Dr.B.Chendilnathan, CHENNAI V. Addl.CIT, CHENNAI

ITA 400/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5048 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: S SRIDHAR
• Keywords: Income from undisclosed sources; Revised return
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NOS. 399, 400 & 401/MDS/2010 ASSESSMENT YEARS : 2003-04, 2004-05 & 2005-06 DR. B. CHENDILNATHAN, NO.4J, BRIKRIT APARTMENTS, ALACRITY COMPLEX, VIJAYANAGAR, VELACHERY, CHENNAI 600 042. PAN : ADJPC7708H (APPELLANT) V. THE ADDITIONAL COMMISSIONER OF INCOME TAX, BUSINESS RANGE III, CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR RESPONDENT BY : SHRI K.E.B . RENGARAJAN JUNIOR STANDING COUNSEL O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST A COMMON ORDER DATED 22.2.2010 OF COMMISSIONER OF INCOME TAX (APPEALS)- VIII, CHENNAI, FOR THE ASSESSMENT YEARS INVOLVED. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A PRACTIC ING NEURO SURGEON AND ALSO WORKING IN APOLLO HOSPITAL, HAD FI LED RETURNS FOR THE I.T.A. NOS. 399 TO 401/MDS/10 2 IMPUGNED ASSESSMENT YEARS SHOWING SALARIES RECEIVED FROM M/S APOLLO HOSPITAL. LATER ON, THE A.O. RECEIVED INFOR MATION GATHERED BY INVESTIGATION WING OF THE DEPARTMENT THAT ASSESSEE AS WELL AS SIMILARLY PLACED DOCTORS HAD RECEIVED ADDITIONAL PR OFESSIONAL RECEIPTS FROM M/S APOLLO HOSPITAL AND BASED ON SUCH INFORMAT ION, THE ASSESSMENTS WERE REOPENED. IN THE RETURNS FILED PU RSUANT TO NOTICES ISSUED UNDER SECTION 148 OF INCOME-TAX ACT, 1961 (H EREINAFTER CALLED THE ACT), ASSESSEE DID ADMIT ADDITIONAL INCOME FO R THE RESPECTIVE ASSESSMENT YEARS. BUT, NEVERTHELESS HE ALSO CLAIME D EXPENSES THEREFROM. THE CLAIM OF EXPENSES FOR EACH OF THE Y EAR AGAINST SUCH ADDITIONAL INCOME ADMITTED WAS AS UNDER:- ASSESSMENT YEAR SALARY ` STAFF WELFARE ` VEHICLE MAINTENANCE ` HOSPITAL CHARGES ` 2003-04 2,93,476 48,369 45,107 96,738 2004-05 3,71,132 67,783 1,03,349 1,35,566 2005-06 5,80,345 1,07,586 1,72,759 2,15,173 3. OUT OF THE ABOVE CLAIM OF EXPENSES, THE A.O. WAS OF THE OPINION THAT ASSESSEE HAD NOT PRODUCED SUFFICIENT EVIDENCE FOR PROVING THE CLAIMS, EXCEPT FOR HOSPITAL CHARGES WHICH WAS 10% O F THE AMOUNTS RETAINED BY THE M/S APOLLO HOSPITAL. ALL OTHER CLA IMS OF EXPENSES I.T.A. NOS. 399 TO 401/MDS/10 3 WERE DISALLOWED BY THE A.O. ASSESSEE MOVED IN APPE AL BEFORE THE CIT(APPEALS) FOR ALL THE YEARS AND ALSO FILED DETAI LED BREAK-UP OF THE EXPENSES CLAIMED FOR SALARIES, STAFF WELFARE AND VE HICLE MAINTENANCE. OUT OF SALARIES CLAIMED TO HAVE BEEN PAID TO DOCTOR S, THE CIT(APPEALS) HELD THAT ` 1,12,000/- FOR ASSESSMENT YEAR 2003-04, ` 1,48,000/- FOR ASSESSMENT YEAR 2004-05 AND ` 2,30,000/- FOR ASSESSMENT YEAR 2005-06 WERE ALLOWABLE. AS PER THE LD. CIT(APPEALS), AGAINST UNACCOUNTED INCOME, SOME UNAC COUNTED EXPENDITURE WAS ALSO FAIRLY ALLOWABLE ON THE BASIS OF MATCHING PRINCIPLE. IN SO FAR AS SALARIES PAID TO WARD BOYS AND NURSES WERE CONCERNED, THE LD. CIT(APPEALS) HELD THAT 50% HAD T O BE ALLOWED. SIMILARLY, FOR STAFF WELFARE EXPENSES ALSO, THE LD. CIT(APPEALS) HELD THAT 50% WAS TO BE ALLOWED SINCE ASSESSEE HAD TO M EET THE WELFARE NEEDS OF EMPLOYEES PERSONALLY ENGAGED BY HIM, DURIN G THE TIME OF SURGERY AND BEYOND REGULAR HOURS. HOWEVER, WITH RE GARD TO CLAIM FOR VEHICLE MAINTENANCE, LD. CIT(APPEALS) WAS OF THE OP INION THAT THIS WAS RIGHTLY DISALLOWED BY THE A.O. I.T.A. NOS. 399 TO 401/MDS/10 4 4. NOW BEFORE US, THE LEARNED A.R. SUBMITTED THAT T HE EXPENSES CLAIMED BY THE ASSESSEE WERE REASONABLE AND A.O. AS WELL AS CIT(APPEALS) ERRED IN MAKING DISALLOWANCES PURELY B ASED ON ASSUMPTIONS. ACCORDING TO LEARNED A.R., WHEN IT IS AN ACCEPTED POSITION THAT ASSESSEE HAD INCURRED SOME EXPENDITUR E, FOR EARNING THE ADDITIONAL INCOME, THE CLAIMS OUGHT NOT HAVE BE EN DISALLOWED. RELIANCE WAS PLACED BY THE LEARNED A.R. ON THE ASSE SSEES OWN CASE FOR ASSESSMENT YEARS 2000-01 TO 2002-03, DECIDED BY THIS TRIBUNAL ON 19 TH MARCH, 2010 IN I.T.A. NOS. 1219 TO 1221/MDS/09. L EARNED A.R. BROUGHT TO THE ATTENTION OF THE BENCH THAT IN THE CASE OF ONE DR. R. SURENDRAN, ON SIMILAR FACTS, THIS TRIBUNAL HAD H ELD THE EXPENSES CLAIMED TO BE ALLOWABLE. A COPY OF ORDER IN I.T.A. NO.1562 & 1563/MDS/2009 DATED 4.11.2010 WAS ALSO PLACED ON RE CORD. 5. PER CONTRA, LEARNED D.R. SUPPORTING THE ORDER OF THE CIT(APPEALS), SUBMITTED THAT IN THE CASES RELIED ON BY THE ASSESSEE, INCLUDING ASSESSEES OWN CASE FOR EARLIER YEARS, ON LY SALARIES WERE ALLOWED BY THIS TRIBUNAL AND OTHER EXPENSES WERE NO T AT ALL CONSIDERED. THEREFORE, ACCORDING TO HIM, THE CASES RELIED ON BY THE ASSESSEE WERE NOT FACTUALLY COMPARABLE. I.T.A. NOS. 399 TO 401/MDS/10 5 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. WE FIND THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2000-01 TO 2002-03 DECIDED BY THIS TRIBUNAL ON 19 TH MARCH, 2010 (IN I.T.A. NOS.1219 TO 1221/MDS/09), ASSESSEE HAD CLAIMED ADMI NISTRATIVE EXPENSES AT 10% AND ALSO PAYMENTS OF SALARY TO SUBO RDINATE STAFF INCLUDING DOCTORS. IN THE SAID ORDER AT PARA 4, TH E TRIBUNAL HELD AS UNDER:- 4. BEFORE US, SIMILAR ARGUMENTS WERE RAISED ON BEHA LF OF THE ASSESSEE. THE LEGAL ISSUE CHALLENGING THE RE-OPENI NG WAS NOT SERIOUSLY CONTESTED, SO WE DO NOT ACCEPT THE PLEA AG AINST RE- OPENING OF ASSESSMENT ORDERS IN ALL THESE YEARS. WE HAVE ALSO FOUND THAT IN PARA 3.7, 3.8 AND 3.9 OF HIS ORDER, T HE LD. CIT(A) HAS RECORDED AN INCORRECT FACT. THE ASSESSING OFFI CER HAD NOT MADE ANY ADDITION AFTER DENYING THE CLAIM @ 10% ON AC COUNT OF ADMINISTRATIVE CHARGES. IT SHOWS THAT THE LD. CIT( A) HAS PASSED THIS ORDER IN A CURSORY AND LEISURELY MANNER. BE THA T AS IT MAY, THIS CLAIM IS IN FACT ALLOWABLE. THE CHENNAI BENCH HAS BEEN TAKING A VIEW THAT SUCH ADMINISTRATIVE CHARGES @ 100% ARE REQUIRED TO BE PAID. THE HOSPITAL HAS ALSO CONFIRMED THIS FACT . THEREFORE, THIS CLAIM OF THE ASSESSEE IS A VALID ONE. THE OTH ER CLAIM OF THE ASSESSEE IS THAT FOR PROVIDING THE SERVICES TO THE APOLLO HOSPITAL AS A CONSULTANT, HE HAS TO EMPLOY SOME PERSONS TO AS SIST HIM AND THAT IS WHY SALARY HAS BEEN PAID AND HAS BEEN CLAIMED . THE ASSESSING OFFICER DID NOT MAKE FURTHER ENQUIRY, BUT SIMPLY REJECTED THE EXPLANATION OF THE ASSESSEE. GIVEN TH E FACTS AND THE CIRCUMSTANCES OF THE CASE, WE ARE CONVINCED THA T THIS CLAIM OF THE ASSESSEE HAS TO BE ALLOWED. WE HAVE GONE TH ROUGH THE ORAL AS WELL AS WRITTEN SUBMISSIONS AND ARE OF THE CONSIDERED I.T.A. NOS. 399 TO 401/MDS/10 6 OPINION THAT THIS ADDITION BEING NOT WARRANTED AS T HE ASSESSEE HAS TO BE PAY SALARY TO HIS ASSISTANTS TO CARRY HIS BU SINESS DESERVES TO BE DELETED IN ALL THESE YEARS OVER AND A BOVE WHAT HAS BEEN OFFERED IN THE REVISED RETURNS OF INCOME. IT IS THE ASSESSEE WHO HAS TO DECIDE AS TO IN WHAT MANNER HE HAS TO CARRY ON HIS BUSINESS. WHEN RECEIPT OF BUSINESS HAS BEEN ACCEPTED, THE ANCILLARY EXPENSES HAVE ALSO TO BE ACCEPTED. TH ESE EXPENSES HAVE NEITHER BEEN FOUND ILLEGAL NOR HAVE BEEN PROVE D TO BE BOGUS. HENCE, WE ALLOW THIS CLAIM OF THE ASSESSEE IN ALL T HE YEARS. 7. AGAIN IN THE CASE OF DR. R. SURENDRAN, WHO WAS A LSO IN RECEIPT OF SIMILAR AMOUNTS FROM M/S APOLLO HOSPITAL, THIS T RIBUNAL HAD FOLLOWED ITS EARLIER DECISION IN ASSESSEES OWN CAS E REFERRED SUPRA. CONSISTENT WITH THE VIEW TAKEN IN THESE CASES, WE A RE OF THE OPINION THAT ASSESSEES CLAIM FOR SALARY HAS TO BE ALLOWED. IN THE CASE OF DR. R. SURENDRAN (SUPRA), DECIDED BY THIS TRIBUNAL ON 4 TH NOVEMBER, 2010, LD. CIT(APPEALS) HAD ALLOWED 80% OF THE ASSES SEES CLAIM FOR EXPENSES AND THIS WAS UPHELD BY THE TRIBUNAL. THER EFORE, WE ARE OF THE OPINION THAT ASSESSEES CLAIM FOR EXPENSES OTHE R THAN SALARIES, NAMELY, STAFF WELFARE AND VEHICLE MAINTENANCE HAVE TO BE ALLOWED AT 80% OF THE CLAIM. WE THEREFORE DIRECT THAT SALARIE S ARE TO BE ALLOWED IN FULL, WHEREAS STAFF WELFARE EXPENSES AND VEHICLE MAINTENANCE ARE TO BE ALLOWED AT 80% OF THE CLAIM. SINCE THE A.O. HAD HIMSELF ALLOWED SERVICE CHARGES PAID BY THE APOLLO HOSPITAL FOR THE I.T.A. NOS. 399 TO 401/MDS/10 7 ASSESSMENT YEARS CONCERNED, THE OBSERVATION OF THE CIT(APPEALS) THAT SUCH AMOUNTS WERE DISALLOWED IS NOT FOUND TO B E CORRECT. 8. IN THE RESULT, APPEALS OF THE ASSESSEE FOR ALL T HE ASSESSMENT YEARS INVOLVED ARE TREATED AS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 13 TH MAY, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH MAY, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-VIII, CHENNAI (4) CIT-VI, CHENNAI (5) D.R. (6) GUARD FILE