DEBASHISH DAS, MUMBAI V. ACIT 11(2), MUMBAI

ITA 3624/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3302 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHASHANK MUNDLE
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI . , ! ! ! ! . ' ' ' ' ! !! ! , $ $ $ $ %&' %&' %&' %&' % % % % BEFORE SHRI D. MANMOHAN, VP, AND , SHRI D.KARUNAKARA RAO, AM % %% % . : 3624 / /2012 ( ) !*) A.Y 2008-2009 ITA NO. 3624/MUM/2012 (ASSESSMENT YEAR- 2008-2012) DR. DEBASHISH M DA 2 ND FLOOR, GAGANFIRI, 18 TH ROAD, CHEMBUR, MUMBAI-71. PAN: AAEPD6497Q VS ACIT , 11(2), 4 TH FLOOR, AAYAKR BHAWAN, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHASHANK MUNDLE RESPONDENT BY : SHRI RAJARSHI DWIVEDY % ! + ,$ /DATE OF HEARING : 12-06-2013 -* + ,$ /DATE OF PRONOUNCEMENT : 3-7-2013 & && & . .. . O R D E R . ' ' ' ' ! !! ! , $ $ $ $ %&' %&' %&' %&' PER D. KARUNAKAR A RAO, AM THIS IS THE APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF THE CIT(A)-3, MUMBAI DATED 09.03.2012 FOR THE ASSESSMENT YEAR 2008 TO 20 09. 2. THE GROUND RAISED IN THE APPEAL ARE AS UNDER. THE LD CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF 5% OF M&D EXPENSES . THIS CONFIRMATION OF THE DISALLOWANCE OF 5% OF M& D EXPENSES IS UNWARRANTED, ARBITRARY AND BAD IN LAW ESPECIALLY WH EN THE LD. CIT(A) HAS COME TO A FINDING THAT THE APPELLANT HAS FURNISHED ENTIR E DETAILS OF MEDICINES AND DISPOSABLES BEFORE THE AO. 2 IAT 3624/M/2012 DR. DEBASHISH DAS 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE T HAT THE ASSESSEE IS A GENERAL SURGEON BY PROFESSION AND OWNS 30 BEDDED HOSPITAL NAMED DAS SURGICAL HOSPITAL SITUATED AT CHEMBUR, MUMBAI. ASSESSEE FIL ED THE RETURN OF INCOME FOR THE AY 2008-09 DECLARING THE TOTAL INCOME OF RS. 37 ,41,900/-. THE RETURN WAS SCRUTINISED U/S 143(3) OF THE ACT AND THE THAT TOTA L INCOME WAS DETERMINED AT RS. 47,21,460/-. IN THE ASSESSMENT THE AO MADE VARIOUS ADDITIONS AND ONE SUCH ADDITION, WHICH IS SUBJECT MATTER OF THE PRESENT AP PEAL BEFORE US, RELATES TO THE DISALLOWANCES OF EXPENSES AMOUNTING TO RS 7,68,83 O N ACCOUNT OF CONSUMPTION OF MEDICINE AND DISPOSABLES. RELEVANT FACTS ARE GIV EN IN PARA-4 OF THE ASSESSMENT ORDER. 4. FROM THE PERUSAL OF I&E A/C., IT IS NOTICED THA T THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 38,44,119/- ON ACCOUNT OF M EDICINES AND DISPOSABLES. THE ASSESSEE WAS REQUIRED TO FILE DETA ILS OF MEDICINE PURCHASED AND ALSO PRODUCED RECORDS FOR CONSUMPTION OF MEDICINE. THEREFORE, THE ASSESSEE HAS FILED THE DETAILS OF PURCHASE OF MEDICINE, HE HAS FAILED TO PRODUCE RECORDS WITH REGARD TO CONSUMPTION OF THE MEDICINE. IT WAS STATED BY THE ASSESSEE VID E HIS SUBMISSION DATED 19.11.2010 WHICH IS AS UNDER: THE ASSESSEE PURCHASES MEDICINES REQUIRED FOR TREA TMENT OF PATIENTS ADMITTED TO HIS HOSPITAL AS WELL AS FOR THOSE UNDER GOING SURGERIES IN THE OPERATION THEATRE. THE COST OF THESE MEDICINES IS RECOVERED FROM THE PATIENTS WHICH IS INCLUDED IN THIS ACCOUNT. SINCE THE ASSESSEE HAS FILED TO PRODUCE THE RECORD S FOR CONSUMPTION OF MEDICINE, THE EXPENSES CLAIMED BY TH E ASSESSEE REMAIN UNVERIFIABLE. THEREFORE, 20% OF RS. 38,44,119/- IS DISALLOWED WHICH COMES TO RS. 7,68,833/--AND THE SAME IS ADDED TO THE TOTA L INCOME OF THE ASSESSEE. 4. THUS, AO DISALLOWED THE SUM OF RS 7,68,833/- IN VIEW OF THE ASSESSEE FAILURE TO PRODUCE RECORDS WITH REGARD TO CONSUMPTI ON OF MEDICINE AND DISPOSABLES. AGGRIEVED WITH THE DECISION OF THE ASS ESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). BEFORE HIM, ASSE SSEE SUBMITTED THAT THE ASSESSEE PURCHASED MEDICINES AND DISPOSABLES FOR US E OF THE PATIENTS AND THE GENUINENESS OF THE PURCHASES WAS DEMONSTRATED BEFOR E THE AO AND THE SAME IS 3 IAT 3624/M/2012 DR. DEBASHISH DAS ACCEPTED BY THE AO. THEREFORE, THERE IS NO DISPUTE ON THIS ASPECT. HOWEVER, REGARDING THE CONSUMPTION OF THE SAID MEDICINE AND DISPOSABLES, IT IS THE CLAIM OF THE ASSESSEE THAT ENTIRE EXPENDITURE INCURRED ON MEDICINES AND DISPOSABLES IS RECOVERED FROM THE PATIENTS AND THE SAME IS SHOWN A S INCOME OF THE ASSESSEE UNDER THE HEAD OF MEDICINES CHARGES RECOVERY. REG ARDING THE BACKUP RECORDS FOR DEMONSTRATING THE CONSUMPTION OF MEDICINES AND DISPOSALBLES, THE ASSESSEE SUBMITTED THAT NO SEPARATE DETAILS RECORDS ARE REQU IRED TO BE MAINTAINED. THEREFORE, THE ASSESSEE MAINTAINED ONLY THE OPENING AND CLOSING STOCK OF MEDICINES AND THE SAME IS DULY VERIFIED PHYSICALLY WHICH IS CONFIRMED BY THE AUDITORS DURING THE TAX AUDIT EXERCISE. THIS METHOD OF MAINTAINING OF RECORDS IS CONSISTENTLY FOLLOWED BY THE ASSESSEE AND THE SAME IS ACCEPTED BY THE CONCERNED AO OF THE ASSESSEE. THEREFORE, THE ASSESSEE VEHEMEN TLY OBJECTS TO THE SAID DISALLOWANCE ON AD-HOC BASIS ADOPTING THE FLAT RATE OF 20% OF THE EXPENSES. THE ASSESSEE PLEADED FOR DELETION OF THE DISALLOWANCES. ON HEARING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) GRANTED PART RELIEF AS PER DISCUSSION GIVEN IN PARA 1.3. OF THE IMPUGNED ORDER. THE SAME READS AS UNDER . 