DCIT, New Delhi V. M/s. QRG Central Hospital & Research Centre Ltd., Delhi

ITA 6188/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3947 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 12-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPAK GARG SENIOR
• Assessee Lawyers: VP BANSAL
• Keywords: Bogus purchase; Gift; Opportunity of being heard; Bad and doubtful debts; Capital expenditure
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6188/DEL./2014 (ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE 14 (1), VS. M/S. QRG CENTRAL HOSPITAL & RESEARCH NEW DELHI. CENTRE LIMITED, 1, RAJ NARAIN MARG, CIVIL LINES, DELHI 110 017. (PAN : AAACQ1682M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.P. BANSAL, CA REVENUE BY : SHRI DEEPAK GARG, SENIOR DR DATE OF HEARING : 28.09.2017 DATE OF ORDER : 13.10.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, C IRCLE 14 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 06.08.2014 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-XVII, NEW DELHI QUA THE ASSESSMENT YEAR 2 010-11 ON THE GROUNDS INTER ALIA THAT :- (1) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING ITA NO.6188/DEL./2014 2 THE ADDITION OF RS.65,516/- MADE BY THE AO HOLDING AS CAPITAL IN NATURE IGNORING THE FACTS THAT THE ASSESSEE ITSELF ADMITTED THE EXPENDITURE INCURRED ON REPLACEMENT OF OLD FURNITURE. (2) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.L,05,000/- IGNORING THE FACTS OF THE EASE THAT THE ASSESSEE HAS FAILED TO EXPLAIN TH E PURPOSE OF INCREASING THE WORKING CAPITAL OVER DRAFT FACILITY ON WHICH THE FEES IN QUESTION PAID T O THE BANK. (3) ON THE FACTS AND UNDER CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.3,35,780/- IGNORING THE FACTS THAT THE ASSESSEE HAS NOT ESTABLISHED THAT TH E SAID EXPENDITURE WAS INCOME FOR THE BUSINESS OF THE ASSESSEE AND FAILED TO PROVIDE THE IDENTITY AND CONFIRMATION OF THE PERSONS THE WHOM THE GIFTS WERE GIVEN WHICH WERE PURCHASED IN CASH IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD OF THE IT RULES. (4) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING TO ADDITION OF RS.69,874/- MADE BY THE AO ON ACCOUNT OF THE BAD DEBTS ON THE BASIS OF LETTER PRODUCED BY THE ASSESSEE WITHOUT REFERRING THE SAME TO THE AO FOR ITS VERIFICATION. (5) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,00,00,000/- IGNORING THE FACTS THAT THE ASSESSEE COMPANY IS REQUIRED TO SHOW THE CLOSING STOCK AS PER 12 OF THE MOU, WHICH WAS NOT SHOWN IN THE BALANCE SHEET AS ON 31.03.2010. (6) IN THE FACTS AND CIRCUMSTANCES, THE LD. C1T(A) ERRED IN DELETING THE ADDITION OF RS.2,52,000/- MADE ON ACCOUNT OF RENT TREATED AS UNVERIFIABLE BY THE AO ON THE BASIS OF LETTER ITA NO.6188/DEL./2014 3 PRODUCED BY THE ASSESSEE WITHOUT REFERRING THE SAME TO THE AO FOR ITS VERIFICATION. (7) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,24,44,143/- MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES IGNORING THE FACTS OF THE CASE THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE WERE FOUND NOT EXISTING AND THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY O F PERSONS FROM WHOM THE PURCHASES WERE MADE BY THE ASSESSEE. (8) IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,24,44,143/- MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES MADE BY THE AO ON THE BASIS OF LETTER PRODUCED BY THE ASSESSEE WITHOUT REFERRING THE SAME TO THE AO FOR ITS VERIFICATION. (9) IN THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.10,07,441/- OUT OF RS.16,43,824/- MADE BY THE A.O. ON ACCOUNT OF CONSULTANCY CHARGES ON THE BASIS OF A LETTER PRODUCED BY THE ASSESSEE WITHOUT REFERRING TO THE A.O. FOR ITS VERIFICATION. (10) IN THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,00,000/-- MADE BY THE A.O. ON ACCOUNT OF SUNDRY CREDITORS ON THE BASIS OF A LETTER PRODUCED BY THE ASSESSEE WITHOUT REFERRING TO THE A.O. FOR ITS VERIFICATION. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE : DURING SCRUTINY PROCEEDIN G, ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.65,516/- AND RS.1,05,000/- ON ACCOUNT OF REPAIR EXPENSES AND COST OF CHANGE RO OM CABINET AND ON ACCOUNT OF PROCESSING FEE PAID TO IDBI BANK LTD. FOR ITA NO.6188/DEL./2014 4 SANCTIONING OF THE WORKING CAPITAL OVERDRAFT FACILI TY RESPECTIVELY BY TREATING THE SAME AS CAPITAL EXPENDITURE. AO FURTHE R DISALLOWED AN AMOUNT OF RS.3,35,780/- CLAIMED TO HAVE BEEN INCURR ED BY THE ASSESSEE ON GIFTS ON DIWALI ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE THE EVIDENCE FOR DISTRIBUTING THE SAID GIFTS NOR FILED DETAILS OF THE PARTIES AND CONFIRMATION FROM THEM. AO FURTHER DISALLOWED AN AMOUNT OF RS.69,874/- ON ACCOUNT OF B AD DEBTS ON THE GROUND THAT NO EFFORTS TO EFFECT THE RECOVERY H AS BEEN MADE BY THE ASSESSEE. AO FURTHER MADE AN ADDITION OF RS.1, 00,00,000/- ON ACCOUNT OF CLOSING STOCK OF CONSUMABLES AND MEDICIN ES ON THE GROUND THAT AN AVERAGE STOCK AMOUNTING TO RS.1,00,0 0,000/- NEEDS TO BE MAINTAINED BUT THE ASSESSEE HAS FAILED TO SHO W SUCH STOCK IN ORDER TO ESCALATE THE LOSSES. AO ALSO DISALLOWED A N AMOUNT OF RS.2,52,000/- PAID TO JAGMOHAN GARG (HUF) ON THE GR OUND THAT THE NOTICE SENT U/S 133 (6) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) TO JAGMOHAN GARG (HUF) AT THE ADDRESS GIVEN B Y THE ASSESSEE RECEIVED BACK UNSERVED AND AS SUCH, PAYMEN T OF THE RENT HAS NOT BEEN PROVED. AO FURTHER DISALLOWED AN AMOU NT OF RS.1,24,44,143/- ON THE GROUND THAT NO CONFIRMATION HAS BEEN RECEIVED FROM THE PARTIES IN RESPONSE TO THE NOTICE ISSUE U/S 133 (6) OF THE ACT DATED 15.01.2013. AO FURTHER DISALLOWED AN AMOUNT OF RS.16,43,824/- PAID TO DR. SHUCHI DINGRA, DR. MANIS H, DR. ITA NO.6188/DEL./2014 5 SWATANTRA MISHRA AND DR. SEEMA JAIN AGAIN FOR LACK OF CONFIRMATION MADE BY THEM IN COMPLIANCE TO THE NOTI CES ISSUED U/S 133 (6) OF THE ACT. AO FURTHER DISALLOWED AN AMOUN T OF RS.7,00,000/- BEING AN AMOUNT PAYABLE TO THE SUNDRY CREDITORS ON THE GROUND THAT NAMES OF SUCH SUNDRY CREDITORS ARE NOT THERE IN THE BALANCE SHEET. 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITIONS AND A LLOWED THE APPEAL . FEELING AGGRIEVED, THE REVENUE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER P ASSED BY LD. CIT (A) . 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. WHEN IT IS NOT IN DISPUTE THAT THE EXPENDITURE O F RS.65,516/- HAS BEEN INCURRED BY ASSESSEE ON REPAIR OF ROOM CAB INET, QUA WHICH ALL THE NECESSARY DOCUMENTS HAVE BEEN PERUSED BY TH E AO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS RIG HTLY TAKEN THE VIEW THAT NO NEW ASSET HAS BEEN CREATED OF ENDURING BENEFIT AND AS SUCH, THE EXPENDITURE IS IN THE NATURE OF REVENUE E XPENDITURE. SO, ITA NO.6188/DEL./2014 6 WE CONFIRM THE FINDINGS RETURNED BY LD. CIT (A). C ONSEQUENTLY, GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. GROUND NO.2 6. ASSESSEE CLAIMED EXPENDITURE OF RS.1,05,000/- IN CURRED ON ACCOUNT OF PROCESSING FEES PAID TO IDBI BANK LTD. F OR INCREASE IN WORKING CAPITAL OVERDRAFT FACILITIES AS REVENUE EXP ENDITURE. WHEN ADMITTEDLY THERE IS NO CAPITAL CREATION WITH THE LO AN FACILITIES AVAILED OF BY THE ASSESSEE, THE WORKING CAPITAL OVE RDRAFT FACILITY CANNOT BE KEPT UNDER THE CATEGORY OF CAPITAL EXPENS ES, RATHER WORKING CAPITAL OVERDRAFT FACILITY IS OFTENLY USED TO RUN DAY-TO-DAY BUSINESS . HENCE, THE LD. CIT (A) HAS RIGHTLY DELETED THE A DDITION OF RS.1,05,000/- BY TREATING THE SAME AS REVENUE EX PENDITURE. SO, GROUND NO.2 IS DETERMINED AGAINST THE REVENUE. GROUND NO.3 7. ASSESSEE CLAIMED EXPENDITURE OF RS.3,35,780/- IN CURRED ON DIWALI GIFTS AND SWEETS GIVEN TO THE OUTSOURCED DOC TORS. LD. CIT (A) DELETED THE ADDITION ON THE GROUND THAT SHE HAS PERUSED THE DOCUMENTS WHICH WERE ALSO SHOWN TO THE AO. BUT THE LD. AR HAS FAILED TO BRING ON RECORD ANY SUCH DOCUMENTS TO PRO VE THE HIRING OF SERVICES OF THE DOCTORS NOR IT IS PROVED ON RECORD IF THE DOCTORS TO WHOM THE GIFTS ARE GIVEN ARE ON THE ROLL OF THE ASS ESSEE OR ARE ITA NO.6188/DEL./2014 7 RENDERING SERVICES SINCE LONG. NO DOUBT CONFIRMATI ON FROM THE DOCTORS TO WHOM THE GIFTS ARE CLAIMED TO HAVE BEEN GIVEN BY THE ASSESSEE CANNOT BE OBTAINED BUT THE ASSESSEE IS REQ UIRED TO BRING ON RECORD THE EVIDENCE TO PROVE THAT SUCH AND SUCH SER VICES HAVE BEEN RENDERED BY THE SAID DOCTORS. SO, WE ARE OF THE CO NSIDERED VIEW THAT THIS ISSUE IS REQUIRED TO BE REMANDED BACK TO THE AO TO DECIDE AFRESH AFTER CONDUCTING VERIFICATION OF THE FACT TH AT SUCH AND SUCH SERVICES WERE ACTUALLY RENDERED BY THE SAID DOCTORS AND THEIR SERVICES WERE NECESSARY TO RUN THE DAY-TO-DAY BUSIN ESS OF THE ASSESSEE. IN CASE THIS IS PROVED THEN THESE EXPENS ES ARE CERTAINLY TO BE TREATED AS REVENUE EXPENSES. SO, GROUND NO.3 IS DETERMINED IN FAVOUR OF THE REVENUE FOR STATISTICAL PURPOSES. GROUND NO.4 8. AO DISALLOWED AN AMOUNT OF RS.69,874/- CLAIMED B Y THE ASSESSEE ON ACCOUNT OF BAD DEBTS ON THE SOLE GROUND THAT NO EFFORTS FOR RECOVERY OF SUCH BAD DEBTS HAVE BEEN MADE BY TH E ASSESSEE. WHEN THE ASSESSEE HAS PROVED ON RECORD THAT THE DEB TS INCURRED WERE ON REVENUE ACCOUNT AND THIS FACT HAS NOT BEEN DISPUTED BY THE AO THAT THE DEBTS HAVE BECOME BAD AND SOME HAVE BEE N WRITTEN OFF AND TAKEN INTO ACCOUNT IN COMPUTING THE INCOME IN P REVIOUS YEAR, WE FIND NO GROUND TO INTERFERE INTO THE FINDINGS RE TURNED BY LD. CIT ITA NO.6188/DEL./2014 8 (A) DELETING THE ADDITION OF RS.69,874/-. HENCE, G ROUND NO.4 IS DETERMINED AGAINST THE REVENUE. GROUND NO.5 9. AO MADE AN ADDITION OF RS.1,00,00,000/- ON ACCOU NT OF CLOSING STOCK OF CONSUMABLES AND MEDICINES WHICH HA S BEEN DELETED BY THE LD. CIT (A). AO HAS MADE DISALLOWAN CE ONLY ON THE GROUND THAT THE ASSESSEE WAS NOT DISCLOSING ANY STO CK AND WAS SHOWING ONLY FICTITIOUS LOSSES. WHEN THE ASSESSEE HAS PROVED ON RECORD THAT SERVICES OF PHARMACY AND PATH LAB WERE OUTSOURCED AND REMAINING ITEMS WERE BROUGHT AS AND WHEN REQUIRED, THERE USED TO BE NO STOCK AS CONSUMABLES ON PHYSICAL VERIFICATION . SO, AGAIN, WE FIND NO GROUND TO INTERFERE WITH THE FINDINGS RETUR NED BY LD. CIT (A). HENCE, GROUND NO.5 IS ALSO DETERMINED AGAINST THE REVENUE. GROUND NO.6 10. AO DISALLOWED AN AMOUNT OF RS.2,52,000/- PAID T O JAGMOHAN GARG (HUF) ON ACCOUNT OF RENT PAID. SINCE LD. CIT (A) DELETED THE ADDITION AFTER VERIFYING THE FACT THAT THE PAYMENT HAS BEEN MADE AS PER AGREEMENT, AVAILABLE AT PAGES 63 TO 65 AND 66 T O 77 OF THE PAPER BOOK, AND THE FACT THAT THE PAYMENT HAS BEEN MADE THROUGH BANKING CHANNEL TO THE LANDLORDS DIRECTLY AND AS SU CH, THERE WAS NO NEED TO CONFIRM THESE FACTS FROM LANDLORDS. AGAIN, WE FIND NO ITA NO.6188/DEL./2014 9 GROUND TO INTERFERE IN THE FINDINGS RETURNED BY LD. CIT (A), HENCE GROUND NO.6 IS DETERMINED AGAINST THE REVENUE. GROUND NOS.7 & 8 11. AO DISALLOWED THE AMOUNT OF RS.1,24,44,143/- ON ACCOUNT OF PURCHASES OF CONSUMABLES FOR LACK OF CONFIRMATION M ADE BY THE PARTIES FROM WHOM SUCH CONSUMABLES WERE PURCHASED E VEN AFTER ISSUANCE OF NOTICE U/S 133 (6) OF THE ACT. HOWEVER , LD. CIT (A) DELETED THE ADDITION BY OBSERVING THAT ALL THE COPI ES OF BILLS WERE PRODUCED BEFORE THE AO AND ALL THE BOOKS OF ACCOUNT S AND RECORDS WERE SHOWN. LD. CIT (A) ALSO RELIED ON PARA 1 OF T HE ASSESSMENT ORDER WHEREIN IT IS MENTIONED BY THE AO THAT DETAIL ED DOCUMENTS WERE SUBMITTED. 12. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT FIR ST OF ALL, AO HAS WRITTEN IN PARA 1 OF THE ASSESSMENT ORDER THAT THE LD. AR APPEARED FROM TIME TO TIME AND SUBMITTED DETAILS AN D DOCUMENTS BUT NOWHERE STATED THAT THE DETAILED DOCUMENTS WERE SUBMITTED. ON THE OTHER HAND, AO HAS CATEGORICALLY MENTIONED I N THE ASSESSMENT ORDER THAT NO CONFIRMATION RECEIVED AS T O THE PURCHASE OF THE CONSUMABLES FROM THE PARTIES EVEN AFTER THE ISSUANCE OF THE NOTICE U/S 133 (6) OF THE ACT. IN THESE CIRCUMSTAN CES, THE FINDINGS RETURNED BY THE LD. CIT (A) DELETING THE ADDITION O F ITA NO.6188/DEL./2014 10 RS.1,24,44,143/- ARE CRYPTIC AND NON-SPEAKING ONE. SO, WE REMAND THIS ISSUE BACK TO THE LD. CIT (A) TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE PARTIES. CONS EQUENTLY, GROUNDS NO.7 & 8 ARE DETERMINED IN FAVOUR OF THE RE VENUE FOR STATISTICAL PURPOSES. GROUND NO.9 12. LD. CIT (A) DELETED THE ADDITION OF RS.16,43,82 4/- MADE BY THE AO ON ACCOUNT OF PAYMENT TO VARIOUS CONSULTANT DOCTORS ON THE GROUND THAT COPIES OF ITR AND COMPUTATION OF INCOME WAS FILED BEFORE AO AND SHE HAS ALSO VERIFIED THE DETAILS. O N THE OTHER HAND, WHEN WE EXAMINE THE ASSESSMENT ORDER, NO SUCH DOCUM ENTS HAVE BEEN BROUGHT BEFORE AO NOR THE CONCERNED DOCTORS HA VE FILED ANY CONFIRMATION DESPITE ISSUANCE OF THE NOTICE U/S 133 (6) OF THE ACT NOR THE LD. CIT (A) HAS CALLED UPON ANY REMAND REPO RT FROM THE AO. SO, IN THESE CIRCUMSTANCES, WE REMAND THIS ISS UE BACK TO THE FILE OF LD. CIT (A) TO DECIDE AFRESH AFTER PROVIDIN G AN OPPORTUNITY OF BEING HEARD TO THE PARTIES. CONSEQUENTLY, GROUN D NO.9 IS DETERMINED IN FAVOUR OF THE REVENUE FOR STATISTICAL PURPOSES. GROUND NO.10 13. LD. CIT (A) DELETED THE ADDITION OF RS.7,00,000 /- ON ACCOUNT OF SUNDRY CREDITORS MADE BY THE AO ON THE GROUND TH AT NO SUNDRY ITA NO.6188/DEL./2014 11 CREDITORS HAVE BEEN SHOWN IN THE BALANCE SHEET. LD . AR FOR THE ASSESSEE SUBMITTED THAT THE LIST OF SUNDRY CREDITOR S IS THERE AT PAGES 88 & 89 OF THE PAPER BOOK AND THE AMOUNT OF RS.7,00 ,000/- HAS BEEN CLAIMED AGAINST SHRI SANJIV GUPTA MENTIONED AT SL.NO.6 OF THE SUNDRY CREDITORS. HOWEVER, WE ARE OF THE CONSI DERED VIEW THAT THIS FACT IS REQUIRED TO BE VERIFIED BY THE AO IN T HE LIGHT OF THE BALANCE SHEET. SO, THIS ISSUE IS ALSO REMANDED BAC K TO THE AO TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEI NG HEARD TO THE PARTIES. CONSEQUENTLY, GROUND NO.10 IS DETERMINED IN FAVOUR OF THE REVENUE FOR STATISTICAL PURPOSES. 14. RESULTANTLY, APPEAL FILED BY THE REVENUE IS HER EBY PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF OCTOBER, 2017. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH DAY OF OCTOBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XVII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.