Olive Hospitals Private Limited, Hyd, Hyderabad V. ACIT, Circle-16(3), Hyd, Hyderabad

ITA 770/HYD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5155 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 10-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 04-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: D V ANJANEYULU
• Keywords: Revision of order; Opportunity of being heard; Audit objection; Difference of opinion; Assessment record; Change of opinion
• Section: 143(3); 142(1); 133A; 143(1); 205; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.770/HYD/2017 ASSESSMENT YEAR: 2012 - 13 OLIVE HOSPITALS PVT LTD., HYDERABAD. PAN: AABCO 0749 G VS. PRINCIPAL COMMISSIONER OF INCOME TAX - 4, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI D.V.ANJANEYULU REVENUE BY: SRI Y.V.S.T. SAI, CIT - DR DATE OF HEARING: 10.01.2019 DATE OF PRONOUNCEMENT: 30 .01.2019 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2012 - 13 AGAINST THE REVISION ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 DATED 22.03.2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ORDERS OF THE PRINCIPAL CIT - 4 ASSUMING JURISDICTION UNDE R SECTION 263 OF THE ACT ARE CONTRARY TO LAW AND FACTS OF THE APPELLANTS CASE AS THE ORDERS PASSED U/S 143(3) ARE NEITHER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE NOR COVERED UNDER NEWLY INSERTED EXPLANATION2 OF SECTION 263 W.E.F 1 ST JUNE, 2015 ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 35AD OF THE ACT. 2. THAT THE PROCEEDINGS U/S 263 OF THE ACT BY THE PR. CIT - 4 HAVE BEEN INITIATED ON ACCOUNT OF CHANGE OF OPINION ON THE BASIS OF SUGGESTION BY AUDIT PART BY TAKING VIEW T HAN THE VIEW EXPRESSED BY THE DEPARTMENT IN RESPONSE TO THE AUDIT OBJECTION BY NOT ACCEPTING THE AUDIT OBJECTION AND DEFENDING THAT THE ACTIVITY OF THE COMPANY IS FULLY COVERED U/S 35AD, WHICH IS NOT PERMITTED BY LAW. ] 2 3. THE JURISDICTION U/S 263 BY THE PR. CIT - 4 WRONGLY ASSUMED AS THE A.O. AFTER SCRUTINIZING ALL THE DETAILS, MAKING ENQUIRIES, PROPER VERIFICATION AND CONSIDERATION OF THE ENTIRE MATERIAL ON RECORD HAD ALLOWED THE CLAIM U/S 35ADAFTER DUE APPLICATION OF MIND. THE SAID STAND ALSO GETS CO NFIRMED FROM THE FACT THAT THE DEPARTMENT IN RESPONSE TO THE AUDIT OBJECTION RAISED BY THE AG OFFICE DURING REVENUE AUDIT HAS NOT ACCEPTED THE AUDIT OBJECTION AND DEFENDED THAT THE ACTIVITY OF THE COMPANY IS FULLY COVERED U/S 35AD. 4. FOR THESE AND OTHER REASONS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THE HONBLE TRIBUNAL TO KINDLY SET ASIDE THE ORDER PASSED BY THE PR. CIT - 4. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SPECIALITY HOSP ITALS. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13ON 28.09.2012 ADMITTING A LOSS OF RS. 6,27,55,359/ - . THE RETURN OF INCOME WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT . THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY U/S CASS AND ACCO RDINGLY THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED 30.03.2015. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT THERE WAS A SURVEY U/S 133A ON 21.01.2014 IN THE BUSINESS PREMISES OF THE ASSESSEE. THE ASSESSING OFFICER CA LLED FOR THE BOOKS OF ACCOUNT OF THE ASSESSEE - COMPANY ALONG WITH THE SUPPORTING BILLS / VOUCHERS FOR THE EXPENDITURE DEBITED TO P & L ACCOUNT ETC. THE ASSESSEE SUBMITTED THE INFORMATION CALLED FOR AND ON VERIFICATION OF THE SAME, THE A.O. OBSERVED THAT TH E MAIN OBSERVATION OF THE SURVEY TEAM WAS THAT THE ASSESSEE - COMPANY HAS MADE CERTAIN PAYMENTS TO DOCTORS WHO HAVE REFERRED PATIENTS TO THE HOSPITAL WHICH ARE DEBITED TO P & L ACCOUNT UNDER THE HEAD REFERRAL PAYMENTS. A.O. OBSERVED SUBSEQUENT TO SURVEY O PERATIONS, VIDE LETTER DATED 04.02.2014 THE ASSESSEE AGREED FOR THE DISALLOWANCE OF A PORTION OF PAYMENTS TO THE DOCTORS TO AVOID FURTHER LITIGATION AND ACCORDINGLY, THE A.O DISALLOWED A SUM OF RS. 11,30,073/ - AND BROUGHT IT TO TAX. 3 SUBSEQUENTLY, THE CIT ASSUMED JURISDICTION U/S 263 OF THE ACT AND ON PERUSAL OF THE ASSESSMENT RECORD, HE CAME TO THE CONCLUSION THAT THE ASSE SSEE WAS ALLOWED DEDUCTION U/S 35AD OF THE ACT BY THE AO WITHOUT PROPER VERIFICATION AND THUS ACCORDING TO THE CIT, THE ASSESSMENT ORDER HAS BECOME ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HE ACCORDINGLY , DIRECTED THE A.O. TO RE - DO THE ASSESSMENT AFTER EXAMINING THE CLAIM U/S 35AD IN DETAIL AND PROVIDING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE - COMPANY TO SUBSTANTIATE THE CLAIM. AGAINST THIS ORDER OF CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSE L FOR THE ASSESSEE , WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE CIT , SUBMITTED THAT THE CIT HAS INITIATED THE 263 PROCEEDINGS ONLY ON THE BASIS OF AUDIT OBJECTION AND HAS NOT APPLIED HIS MIND TO COME TO THE CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE FURTHER SUBMITTED THAT THE A.O. HAS CALLED FOR THE RELEVANT MATERIAL RELATING TO THE DEDUCTION U/S 35AD OF THE ACT DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) AND THAT THE ASSESSEE - COMPANY HA D PRO DUCED SUCH INFORMATION BEFORE THE A.O. AND THEREFORE, IT CANNOT BE SAID THAT THE A.O. HAS NOT APPLIED HIS MIND TO THE CLAIM OF THE ASSESSEE MAKING THE ASSESSMENT ORDER ERRONEOUS. HE HAS DRAWN OUR ATTENTION TO THE SUBMISSIONS OF THE ASSESSEE BEFORE THE A.O . DATED 10/11/2014 AND ASSESSEES REPLY DATED 04/11/2015 , 12/09/2015 TO THE NOTICE ISSUED U/S 142(1) OF THE ACT, WHEREIN AT POINT NO.6 THE ASSESSEE SUBMITTED AS UNDER: 6. PROOF THAT HOSPITAL IS A 100 BEDDED HOSPITAL AND IS ENTITLED TO CLAIM DEDUCTION U/S 35AD IS ENCLOSED HEREWITH AS APPROVED AND GIVEN BY CHIEF COMMISSIONER OF INCOME TAX VIDE PROCEEDINGS DATED 17/10/2012 ON THE BASIS OF LETTER DATED 09/10/2012 RECEIVED FROM CENTRAL GOVT HEALTH SCHEME BASED ON INFORMATION GATHERED AND CERTIFIED BY THE ADDI TIONAL DIRECTOR CGHS EVIDENCING HOSPITAL IS HAVING 122 BEDS. 4 4. THUS, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, RELEVANT MATERIAL HAS BEEN SUBMITTED BEFORE THE A.O. AND AFTER BEING SATISFIED WITH THE ALLOWABILITY OF THE ASSESSEE S CLAIM ONLY , THE A.O. HAS ALLOWED THE DEDUCTION U/S 35AD OF THE ACT. FURTHER, HE ALSO SUBMITTED THAT THE CIT HAS NOT BROUGHT OUT AS TO HOW THE ASSESSMENT ORDER HAS CAUSED PREJUDIC E TO THE INTEREST OF REVENUE AND THEREFORE, THE TWIN CONDITIONS OF SECTION 263 OF THE ACT ARE NOT SATISFIED AND THE REVISION ORDER NEEDS TO BE SET - ASIDE. HE RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF THE ABOVE CONTENTION: 1. MOIL LTD VS. CIT [2017] 396 ITR 244 (BOM.) 2. CIT VS. RELIANCE COMMUNICATION LTD [2017] 396 ITR 217 (BOM.) 3. CIT VS. NIRAV MODI [2016] 390 ITR 292 (BOM.) 4. LANCO KONDAPALLI POWER LTD VS. JC IT [2014] 152 ITD 132 5. CIT AND ANOTHER VS. GOKULDAS ESPORTS, PAPRIKA, WEAL MONUMERTAL MEMORIALS [2011] 333 ITR 214 6. CIT VS. G.K. KABRA [1995] 251 ITR 707 (CAL.) 7. UNIPRO TECHNO INFRASTRUCTURE (P) LTD VS. PCIT (2017) 185 TTJ 205 8. JEEWANLAL LTD VS. ACIT [1977] 108 ITR 407 (CAL) 5. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS START ED THE HOSPITAL ON 14 TH MAY, 2010 AND IN PRO OF THEREOF , THE NEWS PAPER CUTTINGS ARE FILED IN THE PAPER BOOK. THE ASSESSEE HAS RECEIVED A CERTIFICATE OF TEMPORARY REGISTRATION OF A.P. ALLOPATHIC PRIVATE MEDICAL CARE ESTABLISHMENTS ON 16.06.2010. THE ASSESSE E HAS MADE AN APPLICATION FOR EXEMPTION U/S 17(2)(II)(B) TO THE INCOME TAX DEPARTMENT ON 18.08.2011 AND THE APPROVAL WAS GRANTED VIDE LETTER DATED 17.10.2012. THEREFORE, IT IS CONCLUDED THAT THE HOSPITAL HAD BEEN SETUP AND THE ASSESSEE HAS STARTED ITS OPERATIONS FROM THE DATE OF INAUGURATION OF THE HOSPITAL. THE GROUND ON WHICH THE CIT HAS 5 REVISED THE ASSESSMENT ORDER IS THAT THE A.O HAS NOT VERIFIED THE CLAIM OF DEDUCTION U/S 35AD OF THE ACT THEREBY MAKING THE ASSESSMENT ORDER ERRONEOUS. IT IS SE TTLED LAW THAT TO REVISE AN ASSESSMENT ORDER, THE CIT SHOULD BE SATISFIED THAT THE ORDER OF THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE FIND THAT DURING THE PROCEEDINGS U/S 263 OF THE ACT, THE ASSESSEE HAS FILE D ALL THE DETAILS BEFORE THE CIT, BUT HE HAS FAILED TO CONSIDER THE SAME . W ITHOUT BRINGING O N RECORD AS TO HOW THE NON - CONSIDERATION OF THE CLAIM U/S 35AD HAS CAUSED PREJUDIC E TO THE INTEREST OF REVENUE, HE HAS REMITTED THE MATTER TO THE FILE OF THE A.O W ITH A DIRECTION TO RE - DO THE ASSESSMENT AFTER EXAMINING THE CLAIM U/S 35AD IN DETAIL. THEREFORE, ACCORDING TO US, THE CIT HAS FAILED TO FULFIL THE TWIN CONDITIONS U/S 263 OF THE ACT FOR MAKING THE REVISION. 7. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. G.R. TANGAMALIGAI [2003] 259 ITR 129 HAS HELD THAT IN THE ABSENCE OF ANY FINDING THAT THERE IS LOSS OF REVENUE, INTERFERENCE U/S 263 IS NOT JUSTIFIED. SIMILAR VIEW WAS TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL AT CHANDIGARH IN THE CASE OF P UNJAB WOOL SYNDICATE VS. ITO [2012] 17 ITR (T) 439 (CHANDIGARH). FURTHER, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASHISH RAJPAL [2010] 320 ITR 674 (DELHI) AND ALSO IN THE CASE OF CIT VS. VIKAS POLYMERS [2012] 341 ITR 0537 (DEL.) HAS HELD THAT WHERE THE ASSESSING OFFICER DURING THE SCRUTINY ASSESSMENT PROCEEDINGS HAS RAISED A QUERY WHICH WAS ANSWERED BY THE ASSESSEE TO THE SATISFACTION OF THE ASSESSING OFFICER BUT THE SAME WAS NOT REFLECTED IN THE ASSESSMENT ORDER, THE CONCLUSION CANNOT BE DRAWN BY THE COMMISSIONER THAT NO PROPER ENQUIRY WITH RESPECT TO THE ISSUE WAS MADE BY THE ASSESSING OFFICER WHICH ENABLED HIM TO ASSUME JURISDICTION U/S 263 OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD [2012] 343 I TR 329 (DELHI) 6 HAS HELD THAT THE COMMISSIONER CANNOT REMAND THE MATTER TO THE ASSESSING OFFICER TO DECIDE WHETHER THE FINDING RECORDED ARE ERRONEOUS WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS AND HOW THAT IS SO. 8. WE FIND THAT IN THE CASE BEFORE US ALSO, T HE COMMISSIONER HAS NOT EXAMINED AND DECIDED AS TO HOW THE ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE BUT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THE ASPECT , WHICH IS NOT PERMISSIBLE. 9. THEREFORE, R ESPECTFULLY FOLLO WING THE ABOVE DECISIONS ON THE ISSUE, WE HOLD THAT THE REVISION ORDER PASSED U/S 263 OF THE ACT DATED 22.03.2017 IS NOT SUSTAINABLE IN LAW. THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 10 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 T H JANUARY, 2019 . SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 30 TH JANUARY, 2019. OKK COPY TO: - 1) M/S. ANJANEYULU & CO., CHARTERED ACCOUNTANTS, 30, BHAGYALAKSHMI NAGAR, GANDHI NAGAR, HYDERABAD - 500 080. 2) PR. COMMISSIONER OF INCOME TAX - 4, HYDERABAD. 3) THE CIT - 4 , HYDERABAD 4) THE ACIT, CIRCLE - 16(3) , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE