Income Tax Appellate Tribunal - Ahmedabad
Dr. Rohit P. Patel, Vijapur vs Assessee on 30 November, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " D "
Before Shri G.D.AGRAWAL, VICE-PRESIDENT (AZ) and
Shri MUKUL Kr. SHRAWAT, JUDICIAL MEMBER
Date of hearing : 04/11/2010 Drafted on: 30/11/2010
Sl. ITA No(s) Assessment Appeal(s) by
No(s). Year(s)
Appellant (s) Respondent(s)
1. 2313/Ahd/2007 2001-02 Dr.Rohit Purshottambhai The Income
Patel, Prop.Pooja Hospital Tax Officer
Nr.Veterinary Hospital Patan Ward-
Vijapur, Mehsana 3
PAN : ABKPP 0210 H Mehsana
(Assessee) (Revenue)
2. 2791/Ahd/2007 2001-02 Revenue Assessee
3. 1019/Ahd/2006 2002-03 Assessee Revenue
4. 1570/Ahd/2006 2002-03 Revenue Assessee
5. 2314/Ahd/2007 2003-04 Assessee Revenue
6. 2792/Ahd/2007 2003-04 Revenue Assessee
Assessee(s) by : Shri A.L. Thakkar, A.R.
Revenue by : Shri Abhijeet Kumar N. D.R.
ORDER
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
All these six appeals are cross-appeals and for the sake of convenience consolidated and hereby decided by this common order.
A. Assessee's appeal, ITA No.2313/Ahd/2007 (A.Y. 2001-02)
2. Ground No.1
1. The learned Commissioner of Income Tax (A) has erred in confirming the order passed by the A.O. by reopening the assessment u/s.147 of the Act only on the basis of DVO's ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -2- Valuation Report in respect of residential property of the appellant which is illegal and bad in law.
2.1. Facts in brief as emerged from the impugned Learned CIT(Appeals)XXI Ahmedabad order dated 28/08/2007 and the corresponding assessment order passed u/s.143(3) r.w.s. 147 of the I.T. Act, 1961 dated 27/12/2006 were that a survey u/s.133A of the I.T.Act was carried out on 13/01/2003. A question of unaccounted investment in a residential-bungalow was raised and the matter was also referred to District Valuation Officer(in short DVO). On the basis of the DVO's report, there was a difference between the cost of construction as disclosed by the assessee and as determined by the DVO. Consequently, notice u/s.148 was issued and the case was reopened. On hearing both the sides and considering the applicability of the law in respect of the reopening of an assessment we find no fallacy in the action of the Assessing Officer. With the result, we hereby uphold the findings of the Learned CIT(Appeals) and this ground of the assessee is hereby dismissed.
3. Ground No.2
2. The learned Commissioner of Income Tax (A) has erred in retaining the addition of Rs.2,00,000/- out of addition made of Rs.8,98,807/- by the A.O. for alleged unexplained investment in the residential property called Joyal Bunglow at Vijapur u/s.69 of the I.T. Act, 1961.
ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -3- 3.1. As is evident from the orders of the authorities below, the matter was referred to the DVO who has assessed the cost of construction pertaining to the three years and valued the same as follows:-
"Sr.No. Period Expenditure Assessed Difference construction stated by cost of assessee construction (Rs.) 1 2000-01 6,31,328 15,30,135 8,98,807 2 2002-02 15,01,409 35,98,654 20,97,245 3 2002-03 1,80,070 3,62,364 1,82,284 Total 23,12,807 54,91,153 31,78,346"
3.2. As per the above calculation there was a variation between the value declared by the assessee for the year under consideration at Rs.6,31,328/-; as against that, the value determined by DVO at Rs.15,30,135/-; the difference of Rs.8,98,807/- was taxed by the Assessing Officer as an unexplained investment in the hands of the assessee.
4. When the matter was carried before the first appellate authority, considering the totality of the circumstances of the case, he was of the view that it would be reasonable to restrict the addition at Rs.2,00,000/- for the year under consideration.