1.3. I HAVE CONSIDERED THE FACTS AND THE MATERIAL ON RECORD. IT IS SEEN THAT THE APPELLANT HAS FURNISHED ENTIRE DETAILS OF MEDICINES AND DISPOSABLES BEFORE THE AO. THE APPELLANT IS A DOCTO R AND RUNNING A HOSPITAL IN WHICH PURCHASES OF MEDICINES AND DISPOS ABLES ARE NECESSARY. HOWEVER, THE AO HAS DISALLOWED 20% ON THE GROUND TH AT CONSUMPTION RECORD OF MEDICINES WAS NOT PRODUCED. HOWEVER, THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN MAINTENANCE OF STOCK AN D DETAILS FURNISHED BY THE APPELLANT. THEREFORE, DISALLOWANCE @ 20% IS NOT JUSTIFIED AND RATHER ON HIGHER SIDE. HOWEVER, CONSIDERING THE NATURE OF EXPENSES IT WOULD BE REASONABLE TO RESTRICT THE DISALLOWANCE TO 5% OF TH E EXPENDITURE ON MEDICINE. THEREFORE, THE AO IS DIRECTED TO WORK OUT THE DISALLOWANCE @ 5% OF RS. 38,41,448/- AS AGAINST 20% DISALLOWED BY HIM. 5. THUS, CIT(A) RESTRICTED THE DISALLOWANCE TO 5% ON T HE REASONING THAT AO FAILED TO DEMONSTRATE SPECIFIC DEFECTS IN THE STOCK MAINTAINED BY THE ASSESSEE. FURTHER, GIVING NO REASONS, HE HELD THAT FLAT RATE OF 20% IS ON THE HIGHER SIDE. 4 IAT 3624/M/2012 DR. DEBASHISH DAS AGGRIEVED WITH THE PART CONFIRMATION OF THE ADDITIO N, ASSESSEE FILED THE PRESENT APPEAL BEFORE US. DURING THE PROCEEDINGS, LEARNED COUNSEL FOR THE ASS ESSEE MENTIONED THAT THE ASSESSEE DEBITED THE EXPENDITURE OF RS. 38,41,4 48/- ON ACCOUNT OF MEDICINES AND DISPOSABLES. DURING THE ASSESSMENT PROCEEDINGS, LD AO IS SATISFIED WITH REGARD TO THE GENUINENESS OF THE PURCHASE OF SAID M EDICINES AND DISPOSABLES AND HOWEVER, ON THE ISSUE OF PARTICULARS OF CONSUM PTION OF MEDICINE AND DISPOSABLE, IN VIEW OF THE ASSESSEES FAILURE TO P RODUCE THE CONSUMPTION RECORDS OF THE SAID ACCOUNT, AO MADE DISALLOWANCE AMOUNTING TO RS. 7,68,833/- IE @ 20 % OF RS 38,44,119/-. LD AR FOR ASSESSEE ALSO MENTIO NED THAT THE CIT(A) GRANTED PART RELIEF STATING THAT 20% MAKING DISALLOWANCES @ 20 % IS HIGHER SIDE INSTEAD OF DELETING THE ENTIRE ADDITION. FURTHER, LD AR MEN TIONED THAT THE CIT(A) ERRONEOUSLY RESTRICTED THE DISALLOWANCES TO 5% OF THE EXPENDITURE. FURTHER ALSO, LD COUNSEL MENTIONED THAT THE ASSESSEE FILED COPIES OF THE DOCUMENTS FEW CASES OF PATIENTS ON SAMPLE BASIS, WHICH DEMONSTRATE THE FACT OF CONSUMPTION OF MEDICINES. THEREFORE, AS PER THE ASSESSEES COUNSEL , THE QUESTION OF CONSUMPTION OF MEDICINES BY THE ASSESSEE FOR PATIENT IS A FACT, WHICH IS NOT CONTROVERTED BY THE AO WHILE MAKING DISALLOWANCE. FURTHER HE ALSO M ENTIONED THAT ASSESSING OFFICER/ CIT (A) DID NOT HAVE ANY BASIS FOR MAKING SUCH AD HOC DISALLOWANCES ADOPTING FLAT RATES OF 20% AND 5%, AS THE CASE MAY BE. HE PLEADED FOR ENTIRE DELETION OF THE IMPUGNED ADDITION AND ACCEPT THE SA ID CLAIM OF THE ASSESSEE. 6. ON THE OTHER HAND, LEANED DR FOR THE REVENUE REL IED HEAVILY ON THE ORDER OF THE AO AND CIT(A). ELABORATING THE CONCLUSION OF THE REVENUE AUTHORITIES, LEARNED DR MENTIONED THAT WHEN A DEDUCTION IS CLAIM ED IN THE RETURN, IT IS DUTY OF THE ASSESSEE TO DEMONSTRATE WITH EVIDENCES. WHEN THE ASSESSEE FAILED DISCHARGE HIS DUTY, THE AO IS JUSTIFIED IN MAKING D ISALLOWANCE. IN THIS CASE THE ASSESSEE ADMITTEDLY FAILED TO MAINTAIN REQUISITE RE GISTERS RELATING TO THE CONSUMPTION OF MEDICINES AND DISPOSABLES AND THE AO IS NOT SATISFIED ON THIS ASPECT. IN SUCH A FACTUAL MATRIX OF THE CASE THE CL AIM OF THE ASSESSEE CANNOT BE 5 IAT 3624/M/2012 DR. DEBASHISH DAS ACCEPTED. THEREFORE, AS PER LD DR, THE ORDER OF THE CIT(A) IS REASONABLE WHICH IS IT CALL FOR ANY INTERFERENCE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDER OF THE ASSESSING OFFICER AS WELL AS CIT(A). THE CORE ISSUE FOR ADJUD ICATION RELATES TO THE GENUINENESS OF THE CLAIM OF CONSUMPTION OF THE MEDI CINE AND DISPOSABLES FOR THE PATIENTS AND THE RECORDING OF THE SAME. IN THIS REG ARD, ASSESSEE ARGUES THAT THERE IS NO NEED TO MAINTAIN SUCH RECORDS AND THERE FORE, MERE SUBMISSION OF OPENING AND CLOSING STOCK RECORDS IS SUFFICIENT AND THERE IS NO NEED TO MAINTAIN RECORDS SHOWING THE USE OF MEDICINE/DISPOSABLE FOR THE PATIENTS. OF COURSE, ASSESSEE ALSO RELIES ON THE PRINCIPLE OF CONSISTENC Y, WHERE THE DEPARTMENT ACCEPTED THE ASSESSES BOOKS IN THIS REGARD OVER TH E YEARS IN THE PAST. ASSESSEE OBJECTS TO THE PRINCIPLE OF ESTIMATIONS BASED ON TH E AD-HOC BASIS. IN THIS REGARD, ASSESSEES COUNSEL FILED VARIOUS DECISIONS BEFORE U S IN HIS FAVOUR. ON THE OTHER HAND, IT IS THE ARGUMENT OF THE REVENUE THAT, WHEN THE CLAIM OF DEDUCTION IS MADE, THE ASSESSEE IS UNDER OBLIGATION TO MAINTAIN RECORDS TO DEMONSTRATE THE FACT OF CONSUMPTION OF MEDICINE FOR THE PATIENTS. W HEN THE ASSESSEE HAS FAILED ON HIS DUTY, THE AO IS JUSTIFIED TO MAKE DISALLOWAN CE. WE HAVE CONSIDERED THE ABOVE DIVERGENT STANDS OF T HE PARTIES IN DISPUTE AND PERUSED THE AVAILABLE RECORDS AND PAPER BOOK FI LED BEFORE US. THE PAPER BOOKS CONTAINS SAMPLE COPIES OF THE PATIENTS RECOR DS. ON PERUSAL OF THE SAME, IT IS NOTICED THAT THERE IS SOME NOTING RELATING TO PR ESCRIPTION OF THE MEDICINES BY THE DOCTORS. HOWEVER, THEY DO NOT INDICATE THAT THE SAID PRESCRIBED MEDICINES ARE SUPPLIED BY THE ASSESSEE. HOWEVER, THE SAID DET AILS FURNISHED ARE NOT EXHAUSTIVE FOR ALL THE MEDICINES CONSUMED. AS SUCH IT IS AN ADMITTED FACT THAT THE ASSESSEE IS NOT MAINTAINING THE RECORDS RELATING TO CONSUMPTION OF MEDICINE. AO HAS NOT DEMONSTRATED THE NEED FOR MAINTAINING AN Y RECORDS IN THIS REGARD. FURTHER, IT IS TRITE LAW THAT THE ASSESSEE IS UNDER OBLIGATION TO DEMONSTRATE THE CLAIM OF EXPENDITURE MADE IN THE RETURN/FINANCIAL S TATEMENTS. REGARDING THE ARGUMENT RELATING TO CONSISTENCY ISSUES, WE REJECT THE SAME IN VIEW OF THE 6 IAT 3624/M/2012 DR. DEBASHISH DAS APPLICABILITY OF THE PRINCIPLE OF RES JUDICATA TO INCOME TAX MATTERS. THEREFORE, IN PRINCIPLE, THE AO IS JUSTIFIED IN RESORTING TO MAKE DISALLOWANCE ON ACCOUNT OF CONSUMPTION OF MEDICINE AND DISPOSABLES. HOWEVER, WE REJECT THE BASIS ADOPTED BY BOTH THE AUTHORITIES BELOW IE FLAT RATE OF 20% OR 5% OF THE CLAIM. AS SUCH, THE ORDERS OF THE AO/CIT(A) ARE SILENT ON THE REASONING FOR ADOPTING THE SAID FLAT RATES AND THEREFORE, THEY CONSTITUTE COMP LETE GUESSWORK. AS HELD BY VARIOUS COURTS, SOME AMOUNT OF GUESSWORK IS ACCEPTE D IN SUCH ESTIMATION BASED ADDITIONS AND HOWEVER, COMPLETE GUESSWORK IS UNACCE PTABLE. THE DECISIONS RELIED UPON BY LD COUNSEL FOR THE ASSESSEE SUPPORTS THE SAME. THEREFORE, WE REJECT THE VERY MANNER OF QUANTIFYING THE DISALLOWA NCE. INSTEAD, CONSIDERING THE FAILURES OF THE ASSESSEE IN DISCHARGE OF THE ONUS A ND TO ESTABLISH THAT SAID MEDICINE AND DISPOSABLES ARE CONSUMED FOR THE PATIE NTS, MAKING ROUND SUM DISALLOWANCE OUT OF THE CLAIM IN THE RETURN, MUST M EET THE NEEDS OF THE JUSTICE. SUCH A MEASURE MAY MOTIVATE THE ASSESSEE IN DIRECTI NG HIS ACCOUNTING STAFF TO MAINTAIN PROPER RECORDS OR EVIDENCES ON THIS ACCOUN T OF CONSUMPTION OF MEDICINE AND DISPOSABLES TOO. THEREFORE, WE RESTRI CT THE DISALLOWANCE TO ROUND SUM AMOUNT OF RS. 1 LAKH. THUS, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE AND MODIFY HIS ORDERS. ACCORDINGLY, THE GROUND RAIS ED BY THE ASSESSEE IS PARTLY ALLOWED . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY 3- 7-2013 SD/- SD/- (D.MANMOHAN) (D .KARUNAKAR RAO) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI : 3-7-2013 PS.- PRAMOD 7 IAT 3624/M/2012 DR. DEBASHISH DAS /(, /COPY TO:- 1) 01 /THE APPELLANT. 2) /201 /THE RESPONDENT. 3) 3 ( ) - MUMBAI / THE CIT (A) , MUMBAI. 4) 3 , MUMBAI /THE CIT , MUMBAI, 5) 4!56 /(,( , , / THE D.R. D BENCH, MUMBAI. 6) 6 ) 7 COPY TO GUARD FILE. &. % / BY ORDER / / TRUE COPY / / / % 8 , DY./ASSTT. REGISTRAR I.T.A.T., MUMBAI