Income Tax Appellate Tribunal - Chandigarh
Smt. Bharti Bansal Prop., Patiala vs Assessee on 17 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL: "A" BENCH: CHANDIGARH
BEFORE SHRI H L KARWA, VP AND SHRI D K SRIVASTAVA, AM
ITA No. 957/Chd/2010
AY 2007-08
A.C.I.T. Circle, Patiala v. Smt. Bharti Bansal Prop. M/s Modern
Clinical Laboratory, Patiala
AARPB G
Cross objection No. 27/Chd/2010
Arising out of ITA No. 957/Chd/201
AY 2007-08
Smt. Bharti Bansal Prop. M/s Modern v A.C.I.T. Circle, Patiala
Clinical Laboratory, Patiala
Department By : Shri N.K. Saini
Assessee By: Shri Ashok Kumar Goel
Date of hearing: 17.11.2011
Date of pronouncement: 16 .01.2012
ORDER
D K Srivastava: The appeal filed by the Department and the memorandum of cross-objections filed by the assessee are directed against the order passed by the ld. CIT(A) on 26.4.2010. Both of them relate to AY 2007-08. The issues in both of them are common. We therefore find it convenient to dispose off both of them by a consolidated order.
2. In ITA No. 957/Chd/2010, the Department has taken the following grounds of appeal:
"1 In the facts and circumstances of the case, the ld. CIT(A) has erred in holding that the book results of the assessee should not be rejected in-toto even w hen the assessee had failed to maintain case/patient register, stock register and inventory of consumables.
2. In the facts and circumstances of the case, the ld. CIT(A) has erred in restricting the addition to the extent of Rs. 75,000/- out of the total addition of Rs. 20,11,210/- made by the AO on account of unaccounted receipts, which is arbitrary and without any basis.
3. In the facts and circumstances of the case, the ld. CIT(A) has erred in condoning the assessee's failure to maintain the books of account, including case/patient register and stock register, against the mandate of Rule 6F(3) read with Section 44AA, which is clearly 2 ITA No. 957/Chd/2010 An d C . O N o . 2 7 / C h d / 2 0 1 0 A. C . I. T V . B h a r t i B a n s a l beyond the jurisdiction of ld. CIT(A) and hence the relief given to the assessee is illegal.
4. In the facts and circumstances of the case, the assessee, having failed to maintain the records as per Rule 6F(3) read with Section 44AA and in turn failed to substantiate the book results and hence the AO was justified in rejecting the books of account and estimating the gross receipts.
5. In the facts and circumstances of the case, the ld. CIT(A) has erred in giving relief to the assessee by merely mentioning that the rates mentioned in the assessment order and the rates actually charged by the assessee "in a great way substantiate the appellant's contention', without appreciating the fact that the AO had applied the rates as per Association of Practising Pathologists and Micro-biologists, Patiala, supplied by the assessee herself to the AO on 16.10.2009 wherever the assessee had failed to furnish the list of rates charged by her.
6. It is prayed that the order of the ld. CIT(A) be set aside, being illegal and that of the AO restored.
7. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and disposed of."
3. In Cross-objections No. 27/Chd/2010, the assessee has taken the following grounds of appeal:-
"1 The ld. CIT(A) has erred in not accepting the book result in toto when books of accounts have been accepted.
2. The ld. CIT(A) has erred in confirming the addition of Rs. 75,000/- when even in estimate made without any scientific basis, the difference is nominal."
4. The assessee is engaged in the business of running a pathological laboratory at Patiala in the name and style of M/s Modern Clinical Laboratory. She filed her return of income on 6.8.2007 returning total income at Rs. 9,32,880/-. After processing, the return was selected for scrutiny. During the course of scrutiny the AO found that the assessee had not maintained the case/patient register, stock register and inventory of consumables. He therefore rejected the book results and 3 ITA No. 957/Chd/2010 An d C . O N o . 2 7 / C h d / 2 0 1 0 A. C . I. T V . B h a r t i B a n s a l added a sum of Rs. 26,11,210/- to the income returned by the assessee for the reasons given in the assessment order.
5. Aggrieved by the aforesaid addition made by the AO, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) however, deleted the impugned addition with the following observations:-
"4.8 I have gone through the rival submissions, assessment record and remand report/counter comments. Looking to the all facts as discussed above the most of chemicals are liquid and are supplied in bottles/containers. Further AO's plea that consumption of consumable are not related to receipt month wise is also not valid ground. Firstly it is monthly purchase and further in view of detail submissions by the appellant that even the collection cost varies for 0.67 to 20% and other factor like time taken in analysis varies from hrs to days, depending upon nature of test. The allegation of monthly variation does not hold good in view of he fact that in the actual estimate prepared from the actual consumption of chemical the variation is just 1.77% without any scientific basis and further allowing standard cost calibration cost and wastage is not on any technical basis and in view of various high court's findings monthly variation in consumable used cannot be ground for rejection of books of account. Further plea of assessee that more analysis required i.e. consumption of consumable like disposable syringe/needle are same for test, non maintenance of stock record of consumables cost of each test, purchase for a period, purchase taken as consumption are covered in the above point and has nothing to do with the patient register. Most of the observation of the AO are general in nature but these cannot be basis for rejection of books of accounts. Regarding non maintenance of patient register the assessee's plea that when all the requisite information as those required in the prescribed register is there mentioned in the receipt itself i.e. Date, Sr. No., Patient name, Test performed, fee received and date of receipt is there, that can not be basis for rejection of books of account. Regarding the estimate prepared by AO as per Annexure, the difference after remand report as submitted by assessee as per revised working comes out to Rs. 73,830/- after correcting for rate, expert opinion as discussed supra. It is factually correct that no scientific basis 4 ITA No. 957/Chd/2010 An d C . O N o . 2 7 / C h d / 2 0 1 0 A. C . I. T V . B h a r t i B a n s a l has been given by AO neither in the assessment order nor in the rejoinder for basis of number of test hence the said estimate is not correct. Otherwise, difference is just 1.77% which is very minor. I have also carefully considered the remand reports submitted by the AO on 9.4.2010 duly forwarded by JCIT on 15.4.2010 in which the AO in para 2(i) of his order has given the factual position regarding rate mentioned in Annexure I of the assessment order and actual rate charged by the assessee after verification on the basis of receipt of books which in a great way substantiates the appellant's contention. As regards quantity of wax used for biopsy test and the cross examination provided to assessee the result is that during the cross examination the concerned medical expert relied upon by the AO in his order has stated the fact that the wastage of wax for making blocks for biopsy test comes to 20% and blocks required for one small endoscopy biopsy is one block and for other biopsy it is 10 blocks.
As regards, the AO's emphasis in his order that assessee is not maintaining stock register for consumables and counsel's plea that this practice is being going on since the inception of lab. Looking to the peculiar nature of the business of the assessee where the pathological tests are to be performed involving the diagnosis of disease where the human life is at a stake no precise formulate can be laid out and it is not possible to maintain stock of open liquids/chemicals etc. The assessee has also brought to my notice that the assessee's book result which has been accepted in past by the department is consistent and there is no variation in that. Assessee alongwith in his reply letter dated 22.4.2010 has filed ratio of consumable to gross receipts which is 22.06% for this year as compared to 25.33% and 26.54% of earlier years."
6. In support of appeal, the ld. DR supported the order passed by the AO.
7. In reply the ld. authorised representative for the assessee supported the order passed by the ld. CIT(A).
8. We have heard both the parties and perused the orders passed by the AO and the ld. CIT(A). The ld. CIT(A) has given cogent reasons for deleting the impugned addition. We are in agreement with the 5 ITA No. 957/Chd/2010 An d C . O N o . 2 7 / C h d / 2 0 1 0 A. C . I. T V . B h a r t i B a n s a l reasoning given by him. In this view of the matter, the appeal filed by the Department is dismissed.
9. Apropos memorandum of Cross-objections, the ld. CIT(A) has given cogent reasons for sustaining the addition to the extent of Rs. 75,000/- out of total addition of Rs. 20,11,210/- made by the AO. No infirmity in his order has been pointed out. In this view of the matter, the order passed by the ld. CIT(A) is confirmed. Memorandum of cross-objections filed by the assessee is dismissed.
Order pronounced on 16.01.2012
Sd/- Sd/-
(H L KARWA) (D K SRIVASTAVA)
VICE PRESIDENT ACCOUNANT MEMBER
Chandigarh, 16.01.2012
SURESH
Copy to:
1. The Appellant, A.C.I.T.
2. The Respondent, Smt. Bharti Bansal
3. The CIT, Patiala
4. The CIT(A), Patiala
5. The D.R, Income-tax Department, Chandigarh Assistant Registrar, ITAT, Chandigarh