5. With this brief factual background, we have heard both the sides at length. It is worth to mention that while deciding the appeal of the assessee for the subsequent Assessment Year 2002-03, the Learned ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -4- CIT(Appeals) has made an elaborate discussion through which few important points have emerged as follows:
(a) The declared cost of construction including the cost of land and building as per assessee was at Rs.21,91,423/-. The assessee has obtained a Valuation of a Registered Valuer Shri B.B. Patel who has estimated the cost of construction at Rs.29,03,300/-.
(b) The assessee has furnished complete details of construction and made a claim that all the bills and invoices in respect of the cost of construction, labour charges, purchase of material, payments to contractor, etc. have been duly produced before the DVO.
(c) Through submissions made before DVO, the assessee has furnished building plan, structural drawings and Valuation Report of a Registered Valuer.
(d) A vehement contention was that no defect was found in the books of account which were stated to be duly audited under the provisions of section 44AB of the I.T.Act.
(e) Before the DVO, objections were raised in respect of plinth rates applied without any supporting evidence or specific datas, if any collected.
ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -5-
(f) Case laws cited in support of the correctness of the valuation as disclosed by the assessee were K.K. Shesha Iyer 246 ITR 351 (Mad.), Hotel Joshi 242 ITR 478 (Raj.), Rajgir Builders 70 ITD 226(Mum.), Vaishali Hotels 66 TTJ 692(Pune).
(g) Valuation Report of the DVO, which was relied upon by the Assessing Officer, was very cryptic without giving specific details as is evident from the final valuation and the rates adopted, for example, reproduced below:-
"8.0 RATE ADOPTED FOR VALUTION:
8.1. Plinth area rates adopted : Prevalent market rate at Vijapur, Mehsana appro-
priate to the type and equally of works and specifications adopted in the building for the relevant period of construction.
8.2. Additional items not Market rate for the Covered under 8.1. relevant period of construction.
9.0 COMMNETS ON REGISTERED VALUER'S REPORT:
In this case the assessee has not submitted any Registered Valuer's report hence no comments are being offered."
6. On hearing both the sides and in the light of the above observations, we are of the view that the Learned CIT(Appeals) has partly affirmed the impugned addition towards cost of construction that too merely on an estimation. We have been requested to thoroughly ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -6- examine the DVO's report which was made the basis for the impugned additions respectively in each three years. It is true that the DVO's report was full of shortcomings. In the said valuation report, there is no information through which it could be found the basis for adoption of higher valuation than the value declared by the assessee. It is also not evident that on what market rate the DVO has arrived at those figures of valuation. The DVO has also not mentioned the area of construction or the covered area which was made the basis for calculation of the cost of construction. It is very strange to see that a technical person, i.e. DVO has not made an effort to comment upon certain basic information but arrived at a final conclusion about the overall valuation of the property.
On the other hand the assessee has stated that all the bills, vouchers and purchase details of building materials were not only placed before the AO but also before the DVO. It has also been stated that the assessee has obtained one Valuation Report of a Registered Valuer dt.18.10.2003 and also an opinion of one Sri Bipin Chandra Parikh, Govt. Reg. Valuer dated 7.3.2005. Both were very much placed before the DVO through which building plan, structural drawings and the construction specifications were submitted. So the vehement contention was that without pinpointing any defect or discrepancy in the assessee's valuation the same was rejected. To buttress our view, we hereby quote a decision of Hon'ble Madras High Court in the case of K.K.Seshaiyer reported at 246 ITR 351 (Mad.), wherein it was observed that an opinion of the DVO cannot be straightaway substituted for the actual cost recorded in the assessee's books when the credibility of books maintained by the assessee is not doubted and correctness of the entries therein was not ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -7- questioned. Likewise, the Hon'ble Rajasthan High Court in the case of CIT vs. Hotel Joshi reported at 242 ITR 478 (Raj.) has made an observation that if the account of expenses of construction is maintained and the assessee also produces the vouchers there should be no reason not to accept the same, even where a reference is made to DVO, Assessing Officer has to ultimately appreciate the material on record and satisfy himself as to correct valuation of the asset. In view of this and considering the principles laid down in the afore cited case laws, we are of the view that in the absence of any contrary material or an evidence against the assessee it was not justifiable on the part of the Revenue Authorities to make an addition merely on an estimation. We, therefore, reverse the findings of the authorities below and direct to adopt the value of the property year-wise as disclosed by the assessee. Therefore, this ground is allowed.
7. Ground No.3
3. The learned Commissioner of Income Tax (A) has erred in confirming the disallowance of interest expenses of Rs.50,780/- made by the A.O. holding that the borrowed amount has not been utilized for business purpose and that the appellant is not entitled to deduction u/s.24 of the I.T. Act since the construction of the property was not completed in the previous year.
7.1. In respect of the above ground, it was observed by the Assessing Officer that the interest was paid to State Bank of India pertaining to Housing Loan obtained by the assessee. It was held that since the borrowed amount was not utilized for business purposes, therefore, the claim of interest was inadmissible. When the matter was carried before ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -8- the first appellate authority, the action of the Assessing Officer was confirmed as per the following observation:
"I have considered the submissions of the appellant and perused the facts of the case. I do not see any merit in the argument of the Ld. Authorised Representative of the appellant that the Assessing Officer should have material on record to prove that the loan borrowed by the appellant for house building was used for business. The onus is on the assessee to prove that the housing loan for construction of residential bunglow was obtained by the appellant and the same was utilized for construction of bunglow and not for any other purpose. In the alternate, the Ld. Authorised Representative of the appellant has contended that as per provisions of explanation to section 24, the interest on borrowed capital is allowable even for the period before acquisiti8on or construction is completed. I find that allowability of interest on borrowed funds is to be considered as per section 24 of the I.T. Act. The appellant has admitted that the construction of residential house was completed in the previous year relevant to A.Y. 2003-04. Therefore, for the current A.Y. no amount of interest on the borrowed fund is allowable and therefore, disallowance of Rs.50,780/- made by the Assessing Officer is confirmed. The appellant may put up his claim for the deduction of interest in the proceedings for A.Y. 2003-04."
8. Considering the totality of the facts and circumstances of the case and in view of the specific observation of the Revenue Authorities that the interest in question was not an allowable expenditure being not related to the profession of the assessee for the year under consideration, we hereby confirm the findings of the Learned CIT(Appeals). This ground is, therefore, dismissed.
9. Ground No.4 ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04 -9-
4. The learned Commissioner of Income Tax (A) has erred in confirming the disallowance made by the A.O. of Rs.4000/- out of telephone expenses and of Rs.1500/- out of petrol expenses on lump sum basis.
9.1. These additions were primarily on the ground that the possibility of personal use of telephone and petrol expenses could not be ruled out in the case of the assessee. Nothing much has been argued in this regard and considering the smallness of the amount and the trifle nature of the issue, we are not inclined to interfere with the findings of the Learned CIT(Appeals), hence affirm the same and reject this ground of the assessee.
B. Revenue's appeal, ITA No.2791/Ahd/2007 (A.Y. 2001-02)
10. The only substantive ground raised by the Revenue reads as under:-
1. The learned CIT(Appeals) has erred in law and on facts in deleting the additions of Rs.6,98,807/- made on account of unexplained investment in residential bungalows.
10.1. While deciding the assessee's appeal(supra), we have already taken a view that the DVO's report which was made the basis of the impugned addition as unexplained investment towards cost of construction in a residential-bungalow was full of defects and not based upon any convincing material or datas. The said report is absolutely silent to describe the basis on which the valuation was computed of the property. Therefore, following the reason already assigned hereinabove, we find no force in this ground of the Revenue, hence dismissed.
C. Assessee's appeal, ITA No.1019/Ahd/2006 (A.Y. 2002-03) ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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11. Ground No.1
1. The learned Commissioner of Income Tax (A) has erred in confirming the addition of Rs.116298/- made by the A.O. estimating the fees of Rs.1846/- in respect of 63 (405-352) patients even though the appellant has provided free service to them.
11.1. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 21/03/2005 and the impugned order of Learned CIT(Appeals)-XXI, dated 10/03/2006 were that the Assessing Officer had made an allegation that the full amount of medical fees of all the patients have not been recorded by the Assessing Officer. The Assessing Officer has also negated the claim that the assessee has provided free treatment to number of patients. An addition of Rs.7,47,630/- was made. When the matter was carried before the first appellate authority, complete details were furnished with the help of patients' register and affidavits have also been place on record. On detailed examination, Learned CIT(Appeals) found that 352 patients have been provided free services based upon their affidavits, however, in respect of 63 patients, the assessee has failed to prove that no fees was received. The findings of Learned CIT(Appeals), in this regard, were as under:
"I have examined the basis of disallowance by the AO and the contention raised by the appellant. I find considerable force in the arguments made by the appellant. It has been the consistent stand of the appellant that complete books of accounts are maintained which are duly audited as per the provisions of section 44 AB of the I.T.Act, 1961. No specific defect or discrepancy has been pointed out therein. It is also seen that the Birth register is duly maintained which contain complete records of the patients, sex of child, date of delivery, religion, etc. Similarly, serially numbered receipt books are maintained and contain the Nil receipts ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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wherever they have been issued. All these records have been furnished at the assessment stage, which has not been contradicted by the AO. Even other registers recording the birth in the hospital are maintained which the relevant authorities authenticate. Where the receipts are serially numbered the allegation of interpolation would not survive. As regards the details of 132 patients which have been placed as annexure to the assessment order the appellant has furnished a reconciliation statement containing the details of the OPD receipt no., delivery receipt no. date of receipt etc. It is observed that receipts have been issued in all but one case. Therefore, the allegation of the AO does not seem to be correct. The appellant has filed affidavits of 138 patients at the time of assessment proceedings and further affidavits of 214 patients at the appellate stage confirming the non- payment of fees or having received the services free of charge. The AO at the assessment stage after cross examination of 10 patients has not brought on record any material which would support his allegation that the patients have paid fees to the appellant which have not been recorded by the appellant. He has merely attempted to raise doubts by stating the patients did not comply to the summons or were unavailable etc. He has also not mentioned which particular patient responded to the summons and who did not comply It is seen that the objections are general in nature and if the AO had any doubts after his cross examination he could have put it before the appellant so that he could have made the necessary clarification which the AO has failed to do. The AO has at the time of the appellate proceedings also chosen not to examine any of the patients who have stated that they have received free treatment and not paid any fees. However, I find that even at appellate stage the appellant has not furnished evidence in case of all patients claimed to have been provided free service by him. Further, the fact that in the subsequent year the appellant has made a disclosure in the survey proceedings u/s.133A also, cannot be overlooked. I, therefore accept that 352 patients (138 +
214) whose affidavits have been furnished at the assessment as well as appellate stage have not paid any fees and the appellant has rendered free services. However, in the case of the remaining 63 patients (405 - 352) I confirm the addition made by ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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the AO . The addition so confirmed works out to Rs.116298 (Rs.1846 x 63 patients)."
12. On hearing the submissions of both the sides and considering the overall evidences as appreciated by the Learned CIT(Appeals), we are also of the view that the assessee is entitled for the relief in respect of those patients who have confirmed through their respective affidavits that no fees has been paid for the medical treatment. However, in respect of the remaining patients, there was no conclusive evidence that no fees was received by the assessee, rather the delivery registers and the municipal record have caused some doubts which still remained unsubstantiated. Thus, the totality of the facts and circumstances of the case hereby warrants not to interfere with the findings of the Learned CIT(Appeals), so the same is hereby confirmed. This ground of the assessee is, therefore, dismissed.
13. Ground No.2
2. The learned Commissioner of Income Tax (A) has erred in confirming an addition of Rs.500000/- for alleged undisclosed/unaccounted cost construction of the residential house on estimate basis.
13.1. We have already taken a view while deciding appeal for Assessment Year 2001-02(supra) that there was no basis for an estimated addition towards cost of construction of the residential-bungalow, specially when the assessee's stand got the support of two Regd.Valuers and contrary to this the DVO's report was a cryptic and unsubstantiated valuation. Following the same, we hereby reverse the findings of the ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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Learned CIT(Appeals) and direct to grant the relief. This ground of the assessee is allowed.
14. Ground No.3
3. The learned Commissioner of Income Tax (A), has erred in confirming the disallowance made by A.O. of Rs.35297/- for the alleged excess deduction of interest on housing term loan claimed by the Appellant.
14.1. For the year under consideration, the appellant has claimed the payment of interest as per Profit & Loss account which was stated to be against the loan taken from State Bank of India and utilized for the construction of residential-house. Undisputedly, it was a housing loan, therefore, assessee's claim was that it was allowable u/s.24(b) of the I.T.Act. Ld. Learned CIT(Appeals) has referred second proviso to section 24(b) of the I.T.Act and held that the claim was not allowable. We find no fallacy in the view taken by the Learned CIT(Appeals) and affirm the same. This ground of the assessee is, therefore, dismissed.
15. Ground No.4
4. The learned Commissioner of Income Tax (A) has erred in confirming the disallowance made by the A.O. of Rs.7228/- out of electricity expenses.
15.1 In respect of the Electricity Bill, there was a finding that the same was in the name of the wife of the assessee. On account of the said fact, the element of personal use was not ruled out and a proportionate disallowance was made. In the absence of any substantive evidence to establish that the entire claim was meant wholly and exclusively for the ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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purpose of the business, we find no reason to interfere with the findings of the Learned CIT(Appeals), therefore, this ground is dismissed.
16. Ground No.5 is general in nature requires no independent adjudication.
D. Revenue's appeal, ITA No.1570/Ahd/2006 (A.Y. 2002-03)
17. Ground No.1
1. The Ld. CIT(A) has erred in law and on facts of the case in restricting the undisclosed income to Rs.1,16,298/- as against the addition made by the A.O. of Rs.7,47,630/-.
17.1. We have already taken a view while deciding ground No.1 for this year in assessee's appeal hereinabove and confirmed the view taken by the Learned CIT(Appeals) through which a part relief, in respect of the issue of free medical services, was granted. Resultantly, this ground of the Revenue is hereby dismissed.
18. Ground No.2
2. The Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made by the A.O. on account of undisclosed outdoor fee receipts of Rs.50,000/-.
18.1. An adhoc addition of Rs.50,000/- was made by the Assessing Officer primarily on the reason that the assessee has not maintained a daily patients' register as prescribed on Form No.3 C. The assessee has produced other evidences and the patients' register to demonstrate that complete details of OPD patient have duly been maintained, therefore, ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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there was no irregularity in the books of account. The Learned CIT(Appeals) has also given a categorical finding that the Assessing Officer has not specified any particular instance of suppression of receipts. Consequently, we hereby confirm the deletion made by the Learned CIT(Appeals) and this ground of the Revenue is therefore, dismissed.
19. Ground No.3
3. The Ld. CIT(A) has erred in law and on facts of the case in restricting the undisclosed investment in the immovable property to Rs.5,00,000/- as against the addition made by the A.O. of Rs.20,97,245/-.
19.1 A view has already been taken in favour of the assessee through which the part relief granted by the Learned CIT(Appeals) was reversed and directed to accept the assessee's valuation in respect of the construction of residential-bungalow. In the light of the discussion already made hereinabove, this ground of the Revenue is dismissed.
20. Ground No.4
4. The Ld. CIT(A) has erred in law and on acts of the case in deleting the addition made by the A.O. on account of unexplained investment in movable property of Rs.4,50,000/-.
20.1. The basic contention before the first appellate authority was that the survey was conducted on 13/01/2003 relevant for the Financial Year 2002-03, hence pertaining to the Assessment Year 2003-04. If at all, an addition was to be made in respect of the investment in certain movable ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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properties, the same should have been considered for Assessment Year 2003-04 and not for Assessment Year 2002-03,i.e. the year under appeal. Learned CIT(Appeals) has accepted the said contention and held that certain disclosure had already been made by the assessee in the subsequent assessment year, therefore, there was no occasion to tax the said amount in Assessment Year 2002-03, the same was directed to be deleted. Reasoning assigned appears to be logical, therefore we hereby confirm the findings of the Learned CIT(Appeals) and dismiss this ground of the Revenue. Revenue's appeal is dismissed.
E. Assessee's Appeal, ITA 2314/Ahd/2007 (A.Y. 2003-04)
21. Ground No.1
1. The learned Co of Income Tax (A) has erred in retaining an addition of Rs.1,00,000/- out of Rs.9,70,000/- made by the A.O. for the alleged unaccounted cost of construction of Hospital Building.
22. On the basis of the disclosure made at the time of survey, the Assessing Officer has held that the cost of the hospital building as disclosed by the assessee at Rs.14,92,925/- was inadequate. As per Assessing Officer, there was unaccounted bills and vouchers which were to the tune of Rs.9,70,000/- not accounted for in the books of account. This matter was also referred to the Government Approved Valuer and the cost of construction of the hospital building as disclosed by the assessee was almost accepted. The first appellate authority has made a presumption that since in respect of the cost of construction of the residential-house an adhoc addition of Rs.5 lacs was sustained by him, ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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therefore, in the like manner in respect of the cost of construction of the hospital building an adhoc addition of Rs.1 lac was upheld. Now before us the vehement contention is that even after the survey no material was found on the basis of which it could be alleged that there was unexplained investment not recorded in the books of account for construction of the said hospital building. Considering all these aspects, we can hold that once the assessee has furnished the details of construction along with bills and vouchers and no error was found in the records maintained by the assessee, therefore, there was no scope for such an addition made merely on an estimation. We, therefore, reverse the findings of the authorities below and delete the addition. Ground allowed.
23. Ground No.2
2. The learned Commissioner of Income Tax (A) has erred in confirming the disallowance of depreciation of Rs.33523/- claimed by the Appellant on Ahmedabad building.
23.1. In brief, the facts are that the assessee has claimed a depreciation in respect of a building stated to be situated at Ahmedabad. The claim of the assessee was that the said building was acquired for the purpose of setting up a clinic at Ahmedabad. As per assessee's claim the building was ready for use, hence entitled for claim of depreciation. However, as per Assessing Officer, neither there was any evidence that it was actually used for the purpose of medical profession nor there was any evidence that it was ready for use, hence, claim of depreciation was disallowed. When the matter was carried before the first appellate authority assigning ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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those very reasons the action of the Assessing Officer was affirmed. On hearing both the sides, we are also of the view that in the absence of any specific evidence that either the asset in question was ready for use or used for the medical profession, the claim of depreciation was wrongly made. Facts of the case have revealed that it was merely an investment in a building and there was no professional activity carried out by the assessee, neither it was in any manner prepared for the purpose of profession, hence, an investment in a building should not be entitled for claim of depreciation. With these reasons this ground of the assessee is hereby dismissed.
24. Ground No.3
3. The learned Commissioner of Income Tax (A) has erred in confirming the disallowance made by the A.O. of Rs.90,620/- for the alleged excess interest claimed on housing loan u/s.24(1)(vi) of the Act.
24.1. A view has already been taken hereinabove that as per the second proviso to section 24(1)(vi), the assessee is entitled for an interest claim on housing loan upto the extent of Rs.1,50,000/- only. Over and above the prescribed limit the same has rightly been disallowed. Due to this reason the disallowance is hereby affirmed and this ground is dismissed. Assessee's appeal is partly allowed.
F. Revenue's appeal, ITA No.2792/Ahd/2007(A.Y. 2003-04)
25. Ground No.1 ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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(1) The learned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs.1,39,659/- made on account of excess cash found during the course of survey u/s.133A of the Act.
25.1. The allegation was that at the time of survey an excess cash of Rs.4,30,000/- was found which was also offered for taxation as per the statement recorded during the course of survey u/s.133A of the I.T.Act on 13/01/2003. Later on, within few days i.e. on 17/01/2003 the said statement was retracted. In respect of the cash, it was stated through an affidavit that out of a total cash found at the time Survey of Rs.4,31,530/-; a sum of Rs.1,42,024/- was a cash balance as per the regular books of account. Further it is mentioned that there was a disclosure by the assessee of a total sum of Rs.11,90,341/- which has a component of Rs.2,00,341/- towards cash disclosed. It was explained that the total disclosure by the assessee was Rs.11,90,341/- instead of Rs.25,00,000/- which was bifurcated as follows:-
"1. Cash Rs.2,00,341/-
2. Furniture & Fixture Rs.4,50,000/-
3. Repairing of bungalow Rs.3,00,000/-
4. Sundry debtors Rs.1,50,000/-"
25.2. On the basis of above calculation, it was explained that the cash found as per the regular books of Rs.1,42,024/- and a disclosure made of Rs.2,00,341/- has already been accounted for . Vehemently it was argued that the addition made by the Assessing Officer was solely on the basis of the said statement recorded during the survey operation. Before Learned CIT(Appeals) all those evidences were placed and after careful analysis, it was opined that the Assessing Officer ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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was also not able to prove that the cash as disclosed in the books of account was incorrect. Even before us there is no evidence placed from the side of the Revenue to demonstrate that the cash as per books of account was not tallied. Once the admitted factual position is that out of the actual cash found at the time of survey part of it was found recorded in the books of account and the balance was offered for tax. Therefore, now the position is that the assessee had cash as per books of Rs.1,42,024/; plus the assessee had made a disclosure of Rs. 2,00,341/; thus totaling Rs.3,42,365/, but the cash found a the time of Survey was Rs.4,31,530/- hence the balance remained unexplained or unaccounted is Rs.89,165/- . In our considered opinion, this difference was not correctly appreciated by the Ld.CIT(A) and the same is to be taxed in the hands of the assesse. We hereby modify the view taken by the Learned CIT(Appeals) and this ground of the Revenue is partly allowed.
26. Ground No.2 (2) The learned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs.8,70,000/- made on account of unaccounted cost of construction hospital building.
26.1. The Assessing Officer has made an addition of Rs.9,70,000/- basically relying upon the statement of the assessee recorded at the time of survey, however the same was retracted within few days . Facts have revealed that the Survey was conducted and the statement was recorded on 13.01.2003 and through an affidavit dated 17.1.2003 the said ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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disclosure was revised in which an amount of Furniture and Fixture of Rs.4,50,000/- was made. When the matter was carried before the first appellate authority, though Learned CIT(Appeals) has made a specific reference that the assessee has furnished a valuation report of a Government approved valuer and that valuation was very close to the cost of construction declared by the assessee, however, he has thought it proper to retain the addition at Rs.1,00,000/- on estimate basis. It is also worth to note that the Learned CIT(Appeals) has asked the comments of the Assessing Officer, however, even after reminders there was no reply received from the office of the Assessing Officer, therefore, Learned CIT(Appeals) thought it proper to proceed with the appeal as per the record available before him. Considering the arguments of both the sides, we are of the view that once a valuation report of a technical person is on record and which is very close to the cost of construction disclosed by the assessee in his books of account and the Revenue is not in a position to place any contrary material, therefore, there was no justification for such an adhoc addition. A view has already been taken while deciding the assessee's appeal, therefore, this ground of the Revenue is hereby dismissed.
27. Ground No.3 (3) The learned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs.2,00,000/- made on account of household expenses.
ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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27.1. The Action of the Assessing Officer for making the addition for house-hold expenses was based upon the statement recorded during the course of survey. However, the admitted factual position is, as discussed hereinabove, the assessee has furnished an Affidavit and retracted the statement later on. When the matter was carried before the first appellate authority, it was found that the appellant was showing a monthly withdrawal of Rs.10,000/-. Learned CIT(Appeals) has also given a finding that in the past as well the said withdrawal was accepted. As per Learned CIT(Appeals), Rs.1,20,000/- was reasonable house-hold expenditure considering the place where the assessee is residing. A fundamental question is raised before us that in the absence of any contrary material in the possession of the Revenue Department even after survey operation through which it could be demonstrated that the assessee has incurred, over and above, the expenditure for house-hold, whether it was justifiable to disturb the claim of expenditure as disclosed in the books of account. We do agree with the finding of Learned CIT(Appeals) and, therefore, affirm his verdict that the H.H.expenditure as disclosed was a reasonable expenditure. This ground of the Revenue is, therefore, dismissed.
28. Ground No.4 (4) The earned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs.49,000/- made on account of unexplained credits in capital account.
ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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28.1. On scrutiny of the accounts, it was noticed by the Assessing Officer that a sum of Rs.49,000/- was found credited in the assessee's capital account. The explanation of the assessee was that it belonged to his brother-in-law who happened to be a partner of a firm M/s.Pooja Plastics. The said unit was claimed to have been closed down and the aforesaid amount was nothing but sale consideration of machinery. However, the Assessing Officer was not convinced and taxed the same. Before Learned CIT(Appeals), a confirmation from the concerned parties have been filed and it is also worth to mention that following the procedure of Rule 46A of the I.T. Rules, 1962 Learned CIT(Appeals) confronted all those evidences to the Assessing Officer as well. Naturally, once it was established that the amount in question did not belong to the assessee, therefore, it was directed to delete the same. On due consideration of the relevant material, we hereby affirm those findings of Learned CIT(Appeals). This ground of the Revenue is dismissed.
29. Ground No.5 (5) The learned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs.1,82,284/- made on account of unaccounted investment in residential bungalow.
29.1. In respect of the alleged unaccounted investment in residential- bungalow, we have already taken a view in favour of the assessee and thereupon held that the value as declared by the assessee has to be accepted subject to the directions made hereinabove. Consequently, we ITA Nos.2313,2791/Ahd/07, 1019, 1570/Ahd/2006 & 2314, 2792/Ahd/2007 Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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find no force in this ground of the Revenue in this assessment as well and hereby dismissed.
30. We summarize the result as under:-
1. Assessee's appeal, ITA No.2313/Ahd/2007 for Assessment Year 2001-02 is partly allowed.
2. Revenue's appeal, ITA No.2791/Ahd/2007 for Assessment Year 2001-02 is dismissed.
3. Assessee's appeal, ITA No.1019/Ahd/2006 for Assessment Year 2002-03 is partly allowed.
4. Revenue's appeal, ITA No.1570/Ahd/2006 for Assessment Year 2002-03 is dismissed.
5. Assessee's appeal, ITA No.2314/Ahd/2007 for Assessment Year 2003-04 is partly allowed.
6. Revenue's appeal, ITA No.2792/Ahd/2007 for Assessment Year 2003-04 is partly allowed. ` Order signed, dated and pronounced in the Court on 10/ 12 /2010.
Sd/- Sd/-
( G.D.AGRAWAL ) ( MUKUL Kr. SHRAWAT )
VICE PRESIDENT (AZ) JUDICIAL MEMBER
Ahmedabad; Dated 10 / 12 /2010
T.C. NAIR, Sr. PS
Copy of the Order forwarded to :
1. The Assessee.
2. The Department.
3. The CIT Concerned
4. The ld. CIT(Appeals)-XXI, Ahmedabad
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad
ITA Nos.2313,2791/Ahd/07, 1019,
1570/Ahd/2006 & 2314, 2792/Ahd/2007
Dr.Rohit Purshottambhai Patel vs. ITO (cross appeals) AYs 2001-02, 2002-03 & 2003-04
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1. Date of dictation.......................30/11/2010
2. Date on which the typed draft is placed before the Dictating Member 01/12/2010.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S.........10/12/10
6. Date on which the file goes to the Bench Clerk..................... 10/12/10
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................