The ACIT, Circle-5, Surat V. M/s. Me and Mummy Hospital, Surat

ITA 2695/AHD/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1764 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-09-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 23-12-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J P SHAH
• Keywords: Depreciation; Income from undisclosed sources; Period of limitation; Corroborative evidences; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 133A; 133(6); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES C BENCH: AHMEDABAD (BEFORE S/SHRI R.V. EASWAR, VP AND A N PAHUJA, AM) ITA NO. 2695/AHD/2005 A Y: 2002-03 THE A. C. I. T., CIRCLE 5, ROOM NO.217, AAYAKAR BHAVAN, MAJURA GATE,SURAT VS M/S. ME AND MUMMY HOSPITAL, JALNIDHI, 3 RD FLOOR,NANPURA, SURAT, [PAN: AAGFM 2467 B] APPELLANT RESPONDENT ASSESSEE BY SHRI JP SHAH, AR REVENUE BY SHRI C. K. MISHRA, DR ORDER A N PAHUJA: THIS APPEAL FILED BY THE REVENUE AGAINST AN ORDER DATED 05-10-2005 OF THE LEARNED CIT(A)-IV, SURAT, R AISES THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS)-IV, SURAT HAS BEEN ERRED I N DELETING THE ADDITION OF RS.1,08,443/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAPITAL EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS)-IV, SURAT HAS BEEN ER RED IN DELETING THE ADDITION OF RS. 19,54,344/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF UNCONFIRMED/NON-GEN UINE LIABILITIES IN ABSENCE OF ANY SUPPORTING EVIDENCE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS )-IV, SURAT HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE CONFESSED HIS INABILITY EITHER TO PRODUCE CONFIRMATION OR THE PARTIES FOR VERIFICATION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-IV, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.2,38,358/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNVERIFIABLE PU RCHASES AS ALSO ERRED IN DELETING THE ADDITION OF RS.27,360 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON THE SAID PURCHASES OF FURNITURE AND FIXTURE. ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 2 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-IV, SURAT HAS FAILED TO CONSIDER THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO PROVE THE PURCHASES CLAIMED A ND OUTSTANDING LIABILITIES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 7. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L EARNED COMMISSIONER OF INCOME-TAX (APPEALS), SURAT MAY BE SET- ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.4,92,636/- FILED ON 29-10-2002 BY THE ASSESSEE F IRM, RUNNING AN HOSPITAL, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 19 61(HEREINAFTER REFERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE ISSUE O F NOTICE U/S 143(2) OF THE ACT. IN THIS CASE, A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE FIRM ON 07-06-2002. DURING THE COURSE OF SURVEY, ON THE BASIS OF