ITO, Ward-3(1), Hyd, Hyderabad V. SHK Hospitals (P) Ltd., Hyd, Hyderabad

ITA 230/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2685 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Keywords: Unexplained cash credit; Business income; Depreciation
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA. NO. 230 / HYD /2016 ASSESSMENT YEAR: 2011 - 2012 INCOME TAX OFFICER, WARD 3(1), HYDERABAD. VS. M/S. SHK HOSPITALS (P) LTD., 8 - 2 - 686/C/D/5, ROAD NO.12, BANJARA HILLS, HYDERABAD. PAN: AAMCS 5007 N (APPELLANT) (RESPONDENT) FOR RE VENUE : S MT. N. SWAPNA, DR FOR ASSESSEE : NONE DATE OF HEARING : 25 .01.2018 DATE OF PRONOUNCEMENT : 25 .01.2018 ORDER PER D. MANMOHAN , VP. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 3, HYDERABAD AND IT PERTAINS TO THE A.Y. 2011 - 2012. 2. THOUGH SEVERAL NOTICES WERE ISSUED TO THE ASSESSEE, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE THEREFORE PROCEED TO DISPOSE OF THE APPEAL EX - PARTE , QUA THE ASSESSEE. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND CAREFULLY PERUSED THE RECOR D. ASSESSEE - COMPANY WAS RUNNING A CLINIC TO TAKE CARE OF THE NEEDS OF PATIENTS. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE - COMPANY ADMITTED A TOTAL INCOME OF RS.32,75,954/ - , WHICH WAS SET - OF F AGA INST THE BROUGHT FORWARD LOSES OF EARLIER YEARS. THE CA SE HAVING BEEN SELECTED FOR SCRUTINY, THE A.O. CALLED UPON MANAGING 2 DIRECTOR OF THE ASSESSEE - COMPANY TO FURNISH COPIES OF ANNUAL REPORTS, TAX AUDIT REPORTS ETC. SINCE THERE WAS NO RESPONSE TO THE NOTICES, AN EX - PARTE ASSESSMENT WAS MADE WHEREIN THE A.O. E STIMATED THE INCOME AT 10% OF THE GROSS RECEIPTS , CLEAR OF ALL THE EXPENDITURE, INCLUD ING DEPRECIATION. ACCORDINGLY, THE BUSINESS INCOME WAS DETERMINED AT RS. 1,08,04,365/ - AS AGAINST THE TOTAL INCOME OF RS. 32,75,954/ - DECLARED BY THE ASSESSEE. ANOTHER A DDITION OF RS.2,12,55,000/ - WAS MADE U/S 68 OF THE ACT TOWARDS UNEXPLAINED CASH CREDIT. 3.1. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, ASSESSEE - COMPANY PREFERRED AN APPEAL BEFORE THE LD. CIT(A) CONTENDING , INTER ALIA , THAT THE ASSESSEE - COMPANY I S CONSISTENTLY INCURRING LOSSES AND ULTIMATELY CLOSED DOWN THE HOSPITAL LOCATED AT UPPAL , HYDERABAD WHEREAS THE ASSESSING OFFICER HAS ESTIMATED 10% OF GROSS RECEIPTS AS PROFITS WITHOUT BOTHERING ABOUT THE REALITIES OF THE SITUATION. SIMILARLY, IT WAS CON TENDED T HAT THE ASSESSMENT WAS MADE IN A HURRY U/S 144 OF THE ACT IN THE MONTH OF FEBRUARY 2014 EVEN THOUGH THERE WAS SUFFICIENT TIME AVAILABLE FOR COMPLETION OF ASSESSMENT . ADDITION U/S 68 OF THE ACT WAS ALSO CHALLENGED ON THE GROUND THAT THE A.O. MADE THE IMPUGNED ADDITION WITHOUT BOTHERING TO KNOW ABOUT THE CASH COMPONENT OF THE SAID LOAN. 4. THERE WAS A DELAY IN FILING THE APPEAL BEFORE THE LD. CIT(A) FOR WHICH ONE OF THE DIRECTORS OF THE ASSESSEE - COMPANY SHRI K. UPENDER REDDY TENDERED AN EXPLANATION STATING THAT HE CONTESTED FOR ELECTION AS MEMBER OF LEGISLATIVE ASSEMBLY (MLA), AND DUE TO ELECTION DISTURBANCES, THERE WAS A DELAY IN FILING THE APPEAL. ACCORDINGLY, THE DELAY WAS CONDONED. ON MERITS ALSO IT WAS STRONGLY CONTENDED THAT T HOUGH THE ASSESSEE - COMPANY WAS INCORPORATED ON 21.07.2008 , RIGHT FROM INCEPTION THE HOSPITAL LOCATED AT UPPAL, HYDERABAD SUFFERED CONTINUOUS LOSSES AND COULD NOT TAKE OFF AND ULTIMATELY THE ASSESSEE HAD TO CLOSE DOWN THE HOSPITAL. THE HOSPITAL INCURRED LO SSES FROM THE BEGINNING AND THE MACHINERY WAS SEIZED BY THE BANKS AND THE STAFF ALSO 3 LEFT THE SERVICES OF THE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEREBY THE REPLY COULD NOT BE SENT TO THE ASSESSING OFFICER IMMEDIATELY. UNDER THESE CIRCUMS TANCES, ADDITIONAL INFORMATION WAS SUBMITTED DURING THE APPEAL PROCEEDINGS. THE A.O. CALLED FOR THE REMAND REPORT ON THE STRENGTH OF THE INFORMATION FURNISHED BY THE ASSESSEE AND UPON EXAMINING THE DETAILS, THE LD. CIT(A) OBSERVED THAT SUBSTANTIAL RECEIPT S OF THE ASSESSEE - COMPANY ARE FROM GOVERNMENT OF ANDHRA PRADESH . MA IN INCOME WAS FROM AAROGYA SRI SCHEME AND MAJOR EXPENDITURE WAS PURCHASES OF CONSUMABLES, DOCTORS CONSULTATIONS, RENT TOWARDS BUILDING AND EQUIPMENT, SALARIES TO STAFF, ADVERTISEMENT ETC ., AND THUS CONCLUDED THAT THE ESTIMATE OF INCOME , IN THE ABOVE BACKGROUND OF FACTS, AS MADE BY THE A.O, IS UNREASONABLE. IN THE OPINION OF THE LD. CIT(A) , A ROUNDSUM DISALLOWANCE OF RS. 25 LAKHS WOULD MEET THE ENDS OF JUSTICE AND THE A.O. WAS DIRECTED AC CORDINGLY. 5. WITH REGARD TO THE ADDITION MADE U/S 68 OF THE ACT, LD. CIT(A) NOTICED THAT ALL THE MAJOR PAYMENTS WERE RECEIVED FROM PROPER SOURCES AND THEREFORE, IT IS NOT A FIT CASE FOR MAKING ADDITION U/S 68 OF THE ACT. ACCORDINGLY, THE ADDITION MADE B Y THE A.O IS DELETED. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE OUTSET, IT MAY BE NOTICED THAT THE AUTHORIZATION OF THE PRINCIPAL COMMISSIONER OF INCOME TAX U/S 253(2) OF THE ACT IS BA L D AND IT DOES NOT SPECIFY THE GROUNDS UPON WH ICH THE APPEAL WAS AUTHORISED. IN FACT, THE GROUNDS OF APPEAL BEFORE US ARE ONLY ON ONE ISSUE I.E., TO RESTORE THE ESTIMATE OF INCOME MADE BY THE ASSESSING OFFICER @ 10% ON THE TOTAL RECEIPTS AND THERE WAS NO GROUND WITH REGARD TO THE DELETION OF ADDITION OF RS. 2,12,55,000/ - . THOUGH IN EACH CASE, THE BENCH HAS BEEN BRINGING TO THE NOTICE OF THE DEPARTMENTAL AUTHORITIES, THE PROCEDURE PRESCRIBED BY THE CBDT IN ENSURING THAT THE GROUNDS SOUGHT 4 TO BE RAISED SHOULD BE PROPERLY APPROVED BY THE COMMISSIONER, I N MOST OF THE CASES, THE GROUND - WISE REMARKS OF THE COMMISSIONERS WERE NOT PLACED ON RECORD WHICH COMPELS US TO TAKE AN ADVERSE INFERENCE AND GOING BY THE GROUNDS RAISED BY THE ASSESSING OFFICER, WE ASSUME THAT THE REVENUE IS NOT IN APPEAL WITH REGARD TO T HE SECOND ADDITION WHICH WAS DELETED BY THE LD. CIT(A). 8. EVEN WITH REGARD TO THE ESTIMATE OF INCOME AT RS. 25 LAKHS ON ROUND SUM BASIS, NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED DEPARTMENTAL REPRESENTATIVE TO CONTRADICT THE FINDINGS OF THE LD. CIT (A). IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN INCURRING LOSSES SINCE INCEPTION AND IT WAS ULTIMATELY CLOSED. THE OBSERVATION THAT THE MAJOR PART OF THE INCOME ARE FROM AROGYA SRI SCHEME WAS ALSO NO T DISPUTED. UNDER THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ESTIMATION MADE BY THE LD. CIT(A) DO ES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 25.01.2018 . SD/ - SD/ - (S. RIFAUR RAHMAN) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED: 25 TH JANUARY, 2018. OKK, SR.PS COPY TO 1. M/S. SHK HOSPITALS P LTD., 8 - 2 - 686/C/D/5, ROAD NO.12, BANJARA HILLS, HYDERABAD - 034. 2. INCOME TAX OFFICER, WARD 3(1), HYDERABAD. 3. CIT (AA) - 3, HYDERABAD. 4. PR. CIT - 3, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE