TMI Blog2022 (10) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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on request of doctors and staff member of Anandalok Hospital certain equipments / marchinaries which were obsolete and outdated ,he recommended the scrapping of the same after carrying out the necessary examination.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 bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in ground no. 1 is against the confirmation of addition of Rs. 3,84,55,428/- by the Ld. CIT(A) as made by the AO by doubting the genuineness of the expenditure incurred on free distribution of medicines to patients and other social organizations. 3. Facts in brief are that the assessee is a trust engaged in the charitable activities and is registered u/s 12A vide No. S-47/WB-VII of 1984-85 dated 01.03.1985. The objectives of the trust are to establish and maintain dispensaries for free distribution of medicine and treatment of poor patients , to set up and operate hospitals, nursing homes and to render medical aid to poor and deserving patients. During the year, AO notes that the assessee has distributed/donated medicines of Rs. 3,84,55,428/- and accordingly he called upon the assessee trust to prove and justify the said distribution of free medicines. The assessee vide written submission dated 10.08.2016 provided the list of medicines which were distributed. In the said submission, the assessee submitted that it used to receive requests from various social organizations for free medicines which are also engaged in providing help to the poor and needy public. In October, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed the order of AO by dismissing the appeal by observing that the assessee has failed to discharge its onus in respect of its claim of expenditure qua distribution of free medicine. The Ld. CIT(A) also noted that the assessee failed to furnish any confirmation to that effect of receipt of free medicines from doctors and patients. While dismissing the appeal the Ld. CIT(A) observed and hold as under: 4.2.12. I have perused the AO s order and fact of the case with submission of the appellant. The appellant had no evidences in respect of distribution of medicines had been submitted in respect of distribution of medicines through various organizations as claimed by the appellant trust during the course of hearing and appeal proceedings. The appellant trust had completely failed to discharge the onus in respect of claim of expenditure in respect of the distribution of medicines. The appellant was given plenty opportunity to controvert the finding of the AO. The appellant did not bring any confirmatory letter from the club in respect of receipt of medicine. Neither it produced them as his witness. No doctors confirmation was submitted regarding visiting of camps and identity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are really distributed amongst the club for the sake of argument. The club has outrightly denied the receipt of any such medicines and it is also a matter of record that the club has received blankets in very few numbers which has been accepted by them. Their credence cannot be doubted upon as what they have received has been accepted and what not received has been denied. Once all these materials were confronted to the appellant it was duty of the appellant to give clarificatory letter or retracting letter of the aforesaid club members and further circumstantial evidences which may suggest the distribution of medicines. But, it was not done by the appellant. As regards the claim that purchases has not been doubted, therefore, expenses has to be allowed, this claim is also not sustainable because the utilization of the medicines has not been proved under the head which was claimed by the appellant. The appellant can return these medicines, can sale out of book, can sale to the patients or can do whatever can be done out of books. Once, the appellant has claimed that it has used for the purpose of free distribution then the proving uses of such medicines was the onus of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... testifying the holding of medical camps in that area for distribution of free medicines and doctors advice. The Ld. A.R also brought to our notice that the written requests received from various social organizations for donation of medicines so that same could be distributed to the flood affected poor people. The Ld. A.R. therefore requested that the genuineness of expenses which are incurred purely for purpose of charity and in terms of objectives of trust could not be doubted. The Ld. A.R also referred to the notices issued u/s 133(6) of the Act to these medicines suppliers who have confirmed to have supplied medicines to the assessee. The AR also referred to the statement of Dr. Chatterjee on 01.12.2016 recorded by the AO 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 camp for Anandalok and submitted that the said statement was recorded under duress and undue pressure. The ld AR then referred to second statement recorded on 25.02.2014 in the remand proceedings of Dr. T. N. Chatterjee u/s 131 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finally the ld AR prayed that the order of Ld. CIT(A) may kindly be reversed on this issue and the AO be directed to delete the disallowance. 6. The Ld. D.R while relying heavily on the order of authorities below argued that the assessee could not discharge the onus of proving the free distribution of medicines and also donation of free medicines to various social organizations and therefore the addition was rightly made by the AO and confirmed by the Ld. CIT(A). The Ld. D.R submitted that mere submission of photographs of the medical camps would not be suffice. The Ld. D.R. also drew our attention to the findings of AO as well as Ld. CIT(A) that there was no flood in that area and therefore on this count alone the order of Ld. CIT(A) may kindly be upheld as these expenses could not be explained by the assessee with relevant evidences of having distributed/donated the medicines as claimed by the assesse. 7. In this rebuttal the Ld. A.R. referred to the flood report brought out by the Govt. of West Bengal which confirmed that the district of Midnapore was flooded as the river Kalighai and its tributaries namely Kapaleswari and Chandia were flooded due to excessive rain fall a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e social organizations. We also note that the assessee has been providing free construction of huts to the homeless people and also organized various charitable activities in keeping with its objects during the year.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. We note that there is conflict in the statement by Dr. T.N. Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .The Assessee submitted that during the year the value of assets which were scrapped were amounted to Rs. 17,32,99,000/- which could fetch only Rs. 85,000/- According to the AO, the asset cannot be discarded like this by simply deducting from the assets. According to AO ,the value of such assets has to be considered as income of the assessee for the reason that the assessee has fully claimed the value of assets, plant and machinery as deduction at the time of purchase and he accordingly added this amount to the income of the assessee. 11. In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assesse by observing and holding as under: 4.4.8. I have perused the fact submitted by the appellant. The appellant trust had again reiterated that the appellant trust has been acquiring assets since inception of the trust for carrying out of medical activities. The original cost of the assets which had been written of were forming part of the block of assets and most of the assets written off had been become dilapidated and were not usable owing to change in technology and efflux of time. It can be seen that the written down value of such assets would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the employees of D Group. The appellant has argued that the assessment u/s 143(3) of the Income Tax Act, 1961 has been made each year and never during the course of assessment of earlier year had any disallowance been made in respect of application of income for acquisition of asset. The appellant Trust had produced such compelling evidences in respect of the assets i.e complete statement of the assets acquired periodically and the actual cost of assets written off is lower than the actual cost of asset as on 1.4.2007. Further the Assessing officer had taken statement of the employees and medical practitioner who had certified the existence of assets and handing over of assets. The Appellant Trust had submitted that assessee Trust was subject to assessment for earlier years also and no adversity was found over utilization of assets. Just because sale of assets is doubted the existence of assets cannot be denied in the presence of such evidences. From the submission of the appellant and observation of the AO and the details submitted during the course of appellate proceedings it is seen that the appellant had claimed sale of assets of Rs. 17,32,99,000/- which was its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. As the appellant Trust could not furnish any documentary evidence in respect of the sale value of scrap except that the scrap was handed over to the employees and the same was sold and the sale proceeds was shared. The reply of the appellant trust in respect of scrap is not acceptable as these machines are of high quality and even Schedule II of Companies Act, 2015 provides that residual value of an asset shall not be more than five percent. The appellant did not submit any proof of sale which clearly shows that the sales were made out of books of account. The Assessing officer had made the addition on actual value of assets without going into the facts that this was the original value and in the year of sale it could have fetched only scrap value. In view of the facts and evidences furnished and submission made in respect of year wise addition made it can be concluded conclusively that asset written off was part of the assets acquired from time to time. In the instant case the actual cost of the asset cannot be assessed as income of the Trust as the same had been acquired long time back and had been used for the operations of the Trust. The same had been disposed off as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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