EXAMINATION OF RECORDS AND ENQUIRY FROM PATIENTS IT WAS REVEALED THAT THE ASSESSEE WAS NOT FULLY RECORDING CONSULTANCY CHARGE S AS WELL AS OTHER CHARGES IN THEIR BOOKS. THE HOSPITAL IS STATED TO HAVE BEEN PU RCHASED IN THE NAME OF DR. PRAFUL B. DOSHI, DR. MITSUBEN P. DOSHI AND HUF OF D R. PRAFUL B. DOSHI IN THE RATIO OF 7:7:3 FROM M/S REGENCY CORPORATION, SURAT FOR A CONSIDERATION OF RS. 90 LACS. IN HIS STATEMENT, DR. PRAFUL B. DOSI ADMITTED THAT ENTIRE CASH OF RS. 45 LACS FOR PURCHASE OF THE HOSPITAL WAS PAID BY DR. MITSUBENI P. DOSHI OUT OF HER UNACCOUNTED INCOME FROM MEDICAL PROFESSION. IN ADDI TION, DR. PRAFUL B. DOSHI PURCHASED A SHOP NO. G-9 IN THE SAID PREMISES FOR R S. 3,87,000/-, FOR WHICH A SUM OF RS.1,00,000/- WAS PAID IN CASH OUT OF HIS UN ACCOUNTED INCOME. DR. DOSHI IN REPLY TO QUESTION NO.13 ADMITTED UNACCOUNTED INC OME OF RS.55 LACS IN FY 2001-02 AND RS.6.13 LACS IN FY 2002-03 ON THE DATE OF SURVEY. THE DETAILS OF ADDITIONAL INCOME OF RS. 61.13 LACS DECLARED IN TH E TWO ASSESSMENT YEARS ARE MENTIONED IN PARA 3.2 OF THE ASSESSMENT ORDER. ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 3 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE CLAIMED PROCESSING CHARGES OF RS.1,14,151/- FOR TAKING TERM LOAN FOR THE RENOVATION OF THE HOSPITA L. THE AO WAS OF THE OPINION THAT THE SAID AMOUNT WAS OF CAPITAL NATURE. IN RESP ONSE TO A SHOW CAUSE NOTICE, THE ASSESSEE CONTENDED THAT THE EXPENDITURE INCURRE D FOR PROCESSING CHARGES FOR OBTAINING LOAN DOES NOT RESULT ANY ENDURING BENEFIT AND THEREFORE, CANNOT BE CAPITALIZED, IN VIEW OF THE DECISION IN THE CASE OF INDIA CEMENTS LTD. VS CIT (1966) 60 ITR 52 (SC) AND ORISSA CEMENTS LTD. VS CI T (1969) 73 ITR 14 (DEL). HOWEVER, THE AO REJECTED THESE CONTENTIONS OF THE A SSESSEE AND DISALLOWED THE CLAIM OF RS. 1,14,151/-, TREATING THE AMOUNT OF CAP ITAL NATURE AND ALLOWED DEPRECIATION @5% ON THE SAID AMOUNT. 4. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON HOLDING AS UNDER: 1. I HAVE CONSIDERED THE SUBMISSIONS. IN THE CASE REFERRED TO ABOVE. THE HONBLE SUPREME COURT HAS HE LD THAT THERE IS NO DISTINCTION BETWEEN INTEREST IN RESPECT OF LO AN AND EXPENDITURE INCURRED ON OBTAINING LOAN. THE LOAN IS NOT AN ASSE T OR ADVANTAGE OF ENDURING NATURE AND OBJECT OF LOAN IS IRRELEVANT CO NSIDERATION. THEREFORE THIS EXPENDITURE WAS NOT CAPITAL IN NATUR E AND WAS LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSIN ESS. RESPECTFULLY, FOLLOWING THE DECISION OF THE APEX CO URT, THIS DISALLOWANCE IS DIRECTED TO BE DELETED. 5. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE FINDIN GS OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE RELEVANT PROVISIONS OF SEC. 2(28A) OF THE ACT DEFINING 'INTEREST' INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEY S BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEE N UTILIZED. THE PROCESSING CHARGES FOR OBTAINING LOAN WERE INCURRED BY THE ASS ESSEE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD AND IT IS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 4 THE LOAN WAS OBTAINED AND THE LOAN OBTAINED IS NOT AN ASSET OR ADVANTAGE OF AN ENDURING NATURE. IN THE LIGHT OF VIEW TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD. (SUPRA)AND HONBLE DELHI HIGH COURT IN IN ORISSA CEMENTS LTD. (SUPRA) WE HOLD THAT THE EXPENDITURE O F RS.1,14,151/- WAS NOT IN THE NATURE OF CAPITAL EXPENDITURE AND WAS LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEE'S BUSIN ESS. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE REVENUE AND DIRECT THE AO TO ALLOW THE SAID AMOUNT AS REVENUE EXPENDITURE WHILE WITHDRAWIN G THE DEPRECIATION ALLOWED THEREON BY HIM. CONSEQUENTLY GROUND NO.1 IN THE AP PEAL IS DISMISSED. 7. GROUND NOS.2 AND 3 IN THE APPEAL OF THE REVENUE RELATE TO ADDITION OF RS. 19,54,344/- ON ACCOUNT OF UNCONFIRMED/NON-GENUINE L IABILITIES IN THE ABSENCE OF SUPPORTING EVIDENCE. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH CONFIRMATION OF OUTST ANDING BALANCE ABOVE RS.1,00,000/-. AFTER OBTAINING DETAILS FROM THE ASS ESSEE, THE AO ISSUED NOTICE U/S 133(6) TO THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY REPLY FROM THE PARTY AMOUNT OUTSTANDING (RS.) 1 SHIVANI SCIENTIFIC IND. P. LTD. NOT RECEIVED 2,5 6,000 2 MARUTINANDAN INFOTECH P. LTD. RECEIVED 1,42,850 3 SHARP SIGN -DO- 1,25,990 4 MEHTA PLYWOOD -DO- 2,02,467 5 PATEL SANITARYWARE NOT RECEIVED 2,17,353 6 AZAD ELEC. & HARDWARE HOUSE -DO- 1,54,320 7 PUSHPAM PLYWOOD RETURNED UNSERVED 1,37,856 8 DSS IMAGE TECH P. LTD. RECEIVED 7,25,000 9 SHREE GAUTAM TRADING CO. RETURNED UNSERVED 1,00,502 10 STRUCTURE NOT RECEIVED 17,05,991 7.1 OUT OF AFORESAID 10 PARTIES, CONFIRMATION WA S RECEIVED FROM THE FOUR PARTIES WHILE NOTICES WERE RETURNED UN-SERVED IN THE CASE OF TWO AND THE OTHER FOUR DID ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 5 NOT RESPOND. AFTER OBTAINING FURTHER DETAILS FROM T HE ASSESSEE, THE AO OBSERVED AS UNDER: (A) SHIVANI SCIENTIFIC IND. P. LTD.:- THE ASSESSEE HAS SHOWN PAYMENT IN THE SUBSEQUENT YEAR. ALL THE PAYMENTS WERE MADE BY WAY OF DEMAND DRAFT EXCEPT PAYMENT OF RS.50,000/- WHICH WAS MADE BY WAY OF CHEQUE. THE ASSESSEE WAS REQUESTED TO PRODUCE THE COPY OF D EMAND DRAFT. BUT, THE ASSESSEE FAILED TO SUBMIT THE SAME TILL DATE. T HE PAYMENT THROUGH CHEQUE WAS VERIFIED FROM THE BANK ACCOUNT AND IT WA S FOUND TO BE GENUINE. THE REMAINING PAYMENT COULD NOT BE VERIFIE D BECAUSE THE SAME WERE MADE BY WAY OF D. D. THEREFORE, THE BALANCE OF RS.2,06,000/- IS CONSIDERED AS NON-GENUINE AND BEING ADDED TO THE T OTAL INCOME OF THE ASSESSEE IN LIGHT OF THE FOLLOWING FACTS :- I. THE ASSESSEE DID NOT FURNISH THE CONTRA ACCOUN T OF THE PARTY OR BANK STATEMENT OF THE PARTY SHOWING THE TRANSACTIONS ENTERED INTO AND PAYMENT MADE. II. THE OUTSTANDING BALANCE ALSO REMAINED UNCONFIRM ED BECAUSE, THE PARTY DID NOT REPLY TO THE NOTICE U/S. 133(6) ISSUED BY THE UNDERSIGNED. III. THE PAYMENT MADE IN SUBSEQUENT YEAR ALSO COULD NOT BE VERIFIED. IV. THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PR OVE THE GENUINENESS OF OUTSTANDING BALANCE AND THE PAYMENT MADE IN THE SUBSEQUENT YEAR. (B) PATEL SANITARYWARE :- THE ASSESSEE HAS SHOWN PAYMENT OF RS1,75,000/- IN THE SUBSEQUENT YEAR. ALL THE PAYMEN TS WERE MADE BY WAY OF CHEQUE. THE PAYMENT THROUGH CHEQUE WAS VERIFIED FROM THE BANK ACCOUNT AND IT WAS FOUND TO BE GENUINE. THE REMAINI NG BALANCE OF RS.42,353/- COULD NOT BE VERIFIED BECAUSE, THE ASSE SSEE DID NOT FURNISH ANY DETAILS IN RESPECT OF THIS OUTSTANDING BALANCE. THEREFORE, THE BALANCE OF RS.42,353/- IS CONSIDERED AS NON-GENUINE AND BEI NG ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN LIGHT OF THE FOLLOWING F ACTS:- I. THE ASSESSEE DID NOT FURNISH THE CONTRA ACCOUN T OF THE ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 6 PARTY OR BANK STATEMENT OF THE PARTY SHOWING THE TRANSACTIONS ENTERED INTO AND PAYMENT MADE. II. THE OUTSTANDING BALANCE ALSO REMAINED UNCONFIRM ED BECAUSE, THE PARTY DID NOT REPLY TO THE NOTICE U/S. 133(6) ISSUED BY THE UNDERSIGNED. III. THE PAYMENT OF ONLY RS.1,75,000/- MADE IN SUBS EQUENT YEAR COULD NOT BE VERIFIED. REGARDING REMAINING BAL ANCE, THE ASSESSEE DID NOT FURNISH ANY DETAILS. V. THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PRO VE THE GENUINENESS OF OUTSTANDING BALANCE AND THE PAYMENT MADE IN THE SUBSEQUENT YEAR. C. AZAD ELEC. & HARDWARE HOUSE :- THE ASSESSEE HAS SHOWN PAYMENT OF RS.2,20,000/- IN SUBSEQUENT YEAR. ALL THE PAYMEN TS WERE MADE BY WAY OF CHEQUE. THE PAYMENT THROUGH CHEQUE WAS VERIFIED FROM THE BANK ACCOUNT AND IT WAS FOUND TO BE GENUINE. THEREFORE, NO ADDITION IS BEING MADE IN RESPECT OF BALANCE DUE TO THIS PARTY. D. STRUCTURE : THE ASSESSEE HAS SHOWN PAYMENT OF RS.4.5 LAKHS IN THE SUBSEQUENT YEAR. ALL THE PAYMENTS WERE MADE BY WAY OF DEMAND DRAFT. THE ASSESSEE WAS REQUESTED TO PRODUCE THE COPY OF D EMAND DRAFT. BUT, THE ASSESSEE FAILED TO SUBMIT THE SAME TILL DATE. T HEREFORE, THE PAYMENT MADE IN SUBSEQUENT YEAR COULD NOT BE VERIFIED. THUS , THE BALANCE OF RS.17,05,991/- DUE TO THIS PARTY IS CONSIDERED AS N ON-GENUINE AND BEING ADDED TO THE TOTAL INCOME OF THE ASSESSEE IN LIGHT OF THE FOLLOWING FACTS:- I. THE ASSESSEE DID NOT FURNISH THE CONTRA ACCOUN T OF THE PARTY OR BANK STATEMENT OF THE PARTY SHOWING THE TRANSACTIONS ENTERED INTO AND PAYMENT MADE. VI. THE OUTSTANDING BALANCE ALSO REMAINED UNCONFIRM ED BECAUSE, THE PARTY DID NOT REPLY TO THE NOTICE U/S. 133(6) ISSUED BY THE UNDERSIGNED. VII. THE PAYMENT MADE IN SUBSEQUENT YEAR ALSO COULD NOT BE VERIFIED. VIII. THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THE GENUINENESS OF OUTSTANDING BALANCE AND THE PAYMENT MADE IN THE SUBSEQUENT YEAR. 7.2 IN THE LIGHT OF HIS AFORESAID OBSERVATION S, THE AO RELYING UPON THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF AS SAM PESTICIDES & AGRO ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 7 CHEMICALS VS. CIT 227 ITR 846(GAU) CONCLUDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS TO PROVE OUTSTANDING DUES GIVEN TO VARIOUS PARTIES AND ACCORDINGLY, DISALLOWED THE AFORESAID AMOUNT OF RS. 19,54,344/-. 8. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON HOLDING AS UNDER: BEFORE ME, THE LD. A. R. SUBMITTED THAT IN THE CAS E OF M/S. SHIVANI INDS. THOUGH THE OUTSTANDING BALANCE WAS 2,06,000/, THE EVIDENCE PRODUCED BEFORE THE AO WAS CONFIRMATION OF THE PART IES CONTAINING BANK ACCOUNT NO., COPY OF ACCOUNT OF THE PARTY FOR SUBSE QUENT YEARS INDICATING PAYMENTS MADE AND COPIES OF BANK STATEMENTS INDICAT ING THE FACT OF OBTAINING THE DEMAND DRAFT FROM THE SAME BANK FOR P URPOSE OF MAKING PAYMENTS TO THE SAID PARTY. IT WAS FURTHER SUBMITTE D THAT THE AO HAD ALSO ACCEPTED THE FACT THAT IN THE SUBSEQUENT YEARS, PAY MENT THROUGH ACCOUNT PAYEE CHEQUE OF RS.50,000/- WAS MADE AND THIS WOULD SHOW THAT THERE WAS A CLEAR BUSINESS TRANSACTION WITH THE SAID PART Y AND THE AOS ASSUMPTION THAT THE BALANCE LIABILITY CEASED TO EXI ST WAS NOT BASED ON THE FACT OF THE CASE. IN RESPECT OF ADDITION OF RS. 42, 353/- IN RESPECT OF M/S. PATEL SANITARY WARE, IT WAS SUBMITED THAT COPIES OF BILLS, CONFIRMATION OF THE PARTY WITH PAN AND COPIES OF BANK STATEMENT IND ICATING PAYMENTS MADE TO THE SAID PARTY IN THE SUBSEQUENT YEAR BY CH EQUES, WAS FURNISHED BEFORE THE AO AND THE AO ADDED THE BALANCE WITHOUT ANY MATERIAL ON RECORD THAT THE SAID LIABILITY HAD CEASED TO EXIST. IN RESPECT OF ADDITION OF RS.17,05,991/- OF BALANCE OUTSTANDING TOWARDS M/S. STRUCTURES IT WAS SUBMITTED THAT COPIES OF BILLS, CONFIRMATION OF THE PARTY AND COPY OF THE BANK STATEMENT INDICATING PAYMENTS TO THE SAID PART Y DURING THE SUBSEQUENT YEARS WERE FILED BEFORE THE AO AND THE A OS ASSUMPTION THAT THIS LIABILITY WAS BOGUS WAS NOT CORRECT. THE COPIE S OF ABOVE MENTIONED DOCUMENTS HAVE ALSO BEEN FURNISHED BEFORE ME. I HAVE CONSIDERED THE SUBMISSIONS AND I DO NOT UNDE RSTAND THE LOGIC BEHIND THE CONCLUSIONS OF THE AO IN RESPECT O F THESE ADDITIONS. IT IS A FACT THAT CONTRA-ACCOUNTS OF ALL THESE PARTIES WERE FILED BEFORE THE AO. IT IS ALSO A FACT THAT PAYMENTS WERE MADE TO THESE PARTIE S EITHER THROUGH CHEQUES OR THROUGH DEMAND DRAFTS WHICH ARE REFLECTE D IN THE BANK STATEMENT OF THE APPELLANT FOR SUBSEQUENT YEARS. IT IS ALSO SEEN THAT THE AOS OBSERVATION THAT CONTRA-ACCOUNTS OF THESE PART IES WERE NOT FILED BEFORE HIM, IS ALSO NOT CORRECT. I DO NOT SEE ANY J USTIFICATION IN TREATING THESE LIABILITIES AS NON-GENUINE IN VIEW OF EVIDENC E OF PAYMENTS MADE THROUGH BANKING CHANNELS, IN SUBSEQUENT YEARS. IN V IEW OF THESE, THE ENTIRE ADDITION OF RS.19,54,344/- IS DIRECTED TO BE DELETED. 9. THE REVENUE IS NOW IN APPEAL AGAINST THE AFORESA ID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE FINDIN GS OF THE AO WHILE THE ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 8 LEARNED AR ON BEHALF OF THE ASSESSEE RELIED UPON T HE ORDER OF THE LEARNED CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THE FINDINGS OF THE LEARNED CIT(A) THAT PAYMENTS TO THE AFORESAI D PARTIES WERE MADE IN THE SUBSEQUENT YEARS AND REFLECTED IN THE BANK STATEMEN T. THE RELEVANT PROVISIONS OF SEC. 41(1)(A) OF THE ACT STIPULATE THAT WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF L OSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MA NNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SO ME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEME D TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROF ESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT. UNDISPUTEDLY , THE ASSESSEE DID NOT RECEIVE ANY BEN EFIT NOR THE AMOUNT HAS BEEN TRANSFERRED TO PROFIT AND LOSS ACCOUNT AND THU S, THE AMOUNT DID NOT BECOME THE ASSESSEE'S OWN MONEY. IN THESE CIRCUMSTANCES, P ROVISIONS OF SEC. 41(1)(A) ARE NOT ATTRACTED. 10.1 HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. SILVER COTTON MILLS CO. LTD., 254 ITR 728(GUJ) HELD THAT SIMPLY BECA USE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FILING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIATE ACTION AGAINST THE ASSESSEE, IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. THE LIABILITY STILL R EMAINS, THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE OF SUGAULI SUGAR WOR KS (P.) LTD. [1999] 236 ITR 518 (SC), HONBLE JURISDICTIONAL HIGH COURT FURTHER HEL D THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF L IABILITY BY THE CREDITOR, THE LIABILITY ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 9 SUBSISTS AND, THEREFORE, EVEN IF THE ENTRIES ARE MA DE TO WRITE BACK THE EXPENDITURE, THE AMOUNT SO WRITTEN BACK CANNOT BE A DDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. IN THE CASE UNDER CONSIDERATION, THERE IS NO BASIS FOR HOLDING THE LI ABILITIES AS NON-GENUINE AS CONCLUDED BY THE LD. CIT(A) AND THEREFORE, WE ARE N OT INCLINED TO HAVE A DIFFERENT VIEW IN THE MATTER. THEREFORE, GROUND NOS. 2 AND 3 IN THE APPEAL ARE DISMISSED. 11. GROUND NOS.4 & 5 IN THE APPEAL RELATE TO ADDITI ON OF RS.2,38,358/- ON ACCOUNT OF UNVERIFIABLE PURCHASES AND RS.27,360/- O N ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON PURCHASE OF FURNITURE AND FIXTURE. SINCE THE ASSESSEE DID NOT FURNISH CONFIRMATION OF THE FOLLOWING TWO PARTIES PUSPHAM PLYWOOD RS. 1,37,856/- AND SHREE GAUTAM TRADING CO. RS.1,00,502/- THE AO ISSUED NOTICE U/S 133(6) OF THE ACT TO THE A FORESAID PARTIES. HOWEVER, THESE NOTICES WERE RETURNED UNSERVED. IN RESPONSE T O A SHOW CAUSE NOTICE ISSUED BY THE AO VIDE LETTER DATED 17-02-2005, THE ASSESSEE REPLIED VIDE LETTER DATED 23-2-2005 THAT THE INVOICE OF RS.1,00,083/- O F SHREE GAUTAM TRADING CO. HAS BEEN MISPLACED AND THE PARTY COULD BE LOCATED A T THE ADDRESS AVAILABLE WITH THEM, THE SAID PARTY HAVING DISCONTINUED ITS BUSINE SS. THE ASSESSEE EXPLAINED THAT PURCHASE OF MATERIAL WAS MADE THROUGH ACCOUNT PAYEE CHEQUE. AS REGARDS OCTROI PAYMENT MADE FOR PURCHASES FROM PUSHPAM PLYW OOD, THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAS NOT PAID ANY OCTROI FOR SUCH PURCHASES. SINCE THE SAID PARTY HAD ALSO DISCONTINUED ITS BUSINESS W HILE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE, THE ASSESSEE PLEADED THAT THE LIABILITY WAS GENUINE AND NO ADDITION SHOULD BE MADE. HOWEVER, THE AO REJECTE D THESE CONTENTIONS ON THE GROUND THAT THE ASSESSEE PURCHASED FURNITURE FROM M /S GAUTAM TRADING COMPANY VIDE BILL OF RS.1,00,419/- DATED 1.1.2002 AND OF RS.1,00,083/- DATED 1.3.2002. THE PAYMENT FOR THE FIRST BILL WAS MADE O N 14-1-2002 VIDE CHEQUE NO..1644767 DRAWN ON BANK OF INDIA. THIS CHEQUE WAS CLEARED ON 19-1-2002 AND IN THE BANK STATEMENT NAME IS MENTIONED AS GAJANAN INSTEAD OF PARTYS NAME. ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 10 ACCORDINGLY, THE AO TREATED THE PAYMENT FOR THE FIR ST BILL AS NON-GENUINE WHILE THE PAYMENT FOR THE SECOND BILL WAS OUTSTANDING. SINCE THE ASSESSEE DID NOT PRODUCE EITHER INVOICES FOR PURCHASE FROM M/S GAUTAM TRADIN G COMPANY NOR COULD PRODUCE THE PARTY WHILE NOTICE U/S 133(6) OF THE AC T RETURNED UNSERVED, THE AO TREATED THE WHOLE OF THE PURCHASE AS NON-GENUINE AN D DISALLOWED THE CLAIM FOR DEPRECIATION @ 5%. AS REGARDS PUSHPAM PLYWOOD, THE AO FOUND THAT THE PURCHASES OF RS.3,57,382/- WAS MADE FROM OUTSIDE OC TROI LIMITS. SINCE THE ASSESSEE FAILED TO FURNISH CONFIRMATION IN RESPECT OF OUTSTANDING CREDIT BALANCE OF RS. 1,37,856/- WHILE NOTICE U/S 133(6) ISSUED TO TH E AFORESAID PARTY WAS RETURNED UNSERVED AND THE ASSESSEE COULD NOT FURNISH ANY EVI DENCE OF PAYMENT OF OCTROI DUTY, THE AO TREATED THE PURCHASE OF RS. 3,46,698/- AS NON GENUINE AND ACCORDINGLY, DISALLOWED DEPRECIATION @5% BESIDES A DDING RS.1,37,856/- ON ACCOUNT OF OUTSTANDING LIABILITY, TREATING THE SAM E AS NON-GENUINE. 13. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDIT ION HOLDING AS UNDER: BEFORE ME, THE LD. A. R. SUBMITTED THAT IN RESPECT OF PUSHPAM PLYWOOD COPIES OF BILLS, COPIES OF BANK STATEMENT I NDICATING PAYMENTS MADE TOTALING RS. 2 LAKHS DURING THE YEAR AND RS. 1 LAKH DURING THE SUBSEQUENT YARS WAS PRODUCED BEFORE THE AO. IT WAS FURTHER SUBMITTED THAT THE AO OBSERVED ON SOME BILLS RUBBER STAMP WAS NOT AFFIXED OR OCTROI DUTY WAS NOT PAID. BUT AS PER TERMS OF PURCHASE THE OCTROI DUTY WAS PAID BY THE DEALER AND THE GOODS WERE TO BE DELIVERED AT THE PREMISES OF THE APPELLANT AND WHY RUBBER STAMP WAS NOT AFFIXED ON S OME BILLS WOULD NOT BE THE CONCERN OF THE APPELLANT AND THIS ASPECT WOU LD NOT MAKE THE GENUINE TRANSACTIONS TO BE INGENUINE SINCE THE PAYM ENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES ONLY. IT WAS FURTHER SUBMITTED THAT IN RESPECT OF GAUTAM TRADING CO. COPY OF THE BANK STAT EMENTS INDICATING PAYMENTS DURING THE YEAR AND SUBSEQUENT YEARS WERE PLACED BEFORE THE AO. IT WAS FURTHER SUBMITTED IN THE CASE OF PAYMENT MADE ON 14/1/2002 OF RS. 1 LAKH, THE BANK HAD WRITTEN GAJANAN INSTEAD OF GAUTAM. THIS WAS A MISTAKE ON THE PART OF THE BANK AND THE BANK HAD SU BSEQUENTLY, ISSUED A CERTIFICATE INDICATING THAT THE SAID ENTRY SHOULD B E READ AS GAUTAM TRADING CO. A COPY OF THE CERTIFICATE PLACED BEFOR E ME. I HAVE CONSIDERED THE SUBMISSIONS AND HAVE GONE THR OUGH THE PAPER BOOK FILED BY THE APPELLANT. I AGREE WITH THE APPELLANT THAT WHY OCTROI STAMP WAS NOT AFFIXED ON SOME OF THE BILLS OF CONCE RN TO THE APPELLANT. IT IS A MATTER OF RECORD THAT PAYMENTS HAVE BEEN MADE TO THE PARTY THROUGH THE BANK ACCOUNT OF THE APPELLANT DULY REFLECTED IN THE BANK STATEMENT. ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 11 SIMILARLY, IN THE CASE OF THE OTHER PARTY ALSO, THE PAYMENTS WERE MADE THROUGH THE BANK ACCOUNT COPIES OF THE BILLS OF THE PARTIES WERE FILED BEFORE THE AO AND THEREFORE THERE IS NO JUSTIFICATION IN T REATING THE OUTSTANDING BALANCE AS NON-GENUINE. ADDITION ON THIS ACCOUNT TO TALING RS.2,38,358/- IS THEREFORE DIRECTED TO BE DELETED. THE NEXT GROUND OF APPEAL IS REGARDING DISALLOWANCE OF RS.2,73,60/- CLAIMED AS DEPRECIATION ON FURNITURE A ND FIXTURE ON ACCOUNT OF PURCHASED HELD AS NON-GENUINE. IN VIEW OF THE FACT THAT THIS IS PART OF GROUND NO.3, WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT IN THE PRECEDING PARAGRAPHS, THIS ADDITIO N IS NOT SUSTAINABLE AND IS DIRECTED TO BE DELETED. 14. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE FINDINGS OF TH E AO WHILE THE LEARNED AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 15. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE REVENUE HAVE NOT PLACED ANY MATERIAL CONTRARY T O THE FINDINGS OF FACTS RECORDED BY THE LEARNED CIT(A) THAT THERE IS NO JUSTIFICATION IN TREATING THE OUTSTANDING BALANCE OF THE AFORESAID TWO PARTIES AS NON-GENUINE, THE PAYMENT TO BOTH THE AFORESAID PARTIES HAVING BEEN MADE BY ACCO UNT PAYEE CHEQUES. IN THESE CIRCUMSTANCES, WE FIND NO REASON TO TAKE A DI FFERENT VIEW IN THE MATTER. THEREFORE, GROUND NO. 4 IN THE APPEAL IS DISMISSED. 16. GROUND NOS. 6 AND 7 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED. 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH DECEMBER,2009 SD/- SD/- (R. V. EASWAR) (A.N. PAHUJA) VICE PRESIDENT ACCOUNTANT MEMBER DATE:11TH DECEMBER,2009 LAKSHMIKANT/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE ITA NO.2695/AHD/2005 ME & MUMMY HOSPITAL 12 2. THE A. C. I. T., CIRCLE 5,ROOM NO.217, AAYAKAR B HAVAN, MAJURA GATE,SURAT 3. CIT(A)-IV,SURAT 4. THE CIT CONCERNED 5. THE DR ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER DR / AR, ITAT, AHMEDABAD