SHK Hospitals Private Limited, Hyderabad V. Income Tax Officer, Ward-3(1), Hyderabad

ITA 493/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9836 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 25-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATHA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3); 144

Judgement Text

ITA NO 493 OF 2018 SHK HOSPITALS P LTD HYDERABAD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD SMC A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.493/HYD/2018 (ASSESSMENT YEAR: 2012-13) M/S.SHK HOSPITALS P LTD HYDERABAD PAN:AAMCS50007N VS INCOME TAX OFFICER WARD 3(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SHRI KIRAN KATHA, DR O R D E R THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13 AGAIN ST THE ORDER OF THE CIT (A)-3, HYDERABAD, DATED 8.12.2 017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN HOSPITAL BUSINESS, E-FILED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 21.05.2013 ADMITTING A TOTAL INCOME OF RS.NIL AFTER SET OFF OF THE BROUGHT FORWARD LOSSES OF THE EARLIER YEARS. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSEE WAS REQUIRED TO FILE CERTAIN DETAILS. HOWE VER, THERE WAS NO RESPONSE FROM THE ASSESSEE AND THEREFORE, THE AO COMPLETED THE ASSESSMENT EX-PARTE U/S 144 OF THE ACT ON THE B ASIS OF THE MATERIAL AVAILABLE ON RECORD. HE OBSERVED THAT THE ASSESSEE HAD GROSS RECEIPTS OF RS.4,46,65,456/- AND HE SOUGHT TO ESTIMATE THE INCOME AT 10% OF THE GROSS RECEIPTS CLEAR OF ALL TH E EXPENDITURE DATE OF HEARING : 25.03.2019 DATE OF PRONOUNCEMENT: 03.04.2019 ITA NO 493 OF 2018 SHK HOSPITALS P LTD HYDERABAD. PAGE 2 OF 4 INCLUDING DEPRECIATION. ACCORDINGLY, A SHOW CAUSE N OTICE WAS ISSUED TO THE ASSESSEE BUT THE ASSESSEE DID NOT FIL E ANY OBJECTION TO THE SAME. THEREFORE, THE AO ESTIMATED THE INCOME AT 10% OF THE GROSS RECEIPTS AND BROUGHT IT TO TAX. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) STATING THAT UNDER SIMILAR CIRCUMSTANCES, T HE AO FOR THE A.Y 2011-12 HAD HELD THAT THERE IS NO MERIT IN ESTI MATING THE INCOME AT 10% OF THE GROSS RECEIPTS AND HAD ACCORDI NGLY RESTRICTED THE DISALLOWANCE TO RS.25.00 LAKHS. THE ASSESSEE RELIED UPON THE FINDINGS OF THE CIT (A) AND ALSO THE DECIS ION OF THE ITAT FOR THE EARLIER A.Y FOR RESTRICTING THE DISALLOWANC E TO RS.25.00 LAKHS. THE CIT (A), HOWEVER, CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US AGAIN RE ITERATING THE SUBMISSIONS MADE BEFORE THE AO AND THE CIT (A) AND ALSO BY PLACING RELIANCE ON THE DECISION OF THE ITAT IN THE CASE OF THE ASSESSEE FOR THE A.Y 2011-12. THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL: 1. THE APPEAL ORDER IS BAD IN LAW AND IS CONTRARY TO THE FACTS. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS NOT PASSED THE SPEAKING ORDER WHILE AFFIRMING THE ESTIMATION OF INCOME @ 10% OF THE GROSS RECEIPTS, S INCE THE ASSESSEE COMPANY IS INCURRING THE PERPETUAL LOSSES FROM INCEPTION AND AS PER AUDITED BALANCE SHEET OF 2017, RESERVES & SURPLUS ARE SHOWING NEGATIVE BALANCE OF RS. 3.11 CRS. 3. THE LEARNED COMMISSIONER HAS NOT CONSIDERED, THE ORDER OF HIS PREDECESSOR IN ASSESSOR'S OWN CASE FOR THE A .Y. 2011- 12, WHERE IS AGAINST ESTIMATION OF INCOME @ 10% ONL Y A ROUND SUM OF RS. 25 LACS WAS DISALLOWED 4. IT IS PRAYED THAT ACTION OF LEARNED COMMISSIONER IN CONFIRMING INCOME ESTIMATION @ 10 % OF GROSS RECEIP TS IS ARIBITRATORY AND AGAINST EQUITY AND NATURAL JUSTICE . IT IS ITA NO 493 OF 2018 SHK HOSPITALS P LTD HYDERABAD. PAGE 3 OF 4 PRAYED THAT ORDER OF LEARNED COMMISSIONER APPEAL MA Y PLEASE BE QUASHED. 5. ANY OTHER GROUNDS AT THE TIME OF HEARING. 4. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELI ANCE UPON THE DECISION OF THE ITAT AND PRAYED THAT THE D ISALLOWANCE SHOULD BE RESTRICTED TO RS.25.00 LAKHS THIS YEAR AL SO. HE SUBMITTED THAT THE ASSESSEE HAS NEVER BEEN MAKING A NY PROFITS AND ULTIMATELY HAD CLOSED DOWN ITS BUSINESS IN THE SUBSEQUENT YEARS. HE PRAYED THAT THE ORDER OF THE ITAT MAY BE FOLLOWED. 5. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, I FIND THAT THE ASSESSEE HAD HUGE CARRIE D Y BROUGHT FORWARD LOSSES AND THEREFORE, THE ASSESSEE HAD BEEN ADMITTEDLY NIL INCOME. FURTHER, FOR THE A.Y 2011-12 ALSO, TH E AO HAD ESTIMATED THE INCOME AT 10% OF THE GROSS RECEIPTS A ND THE TRIBUNAL HAD RESTRICTED THE SAME TO RS.25.00 LAKHS AFTER OBSERVING THAT THE ASSESSEE HOSPITAL HAS ULTIMATELY BEEN CLOSED DOWN. THE RELEVANT PARA OF THE ITAT ORDER IS REPROD UCED HEREUNDER FOR READY REFERENCE: 8. EVEN WITH REGARD TO THE ESTIMATE OF INCOME AT RS . 25 LAKHS ON ROUNDSUM BASIS, NO MATERIAL WAS BROUGHT ON RECORD B Y THE LEARNED DEPARTMENTAL REPRESENTATIVE TO CONTRADICT THE FINDI NGS OF THE LD. CIT(A). IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN INC URRING LOSSES SINCE INCEPTION AND IT WAS ULTIMATELY CLOSED. THE OBSERVA TION THAT THE MAJOR PART OF THE INCOME ARE FROM AROGYA SRI SCHEME WAS A LSO NOT DISPUTED. UNDER THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW T HAT THE ESTIMATION MADE BY THE LD. CIT(A) DOES NOT CALL FOR ANY INTERF ERENCE. ACCORDINGLY, ITA NO 493 OF 2018 SHK HOSPITALS P LTD HYDERABAD. PAGE 4 OF 4 THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONO UNCED ACCORDINGLY IN THE OPEN COURT ON 25.01.2018. 7. IN THE SAID A.Y, THE CIT (A) HAD ESTIMATED THE DISALLOWANCE AT RS.25.00 LAKHS WHICH WAS MUCH LESS THAN 5% OF THE GROSS RECEIPTS. BY RESTRICTING THE SET OFF OF R S.25.00 LAKHS FOR THE RELEVANT A.Y BEFORE US, IT COULD BE NEARLY 5% O F THE GROSS RECEIPTS. THEREFORE, RESPECTFULLY FOLLOWING THE DEC ISION OF THE COORDINATE BENCH AND ALSO TAKING INTO CONSIDERATION THE ASSESSEES AGREEMENT TO ESTIMATE THE DISALLOWANCE A T RS.25.00 LAKHS, THE AO IS DIRECTED TO RESTRICT THE DISALLOWA NCE TO RS.25.00 LAKHS. ASSESSEES APPEAL IS ACCORDINGLY PARTLY ALLO WED. 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD APRIL, 2019. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 3 RD APRIL, 2019. VINODAN/SPS COPY TO: 1 M/S. SHK HOSPITALS (P) LTD, D.NO.8-2-686/C/D/5 RO AD NO.12, BANJARA HILLS, HYDERABAD 500034 2 ITO WARD 3(1) SIGNATURE TOWERS, KONDAPUR, HYDERAB AD 500084 3 CIT (A)-3 HYDERABAD 4 PR. CIT 3, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER