Smt. Archana Singh, Ambedkar Nagar V. The Income Tax Officer, Faizabad

ITA 537/LKW/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100450 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 23-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K R RASTOGI
• Keywords: Depreciation; Rule of consistency

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.537/LKW/2014 ASSESSMENT YEAR: 2010 11 SMT. ARCHANA SINGH, R/O 204, SHASTRI NAGAR, AKBARPUR, AMBEDKAR NAGAR. PAN:BKUPS4259J VS. ITO, RANGE III, FAIZABAD (APPELLANT) (RESPONDENT) ITA NO.538/LKW/2014 ASSESSMENT YEAR: 2010 11 DR. RAJENDRA PRATAP SINGH , R/O 204, SHASTRI NAGAR, AKBARPUR, AMBEDKAR NAGAR. PAN: BKUPS4259J VS. ITO , RANGE III , FAIZABAD (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI K. R. RASTOGI, C. A. REVENUE BY SHRI AMIT NIGAM, SR. DR DATE OF HEARING 21 /0 9 /201 5 DATE OF PRONOUNCEMENT 29/10/2015 O R D E R PER A. K. GARODIA, A.M. BOTH THESE APPEALS ARE FILED BY TWO DIFFERENT BUT RELATED ASSESSEES AND THESE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LEARNED CIT (A) I, LUCKNOW BOTH DATED 05.03.2014 FOR A.Y. 2010 11. BOTH THESE APPEALS W ERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FACTS ARE THAT A SURVEY WAS CONDUCTED IN THE CLINIC OF DR. R. P. SINGH AND IT WAS FOUND THAT A MEDICAL STORE EXISTED THERE AND IT WAS UNDER THE SUPERVISION OF DR. R. P. SINGH HIMSELF AS ADMITTED BY HIMSELF IN H IS STATEMENT RECORDED IN THE 2 COURSE OF SURVEY. IT WAS ALSO NOTICED IN THE SURVEY THAT THE ASSESSEE DR. R. P. SINGH HAS NOT MAINTAINED PATIENT REGISTER. IT WAS ALSO FO UND THAT NO BOOKS WERE FOUND AT THE TIME OF SURVEY. VARIOUS ADDITIONS WERE MADE IN THE INCOME OF DR. R. P. SINGH OVER AND ABOVE THE INCOME OF RS. 875,080/- DISCLOSE D BY HIM IN HIS RETURN OF INCOME SUCH AS RS. 192,690/- FOR ALLEGED UNDERSTATEMENT OF INVESTMENT IN BUILDING, RS. 468,675/- OUT OF PROFESSIONAL RECEIPTS FROM OPD, RS . 28,710/- OUT OF X RAY RECEIPTS, RS. 73,260/- OUT OF PATHOLOGY RECEIPTS, R S. 360,954/- ON ACCOUNT OF INCOME OF MEDICAL STORE FOR WHICH IT WAS EXPLAINED BY THE ASSESSEE THAT INCOME IS DECLARED IN THE HANDS OF HIS WIFE SMT. ARCHANA SING H, RS. 111,500/- & RS. 346,000/- BEING SALARY DEBITED BY SMT. ARCHANA SING H AND DR. R. P. SINGH, RS. 10,396/- OUT OF CAR RUNNING & MAINTENANCE , RS. 2,4 72/- OUT OF TELEPHONE & MOBILE EXPENSES, RS. 13,500/- OUT OF ACCOUNTING CHARGES AN D RS. 15,577/- OUT OF DEPRECIATION ON CAR TOTAL RS. 16,23,736/-. IN THE C ASE OF SMT. ARCHANA SINGH, THE INCOME FROM MEDICAL STORES DECLARED BY HER HAS BEEN ADDED ON PROTECTIVE BASIS AFTER FURTHER ADDITION OF RS. 96,000/- BEING DISALL OWANCE OUT OF SALARY, RS. 1,854/- BEING DISALLOWANCE OUT OF TELEPHONE & MOBILE EXPENS ES AND RS. 9,266/- OUT OF TRAVELLING & CONVEYANCE EXPENSES TOTAL RS. 107,120/ -. BEING AGGRIEVED, BOTH THESE ASSESSES CARRIED THE MATTERS IN APPEAL BEFORE CIT ( A). ONE COMMON CONTENTION WAS THAT INCOME FROM MEDICAL STORES BE TAXED ON SUBSTAN TIVE BASIS IN THE HANDS OF SMT. ARCHANA SINGH AS AGAINST ADDED BY THE A.O. ON PROTE CTIVE BASIS IN HER HANDS AND SUBSTANTIVE BASIS IN THE HANDS OF DR. R. P. SINGH. LEARNED CIT (A) UPHELD THE ASSESSMENT ORDER ON THIS ASPECT AND NO RELIEF WAS A LLOWED. SECOND CONTENTION OF BOTH THESE ASSESSES WERE ABOUT VARIOUS DISALLOWANCE S MADE BY THE A.O. IN BOTH CASES. ON THIS ASPECT, PART RELIEF WAS ALLOWED BY L EARNED CIT (A) IN BOTH CASES. NOW BOTH THESE ASSESSES ARE IN FURTHER APPEAL BEFORE US ON BOTH ASPECTS. THE FIRST ASPECT TO BE DECIDED BY US IS ABOUT THE TAXABILITY OF INCO ME FROM MEDICAL STORES THAT IT SHOULD BE TAXED IN THE HANDS OF DR. R. P. SINGH OR SMT. ARCHANA SINGH AND THE SECOND ASPECT IS ABOUT PART DISALLOWANCES CONFIRMED BY CIT (A). 3 3. REGARDING FIRST ASPECT I.E. IN WHOSE HANDS THE I NCOME OF THE MEDICAL STORES BE TAXED, HE REITERATED THE SAME CONTENTIONS WHICH WER E RAISED BEFORE CIT (A) AS NOTED BY HIM IN PARA 6.1 OF HIS ORDER IN THE CASE O F DR. R. P. SINGH. REGARDING VARIOUS DISALLOWANCES, HE SUBMITTED THAT THE SAME A RE EXCESSIVE. HE SUBMITTED THAT FOR ESTIMATING THE OPD RECEIPTS, THE A.O. ALLOWED O NLY 38 HOLIDAYS AND LEARNED CIT (A) ALLOWED 52 SUNDAYS BUT APART FROM SUNDAYS, THER E ARE OTHER GAZETTE HOLIDAYS ALSO AND THE CLINIC REMAINS CLOSED WHEN THE ASSESSE E DR. R P SINGH IS UNWELL OR GOES OUTSIDE FOR PERSONAL WORK AND HENCE, MAXIMUM 300 WO RKING DAYS SHOULD BE CONSIDERED FOR THIS ESTIMATION. REGARDING NO. OF PA TIENTS CONSIDERED AT 70 PER DAY AND FEES AT RS. 70/- PER PATIENT UP TO 31.08.2009 A ND RS. 100/- THEREAFTER, HE SUBMITTED THAT IT INCLUDES REPEAT PATIENTS, WHO ARE NOT CHARGED AND FREE AND CONCESSIONAL PATIENTS ARE ALSO THERE. REGARDING X RAY & PATHOLOGY CHARGES, HE SUBMITTED THAT X RAY RECEIPTS ARE ESTIMATED BY CIT (A) AT RS. 3.12 LACS ON THE BASIS OF 300 WORKING DAYS AND 8 X RAY PER DAY WITH CHARGE S @ RS. 130/- PER X RAY AND PATHOLOGY RECEIPTS ARE ESTIMATED AT RS. 2.10 LACS O N THE BASIS OF 300 WORKING DAYS @ RS. 700/- PER DAY. HE FURTHER SUBMITTED THAT AFTE R CONSIDERING ALLOWABILITY OF COMMISSION OF 65% TO PATHOLOGISTS AND TO X RAY TECH NICIAN @ RS. 17/- PER X RAY, IT WAS HELD THAT NO ADDITION IS CALLED FOR ON THAT ACC OUNT BUT DISALLOWANCE OF RS. 52,855/- WAS MADE ON THIS BASIS THAT THIS EXPENDITU RE FOR PURCHASE OF CONSUMABLES X RAY AND ROUTINE INVESTIGATION WAS TO BE INCURRED BY THE TECHNICIAN AND NOT THE ASSESSEE. HE SUBMITTED THAT THESE EXPENSES ARE NOT FOR PATHOLOGY BUT FOR PURCHASING X RAY FILMS BECAUSE DEDUCTION OF RS. 17/ - PER X RAY ALLOWED TO TECHNICIAN IS FOR HIS LABOUR CHARGES AND OTHER CONSUMABLES EXC LUDING X RAY FILMS AND THEREFORE ALLOWABLE. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT IN THE APPEAL OF DR. R. P. SINGH, AS PER GROUND NO. 1, THE DISPUTE IS ABOUT ADDITION OF RS. 374,875/- UPHELD BY CIT (A) ON ACCOUNT OF OPD RECEIPTS AND RS. 52,85 5/- BEING ADDITION OUT OF X RAY & PATHOLOGY RECEIPTS. AS PER GROUND NO. 2, THE DISP UTE IS ABOUT DISALLOWANCE OF SALARY OF RS. 3.46 LACS. REGARDING THE ADDITION OF RS. 374,875/- UPHELD BY CIT (A) 4 OUT OF OPD RECEIPTS, WE FIND THAT HE HAS ADOPTED 31 3 WORKING DAYS AND 70 PATIENTS PER DAY AND RATE ADOPTED BY HIM IS RS. 70/- FOR 131 DAYS AND RS. 100/- FOR 182 DAYS. IN THE FACTS OF THE PRESENT CASE, WE HOLD THA T TOTAL WORKING DAYS FOR OPD CHARGES ALSO SHOULD BE TAKEN AT 300 DAYS AS WERE TA KEN BY CIT (A) FOR X RAY & PATHOLOGY. IT MEANS 25 DAYS PER MONTH AND HENCE 125 DAYS FOR 5 MONTHS ENDING ON 31.08.2009 AND 175 DAYS FOR 7 MONTHS FROM 01.09.200 9 TO 31.03.2010. CHARGES ARE OKAY @ RS. 70/- PER PATIENT UP TO 31.08.2009 AND RS . 100/- PER PATIENT THEREAFTER BUT NO. OF PATIENTS SHOULD BE CONSIDERED AT 60 PER DAY AFTER GIVING BENEFIT OF REPEAT PATIENT 5 PER DAY AND FREE PATIENT 5 PER DAY. IN TH IS MANNER, THE OPD CHARGERS COMES TO RS. 15,75,000/- AS AGAINST RS. 15,41,025/- SHOWN IN P & L ACCOUNT. SO ADDITION OF RS. 33,975/- ON THIS ACCOUNT IS CONFIRM ED AS AGAINST RS. 374,875/- UPHELD BY CIT (A). 4.1 REGARDING DISALLOWANCE OF RS. 52,855/-, WE FIND FORCE IN THE SUBMISSIONS OF LEARNED AR OF THE ASSESSEE THAT RS. 17/- PER DAY CO MMISSION IS PAID FOR SERVICE CHARGES AND OTHER CONSUMABLES FOR X RAY EXCLUDING X RAY FILMS, WHICH IS PURCHASED BY THE ASSESSEE BY SPENDING THIS AMOUNT OF RS. 52,8 55/-. TOTAL X RAYS ARE 2400 BEING 8 X RAY PER DAY FOR 300 DAYS. COST PER X RAY FILM COMES TO RS. 22/- APPROX. IF IT IS ACCEPTED THAT THIS AMOUNT OF RS. 52,855/- IS SPENT FOR PURCHASING 2400 X RAY FILMS. IN OUR CONSIDERED OPINION, IT IS REASONABLE BECAUSE COST OF RS. 17/- PER X RAY PAID TO TECHNICIAN CANNOT COVER THE LABOUR CHARGES, CONSUMABLES FOR WASHING THE FILM ETC AS WELL AS COST OF X RAY FILM. HENCE, WE D ELETE THIS DISALLOWANCE. 4.2 REGARDING DISALLOWANCE OUT OF RS. 3.46 LACS OUT OF SALARY OF RS. 6.40 LACS, WE FIND THAT AS PER THE PARA 5 OF THE ASSESSMENT ORDER , THE A.O. ALLOWED DEDUCTION OF RS. 2.94 LACS AS ALLOWABLE SALARY ON THIS BASIS THA T MONTHLY SALARY OF RS. 24,500/- IS INCURRED. THIS INCLUDES RS. 8,500/- PER MONTH FOR M EDICAL STORE AND RS. 6,000/- PER MONTH FOR X RAY TECHNICIAN AND PATHOLOGY TECHNICIAN . THE ANNUAL TOTAL OF THESE TWO SALARIES COMES TO RS. 1.74 LACS. IF THIS IS ADD ED TO THE DISALLOWED AMOUNT OF RS. 3.46 LACS, THE TOTAL COMES TO RS. 5.20 LACS. IT WAS THE CONTENTION OF THE LEARNED AR 5 OF THE ASSESSEE THAT COMMISSION TO PATHOLOGY TECHNI CIAN @ 65% AND TO X RAY TECHNICIAN @ RS. 17/- PER X RAY IS INCLUDED IN SALA RY CLAIMED AND IT SHOULD BE ALLOWED. WE FIND FORCE IN THIS CONTENTION. THE AMOU NT OF 65% COMMISSION OF RS. 2.10 LACS TO PATHOLOGY TECHNICIAN COMES TO 136,500/ - AND TO X RAY TECHNICIAN @ RS. 17/- PER X RAY FOR 2400 X RAY IN THE YEAR COMES TO RS. 40,800/- TOTAL RS. 177,300/-. HENCE, THE DISALLOWANCE OF RS. 342,700/ ( RS. 520,000/- MINUS RS. 177,300/- ) IS CONFIRMED OUT OF RS. 3.46 LACS CONFI RMED BY CIT (A). WE WANT TO MAKE IT CLEAR THAT SALARY OF RS. 8,500/- PER MONTH TOTAL RS. 1.02 LACS WILL BE CONSIDERED AS ALLOWABLE WHILE COMPUTING INCOME OF M EDICAL STORE. 5. NOW WE DECIDE THE COMMON ISSUE I.E. QUANTUM OF I NCOME OF MEDICAL STORES AND IN WHOSE HANDS IT SHOULD BE TAXED. REGARDING QU ANTUM, WE FIND THAT RS. 360,954/- IS DECLARED BY SMT. ARCHANA SINGH AND APA RT FROM MAKING DISALLOWANCE OF SALARY OF RS. 96,000/-, RS. 1854/- OUT OF TELEPHONE EXPENSES AND RS. 9266/- OUT OF TRAVELLING AND CONVEYANCE, NO ADDITION IS MADE. WE HAVE NOTED IN THE ABOVE PARA THAT SALARY OF RS. 102,000/- TO STAFF OF MEDICAL ST ORES IS DISALLOWED OUT OF SALARY EXPENSES OF RS. 6.40 LACS CLAIMED BY DR. R. P. SING H BUT IT WILL BE ALLOWED AS DEDUCTION WHILE COMPUTING INCOME OF THE MEDICAL STO RE. HENCE AGAINST THE INCOME OF RS. 467,974/- (RS. 360,854/- PLUS RS. 96,000/- P LUS RS. 1854/- AND RS. 9266/-), WE ALLOW DEDUCTION OF SALARY OF RS. 1.02 LACS AND C OMPUTE THE INCOME OF THE MEDICAL STORE AT RS. 3,65,974/-. 5.1 NOW THE SECOND ASPECT I.E. IN WHOSE HANDS, IT S HOULD BE TAXED. WE FIND THAT IT WAS CLAIMED BEFORE CIT (A) THAT SMT. ARCHANA SINGH WAS KEEPING ADMINISTRATIVE CONTROL. IT WAS ALSO CLAIMED THAT SEPARATE BOOKS WE RE MAINTAINED AS PER WHICH INCOME WAS WORKED OUT. THE ADVERSE MATERIAL WAS THI S THAT TILL THE DATE OF SURVEY, NO DRUG LICENSE WAS OBTAINED. IN OUR CONSIDERED OPI NION, THIS IS NOT RELEVANT FOR DECIDING THAT IN WHOSE HANDS IT SHOULD BE TAXED BEC AUSE IT MAY BE ILLEGAL FOR WANT OF DRUG LICENSE BUT HAS TO BE TAXED IN CORRECT HAND S. IF IT IS NOT TAXED IN THE HANDS OF SMT. ARCHANA SINGH FOR WANT OF DRUG LICENSE, IT CANNOT BE TAXED IN THE HANDS OF 6 DR. R. P. SINGH ALSO FOR SAME REASON BECAUSE DRUG L ICENSE IS NOT THERE IN HIS NAME ALSO. FROM 27.03.2010, THE DRUG LICENSE IS OBTAINED IN THE NAME OF SMT. ARCHANA SINGH. IN EARLIER YEARS I.E. A.Y. 2007 08 TO 2009 10, INCOME FROM MEDICAL STORES WAS DECLARED IN THE HANDS OF SMT. ARCHANA SINGH AS PER COPY OF INCOME TAX RETURNS AND AUDITED ACCOUNTS AVAILABLE IN THE PAPER BOOK AN D THE SAME WAS ACCEPTED BY THE DEPARTMENT. THEREFORE, IN OUR CONSIDERED OPINIO N, AS PER THE PRINCIPLE OF CONSISTENCY AND IN THE FACTS OF THE PRESENT CASE AS DISCUSSED, THIS INCOME FROM MEDICAL STORES AS COMPUTED ABOVE AT RS. 365,974/- S HOULD BE TAXED IN THE HANDS OF SMT. ARCHANA SINGH. WE DIRECT THE A.O. ACCORDINGLY. THE ADDITION ON THIS ACCOUNT IN THE HANDS OF DR. R. P. SINGH IS DELETED AND IN THE CASE OF SMT. ARCHANA SINGH, SUBSTANTIVE INCOME OF RS. 365,974/- IS DIRECTED TO BE ASSESSED AS AGAINST INCOME RETURNED BY HER OF RS. 360,954/- AND ASSESSED BY TH E A.O. ON PROTECTIVE BASIS OF RS. 468,074/-. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) ( A. K. G ARODIA ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:29 /10/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGIST RAR