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2018 (1) TMI 1623 - AT - Income TaxValidity of the assessment proceedings u/s. 153A - HELD THAT - As examined the orders of the lower authorities and we find that for AY 2012-13 return was filed on 27.09.2012 and for AY 2013-14 on 20.09.2013. Before concluding the assessment proceedings, the assessee was searched on 07.12.2012. As per provisions of section 153A of the Act, wherever assessment u/s. 153A is required to be framed consequent to the search, pending assessment shall abate and assessment is to be framed u/s 153A r.w.s. 143(3) of the Act. Under these circumstances, we find no infirmity in issuance of notice u/s. 153A of the Act. We therefore reject this ground of assessee raised in this regard. Disallowance of business promotion expenses claimed u/s. 37 - expenditure was incurred on Doctors not allowable as deduction under the provisions of section 37(1) - AO has observed that the details of business promotion expenses incurred by the assessee on various Doctors is not available - AO further took a note of CBDT Circular No.5/12 dated 01.08.2012 wherein it was clarified that u/s. 37 of the Act such type of expenditure which are prohibited by law cannot be allowed - HELD THAT - Assessee has furnished the details of persons to whom the stunts were sold and the AO has collected the evidences only from few persons. The contention of the assessee that sometime discounts were given in the invoice itself were also not properly appreciated or examined by the AO. When certain hospitals have categorically stated that there are two types of patients and one type of patient cashless treatment is to be given by the hospital in that case the hospital purchase the stunts from the assessee company and wherever the cashless treatment is not given, the patient is required to purchase the stunts. The stunt would be directly sold to the patient and the corresponding entries with regard to sale of the stunt is not recorded in the books of accounts of the hospital and the hospital representatives collect the discount by the company agreed upon given by the company. These aspects need to be examined by the AO. In the light of these facts, we are of the considered view that the issue was not been properly examined by the lower authorities and they have disallowed the claim of the assessee by making superficial observation. Therefore, in the interest of justice, we set aside the order of the CIT(A) in this regard and direct the AO to readjudicate the issue after making necessary enquiry and verification. If the assessee succeeds in establishing that most of the time the discount was given in the invoice itself, the same may be allowed without making a further necessary enquiry. Disallowance of bad debts written off - As observed that assessee has not established that amount has gone bad inspite of all efforts taken by him - HELD THAT - Nothing has been established by the Revenue that condition stipulated under section 36(2) was not fulfilled with respect to any of the debts which were written off by the assessee during the previous year. Under these circumstances, we are of the view that disallowance made by the Revenue authorities is incorrect as the assessee is only required to write off the bad debts and is not required to establish that it has become really bad. Accordingly, we set aside the order of the CIT(A) and direct the AO to allow the claim of bad debt raised by the assessee. Unaccounted cash during the course of search - assessee is before us with the submission that assessee has explained the source of availability of cash but it was not appreciated by the AO - Cash payment by patient s made to hospital by some insurance companies - HELD THAT - or the first type of patient who made cash payments whenever any stunt is deployed in the patient, the assessee company directly sells and places the stunts to patient and patient directly make the payment to the company. Company representatives comes every fortnight or monthly and collect the payment. This explanation was never examined or enquired by the AO. It was further contended that the reply given actually confirms that there were cash collections out of sales and in so far as PGIMER is concerned, it was contended that money was collected on 06.12.2012. Though the hospital has denied the payment made in November 1012 but the same payment was made to the assessee. Since the sufficient evidence was placed on record, AO should have examined and enquired into the genuineness of these statements before making any addition. In the light of specific stand taken by the assessee, we are of the view that explanation furnished by the assessee should have been examined by the lower authorities before making addition of the cash found during the course of search. Since addition was made without making necessary enquiry, we set aside the order of the CIT(A) and restore the matter to the AO to re-examine the availability of cash during the course of search after making a necessary enquiry in the light of the explanations furnished by the assessee Cash deposit in the bank account - AO noted cash of ₹ 10 lakh was deposited in the bank account but no corresponding entry was found in the cash book - HELD THAT - We find that assessee has contended before the AO that it was on account of inadvertent mistake, the corresponding entry of deposit of cash was not made on 02.08.2011 in the cash book but it was done on 29.08.2011 though there was no deposit of cash in the bank. But these explanations of the assessee was not examined by the AO nor by the CIT(A). In the light of these facts, we are of the view that since the issue was not properly examined by the lower authorities, matter should be sent back to the AO to readjudicate the issue in the light of assessee s contentions. Accordingly, we set aside the order of the CIT(A) and restore the matter to his file to readjudicate the issue afresh after affording opportunity of being heard to the assessee in the light of assessee s contentions. Undisclosed cash sales - assessee is before us with the submission that assessee s representatives have collected the cash from Hissar hospital and same was entered in books on 24.03.2011 and as regards the cash collected from PGIMER the same was recorded in books on 14.04.2011. It was recorded in the books as communicated by the representatives, however, the cash remained in his possession at Delhi and he sent mail to Bangalore Office of handing over the cash to Mukesh Yadav at Delhi - HELD THAT - We find that this explanation of the assessee was not examined by the AO by making the necessary enquiry from the concerned parties. Therefore, we are of the view that the matter should be sent back to the AO for readjudication. Accordingly, we set aside the matter to the AO for readjudication of the issue in the light of assessee s contentions after affording opportunity of being heard to the assessee.
Issues Involved:
1. Validity of assessment proceedings under Section 153A of the Income Tax Act. 2. Disallowance of business promotion expenses under Section 37 of the Income Tax Act. 3. Disallowance of discounts given to customers. 4. Disallowance of bad debts written off. 5. Treatment of cash seized as unaccounted cash. 6. Addition made on account of cash deposit in the bank account. 7. Addition made on account of undisclosed cash sales. 8. Charging of interest under Sections 234A and 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of Assessment Proceedings under Section 153A: The assessee challenged the validity of the assessment proceedings initiated under Section 153A for the assessment years 2007-08 to 2011-12. The primary contention was that no incriminating material was found during the second search conducted on 07.12.2012, which could justify the reopening of concluded assessments. The Tribunal examined the legal position and various judicial pronouncements, including the cases of CIT v. Lancy Constructions, DCIT v. Himanshu B. Kanakia, and CIT v. Singhad Technical Education Society. The Tribunal concluded that in the absence of any incriminating material found during the search, the concluded assessments could not be reopened. Consequently, the assessments framed under Section 153A were quashed. 2. Disallowance of Business Promotion Expenses under Section 37: The assessee claimed business promotion expenses, which were disallowed by the Assessing Officer (AO) on the ground that they were incurred on doctors, which is prohibited by the Medical Council of India (MCI) regulations and clarified by CBDT Circular No. 5/12 dated 01.08.2012. The Tribunal held that expenses incurred before 01.08.2012 should be allowed as business expenses, as the CBDT Circular is prospective. For expenses incurred after 01.08.2012, the Tribunal directed the AO to examine whether the doctors attended seminars as faculty members or delegates and allow the expenses accordingly. 3. Disallowance of Discounts Given to Customers: The AO disallowed the discounts given to customers on the basis that the assessee failed to furnish evidence for the payment of discounts and confirmation letters from customers. The Tribunal found that the assessee had provided sufficient details, including credit notes and reconciliation summaries, which were not properly examined by the AO. The Tribunal directed the AO to re-examine the issue in light of the evidence provided and make a fresh determination. 4. Disallowance of Bad Debts Written Off: The AO disallowed the bad debts written off by the assessee on the ground that the assessee had not established that the debts had become irrecoverable. The Tribunal, relying on the Supreme Court's judgment in TRF Ltd. v. CIT and CBDT Circular No. 12/2016, held that the assessee is only required to write off the bad debts in its books of account and is not required to establish that the debts have become bad. The Tribunal directed the AO to allow the claim of bad debts. 5. Treatment of Cash Seized as Unaccounted Cash: During the search, cash amounting to ?29,90,000 was seized from the assessee's Delhi office. The AO treated the cash as unaccounted, as the assessee could not provide satisfactory explanations. The Tribunal found that the explanations provided by the assessee regarding the source of cash from PGIMER and PRAGMA hospitals were not properly examined by the AO. The Tribunal directed the AO to re-examine the availability of cash and make a fresh determination after necessary enquiries. 6. Addition Made on Account of Cash Deposit in the Bank Account: The AO made an addition of ?10 lakhs on account of unexplained cash deposits in the bank account. The assessee explained that the cash deposit was entered in the books on a different date due to an inadvertent mistake by the accountant. The Tribunal directed the AO to re-examine the issue in light of the assessee's explanation and make a fresh determination. 7. Addition Made on Account of Undisclosed Cash Sales: The AO made an addition of ?4,44,252 based on an email found during the search, which was interpreted as undisclosed cash sales. The assessee explained that the cash was collected from hospitals and recorded in the books. The Tribunal found that the explanation was not properly examined by the AO and directed a re-examination of the issue. 8. Charging of Interest under Sections 234A and 234B: The issue of charging interest under Sections 234A and 234B was deemed consequential and did not require independent adjudication. Conclusion: The appeals were partly allowed, with directions for re-examination and fresh determination on several issues, ensuring that proper enquiries and verifications are conducted by the AO.
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