Income Tax Appellate Tribunal - Mumbai
Dr. Ranjit Mukharjee , Mumbai vs Assessee on 23 August, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, 'D', MUMBAI
BEFORE S/SHRI D.K. AG ARW AL (JM) AND B. R AM AKOTAI AH (A.M )
ITA No.3788/M um/2010
(Assessment Year:2006-07)
Incom e Tax Officer Dr.Ranjit Mukherjee,
11(3)(2), Nav Bharati ya Bhavan
Room No.448, CHS Ltd.,
4 t h Floor, V/s Plot No.371/372,
Aayakar Bhavan, SS III, 10 t h Road,
M.K.Road, Chem bur,
Mumbai-400020 Mumbai-400071.
P AN: AAGPM 4423P
APPELLAN T RESPONDENT
ITA No.4005/M um/2010
(Assessment Year:2006-07)
Dr.Ranjit Mukherjee, Incom e Tax Officer
Nav Bharatiya Bhavan 11(3)(2),
CHS Ltd., Room No.448,
Plot No.371/372, V/s 4 t h Floor,
SS III, 10 t h Road, Aayakar Bhavan,
Chembur, M.K.Road,
Mumbai-400071. Mumbai-400020
P AN: AAGPM 4423P
APPELLAN T RESPONDENT
Date of Hearing : 23.8.2011
Date of Pronouncement : 30.8.2011
Revenue by : Shri C.G.K.Nair
Assessee by : Shri Vijay C.Kothari
O R D E R
PER D.K. AGAR WAL (JM) These cross-appeals by the Revenue and assessee are directed against the order dated 19.3.2010 passed by the ld.CIT(A) for the assessm ent year 2006-07. IT A No.3788/Mum/2010 2 IT A No.4005/Mum/2010
(AY:2006-07) Both these appeals are disposed of by this common order for the sake of convenience.
2. Briefly stated facts of the case are that the assessee is a doctor consulting Ophthalmologist. The return was filed declaring total income of Rs.6,84,417/- along with computati on of incom e, Profit and Loss Account, Balance Sheet, Tax Audit Report in Form No.3CD and 3CB. The AO after processing of the return u/s 143(1) of the Income Tax (A), 1961( in short the Act) selected the case for scrutiny and accordi ngly issued notice u/s 143(2) of the of the Act followed by notice u/s 142(1) issued along with questionnaire. The AO after considering the materi al facts, however, completed the assessment at an incom e of Rs.33,14,040/- including the addition of understatem ent of professional income Rs.14,01,457/-, disallowance out of expenses claimed Rs.4,43,620/- and unproved loans of u/s 68 of the Act Rs.5,09,456/- vide order dated 24.12.2008 passed u/s 143(3) of the Act. On appeal, the ld. CIT(A) while partly allowing the appeal allowed substantial relief t o the assessee.
3. Being aggrieved by the order of the learned Commissioner of Incom e Tax (A), the Revenue and assessee both are in appeal before us.
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(AY:2006-07) ITA No.3788/Mum/2010 (B y Revenue)
