ITO, Lucknow V. M/s. Indira Diagnostic Centre & Blood Bank Ltd., Lucknow

ITA 30/LKW/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9087 (ITAT-LUCKNOW)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 17-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2011
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B BB B, LUCKNOW , LUCKNOW , LUCKNOW , LUCKNOW BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI ITA NO.30/LKW/2011 ASSESSMENT YEAR:2005-06 ITO-III(3) LUCKNOW V. M/S INDIRA DIAGNOSTIC CENTRE AND BLOOD BANK LTD. 19/718, INDIRA NAGAR, LUCKNOW PAN:AAABCI0214L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P. K. BAJAJ, D.R. RESPONDENT BY: NONE O OO O R RR R D DD D E EE E R RR R PER PER PER PER H. L. KARWA H. L. KARWA H. L. KARWA H. L. KARWA: :: : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, LUCKNOW DATED 7.10.2010 RELATING TO ASSESSMENT YEAR 2005-06. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING RELIEF ON ACCOUNT OF ADDITIONS MADE UNDER THE HEADS TELEPHONE AMOUNTI NG TO RS.1,14,913/-, VEHICLE RUNNING RS.51,325/-, TRAVELLING & CONVEYANC E RS.3,54,580/-, BLOOD DONORS REFRESHMENT RS.1,57,200/- AND ADMINISTRATIVE AND OPERATING EXP. RS.1,73,600/- MADE BY THE ASSESSING OFFICER THROUGH THE ASSESSMENT ORDER WITHOUT APPRECIATING THE FACTS THAT THERE WAS VALID GROUND FOR SUCH ADDITION. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY DERIVES INCOME FROM RENDERING DIAGNOSTIC SERVICES AND FROM RUNNING BLOOD BANK. IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 31.10.2005 SHOWIN G TOTAL INCOME AT $ 4,60,162. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143 (3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 12.12.2007 DETERM INING THE TOTAL INCOME OF THE ASSESSEE AT $ 9,13,880. WHILE FRAMING THE ASSESSMENT, THE ASSESS ING OFFICER MADE THE FOLLOWING DISALLOWANCES/ADDITIONS:- I) OUT OF TELEPHONE/MOBILE EXPENSES $ 1,14,913 :-2-: II) OUT OF VEHICLE RUNNING EXPENSES $51,325 II) OUT OF TRAVELLING & CONVEYANCE EXPENSES $3,54,580 III) OUT OF BLOOD DONOR REFRESHMENT EXPENSES $1,57,200 IV) OUT OF ADMINISTRATIVE & OPERATING EXPENSES `1,73,600 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CI T(A), THE ASSESSEE TOOK THE FOLLOWING LINE OF ARGUMENTS:- I) THAT THE ENTIRE CLAIM FOR THESE EXPENSES WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND THE NECESSARY EVIDENCE IN THE FORM OF BILLS AND VOUCHERS WAS DULY PRODUCED FOR EXAMINATIO N BY THE ASSESSING OFFICER WHO HAS DISALLOWED PART OF THE CLAIMS ON AD HOC AND ESTIMATE BASIS WITHOUT ANY CONCRETE REASONS. II) THAT THE ASSESSEE-COMPANY IS A PROFESSIONALLY MANAG ED COMPANY, IT HAS MAINTAINED REGULAR ACCOUNTS WHICH HAVE BEEN AUD ITED U/S. 44AB OF THE ACT AND WHICH HAVE BEEN ACCEPTED BY THE ASSESSI NG OFFICER. 5. THE LD. CIT(A) DELETED THE ADDITIONS/DISALLOWANCES OBSERVING AS UNDER:- 3. GROUND OF APPEAL NO.1 PERTAINS TO DISALLOWANCE OF AN AMOUNT OF RS.1,14,913/BEING 10% OF THE EXPENSES CLAIMED UNDER THE HEAD TELEPHONE AND MOBILE. THE AO IS SEEN TO HAVE DISALLOWED THIS AMOUNT ON THE GROUND THAT NO CALL REGISTER WAS MAINTAINED AND THE INCURR ENCE OF EXPENSES SOLELY FOR BUSINESS PURPOSES WAS NOT VERIFIABLE. THE AO HA S MENTIONED IN THE ORDER THAT THE BOOKS OF ACCOUNTS AND SUPPORTING VOU CHERS WERE PRODUCED AND THEY WERE EXAMINED AND DESPITE EXAMINATION OF T HE EVIDENCE PRODUCED HE HAS NOT BEEN ABLE TO SPECIFY THE INSTAN CES OF AND THE EXTENT TO WHICH THE CLAIM IN QUESTION WAS NOT VERIFIABLE. AN ADDITION OF RS.1,14,913/- HAS BEEN MADE ON ADHOC BASIS TREATING 10% OF THE CL AIM AS NOT INCURRED FOR BUSINESS PURPOSES. THE DISALLOWANCE IS MADE PUR ELY ON ADHOC BASIS WITHOUT ASSIGNING ANY CONCRETE REASONS OR POINTING OUT ANY DEFICIENCIES IN THE EVIDENCE PRODUCED BY THE APPELLANT IN SUPPORT O F ITS CLAIM. THE :-3-: DISALLOWANCE OF RS.1,14,913/- MADE OUT OF TELEPHONE /MOBILE EXPENSES IS THEREFORE DIRECTED TO BE DELETED. 3. GROUND OF APPEAL NO.2 RELATES TO DISALLOWANCE O F RS.51,325/- OUT OF VEHICLE RUNNING EXPENSES. THE DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT NO LOG BOOK HAS BEEN MAINTAINED AND THE EXPENS ES ARE NOT FULLY VOUCHED SO AS TO BE VERIFIABLE. IT IS SEEN THAT THE AO HAS NOWHERE POINTED OUT ANY DEFICIENCIES IN THE SUPPORTING VOUCHERS WHI CH ARE ADMITTED TO HAVE BEEN PRODUCED AND DULY EXAMINED. HE HAS ALSO NOT SP ECIFIED THE CLAIMS IN RESPECT OF WHICH SUPPORTING EVIDENCE WAS NOT PRODUC ED. MERE ABSENCE OF LOG BOOK CANNOT BE A BASIS TO MAKE AN ADHOC DISALLO WANCE @ 10% OF THE CLAIM. THE DISALLOWANCE MADE BY THE AO IS NOT BASED ON ANY CONCRETE REASONS AND IT HAS BEEN MADE IN A ROUTINE MANNER. T HE DISALLOWANCE MADE BY THE AO IS, THEREFORE, DIRECTED TO BE DELETED. 4. GROUND NO 3 PERTAINS TO DISALLOWANCE OF RS.1,57 ,200/- ( @ 10% OF THE CLAIM) OUT OF BLOOD DONORS' REFRESHMENT EXPENSE S. THE DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT THE CLAIM WAS SOUG HT TO BE SUPPORTED BY SELF MADE VOUCHERS AND THE CLAIM WAS NOT FULLY V OUCHED AND VERIFIABLE. THE AO OUGHT TO HAVE APPRECIATED THAT THE PERSONS W HO COME FOR BLOOD DONATION HAVE TO BE SERVED SOME REFRESHMENT AND THE SE BLOOD DONORS ARE NOT SUPPOSED CARRY ANY BILL BOOK OR RECEIPT BOOK. U NDER THESE CIRCUMSTANCES .THE EXPENSES INCURRED HAD TO BE VOUC HED BY THE APPELLANT ITSELF. THE APPELLANT CONTENDS THAT DURING THE YEAR 12,078 BOTTLES OF BLOOD WERE COLLECTED THROUGH VOLUNTARY BLOOD DONATION AND THE EXPENDITURE INCURRED WORKED OUT TO HARDLY RS.130/- PER BOTTLE. THE DISALLOWANCE MADE BY THE AO IS NOT BASED ON SOUND REASONING AND ANY C ONCRETE FACTS. THIS DISALLOWANCE MADE BY THE AO IS, THEREFORE, DIRECTED TO BE DELETED. 5. GROUND NO. 4 PERTAINS TO DISALLOWANCE OF RS.1,73 ,600/- OUT OF ADMINISTRATIVE OPERATING EXPENSES BY HOLDING THAT S OME EXPENSES WERE NOT RELATED TO BUSINESS ACTITIES. THE AO HAS HOWEVER NO T SPECIFIED THE EXTENT OF SUCH EXPENSES AS ARE HELD TO BE NOT RELATED WITH BU SINESS ACTIVITIES. THE AO HAS ALSO NOT EXAMINED THE NATURE OF SUCH EXPENSE S AND SEEMS TO HAVE DISALLOWED THE CLAIM GOING MERELY BY THE NARRATION OF EXPENSES. THE APPELLANT CLAIMS THAT DURING THE YEAR 17 NEW CENTRE S WERE ADDED AND THE :-4-: MANGERS AND UNIT INCHARGE HAD TO BE FREQUENTLY CALL ED TO LUCKNOW FOR DISCUSSION AND GUIDANCE. THE DISALLOWANCE IS SEEN T O HAVE BEEN MADE ON ADHOC BASIS AND IN A PERFUNCTORY MANNER AND IS THER EFORE LIABLE TO BE DELETED. ACCORDINGLY THE DISALLOWANCE MADE IS DIREC TED TO BE DELETED. 