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2022 (10) TMI 980 - ITAT KOLKATAAssessment of trust - addition as made by the AO by doubting the genuineness of the expenditure incurred on free distribution of medicines to patients and other social organizations - only on the basis of statements recorded u/s 131 of the office bearers of the social organization, AO disallowed the expenses incurred by the assessee for supplying free medicines to social organizations - HELD THAT:- We note that the AO recorded the statement of Dr. Chatterjee on 01.12.2016 wherein he stated that he associated with Anandalok Hospital as resident medical officer since 1997 but due to personal issues, he left Anandalok in March 2013 and again joined in July 2015 and so he did not attend any medical camps for Anandalok. However on 25.02.2014 in the remand proceedings, Dr. T. N. Chatterjee was again recorded u/s 131 of the Act wherein he stated that on his recommendation the assessee trust scrapped assets worth Rs. 17,32,99,000/-which were not usable / or obsolete. He stated that he was associated since 1997 and was getting contractual fee of Rs. 1,00,000/- per month and in March 2014 on request of other doctors and staff members of the hospital, he verified the medical equipments lying inside of hospital premises and advised the Managing Trustee Mr. Deo Kumar Saraf to discard the old machines/equipments. There is conflict in the statement by Dr. T.N. Chatterjee as in the statement recorded on 01.12.2016 he stated that he left the hospital in March 2013 and again joined in July, 2015 whereas in the statement recorded in the remand proceedings on 02.05.2018 Dr. Chatterjee stated that he was working in the hospital since 1997 and in March 2014, he stated that on request of doctors and staff member of Anandalok Hospital certain equipments / marchinaries which were obsolete and outdated ,he recommended the scrapping of the same after carrying out the necessary examination. So therefore find a merit in the contention of A.R that first statement was recorded under pressure. Therefore on this account also the addition of Rs. 2,21,95,113/- for free distribution of medicine to affected people is wrongly made by the AO. The statements/material cannot be used on the back of the assessee and if done so it is against the principles of natural justice as has been held in the case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] wherein the Hon’ble Apex Court has held that failure to give assessee the cross-examination of witnesses whose statements were relied upon to take an adverse view results in breach of principles of natural justice. In our viewthis is a serious flaw and renders the action of AO as nullity. We are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. In the result the ground no. 1 is allowed. Addition by estimating @ 5% of the cost of scrapped assets - HELD THAT:- The said scrapping/discarding of asset was done on the recommendation of Dr. T. N. Chatterjee who after inspecting these plants or machineries/equipments submitted a report that the said assets were not usable and should be discarded. Thereafter a committee of two employees Shri Sudam Maity and Bhavesh Jhawas constituted who were assigned the job of discarding of the said assets lying in the hospital premises located at Salt Lake. The said committee sold them and utilized the same in a party of all the staff of the assessee trust. We also note that both the authorities have not brought any material/evidence on record which corroborate that these assets were sold for more than Rs. 85,000/- . CIT(A) also agreed to the contentions of the assessee that these obsolete machineries which were not usable and thus directed the AO to make the addition @ 5% which comes to Rs. 86,64,950/-. But in our view by doing so the Ld. CIT(A) has merely acted on surmises and conjectures sans any concrete basis. The said action of the ld CIT(A) is wrong and cannot be sustained. Under these facts and circumstances we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Consequently the ground no. 2 is allowed.
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