Dr. Dhiraj Gada, Indore V. The Dy. CIT, Indore

ITA 531/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2788 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 20-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: G R PARMAR
• Keywords: Recovery proceedings

Judgement Text

PAGE 1 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ABUPG7032P I.T.A.NO. 531/IND/2009 A.Y. : 2006-07 DR.DHIRAJ GADA, DY. CIT, 176, JAWAHAR MARG, VS 4(1), MAIN ROAD, INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI G.R.PARMAR, ADV. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 31.05.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II, INDORE , DATED 08.09.2009, FOR THE ASSES SMENT YEAR 2006-07. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 READS AS UNDER :- (A) THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 140000/- OUT MEDICINE EXPENSES TO RS.100000/- ONLY. PAGE 2 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. (B) THAT THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT LD . AO HAD MADE ADDITION ON THE BASIS OF PRESUMPTION AND ASSUMPTION AND THE DISALLOWANCE SUSTAINED IS ON SURMISE AND CONJECTURE. (C) THAT THE LD. CIT(A) FAILED TO APPRECIATE THE FACT T HAT THE SURRENDER OF IVF RECEIPTS OF RS. 1000000/- IS O F NET INCOME OF TAXATION AND NOT THE GROSS INCOME. 4. THE FACTS, IN BRIEF, ARE THAT IN THE ASSESSMENT YEA R 2007-08, THERE WAS A SURVEY ACTION U/S 133A, WHERE THE ASSES SEE SURRENDERED A SUM OF RS. 15,43,200/- COMPRISING OF FOLLOWING :- 1. I.V.F. CHARGES RS. 10,00,000/- 2. SONOGRAPHY CHARGES RS. 1,93,200/- 3. NURSING HOME CHARGES RS. 3,50,000/- RS. 15,43,200 THE AO ANALYZED THE I.V.F. INCOME AND CONCERNED BOO KS OF ACCOUNT AS WELL AS PATIENTS RECORDS, WHICH REVEALED THAT COST OF TREATMENT INCLUDING MEDICINES EXPENSES WERE NOT ASCERTAINABLE OR VERIFI ABLE. THE AO, THEREAFTER, ANALYZED THE PERCENTAGE OF MEDICINAL EX PENSES IN ASSESSMENT YEAR 2005-06, 2004-05 AND 2006-07, WHICH STOOD AT 5 5.59 %, 67.43% AND 44.63% OF THE I.V.F. PACKAGE RECEIPTS. THE AO, THER EAFTER, HELD THAT SINCE IN THE SUBSEQUENT YEAR, THE ASSESSEE HAD SURRENDERE D A SUM OF RS. 10 PAGE 3 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. LAKHS, HENCE, THE ASSESSEE SHOULD HAVE SUPPRESSED T HE RECEIPTS IN EARLIER YEARS ALSO AND, ACCORDINGLY, HE REWORKED OUT THE GR OSS RECEIPTS UNDER THIS HEAD IN THOSE YEARS. AFTER REWORKING OUT THE GROSS RECEIPTS IN THOSE YEARS, THE AO REWORKED OUT THE PERCENTAGE OF EXPENSES IN THOSE YEARS AND, ACCORDINGLY, HELD THAT THERE COULD BE A LEAKAGE ARO UND 8 TO10 % IN RESPECT OF MEDICINES EXPENSES CLAIMED IN IVF PACKAGE AND WO RKED OUT THE DISALLOWANCE AT RS. 1.40 LAKHS. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS SUB MITTED THAT THE AOS ACTION WAS BASED ON SURMISES AND CONJECTURES AS THE RE WAS NO EVIDENCE OF WHATSOEVER NATURE TO SHOW THAT THE ASSESSEE HAD INF LATED THE EXPENSES OR SUPPRESSED THE RECEIPTS IN THE YEAR UNDER CONSIDERA TION. THE LD. CIT(A), HOWEVER, HAVING REGARD TO THE FACTS EMERGING IN THE SURVEY AS WELL AS OBSERVATIONS OF THE AUDITOR IN THE TAX AUDIT REPORT UPHELD THE ACTION OF THE AO. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE US. 5. THE LEARNED COUNSEL SUBMITTED THAT THE INCOME SURR ENDERED WAS ON ACCOUNT OF SUPPRESSION OF RECEIPTS AND NOT F OR INFLATING EXPENSES AND THAT TOO IN A SUBSEQUENT YEAR, HENCE, THERE WAS NO JUSTIFICATION FOR MAKING THIS DISALLOWANCE. HE FURTHER PLACED RELIANC E ON THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 6. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE, ,ON THE OTHER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD . CIT(A). PAGE 4 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE ASSESSEE HAS SURRENDERED INCOM E UNDER IVF PACKAGE ON ACCOUNT OF SUPPRESSION OF RECEIPTS AND E VEN IN THE COURSE OF SURVEY, THERE IS NO MATERIAL FOUND SO AS TO SUGGEST THAT THE ASSESSEE WAS INFLATING EXPENSES IN PAST ALSO. WE FURTHER FIND TH AT THOUGH THE EXPENSES IN THE YEAR UNDER CONSIDERATION IN PERCENTAGE TERMS ARE LESSER THAN THE EARLIER YEARS, HOWEVER, BY ASSUMING SUPPRESSION OF RECEIPTS, THE AO HAS WORKED OUT THE TOTAL RECEIPTS AND THEREAFTER HE HAS WORKED OUT THE PERCENTAGE OF EXPENSES ON THE BASIS OF THAT FIGURE WHICH CLEARLY SHOWS THAT IT IS A CASE OF ASSUMPTION AND IN OUR VIEW, TH IS APPROACH IS NOT CORRECT IN LAW. WE FURTHER FIND THAT THE TAX AUDITORS OBSE RVATIONS ONLY REFLECT THE AUDIT PROCEDURE CARRIED OUT BY THE TAX AUDITORS AND SUCH OBSERVATIONS CANNOT RESULT INTO AN INFERENCE THAT THE ASSESSEE W AS INDULGING IN INFLATING EXPENSES. ACCORDINGLY, WE HOLD THAT THIS ADDITION D OES NOT HAVE ANY MERIT. THEREFORE, THE SAME IS DELETED. 9. GROUND NO. 2 READS AS UNDER :- 2(A) THAT IN THE FACT AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN HOLDING THAT THE APPELLANT FAILED T O DISCHARGE STATUTORY OBLIGATION TO DEDUCT TAX U/S 194 J IN RES PECT OF PAYMENTS OF PROFESSIONAL FEES TO FELLOW DOCTORS AND PAGE 5 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. PROVISION OF SECTION 40(IA) ARE ATTRACTED AND THE D ISALLOWANCE OF RS. 3,70,000/- IS PROPER. (B) THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN NOT APPRECIATING THE DICTUM LAID DO WN BY HON'BLE SUPREME COURT IN THE CASE OF H8INDUSTAN COCO COLA (P) LIMITED VS. CIT, 293 ITR 226. (C) THAT THE LD. CIT(A) HAS FAILED TO GRASP RATIONALE O F THE REPLY OF HON'BLE F.M. TO THE DEBATE IN THE LOK SABH A ON 29-ON-2008 ON THE FINANCE BILL 2008, AS RELIED UPON BY THE APPELLANT. 10. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE PAID THE IMPUGNED SUM TO DOCTORS, WHO WERE CONSULTANTS, HENCE, THE AO HEL D THAT THE ASSESSEE WAS LIABLE TO DEDUCT THE TAX AT SOURCE AND FAILING WHICH THESE EXPENSES WERE LIABLE TO BE DISALLOWED U/S 40(A)(IA). THE AO ALSO HELD THAT THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES PRIVATE LIMITED VS. CIT AS REPORTED IN 9 ITJ 433, W AS ALSO NOT OF ANY HELP TO THE CAUSE OF THE ASSESSEE AS IN THAT CASE, THE I SSUE INVOLVED WAS REGARDING RECOVERY OF TAX, IN CASE FAILURE OF DEDUC TION OF THE TAX AT SOURCE. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) ALSO CON FIRMED THIS ACTION OF THE AO. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. PAGE 6 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. 11. THE LEARNED COUNSEL NARRATED THE FACTS AND MAINLY NARRATED THE FACTS MADE BEFORE THE REVENUE AUTHORITIES. THE LEAR NED SENIOR DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, PLA CED RELIANCE ON THE ORDER OF LD. CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 13. IT IS NOTED THAT IT IS NOT IN DISPUTE THAT THE ASSE SSEE HAS PAID AN IMPUGNED SUM, WHICH FALL IN THE CATEGORY OF PROFESS IONAL FEE, WHERE ON THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE, WHI CH HAS NOT BEEN DONE. HENCE, IT IS A CASE WHERE THE PROVISIONS OF SECTION 40(IA) ARE CLEARLY ATTRACTED, HENCE, SUCH EXPENSES ARE NOT ALLOWABLE A S EXPENDITURE. THEREFORE, WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT IN LAW. BEFORE PARTING, WE MAY ALSO ADD THAT THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES PRIVATE LIMITED VS. CIT (SUPRA) IS IN A DIFFERENT CONTEXT OF RECOVERY O F TAX NOT DEDUCTED AT SOURCE AND NOT ON THE APPLICABILITY OF PROVISIONS O F SECTION 40A(IA), HENCE, DOES NOT RENDER ANY ASSISTANCE TO THE CAUSE OF THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEE IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PAGE 7 OF 7 -. I.T.A.NO. 531/IND/2009 DR.DHIRAJ GADA, INDORE. 15. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE,2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 4 TH JUNE, 2010. CPU* 26