6. GROUND NO 6 & 7 PERTAIN TO THE DISALLOWANCE OF RS.3,54,580/- OUT OF TRAVELING AND CONVEYANCE EXPENSES CLAIMED AT RS.35, 45,801/-. THE AO HAS REPRODUCED IN HIS ORDER THE EXPLANATION GIVEN B Y THE APPELLANT REGARDING THE INCREASE IN THE CLAIM UNDER THIS HEAD AS COMPARED TO THE CLAIM IN THE IMMEDIATELY PRECEDING YEAR. THE APPELL ANT, IN ITS EXPLANATION, ATTRIBUTED THIS INCREASE TO SPECIFIC FACTORS WHICH EITHER DID NOT EXIST IN THE PRECEDING YEAR OR EXISTED ON A LOWER SCALE. THE AO HOWEVER LINKED THE CLAIM TO THE GROSS RECEIPTS AND HELD THAT THE INCRE ASE IN TRAVELING AND CONVEYANCE EXPENSES WAS NOT PROPORTIONATE TO INCREA SE IN THE GROSS RECEIPTS. THE AO HOWEVER OVERLOOKED THE FACT THAT A N EXPENDITURE IN THIS NATURE COULD NOT BE DIRECTLY, NECESSARILY AND SCIEN TIFICALLY LINKED TO THE GROSS RECEIPTS AND THIS LINKAGE SOUGHT TO BE SHOWN BY THE AO IS NOT BASED ON ANY ACCOUNTING RATIONALE. THE AO HAS MADE NO ATT EMPT TO INQUIRE AND ESTABLISH THAT ANY PART OF THE CLAIM WAS NON GENUIN E AND WAS THEREFORE NOT ALLOWABLE. THE AO HAS DISALLOWED THE CLAIM @ 10% IN AN ADHOC MANNER WITHOUT ESTABLISHING THE NON GENUINENESS OF THE CLA IM AND WITHOUT SPECIFYING SUCH VOUCHERS AS COULD NOT RELIED UPON. THIS DISALLOWANCE, AS MADE BY THE AO, IS THEREFORE DIRECTED TO BE DELETED . 6. WE HAVE HEARD THE LD. D.R. AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OF FICER HAS DISALLOWED 10% OUT OF EXPENSES DEBITED UNDER THE HEAD TELEPHONE AND MOBI LE EXPENSES BY ALLEGEDLY HOLDING THEM TO BE INCURRED FOR PERSONAL USE. THE ASSESSIN G OFFICER HAS ALSO DISALLOWED 10% OF THE VEHICLE RUNNING EXPENSES DEBITED TO THE PROFI T AND LOSS ACCOUNT BY ALLEGEDLY HOLDING THAT THEY ARE NOT FULLY VOUCHED AND VERIFIA BLE. FURTHER, THE ASSESSING OFFICER DISALLOWED 10% OF THE EXPENSES DEBITED UNDER THE HE AD BLOOD DONORS REFRESHMENT EXPENSES BY ALLEGEDLY HOLDING THAT THE EXPENSES AR E NOT FULLY VOUCHED AND VERIFIABLE. THE ASSESSING OFFICER ALSO DISALLOWED 10% OF THE EX PENDITURE DEBITED UNDER THE HEAD TRAVELLING AND CONVEYANCE EXPENSES BY ALLEGEDLY H OLDING THAT SPECIFIC DETAILS SHOWING :-5-: THAT ALL THE EXPENSES ARE FOR BUSINESS PURPOSES ONL Y HAVE NOT BEEN MAINTAINED. WE ALSO FIND THAT THE ASSESSING OFFICER HAS DISALLOWED 5% O F THE EXPENSES DEBITED UNDER THE HEAD :ADMINISTRATIVE AND OPERATING EXPENSES BY AL LEGEDLY HOLDING THAT THE SAME EXPENSES ARE NOT RELATED TO THE BUSINESS ACTIVITIES SUCH AS BUSINESS MEETS AND CONFERENCE EXPENSES, ETC AND ARE NOT VERIFIABLE. W E FIND THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT WHICH HAVE BEEN AUDITED U/S. 44AB OF THE ACT. WE ALSO FIND THAT THE DISALLOWANCES MADE BY THE ASSESS ING OFFICER ARE PURELY ON ADHOC BASIS WITHOUT ASSIGNING ANY COGENT REASON OR POINTING OUT ANY DEFICIENCY IN THE EVIDENCES PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. IN OUR VIEW, THE LD. CIT(A) HAS GIVEN COGENT REASONS IN THE IMPUGNED ORDER WHILE DELETING THE DISALLOWANCES/ADDITIONS MADE BY THE ASSESSING OFFICER. AFTER GOING THROUGH THE ORDER OF THE LD. CIT(A) ON ALL THE ISSUES, WE DO NOT FIND ANY INFIRMITY IN THE SAME WH ICH DESERVES TO BE CONFIRMED, PARTICULARLY WHEN THE ASSESSING OFFICER HAS MADE TH E DISALLOWANCES/ADDITIONS BY GIVING GENERAL OBSERVATIONS STATING THAT THE EXPENSES WERE NOT INCURRED FOR BUSINESS PURPOSES. IN FACT, THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SINGLE ITEM OF EXPENDITURE WHICH WAS INCURRED FOR NON-BUSINESS PURPOSE. 7. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN TH E APPEAL OF THE REVENUE AND ACCORDINGLY WE DISMISS THE SAME. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17.3.201 1. SD/- SD/- [ N. K. SAINI] [H. L. KARWA] ACCOUNTANT MEMBER VICE PRESIDENT DATED:17.3.2011 JJ:1703 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR