TMI Blog2010 (9) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted only on the date of hearing and all the Benches of the Tribunal are accepting the same on dates of hearing. However, he further submitted that if the Department has made a big issue out of this, then he will not even press for accepting the synopsis. 5. We have considered this preliminary objection raised by the CIT-DR and find no force in the submissions of the ld. CIT-DR. The meaning of Synopsis is given in Income Tax Lexicon P.Ramanatha Aiyar as under:- Synopsis. A view of the whole together; a general view of a single subject. Synopsis Synopsis means to cut short, diminish, reduce; a brief or partial statement, les than the whole; an epitome 6. The above clearly shows that synopsis is basically a short summary of the matter being projected before the Tribunal in complicated issues. Such synopsis are regularly being filed by both the sides before various Benches since these kinds of synopsis are quite helpful to the Members of the Tribunal while dictating the orders and that is why they are being accepted. The synopsis does not include any document or material for which the Department has to specifically object. The synopsis generally also includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commencement of the assessment year as per the provision of the section 234B[1] with explanation (2) and 234C [1] with explanation (2) which is not correct. 9. The ld. Chartered Accountant of the assessee submitted that this being a legal issue and does not require finding of any fresh facts, therefore, should be admitted. 10. On the other hand, Ld.CIT DR, objected to the admission of this ground because, according to him, charging of interest under sections 234A, 234B AND 234C was a question of fact. 11. We have considered the rival submissions carefully and find force in the submissions of the Ld.counsel of the assessee. Charging of interest under sections 234A, 234B AND 234C is purely a legal question, particularly, when the levy of interest itself is sought to be challenged. We further find that Hon ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383 held as under that the Tribunal had jurisdiction to examine a question of law which arouse from the fact as found by the authorities and having a bearing on the tax liability. Since no new facts are required to be found and in view of the above decision of the Hon ble Supreme Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even in cases before 1-6- 2003. Therefore, there is no force in the submission that interest cannot be charged before 1-6-2003 and accordingly we reject this part of the argument. 15. We further find that sec.234B reads as under: 234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year [to the date of determination of total income under subsection (1) of section 143 [and where a regular assessment is made, to the date of such regular assessment, on an amount]] equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1. - xx xx xx Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been raised by the assessee which is as under: The complimentary expenditure as evidenced by the seized records is ₹ 3,36,302/- as in paper book Pages 142-176. But the assessing officer allowed ₹ 19,336/- only. The CIT(A) estimated the value of complimentary treatment at ₹ 1,00,000/- without any evidence on estimated basis and allowed a further sum of ₹ 80,664/-. The value of complimentary treatments, lab test, supply of drugs, chemicals and materials are supported by seized evidences and the appellant may submit that remaining amount of ₹ 2,36,302 also may be allowed as expenditure. 18. The ld. Chartered Accountant Shri Warrier submitted that this ground was omitted to be raised because of an over sight. The facts regarding this ground are already incorporated in the orders of the lower authorities and, therefore, same should be admitted. 19. On the other hand, Ld.CIT DR, objected to the admission of this ground because, according to him, this is a factual matrix. 20. After considering the rival submissions, we find that all the facts leading to the dispute in this additional ground are on record in the orders passed by the lower au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the submissions found that evidences for complementary treatments were available in the seized records. But these evidences were not full and complete and considering the normal practice in a hospital, benefit on account of complementary treatment was allowed at ₹ 1,00,000/-. 23. Before us, ld. Chartered Accountant Shri Warrier reiterated the submissions made before the lower authorities and emphasized that some complementary treatment has to be meted out to the staff, family members and close relatives of the staff, certain other beneficiaries who were well wishers and some free treatment on compassionate ground to the poor patients. These are well established practices in any hospital. Therefore, these expenses which were recorded in the seized material should have been allowed to be reduced from the gross receipts when no money was received. In any case, in assessment year 2001-02 assessee had claimed a sum of ₹ 92,211/- out of which AO himself had allowed a sum of ₹ 89,514/- and assessee did not file any appeal because of the smallness of the amount. However, in A.Y 2002-03 the claim on account of complementary treatment was of ₹ 2,88,704/- out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 28-12-2006 is null and void. 2. In the Assessment proceedings the appellant claimed the payment to doctors ₹ 65,61,775/- as expenditure. Out of this ₹ 45,39,089/- is paid as per the regular books of account and ₹ 20,22,686/- is paid as per the diary seized at the time of search on 07-10-2004, 3. The Commissioner of Income Tax [Appeals] found that the payment to the doctors to the extent of ₹ 65,61,775/- is supported by evidence as per the books of accounts and diary seized at the time of search, but payment is disallowed to the extent of 75% and ₹ 15,17,014/- is disallowed and allowed only 25% ₹ 5,05,672/- which is not correct. 4. The payment to doctors are supported by evidence and in these circumstances the disallowance of ₹ 15,17,014/- as expenditure is not justified. 5. The gross income as per the seized material are accepted whereas the expenditure such as payments to the doctors supported by the seized material are not allowed in full. 27. Ground No.1: The ld. Chartered Accountant of the assessee Shri Warrier submitted that the assessee had filed returns for various years on receipt of notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:] The combined reading of the above two provisions makes it clear that the AO has powers to make an assessment by an order which should be in writing and he has to determine the tax payable also. No particular method has been given for computation of such income and it is almost settled that as long as the assessment of income is comprehensible, no fault can be found for such determination and/or assessment. We had specifically asked the ld. Chartered Accountant of the assessee to point out as to how the interest of the assessee would be affected if the starting point of assessment of income was taken at income returned as per the original return. But he gave an evasive reply and argued that it may effect the penalty proceedings etc. It is a matter of common sense that AO starts the computation of income sometimes on the basis of returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are evidence by the seized books maintained by the General Manager in his own handwriting is a piece of evidence. The appellant submission that equal reliance is to be given both in regard to the income and expenditure which are proved by the seized books supported by the statements taken at the time of search is legally tenable. However in the absence of full evidence regarding payments I am not inclined to allow the full amount as expenditure, but considering the circumstantial evidence as per the seized books 75% of the claim of the appellant is disallowed which includes the disallowance under section 40A(3) and 25% ₹ 5,05,672/- is allowed. Relief ₹ 5,05,672/-. 33. Before us the ld. Chartered Accountant Shri Warrier submitted that the search was conducted on 7-10-2004 in the premises of the assessee wherein various documents were found and seized. It was found that the hospital has not recorded the receipts and the receipts which were collected were out of books and certain expenses were made out of such receipts. One of the items of such expenditure is with regard to doctors payments. In fact, a separate book was being maintained in which these recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d u/s.69C. Alternatively, he submitted that payments to doctors were made which are prohibited in the sense that making all cash payments leading to tax evasion is an offence and, therefore, same was covered under Explanation to sec.37. In fact, assessee distributed surplus on account of receipts according to the whims and fancy of management and therefore there is no co-relation between the doctors payments and the receipts. 36. We have considered the rival submissions carefully and agree with the submissions of the ld. Chartered Accountant Shri Warrier. It is a clear case where certain receipts and expenses were being recorded in a separate book and were not being disclosed to the department. During the search, it was noticed from the seized documents that certain receipts have not been declared to the department and the department has brought those receipts to tax which is correct because that is the purpose of the search. However, we fail to understand when once a particular document and/or a note book in which such receipts have been recorded and also certain expenses have been recorded, then how can such expenditure be ignored. In fact, it is the only income portion which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the recasted accounts in order to cover up the discrepancies found out by the Department during the course of search. 3. The CIT[A] has failed to note that the newly prepared accounts filed along with the return U/s.153A is an after thought of the assessee. It is an attempt to cover up the undisclosed receipts by preparing new accounts where entries do not find a place in the books of accounts and other documents seized during the search. Assessing Officer s action in completing the assessment adopting the difference in the collection as per the Computer Print out taken at the time of search and the amount shown in the original return after allowing the items claimed to be excluded by the assessee amounting to Rs. .38,69,326/- except complimentary bills and doctors fees, is correct. The CIT[A] ought to have find that out of the complimentary bills of Rs. .3,36,302/- the Assessing Officer has given deduction of Rs. .19,336/- towards complimentary treatment given to the staff and their family members. Hence CIT[A] s action in allowing a further reduction of Rs. .80,664/- is unwarranted and is not correct in the absence of evidence. 4. The CIT[A] also erred in deletin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no new facts are required to be found and, therefore, even the additional ground raised by the department is admitted. 41. First of all we shall deal with the issue regarding the relief given by the CIT[A] in respect of repairs. 42. Brief facts are that assessee had an old building in which the hospital was running which was constructed in 1985. This building required substantial repairs which were carried out from F.Y 1999-2000 to 7-10-2004 [the period with which we are concerned]. The following expenses have been incurred in respect of construction as well as repairs: Total Investment in the building construction and building repairs. [Paper Book Pages 110-114] From the asst.year 2001 to Asst. Year 2004-05 and upto 07-1-2004 [the date of search] Asst.year Building repair Building construction Total 2000-01 5,31,238 20,46,695 25,77,933 2001-02 2,46,139 27,35,337 29,81,476 2002-03 6,54, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew building and the value of the repair works undertaken by the appellant during the block period. As per the proceedings of the district valuation officer dated 28/12/2006 addressed to the Asst. Commissioner of IT Rs. .66,99,000/- is the value of repairs effected in the building during the block period out of this the appellants claim is the repair to the extent of Rs. .4,76,267/- for this asst. year and this amount is allowed for this asst year out of the total amount certified by the distraction valuation officer. The relief Rs. .4,76,267/-. 44. Before us, Ld.CIT DR submitted that first of all the valuation report is dated 21-12-2006 and the assessment was completed on 28- 12-2006. The letter showing the details of repairs by the DVO is also dated 28-12-2006. Therefore, AO never had an opportunity to go through this claim and, therefore, CIT[A] should not have allowed the claim without giving an opportunity to the AO and this causes violation of Rule 46A. 45. Further no claim can be made before the AO without revising the return in view of the decision of the Hon'ble Supreme Court in the case of GOETZE vs. CIT [supra]. In any case, when in the original return w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable. 49. We have considered the rival submissions carefully and find that as far as the issue regarding violation of Rule 46A is concerned, when CIT[A] had already remanded the matter to the AO, then AO had all the opportunity to examine the claim made by the assessee. In any case, the claim was based on the valuation report and the reference was made by the AO on his own and not on behalf of the assessee. The reference was made to determine the cost of construction but since substantial repairs were also involved, DVO chose to give separate estimate for cost of construction and repairs. The certificate dated 28-12-2006 regarding repairs, copy of which is available at page 124 of the paper book, clearly shows that repairs for the old six storeyed building had been determined at Rs. .66,90,000/-. Since no investigation has been done during the remand proceedings, now it cannot be alleged that CIT[A] has violated Rule 46A and, therefore, we reject this objection. 50. As far as the decision of the Hon'ble Supreme Court in the case of Goetezevs. CIT [supra] is concerned, facts are quite different. In that case the question arose was whether the assessee can make a fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since depreciation is legitimately allowable under the Act this claim of the appellant is allowed. Relief Rs. .5,57,076/-. 53. The Ld.CIT DR submitted that when the assessee has already claimed depreciation at a particular rate, he cannot revise the same in the returns filed u/s.153A. 54. On the other hand, ld. Chartered Accountant Shri Warrier submitted that when the total income was required to be computed u/s.153A r.w.s. 143[3] then necessarily assessee can make claims as per the provisions of the Act and even the department was bound to allow such claims even if they were not made. 55. We have considered the rival submissions carefully and find force in the submissions of the ld. Chartered Accountant Shri Warrier. We find that sec.153A reads as under: 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of deletion of disallowance of salary. This issue has been adjudicated by the ld. CIT[A] vide following para: Salary Para 4(f) Rs. .66,000 The payment of salary to Sri K.Sivadas as per the seized ledger of the hospital is only Rs. .18,000/- whereas the personal IT return filed by him on 28/10/2000 the amount is Rs. .84,000/-. The appellant claimed that the difference is due to mistake in accounting. The seized book as well as copy of the return filed by K.Sivadas on 28/10/2000 before the date of search disclosing salary of Rs. .84,000/- were produced and verified. Being only an accounting mistake this expenditure is to be set off against the additional income as per the seized books and hence allowed. Relief Rs. .66,000/-. 57. The Ld.CIT DR relied on the grounds of appeal. 58. On the other hand, ld. Chartered Accountant Shri Warrier submitted that salary claimed to Sri K.Sivadas was Rs. .18,000/- whereas actually he was paid a sum of Rs. .84,000/-. In fact, this sum of Rs. .66,000/- was debited to his personal account which was reflected in the seized records. In this regard he referred to page-137 of the paper book which is a copy of the seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in I.T.A.No.32/Coch/08 for the A.Y 2000-01 vide para-29. Following that order, we reject this ground. As far as second dispute regarding part disallowance of doctors payments is concerned, same has been adjudicated by us vide para-36 and following that order we allow whole of payment made to doctors. 68. In the result, assessee s appeal in I.T.A.No.33/C/08 is partly allowed. 69. IT[SS]A No.20/Coch/08 [revenue s appeal]: In this appeal revenue has raised the additional grounds which are in regard to repair expenses. 70. After hearing both the parties, we find that an identical issue has been adjudicated by us while adjudicating the revenue s appeal in IT[SS] A.No.19/Coch/08 for the A.Y 2000-01 and following that order, we reject the additional ground raised by the revenue. 71. Through general grounds the following disputes have been raised. 72. As far as the issue relating to allowance of part payments to doctors fee is concerned, the same has been adjudicated by us vide para-36 while adjudicating assessee s appeal in I.T.A.No.32/Coch/08 for the A.Y 2000-01 and following that order, we hold that whole of the doctors payments are allowable as expenditure. The third iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds deposited in the bank account were out of the withdrawals from the firm and in turn were being utilized for the hospital purposes. This account was not incorporated in the original books of accounts. It was submitted that since Dr. K.K.RWarriyar was maintaining this account right from the beginning of block period, therefore, peak amounts should be considered separately for each of the assessment years. The details of peak for each year were given. It was further explained that peak deposit of ₹ 19,,39,840/- was covered by the sources available. Moreover, a sum of ₹ 6,25,610/- was already declared as additional income and whatever deficit is there would be covered by that amount. The ld. CIT(A) after regarding the details of peak deposits as well as cash available in each of that year decided the issue as under: The details submitted by the appellant regarding the balance of cash available as per the seized cash book and the balance of deposit in the bank account for each of the above asst. years are verified and found to be correct. The contention of the appellant that the peak deposit amount is to be considered in all the asst. years separately is accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definitely he could have taken the over all view as all the assessment orders were before him. 78. We have considered the rival submissions carefully and find force in the submissions of the ld. Chartered Accountant Shri Warrier. Firstly, when assessments have been completed on the basis of the search for four years and appeals have been filed in all the years, naturally, ld. CIT(A) was seized of the matter for all the four years which were for his consideration and he could have looked into various orders of the AO while deciding the issue. We also find that ld. Chartered Accountant Shri Warrier is correct by pointing out that peak deposit means maximum balance outstanding on a particular date during the year. The details of peak deposits in each of the year are as under: [a] during A.Y 1999-2000 [which is not before us but bank account was being maintained] peak deposit was ₹ 3,76,799/- on 30-3-1999. On that date cash available as per the seized recprds was ₹ 3,95,994/- and, therefore, no addition was called for since the deposits stand explained in terms of sources available in the cash book. [b] in A.Y 2000-01, peak deposit of ₹ 19,39,840/- was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We, therefore, reject this additional ground. 84. The first ground relates to the legal objection and after hearing both the parties, we find that this issue has been adjudicated by us in assessee s appeal in I.T.A.No.32/Coch/08 for the A.Y 2000-01 vide para-29. Following that order, we reject this ground. 85. As regards ground Nos. 2 to 5 are concerned, the same have been adjudicated by us vide para-36 while adjudicating assessee s appeal in I.T.A.No.32/Coch/08 for the A.Y 2000-01 and following that order, we hold that whole of the doctors payments are allowable as expenditure. 86. In the result, assessee s appeal is partly allowed. 87. I.T.[SS]A No.21/Coch/08 [revenue s appeal]: In this appeal revenue has raised the additional grounds which are in regard to repair expenses. 88. After hearing both the parties, we find that an identical issue has been adjudicated by us while adjudicating the revenue s appeal in IT[SS] A.No.19/Coch/08 for the A.Y 2000-01 and following that order, we reject the additional ground raised by the revenue. 89. The other ground No.2 is general in nature and does not require separate adjudication. 90. Ground No.3 reads as under: T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, we set aside the order of the ld. CIT[A] and remit this issue to the file of the AO with a direction to verify the receipts from OP section from the seized records and then decide the issue accordingly. 96. As far as the ground No.4 relating to the disallowance of doctors fee is concerned, the same has been adjudicated by us vide para-36 while adjudicating assessee s appeal in I.T.A.No.32/Coch/08 for the A.Y 2000-01 and following that order, we hold that whole of the doctors payments are allowable as expenditure. 97. Ground No.5 reads as under: The CIT[A] has also erred in deleting addition of Rs. .5,96,799/- representing Peak credit holding that peak deposit is to be considered in all the relevant assessment years separately and in doing so, the available cash balance as per the seized cash book together with the income offered u/s.153A will be sufficient to cover up the peak deposits. The CIT[A] ought to have seen that these amounts were not recorded in the books of accounts and the assessee had no explanation for the same. 98. After hearing both the parties, we find that in this year also an addition of Rs. .5,96,799/- has been made on the basis of peak deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r statistical purposes. 104. I.T.A.No.441/Coch/08- A.Y 2003-04 [assessee s appeal]: In this appeal also an additional ground has been raised regarding levy of interest under sections 234A, 234B 234C. 105. After hearing both the parties, we find that this issue is identical to the issue raised by the assessee in its I.T.A.No.32/Coch/08 for the A.Y 2000-01. This issue has been adjudicated by us vide paras-14-16 whereby the issue raised by the assessee has been rejected following that order. We, therefore, reject this additional ground. 106. Further to the above additional ground, the assessee has raised various grounds but at the time of hearing the ld. Chartered Accountant Shri Warrier submitted that only two issues have been pressed which are as under: [a] legal objection regarding framing of assessment; [b] part disallowance of payments made to doctors. 107. After hearing both the parties, we find that the first issue has been adjudicated by us in assessee s appeal in I.T.A.No.32/Coch/08 for the A.Y 2000-01 vide para-29. Following that order, we reject this ground. As far as the second issue relating to the disallowance of doctors fee is concerned, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment. 3.1 The learned CIT[Appeal] s decision is in contravention of Rule 46A(1) and deserves to be set aside as none of the perquisite conditions apply to the case of the assessee for admitting additional evidence. 4. The learned CIT[Appeal] also contravened Rule 46A(2) in failing to record his reasons for admitting the additional evidence. 4.1 Without prejudice to the above additional evidence could not have been admitted without according reasonable opportunity to the Assessing Officer for examining or rebutting the same as per Rule 46A(3). 113. Ground No.2: After hearing both the parties, we find that during assessment proceedings while working out gross receipts it was noticed by the AO that assessee had disclosed gross collection of Rs. .10,87,58,765/-. It was further noticed that these expenses do not include the receipts of school of nursing at Ernakulam and collection of Pananagad branch. In view of this, the receipts have been worked out by the AO as under: Collection as per proposal Rs. .10,96,66,157 Less: collection towards Dental Procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch. The net profit of the Panangad branch and the net loss of the Lakshmi school of Nursing are entered in the consolidated profit loss account of the appellant. As a result the addition of Rs. .1604459/- to the income returned is not justified and hereby cancelled. Relief granted Rs. .1604459/-. We are of the view that the ld. CIT[A] has already verified that receipts from these two units have already been consolidated in the over all profit loss account and there is no need to make the separate addition and we agree with the conclusions arrived by the ld. CIT[A]. It was not disputed before us that the receipts have not been consolidated. 118. Ground Nos.3 4 relates to the issue regarding deletion on account of undisclosed investment in the building. 119. After hearing both the parties we find that the AO has referred the matter regarding the cost of construction to the DVO and through that report DVO had determined the cost of construction as under: Bhagvat building Rs. .1,59,21,000 Cost of construction for additional floor In the existing building Rs. .1,41,72,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation officer and the total investments as per the value fixed by the valuation officer and the total investments by the appellant firm and partners is only Rs. .40256/- which us only marginal considering the total investment. As a result the addition of Rs. .1385693/- on account of difference in valuation is not justified and hereby cancelled. 122. Before us, Ld.CIT DR relied on the grounds of appeal and supported the order of the AO. 123. On the other hand, ld. Chartered Accountant Shri Warrier reiterated the submissions made before the lower authorities. 124. After considering the rival submissions, we agree with the submissions of ld. Chartered Accountant Shri Warrier that there is a every possibility that expenditure on account of material or labour etc., in respect of one building could have been booked under different building. When assessee has constructed two buildings, we are of the view that a combined picture has to be seen. If the combined picture is examined, then the difference comes to only Rs. .8,44,256/-. This difference on the total cost of construction of Rs. .3 crores come to less than 3%. There are various decisions of High Courts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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