FATHIMA HOSPITAL P LTD, NAVI MUMBAI V. ACIT (A)-3, MUMBAI

ITA 7867/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2392 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 14-11-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Assessee Lawyers: SURESH SUBRAMANIAN
• Keywords: Depreciation; Revised return; Reason to believe
• Section: 40A(3); 143(3); 133A; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , ! '# , $ , % BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER / I .T.A. NO.7867/MUM/2010 ( / ASSESSMENT YEAR: 2000-01) M/S. FATHIMA HOSPITAL PVT. LTD. C/O. P.N.SUBRAMANIAN & CO, 703-704, 7 TH FLOOR, COMMODITY EXCHANGE BLDG., PLOT NO. 2,3 & 4, SECTOR 19, VASHI, NAVI MUMBAI - 400705 / VS. ACIT 11(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 020 & ./ ' ./ PAN/GIR NO. : AAACF1237B ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) ASSESSEE BY: SHRI . SURESH SUBRAMANIAN (AR) DEPARTMENT BY: SHRI. MOHAMMED RIZWAN 6 ! / DATE OF HEARING: 27.08.2015 789 6 ! /DATE OF PRONOUNCEMENT: 24.11.2015 : / O R D E R PER AMARJIT SINGH, JM: THE APPEAL IN ITA NO.7867/MUM/2010 FOR THE ASSESSME NT YEAR 2000-01 IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 26 -08-2010 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, MUMBAI [HER EINAFTER REFERRED TO AS THE LEARNED CIT(A)] PASSED IN APPEAL NO.CIT(A)-3/ ACIT 11(2)/IT-13/2008- 09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. YOUR APPELLANT FILED THEIR RETURN OF INCOME DEC LARING A LOSS OF RS. 81,725/=. ITA NO.7867/MUM/2010 ASSESSMENT YEAR: 2000-01 2 2. THE LEARNED ASSESSING OFFICER COMPLETED THE ASSE SSMENT UNDER SECTION 143(3) OF THE ACT, INTER ALIA ADDING A SUM OF RS. 41,81,42 5/= U/S 40A(3) OF THE ACT, AS THE PAYMENTS WERE MADE IN EXCESS OF RS. 20,000/= OTHERW ISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, 20% OF SUCH EXPENDITURE WAS NOT ALLOWED AS DEDUCTION. ACCORDINGLY, ADDITION OF RS. 8,36,249/= BEING PROFESSIONAL PAID IN CASH WAS MADE U/S 40A(3). 3. THE LEGAL VERACITY OR ADMISSIBILITY OF THE EXPEN SES ARE NOT DISPUTED AND ONLY AN ADHOC AMOUNT HAS BEEN ADDED WITHOUT ANY SCIENTIF IC BASIS. 4. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) W HO AFFIRMED THE AOS ASSESSMENT. IN NOT GOING INTO SECOND APPEAL, APPEL LANT HAD CHOSEN TO BUY PEACE WITH THE DEPARTMENT AS THAT THERE WAS NO TAX IMPLICATION AS APPELLANT HAD HUGE CARRIED FORWARD DEPRECIATION TO ITS CREDIT. 5. THE AO LEVIED PENALTY U/S 271(1)(C) FOR CONCEALM ENT/FURNISHING INACCURATE PARTICULARS IN RESPECT OF THIS AD-HOC DISALLOWANCE OF 20% I.E. RS. 8,36,249/=. IN AS MUCH AS THIS IS AN ADDITION BORNE OUT BY A LEGAL FI CTION, CONCEALMENT PENALTY OUGHT NOT TO BE LEVIED. 6. ON APPEAL BEFORE CIT(A) THE PENALTY LEVIED BY TH E AO WAS AFFIRMED; HENCE THE PRESENT APPEAL. 2. A SURVEY ACTION U/S. 133A OF THE INCOME TAX ACT ,1961 (IN SHORT THE ACT) WAS CARRIED OUT AT THE HOSPITAL PREMISES OF T HE ASSESSEE-COMPANY AT BANK ROAD, CALICUT, KERALA ON 25/02/2000 BY THE DEPUTY D IRECTOR OF INCOME TAX (INV.), CALICUT, IN PURSUANCE OF THE SEARCH AND SEI ZURE ACTION IN THE CASE OF DR. ROY CHALLY, WHO WAS A DOCTOR AND WAS ALSO PRACTICIN G FROM THE PREMISES OF THE ASSESSEE COMPANY. DURING THE COURSE OF THE SURVEY, IT WAS NOTICED THAT OPERATION CHARGES AMOUNTING TO RS. 1,97,16,764/- CO LLECTED BY THE HOSPITAL FROM THE PATIENTS DURING THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR UNDER CONSIDERATION HAD NOT BEEN ACCOUNTED FOR IN THE BOO KS OF THE ASSESSEE COMPANY. AS THERE WAS REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX AMOUNTING TO RS. 1,97,16,764/- HAD ESCAPED ASSESSMENT BY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVAN T TO ITS ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSMENT WAS REOPENED BY ISSUE OF A NOTICE U/S. 148 OF THE ACT ON 26/07/2005. IN RESPONSE TO THE SAI D NOTICE, THE ASSESSEES REPRESENTATIVE, M/S. P.N.SUBRAMANIAN & CO., CHARTER ED ACCOUNTANT, FILED A LETTER DATED 18/08/2005, STATING THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME ITA NO.7867/MUM/2010 ASSESSMENT YEAR: 2000-01 3 FOR THE YEAR UNDER CONSIDERATION ORIGINALLY ON 29/1 1/2000 AND SUBSEQUENTLY, A REVISED RETURN OF INCOME WAS FILED ON 25/10/2002. THE ASSESSEES REPRESENTATIVES STATED THAT THE SAME MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE INCOME TAX AC T. THEREAFTER, THE QUESTIONNAIRE WAS ISSUED AND IN PURSUANCE OF THE QU ESTIONNAIRE SHRI. SURESH SUBRAMANIAN, CHARTERED ACCOUNTANT ATTENDED THE CASE AND PRESENTED THE CASE OF THE ASSESSEE AND ALSO FILED THE WRITTEN SUBMISSION STATING THAT THE ASSESSEE HOSPITAL PAID AN AMOUNT OF RS. 41,81,245/- TO NINE DIFFERENT DOCTORS AND IT WAS ALSO NOTICED THAT THE HOSPITAL HAD ALSO COLLECTED A N AMOUNT OF RS.1,97,16,764/- FOR OPERATION CHARGES FORM THE PATIENT DURING THE R ELEVANT ASSESSMENT YEAR. THE ASSESSING OFFICER DISALLOWED THE PROFESSIONAL FEES EXPENDITURE OF AN AMOUNT OF RS. 41,81,245/- TO THE DOCTORS ON THE GROUND THAT T HE TRANSACTION WHICH HAS BEEN MADE EXCESS AN AMOUNT OF RS. 20,000/- IS NOT REQUIR ED TO BE ALLOWED, IF THE SAME WAS NOT DONE THROUGH BANKS. ACCORDINGLY, THE A.O. DISALLOWED A SUM OF RS. 8,36,249/-, BEING 20% OF RS. 41,81,245/- U/S 40 A(3) OF THE I.T. ACT. SUBSEQUENTLY, THE PENALTY ORDER U/S 271(1)(C) OF TH E ACT DATED 14/03/2008 WAS PASSED BY IMPOSING THE PENALTY TO THE TUNE OF RS. 3 ,21,956/- ON THE ABOVE SAID DISALLOWANCE, WHICH WAS ALSO CONFIRMED BY THE CIT(A )-3, MUMBAI BY VIRTUE OF AN ORDER DATED 26/08/2010, ACCORDINGLY THE ASSESSEE HOSPITAL IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE REPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE MATERIALS FILED. THE REPRESENTATIVE OF THE ASS ESSEE HAS ARGUED THAT IT IS NOT THE CASE OF CONCEALMENT OR FURNISHING INACCURATE PA RTICULARS. THEREFORE IN THE SAID CIRCUMSTANCE THE ORDER OF THE LD. CIT(A) DATED 26/08/2010 CONFIRMING THE ORDER OF ASSESSING OFFICER IS WRONG AND AN INTACT I T IS LIABLE TO BESET ASIDE. IT IS ALSO ARGUED THAT NON-COMPLIANCE OF THE PROVISIONS O F THE SECTION 40A(3) NOWHERE ATTRACT THE PROVISIONS OF PENALTY WHEN THE PARTICULARS WERE FURNISHED ACCURATELY. THEREFORE THE PENALTY IS NOT LEVIABLE ON THIS GROUND, IN VIEW OF THE ITA NO.7867/MUM/2010 ASSESSMENT YEAR: 2000-01 4 CASE LAWS IN THE CASE OF SALMAN KHAN VS ACIT (ITA 2 559&2560 ITAT MUMBAI), ACIT VS VIP INDUSTRIES(122 TTJ 289 ITAT MU MBAI), POONAM MARBLE PVT. LTD. VS DY. CIT (62 SOT 137 ITAT JODHPU R), GODAVARI TOWNSHIPS PVT. LTD. VS DCIT (103 DTR 1 ITAT VISHAKA PATTANAM), CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (2010)322 ITR 158 (SC). 4. ON THE OTHER HAND, THE LEARNED DR ARGUED THAT TH E ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS U/S 40A(3). THEREFORE, THE CLAIM OF THE ASSESSEE WAS RIGHTLY DISALLOWED AND THE SAID CLAIM LEADS TO THE PENALTY U/S 271(1)(C). THEREFORE, UNDER THE CIRCUMSTANCE, THE APPEAL FILED BY THE ASSESSEE IS LIABLE TO DISMISSED. 5. KEEPING IN VIEW THE ARGUMENTS ADVANCED BY THE LE ARNED REPRESENTATIVES OF BOTH THE PARTIES AND ON CAREFUL PERUSAL OF THE R ECORDS, IT CAME TO NOTICE THAT THE ASSESEES CLAIM FOR EXPENDITURE ON ACCOUNT OF P ROFESSIONAL FEES PAID TO THE DOCTORS, WHOSE NAMES HAVE BEEN MENTIONED IN THE ASS ESSMENT ORDER, TO THE TUNE OF RS. 41,81,245/-. IT WAS ALSO NOT UNDER DISP UTE THAT THE ASSESSEE-COMPANY HAS ALSO PAID TDS ALONG WITH INTEREST OF RS.2,78,26 0/- AS PER ORDER U/S. 201 READ WITH SECTION 194J OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 8,36,249/-, BEING 20% O F THE EXPENDITURE PAID TO THE DOCTORS TO THE TUNE OF RS. 41,81,245/- U/S 40A( 3) AND THE SAID AMOUNT WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. TH E ORDER OF THE ASSESSING OFFICER DATED 21/10/2005 WHICH SPEAKS THAT THERE IS NO CONCEALMENT OR FURNISHING INACCURATE PARTICULARS BY THE ASSESSEE. APPARENTLY, THE PRESENT CASE IS THE CASE U/S 271(1)(C). IN THIS REGARD WE FIND SUPPORT OF LAW SETTLED IN THE CASE OF SALMAN KHAN VS ACIT (ITA 2559&2560 ITAT MUM BAI), ACIT VS VIP INDUSTRIES(122 TTJ 289 ITAT MUMBAI), POONAM MAR BLE PVT. LTD. VS DY. CIT (62 SOT 137 ITAT JODHPUR), GODAVARI TOWNSHIPS P VT. LTD. VS DCIT (103 DTR 1 ITAT VISHAKAPATTANAM), RELIANCE PETRO PRODUCT S PVT. LTD. (2010)322 ITR 158 (SC). IN THE ABOVE CITED CASE, IT HAS BEEN HELD THAT THE DISALLOWANCE ITA NO.7867/MUM/2010 ASSESSMENT YEAR: 2000-01 5 MADE U/S. 40A(3) OF THE ACT CANNOT BE CONSIDERED TO BE A WRONGFUL CLAIM OF EXPENSES SO AS TO ATTRACT PENALTY. ACCORDINGLY WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN BY LEARNED CIT(A). ACCORDINGLY, WE SET ASIDE HIS ORDER AND DIRECT THE A.O. TO CANCEL THE IMPUGNED PENALTY 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 24 TH NOVEMBER, 2015 SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) / ACCOUNTANT MEMBER $ /JUDICIAL MEMBER MUMBAI; ; DATED : 24 TH NOVEMBER, 2015 MP MP MP MP / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. ? )$!$ , , / DR, ITAT, MUMBAI 6. ?@A / GUARD FILE. / BY ORDER, *=! )$! //TRUE COPY// / !' (DY./ASSTT. REGISTRAR) '# $ , / ITAT, MUMBAI