4. Ground No. (a) and (b) are against the deletion of addition of professional i ncome of Rs.14,01,457/-.
5. Brief facts of the above issue are that AO observed that the assessee has shown his professional receipt at Rs.42,04,370/- and net income of Rs.8,78,327/-. The AO further observed that "In this case, surve y u/s 133A of the Act was conducted on 9.2.2007 at the clinic premises of the assessee and his residential premises. Duri ng the course of surve y the assessee was asked to produce the relevant record of the past three years and after cross checking with few bills prepared, the assessee agreed that bills were prepared in those cases who demands them. The assessee is a specialist in microsurgery, intraocular implant, vitero retinal oculoplastics. It was noticed that the assessee charges receipts in several heads like bed charges, operation charges, anesthesia, operation theatre, treatment and that the entire control of patients record and primary maintenance of records is looked after by the assessee himself. It was found that the assessee firm had 3 beds, most of t he patients discharged on the same day, the cornea and refractiv e surgery charges ranged from Rs.15,000/- to Rs.30,000/-, IT A No.3788/Mum/2010 4 IT A No.4005/Mum/2010 (AY:2006-07) the assessee did not produce the books of accounts and the verification of the operation register maintained by the assessee showed that for a normal surgery Rs.15,000/- to Rs.60,000/- were charged. The assessee also admitted in his deposition that he has not having any books of accounts like cash-book and ledger account copy f or verification of receipts and expenses. He also admitted that the records of patients and accounting is not done up to date and no books of accounts were impounded by the survey party. During the course of survey at the premises of the assessee, vide Question No.10, the assessee was pointed out that on verification of t he O.T.Register, bills book, cash book consulting register, substantial difference was f ound and that the records of the receipts are not properly maintai ned and therefore vide Answer to the said question, the assessee voluntarily offered Rs.30,00,000/- to cover the discrepancies." The AO further observed that on being asked, it was explained by the assessee "that the receipts are recorded in the books of accounts maintained; that extracts of the income register and bank statements attached and that any addition will be adhoc, unfair and wit hout an y basis and will put the assessee to undue hardship." However, the AO was of the view that the assessee has not IT A No.3788/Mum/2010 5 IT A No.4005/Mum/2010 (AY:2006-07) produced the books of accounts, bills, vouchers etc. for verification of the claim of the assessee which shows that the assessee has som ething to conceal. The declaration made by the assessee during the survey action is evidenced to the fact that the assessee is not declaring the actual receipts. Evidence by way of discrepancy found during the course of surve y and non-availability during the da y of survey of the extracts of income now filed by the assessee show that th e same was prepared during the course of assessment proceedings and theref ore the same cannot be accepted to be the real affairs of the income of the assessee. The AO further observed that the assessee has claimed TDS of Rs.1,028/- being the tax deducted at source by Surajratan Fatechand Damani Janhit Nidhi, Mum bai on the prof essional paym ent made to the assessee of an amount of Rs.20,147/-. It is also seen from the so called extract of incom e register filed by the assessee to have been maintained that the said income is not reflected therein. In view of this the AO added 1/3 r d of the professional receipts of Rs.42,04,370/- i.e. Rs.14,01,457/-, to the total income of the assessee as income not disclosed to the department out of the professional receipts.
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(AY:2006-07)
6. On appeal, ld.CIT(A) observed that in absence of an y adverse evidence availabl e in the possession of the AO which is a fact that he has no evidence for the assessment year under consideration, one thing is very clear that he would not disturb the receipts of appellant. This is because there would be no basis of doing so and accordingly deleted the adhoc addition made by the AO.
7. At the time of hearing, the ld. DR submits that f or the reasons as mentioned in the assessment order, the ld. CIT(A) was not justified in deleting the addition of Rs.14,01,457/- made by the AO. He, therefore, submits that the addition made by the AO be restored.
8. On the other hand, the learned counsel for the assessee while reiterating the sam e submissions as submitted before the AO and the ld. CIT(A) and in relying on the findings of the ld. CIT(A) further submits that since the assessee has m aintained proper books of accounts, extract of the income register, bank statement etc. were filed during the course of hearing before the AO. The AO without finding any defect in the books of account merely because the said books of accounts were not f ound during the course of survey on 9.2.2007 does not mean that the assessee has not IT A No.3788/Mum/2010 7 IT A No.4005/Mum/2010 (AY:2006-07) maintained the books of account whereas the assessee during the course of survey on 9.2.2007 has produced the books of account for the current year which is also evident from the Answer to Question No.7 and 10 of the statement recorded at the time of survey proceedings, appearing at pages 3 and 4 of the assesee's paper book. He, therefore, submits that the ld. CIT(A) was fully justified in deleting the addition m ade by the AO and his order be upheld.
9. Having carefully heard the submissions of the rival parties and perusing the material available on record we find that there is no dispute that the assessee has filed the return along with the tax audit report and financial statem ents. It is also not i n dispute that the assessee during the course of assessment proceedings has explained that the professional receipts are recorded in the books of account maintained and has filed relevant extracts thereof. The AO without bringing any material on record t o show that such books of accounts are not mai ntained by the assessee in the regular course of business or profession di d not consider the said books of accounts on the ground that the same were prepared during the course of assessment proceedings. This observation of the AO without bringing any material on record is not valid in law. W e further find IT A No.3788/Mum/2010 8 IT A No.4005/Mum/2010 (AY:2006-07) that during the course of survey there is no query by th e AO about the books of account for the assessment year under consideration inasmuch as in answer to question No. 7 and 10 recorded at the time of survey on 9.2.2007, we observe that the books of account for the current year relevant to the assessm ent year 2007-08 were f ound and considered by the AO. Under these circumstances and in absence of any contrary material placed on record by the Revenue against the finding of the ld. CIT(A) we are of the view that the AO was not justified in making adhoc addition in the professional receipt of the assessee by Rs.14,01,457/- and the ld. CIT(A) was fully justified in deleting the sam e. The order passed by the ld.CIT(A) on this account does not call for any interf erence. The grounds taken by the Revenue are, therefore, rejected.
10. Ground No.(c) and (d) are against the deletion of addition of Rs.5,09,456/- made u/s 68 of the Act.
11. Brief facts of the above issue are that it has been observed b y the AO that as per balance-sheet the assessee has shown outstanding borrowed loans in the account of (a) Mr.Sumit Dasgupta-Rs.3,00,000/-, (b) Mrs.V.Savitri- Rs.2,00,000/- and (c) Dr.Prasad Bhide -Rs.9,456/- IT A No.3788/Mum/2010 9 IT A No.4005/Mum/2010
(AY:2006-07) aggregating to Rs.5,09,456/-. In absence of any confirmation of the loans, the AO added the amount of Rs.5,09,456/- to the total income of the assessee u/s 68 of the Act. On appeal, before the ld.CIT(A) it was argued that these are old loans coming from past several years. The ld. CIT(A) while observing that the loans have been coming from the earlier years and have not obtained by the appellant during the year under consideration, deleted the addition made by the AO.
12. At the time of hearing, the ld. DR supports the order of the AO.
13. On the other hand, the learned counsel for the assessee whil e relying on the order of the ld. CIT(A) submits that these are old loans and t he assessee has duly filed his explanation before the AO giving com plete addresses and permanent account num bers of the loan creditors, appearing at pages 97-98 of the assessee's paper book. He further submits that the loans are old is also evident from Part-B of Annexure-I of tax audit report appearing at page 25 of the assessee's paper book. He, therefore, submits that no such addition is called for. However, he submits that he has no objection, if the issue is set aside to the file of the AO to examine the same afresh.
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(AY:2006-07)
14. Having carefully heard the submissions of the rival parties and perusing the material available on record we find that there is no dispute that the assessee was asked to file confirmation letter by the AO. However, there is no m aterial on record to show that such confirmation letters were filed b y the assessee either during the course of assessment proceeding or during the appellate proceedings or even at this stage. In absence thereof and in the absence of any reference to the copy of accounts of the loan creditors, we are of the view that i n the interests of justice, the matter should go back to the file of the AO and accordingly we set aside the order passed by the l d. CIT(A) on this account and send back the matter to the file of the AO to examine the same in the light of our observations hereinabove and according to law after providing reasonable opportunity of being heard to the assessee. The grounds taken by the Revenue are, therefore, partly allowed for statistical purposes.
ITA No.4005/Mum/2010 (B y Assessee)
15. Ground No.1 is against the sustenance of disallowance of expenditure of Rs.4,43,620/-.
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(AY:2006-07)
16. Brief facts of the above issue are that during the course of assessment proceedings the AO noted that the assessee has claimed expenses to the tune of Rs.33,26,043/- the break up of which is appearing at page 4 of the Assessment Order which is reproduced below :
1 Rent Rs.60,000 2 Taxes Rs.15,020 3 Electricity Rs.1, 00,570 4 Medical supplies Rs.8, 62,359 5 Telephone charges Rs.1, 19,114 6 Salaries and wages Rs.86,000 7 Insurance Rs.19,656 8 Repairs and m aintenance Rs.67.437 9 Motor car exp. Rs.86,804 10 Bank charges Rs.2,990 11 Interest on machinery loan Rs.5, 47,758 12 Interest on clinic premises loan Rs.83,104 13 Professional fees paid to Anesthetics Rs.1, 99,588 14 Subscription Rs.9,100 15 Printing and Stationery Rs.1,080 16 Miscellaneous Rs.2,520 17 Depreciation on vehicle Rs.32,172 IT A No.3788/Mum/2010 12 IT A No.4005/Mum/2010 (AY:2006-07) 18 Depreciation on medical equipment Rs.8, 74,417 19 Depreciation on EXABX system Rs.1,772 20 Clinic premises Rs.51,798 21 Clinic premises -2 Rs. 1,02,784 Total Rs.33,26,043 The AO observed that it is not known to whom the rent of Rs.60,000/- was paid, taxes of Rs.15,020/- are related to which premises i.e. residence or clinic, electricity charges of Rs. 1,00,570/- is nowhere mentioned whether it is related to residence also. Regarding m edical supplies of Rs.8,62,359/-
no purchase bills produced. Regarding telephone charges of Rs.1,19,114/- nowhere it is mentioned that whether it related to resi dence, mobile and the expenditure of personal use. Regarding sal ary and wages of Rs.86,000/- no details have been provided whether it relates to driver or otherwise. Regarding motor car expenses of Rs.86,804/-, personal use of motor car cannot be ruled out. Regarding interest on machinery loan of Rs.5,47,758/- and interest on clinic premises loan of Rs.83,104/- no evi dence of loan, its usage and the properties mortgaged are filed. Regarding Miscellaneous expenses of Rs.2,520/- there is no evidence. Regarding depreciation on vehicles of Rs.32,172/- since the IT A No.3788/Mum/2010 13 IT A No.4005/Mum/2010 (AY:2006-07) personal use of the motor car cannot be ruled out, to certain extent of the depreciation cl aim is disallowable u/s 38(2) of the Act. According to the AO the total of these expenses comes to Rs.22,18,102/-. The AO taking into all the facts of the case, however, disallowed Rs.4,43,620/- being 20% of Rs.22,18,102/- and added the sam e to the total incom e of the assessee. On appeal, the ld. CIT(A), however, confirmed the same.
17. At the tim e of hearing, the learned counsel for the assessee submits that the assessee has maintained regular books of account and has filed com plete details of expenses appearing at pages 26 to 94 of the assessee's paper book, therefore, no such disallowance is called for. He furt her submits that in the assessment year 2007-08 wherei n the surve y was taken place i.e on 9.2.2007, the AO in the scrutiny assessment has disallowed the car expenses which includes vehicle loan interest and depreciation, Rs.29,634, telephone expenses for personal use Rs.22,397/- being 20% of total expenses and no other disallowance was made. He further submits that the ld. CIT(A) while observing that the assessee has himself disallowed 1/7 of the car expenses, deleted the adhoc disallowance made by the AO. Regarding the disallowance of telephone expenses, the ld.CIT(A) IT A No.3788/Mum/2010 14 IT A No.4005/Mum/2010 (AY:2006-07) restricted t he same to 15% as against 20% m ade by the AO. In support, he also placed on record the copy of the assessment order and the copy of the order of the ld. CIT(A) for the assessment year 2007-08. He, therefore, submits that no such disallowance is called for.
18. On the other hand, the ld. DR supports the order of the AO and the ld. CIT(A).
19. Having carefully heard the submissions of the rival parties and perusing the material available on record we find that there is no dispute that the assessee has filed the relevant details of all the expenses. The AO without bringing any material on record to show that the expenses incurred by the assessee have not been expended wholl y and exclusively f or the purpose of business or profession or personal in nature has m ade adhoc disallowance of the above expenses. Even, in the financial year 2006-07 in which the survey was taken place no such adhoc disallowance was made by the AO in respect of these expenses except car expenses and telephone expenses. Considering the totality of the facts and circumstances, of the case, and keeping i n view of the that adhoc disallowance made by the AO is not sustainabl e in law, we are of the view IT A No.3788/Mum/2010 15 IT A No.4005/Mum/2010 (AY:2006-07) that the 20% disallowance made by the AO other than car expenses, car depreciation and tel ephone expenses is not sustainable and accordi ngly the same is deleted. W ith regard to the disallowance of car expenses, car depreciation and telephone expenses, we find that the personal use has not been ruled out by the assessee even at this stage and accordingly, we direct the AO to disallow 1/6 t h of the sam e for personal use and delete the balance amount of disallowance. The ground taken by the assessee is, therefore, partly allowed.
20. Ground No.2 is against the disall owance of deduction of u/s 80C of LI C premium of Rs.97,342/-.
21. It was disallowed by the AO as no evidence in support the payment of the LIC premium was filed before him. During the course of appellate proceedings the assessee has filed the sam e before the ld. CIT(A). However, the ld. CIT(A) in the absence of any request for admission of additional evidence rejected the plea of the aseseee and confirmed the disallowance made by the AO.
22. At the tim e of hearing, the learned counsel for the assessee submits that since the assessee has paid the LIC premium, therefore, due relief be allowed to the assessee IT A No.3788/Mum/2010 16 IT A No.4005/Mum/2010 (AY:2006-07) and the issue may be restored back to the file of the AO for verification .
23. On the other hand, the ld. DR supports the order of the AO and the ld. CIT(A).
24. After considering the submissions of the rival parties and perusing the material available on record and in the interests of justice we find that it is not the case of the Revenue that the assessee has not paid LIC premium. The ld.CIT(A) rej ected the claim on the technical ground. This being so, we are of the view that in the i nterests of justice the matter should go back to the file of the AO an d accordingly, we set aside the orders passed by the Revenue authorities on this account and send back the matter to the file of the AO to deci de the same afresh in the light of our observations hereinabove and according to law after providing reasonable opportunity of being heard t o the assessee. The ground taken by the assessee is, therefore, partly allowed for statistical purposes.
25. Ground No.3 is against the levy of interest u/ ss 234A, 234B, 234C and 234D of the Act.
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26. In the absence of any arguments by the learned counsel f or the assessee in this regard, we direct the AO to allow the consequential relief to the assessee in this regard. The ground taken by the assessee is, therefore, partly allowed.
27. Ground no.4 is against the initiation of penalty proceedings u/s 271(1)( c ) of the Act.
28. In the absence of any plea taken by the assessee in this regard, and keeping in view that the ground taken by the assessee is pre-m atured, the sam e is, therefore rejected.
29. In the result, the Revenue's and assessee's appeals stand partly allowed for statistical purposes. Order pronounced in the open court on 30th August, 2011.
Sd sd (B. R AM AKOTAI AH) (D.K. AGARWAL) ACCOUNTAN T M EMBER JUDICI AL MEM BER Mumbai, Dated 30th August, 2011 SRL: IT A No.3788/Mum/2010 18 IT A No.4005/Mum/2010 (AY:2006-07) Cop y to: 1. Appellant 2. Respondent 3. CIT Concerned 4. CIT(A) concerned 5. DR concerned Bench 6. Guard file. True copy BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI