THAT THE ASSESSEE HAS SHOWN LIABILITY OF EX - GRATIA BONUS TO THE DIRECTORS AT RS.2.95 LAKHS AND EX - GRATIA PAYMENT TO OTHER AT RS.6 LAKHS. HE HAS PLACED THAT RS.2.95 LAKHS EX - GRATIA BONUS HAS BEEN PAID TO THE DIRECTORS WHICH ARE CLUBBED UNDER TH E HEAD SALARY TO THE DIRECTORS DEBITED TO THE PROFIT AND LOSS ACCOUNT AT RS.7.16 LAKHS. THE PAYMENT OF RS.6 LAKHS MADE TO STAFF HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT WITH PROPER PAYMENT EVIDENCE. THE LD. CIT(A) WAS ALSO CONVINCED THAT THE ADVANCE PAID TO : - 6 - : STAFF AT RS.1.16 LAKHS HAS BEEN WRONGLY TAKEN BY THE ASS ESSING OFFICER AS BONUS PAYMENT TO STAFF. HE ACCORDINGLY DELETED THE ADDITION. 8 . NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND SIMPLY PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS EXAMINED THE DETAILS OF PAYMENTS AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, HE HAS DELETED THE ADDITION. 9 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT T HE LD. CIT(A) HAS EXAMINED THE DETAILS OF PAYMENT AND WAS OF THE VIEW THAT THERE IS NO UNPAID LIABILITY BEFORE FILING THE RETURN OF INCOME CONCERNING TO THE ASSESSMENT YEAR. SINCE THE LD. CIT(A) HAS PROPERLY EXAMINED THE ISSUE , W E FIND NO INFIRMITY IN HIS ORDER AND WE ACCORDINGLY CONFIRM THE SAME. 10 . APROPOS GROUND NO.3, IT IS NOTICED THAT THE ASSESSING OFFICER HAD MADE DISALLOWANCE OF RS.40,89,974/ - OF PAYMENTS MADE TO M/S AGRIMA MEDICOS HAVING INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 11 . AN APPEAL W AS PREFERRED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT M/S AGRIMA MEDICOS IS A PROPRIETARY CONCERN OF MRS. DIPTI MISHRA , WHO IS RUNNING A MEDICAL SHOP IN THE HOSPITAL PREMISES. THE ASSESSEE - COMPANY AS SUCH HAS NOT BUSINESS DEALING WITH M/S AGRIMA MED ICOS EXCEPT PROVIDING MEDICINES TO THE CONCERNED PATIENTS OF THE HOSPITAL. THE ASSESSEE - HOSPITAL IS ENTERTAINING THE PATIENTS OF GOVERNMENT EMPLOYEE AND THEIR RELATIVES, THEREBY THEIR PAYMENTS ARE REIMBURSED BY THE RESPECTIVE EMPLOYER . THE MEDICINES REQ UIRED IMMEDIATELY AND ADMINISTERED TO THE PATIENTS ARE SUPPLIED BY M/S AGRIMA MEDICOS , WHOSE PAYMENTS ARE RECEIVED DIRECTLY FROM THE CONCERNED EMPLOYER/INSURANCE COMPANY. M/S AGRIMA MEDICOS RAISES THE : - 7 - : BILLS IN THE NAME OF CONCERNED PATIENTS ONLY WHOSE PAY MENTS ARE MADE BY THE RESPECTIVE EMPLOYER. THEREFORE, THE ASSESSEE - HOSPITAL HAS NOTHING TO DO WITH THE MEDICINES SUPPLIED BY M/S AGRIMA MEDICOS AND THEIR PAYMENTS. IN ANY CASE, THE ASSESSEE - COMPANY IS NOT RESPONSIBLE FOR ANY PAYMENT TO M/S AGRIMA MEDICOS EXCEPT FACILITATING THE PAYMENTS MADE FROM CONCERNED EMPLOYER/INSURANCE ORGANIZATION. IT WAS FURTHER CONTENDED THAT THE ASSESSEE - COMPANY HAS BEEN MAINTAINING SEPARATE LED G ER ACCOUNT OF M/S AGRIMA MEDICOS ONLY FOR FACILITATING THE PAYMENTS ON ACCOUNT OF S UPPLY OF MEDICINES TO VARIOUS PATIENTS AND PAYMENTS RECEIVED FROM RESPECTIVE EMPLOYER/INSURANCE COMPANY. THE ASSESSEE - COMPANY BEING HOSPITAL , REQUIRES SUPPLY OF MEDICINES AS PER THE REQUIREMENTS OF THE PATIENTS, THEREBY THE BUSINESS EXPEDIENCY AND THE NEC ESSITY REQUIRES SUCH AN ARRANGEMENT OF SUPPLY OF MEDICINES IN THE HOSPITAL PREMISES. THE EXPLANATIONS FURNISHED BY THE ASSESSEE WERE EXAMINED BY THE LD. CIT(A) AND BEING CONVINCED WITH IT, THE LD. CIT(A) HAS DELETED THE ADDITION. THE RELEVANT OBSERVATION S OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER: - I HAVE CONSIDERED THE SUBMISSIONS AND THE ARGUMENTS PLACED BY THE A .R. OF THE ASSESSEE ALONG WITH THE CONTENTS OF THE ASSESSMENT ORDER. IT IS UNDISPUTED THAT M/S AGRIMA MEDICOS BEING THE PROPRIETARY CONCERN O F MRS. DIPTI MISHRA, HAS SUPPLIED MEDICINES TO VARIOUS PATIENTS ADMITTED TO THE ASSESSEE HOSPITAL AND THE PAYMENTS HAVE BEEN MADE BY THE CONCERNED EMPLOYER/INSURANCE ORGANIZATION ACCORDING TO BILLS RAISED TO THE VARIOUS PATIENTS . THE A.R. OF THE ASSESSEE HAS VERY CLEARLY MENTIONED ALL THE ASPECTS OF THE TRANSACTIONS IN HIS SUBMISSION AND THE ARGUMENTS AS PLACED ABOVE. HERE M/S AGRIMA MEDICOS RAISES BILLS IN THE NAME OF THE PATIENTS AND THE PAYMENTS ARE MADE BY THE CONCERNED EMPLOYER/GOVERNMENT ORGANIZATIO N. SUCH SUPPLY OF MEDICINES ARE NEITHER PART OF THE PURPOSE OF THE : - 8 - : ASSESSEE - COMPANY NOR THE PAYMENTS ARE MADE TO THE ASSESSEE COMPANY. SINCE, SUCH PAYMENTS ARE NOT DEBITED WITH EXPENDITURE TO THE PROFIT AND LOSS ACCOUNT, DISALLOWANCE UNDER SECTION 40A(3) BY THE ASSESSING OFFICER IS COMPLETELY MISPLACED. THE SYSTEM OF ARRANGEMENTS AS EXPLAINED ABOVE IS NOT UNDERSTOOD CORRECTLY BY THE ASSESSING OFFICER. THE A.R. OF THE ASSESSEE HAS CLEARLY MENTIONED AND EXPLAINED THAT THERE HAS NOT BEEN ANY CONTRACT FOR P AYMENTS OF SUPPLY OF SUCH MEDICINES TO VARIOUS PATIENTS. THE ASSESSEE HOSPITAL IS NOWHERE RESPONSIBLE FOR ANY NON - PAYMENT OR SHORT PAYMENT TO M/S AGRIMA MEDICOS . ACCORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) IS MISPLACE D AND THE SAME IS HEREBY DELETED. 12 . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED STRONG RELIANCE UPON THE ORDER OF THE LD. CIT(A) WI TH THE SUBMISSION THAT SINCE THE ASSESSEE HAS NOT PURCHASED ANY MEDICINE FOR WHICH PAYMENT WAS MADE IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT, NO DISALLOWANCE CAN BE MADE IN THE HANDS OF THE ASSESSEE. 13 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE COMPLETE FACTS OF THE CASE WHEREAS THE LD. CIT(A) HAS APPRECIATED THE EXPLANATIONS FURNISHED BY THE ASSESSEE. SINCE THE ASSESSEE WAS SI MPLY A FACILITATOR FOR THE PURCHASE OF MEDICINES FROM M/S AGRIMA MEDICOS FOR THE PATIENTS AND THE PAYMENTS WERE MADE BY THE PATIENTS, THE DISALLOWANCE, IF ANY, CAN ONLY BE MADE IN THE HANDS OF THE PATIENTS, IF THE PAYMENTS EXCEED THE LIMIT, BUT NOT IN THE HANDS OF THE ASSESSEE. SINCE THE LD. CIT(A) HAS PROPERLY EXAMINED THE ISSUE IN THE : - 9 - : LIGHT OF THE DETAILED SUBMISSIONS OF THE ASSESSEE, WE FIND NO INFIRMITY IN HIS ORDER ON THIS ISSUE AND WE ACCORDINGLY CONFIRM THE SAME. 14 . APROPOS GROUND NO.4, IT IS NOTICED T HAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.12,91,901/ - OUT OF SALARY AND WAGES DEBITED TO THE PROFIT AND LOSS ACCOUNT OF RS.64,59,505/ - ON ACCOUNT OF PROPER VERIFICATION. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 1/5 TH 15 . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE PAYMENT OF SALARIES IS BIFURCATED IN THREE HEADS I.E. PAYMENTS TO DOCTORS, STAFF AND CASUAL STAFF. THE PAYMENTS TO DOCTORS ARE MOSTLY IN CHEQUE AND THE PERMANENT STAFFS ARE ALSO PAID IN A MIXED MANNER. HOWEVER, THE PERMANENT S STAFFS ARE ALREADY IN THE ROLE OF P.F. REGISTER AND THEIR PAYMENTS ARE ALSO MONITORED BY OTHER AUTHORITIES. THE CASUAL STAFFS ARE EMPLOYED ON TEMPORARY BASIS AND AS AND WHEN NEED BE, SOMETIMES ON DAY - TO - DAY BASIS ALSO. THEY DO NOT HAVE ANY BANK ACCOUNT AND THE PAYMENTS WERE MADE IMMEDIATELY IN CASH. ALL THE CASH PAYMENTS ARE DULY RECORDED IN THE BOOKS AND DULY RECONCILED WITH THE CASH BOOK. IT WAS FURTHER CONTEN DED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SINGLE AND SPECIFIC DISCREPANCY OF CASH PAYMENTS AND ITS RECONCILIATION WITH THE CASH BOOK. HE MADE AD HOC DISALLOWANCE OF 1/5 OF SALARY AND WAGES DEBITED THE PROFIT AND LOSS ACCOUNT. TH I HAVE CONSIDERED THE SUBMISSIONS AND THE ARGUMENTS PLACED BY THE A. R. OF THE ASSESSEE ALONG WITH THE CONTENTS OF THE ASSESSMENT ORDER. IT IS UNDISPUTED THAT THE SALARY AND WAGES DEBITED TO PROFIT AND LOSS ACCOUNT HAS BEEN RECONCILED WITH THE OF THE TOTAL CLAIM. THE LD. CIT(A) RE - EXAMINED THE ISSUE IN THE LIGHT OF THE DETAILED EXPLANATIONS OF THE ASSESSEE AND BEING CONVINCED WITH IT, HE RESTRICTED THE ADDITION TO RS.2 LAKHS. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER: - : - 10 - : CASH BOOK AND THE ASSESSEE HAS BEEN MAINTAINING THE BOOKS OF ACCOUNT ALONG WITH THE PAYMENTS SLIP AND THEIR MUSTER. THE A.R. HAS SUBMITTED THE EVIDENCE OF PAYMENTS MADE TO THE VARIOUS STAFF ALONG WITH THE EVIDENCE OF PAYMENT VOUCHERS. HE HAS BEEN EMPHASIZING AS DISCUSSED ABOVE, THAT THE BOOKS OF ACCOUNT ARE NOT SUBJECTED AND NO SPEC IFIC DEFECTS OR BOGUS PAYMENTS HAS BEEN POINTED OUT BY THE ASSESSING OFFICER, THEREBY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS PURELY ON ARBITRARY AND AD HOC BASIS. THE ASSESSEE BEING THE PRIVATE LIMITED COMPANY HAS NO PERSONAL EXPENSES OR OTHER WISE NON - BUSINESS EXPENDITURE FOR THE PURPOSE OF PAYMENT MADE TO STAFF AND OTHERS. THE ARGUMENTS AS PLACED ABOVE BY THE A.R . OF THE ASSESSEE ARE VERIFIED WITH THE BOOKS OF ACCOUNT AND THE PAYMENT SLIP. THEREFORE, AN OVERALL CONSIDERATION OF FACTS AND CIR CUMSTANCES OF THE CASE ALONG WITH THE BUSINESS NEED AND COMPULSION, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. HOWEVER, THEIR SERVICES WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS HAS NOT BEEN PROVED, THEREBY, RS.2 LAKHS IS BEING TREATED NON - BUSINESS EXPENDITURE. 16 . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. D.R. HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER HAS MADE AD HOC ADDITION WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT. WHATEVER AMOUNT WAS PAID IN CASH, PROPER RECEIPTS WERE OBTAINED AND COMPLETE DETAILS WERE PRODUCED BEFORE THE LOWER AUTHORITIES. THEREFORE, NO DISAL LOWANCE IS CALLED FOR. 17 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE OF 1/5 TH OF TOTAL CLAIM WITHOUT POINTING : - 11 - : OUT ANY SPECIFIC DEFECT IN A PARTICULAR PAYMENT OR IN THE CASH BOOK. THE LD. CIT(A) HAS RE - EXAMINED THE DETAILS FURNISHED BY THE ASSESSEE AND HE DELETED THE ADDITION. HE, HOWEVER, HAS CONFIRMED THE ADDITION OF RS.2 LAKHS ON ACCOUNT OF CERTAIN EXPENDITURES , WHICH WERE NOT PROVED TO HAVE BEEN INCURRED FOR BUSINESS PURPOSES. SINCE NO SPECIFIC INFIRMITY HAS BEEN POINTED OUT IN THE ORDER OF THE LD. CIT(A), WE CONFIRM HIS ORDER. 18 . IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION ED PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3 RD 1 . APPELLANT MARCH , 2016 JJ: 2302 COPY FORWARDED TO: 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR