2023 (10) TMI 1427 - AT - Income Tax

Undisclosed/suppression of receipts - Gross receipts noted in seized document - addition is made based on exhibit 7 of Annexure AS which was seized from the premises - HELD THAT - The revenue did not bring any records to justify the addition before us except that the receipts are more in the two years. Whereas the records of the patient and arguments of the assessee that based on the past two years performance projection of two years were made cannot be denied and the same is support the fact that past two years data exactly tallied with the records. The revenue merely argued that the document found from the assessee the assessee has to justify the revenue receipt recorded. The arguments of the revenue has no support whereas the assessee justifies the arguments submitting that since the assessee opened up two more branch and being corporate assessee prepared projection as guideline based on the actual performance of last two year has force. During the search revenue did not find from that the records of the patient maintained and consequent there upon no receipt is offered. Considering that aspect of the case we also see that even the CIT (A) erred in directing the AO to compute the profit rate when the revenue clearly fails to justify that the impugned figure recorded on the loose paper is not an estimate but actual receipt of the assessee. Based on these observations the ground no. 2 raised by the assessee is allowed. Assessment u/s 153A - Incriminating material found during search or not? - HELD THAT - Addition is made is in the nature of incriminating material and in the absence of clear explanations of the assessee that the impugned page show the figure for the year under consideration is the estimate based on the past two year actual and against this explanation revenue failed to justify the addition. Based on the said explanation of the assessee we are of the considered view that since the page is not in the nature of incriminating material addition cannot be made considering the decision of the apex court in the case of Abhisar Buildwell 2023 (4) TMI 1056 - SUPREME COURT Commission made to medical professional or related parties to soliciting patients is inadmissible expenditure - Assessee failed to prove the genuineness of these expenses being the commission paid - assessment proceedings based on the records in the form of voucher found that the records maintained by the assessee unsatisfactory and the assessee failed to prove the genuineness of the expenditure - HELD THAT - The deficiency in such a voucher itself says that the same has been maintained during the business of the assessee by the employees. The source of this expenditure is not under dispute. The related receipt from the patient on admission is not under dispute. Entries were duly found in the regular books. Only because of statements recorded during the search the addition cannot be made, the lower authorities failed to appreciate that even in the statement it was clarified that the expenses are being incurred and the same was justified in the statement. Looking to the nature of profession the assessee engaged it is normal practice to give such reimbursement or service charge. As regards the TDS AO failed to establish that the assessee has controverted the provision of TDS, even though all the details of the payment were made available to the ld. AO. AO has not found out what is the amount of the default. Considering the overall facts and considering the nature of the profession of the assessee we see no reason to sustain the addition as the assessee has already recorded the relevant receipt related to expenditure and thus, when the receipt is not in doubt the related expenditure cannot be disallowed merely based on one statement. Addition made on account of anesthesia payment to various consulting doctors made by the AO - HELD THAT - The only concern of the revenue is that the payment has been made in cash and the TDS has not been deducted by the assessee. On this issue the bench noted that the assessee has paid the charges to the anesthesia expert as an agent of the patient. When the assessee has paid the expenditure as agent in providing service the assessee is not liable to deduct the tax as the same is merely paid as an agent of the patient. The revenue has not doubted the role of the assessee in fiduciary capacity while making the payment to the expert. As regards the payment of TDS default the bench noted the appeal of the assessee for TDS default were decided in favour of the assessee for assessment year 2017-18. As revenue did not challenge those order where in the issue of TDS for the year under consideration has already been finalised and on the same very issue again no disallowance can be made. Based on that aspect of the case as the assessee has collected the money on behalf of someone else and there is no income on this aspect of the case. As regards the default of the assessee u/s. 40(a)(i) of the Act, the bench noted that as regards the TDS default the proceeding has already been completed and the revenue did not bring specific default, we see no reason to consider the disallowance on this aspect. Payments had been made to a third party on behalf of the doctors - as argued payments are towards services rendered, and even if they paid to third party these are expenses of the assessee and are allowable - HELD THAT - As the assessee did not explain the nature and purpose to the satisfaction of the ld. AO he has made the addition of Rs. 64,900/-. The ld. CIT (A) also confirmed the finding of the AO. Before us the ld. AR of the assessee submitted that the payments had been made to a third party on behalf of the doctors. Payments are towards services rendered, and even if they paid to third party these are expenses of the assessee. We do not find any force in arguments of assessee, as the assessee failed to justify the reason as to why the payment of the surgery paid the person who are not authorized. Therefore, we do not incline to interfere in the detailed finding of the lower authority. Addition made on account of discount allowed on the bills of patient for treatment - Assessee is an approved hospital for various treatment under the medical insurance coverage and also undertake treatment on various scheme of government. Therefore, as per the scheme of the various treatment the assessee offers discount on the bills of the patient for the package, treatment duration, expenditure on surgery approved rates with the insurance company. All these aspects of the case is duly counted as receipts of the assessee. The assessee accounted the gross receipts and claimed separately the document given to the patient. We observe from the order of the lower authorities that so far as the receipt is concerned, the same is from the government, insurance company. Considering that fact that the assessee has given discount to the patient based on the treatment, duration of treatment of patient, the scheme of the various treatment adopted by the assessee. All these receipts are duly accounted in the books of account. The respective services bills raised by the assessee is not under dispute and thus, there is no reason to disbelieve the related discount expenses claimed by the assessee based on the systematic approach as per corporate scheme of the assessee given to the patient from whom receipt is already accounted. DR did not controvert the finding of the bench in the case of the assessee s own case and also not brought on record any other judicial precedent contrary to the same. Thus, respectfully following the rule consistency we do not find any merits in this ground raised by the revenue. Addition on account of suppression of receipt of X-ray - As it is the normal practice in the medical profession that once the patient is admitted he may have to undergo for X-ray many a time and he may be billed accordingly. It is also happen that due to operator error the result not up to the mark or the angle is not correct the expert order to rework the X-ray and in that process there are also chances that the film gets damaged also. Hence, the conspectus explanation granted by the assessee is to be considered and therefore, the consumption of the X-ray film with that of the overall billed amount no addition can be made. In the light of these fact and analysis of the various factual aspect of the case we respectfully the following decision of the Coordinate Bench in the case of the assessee for assessment year 2011-12 we do not find any force in the arguments of the Revenue and we are of the considered view that there is no fault in the detailed finding of the ld. CIT(A). Decided against revenue. Unaccounted cash deposit during demonetization period - Identity and the treatment given to the patient is duly recorded and there is no adverse observation on this in the regular books of account of the assessee. Revenue cannot tax twice the same receipts, as in the regular books of account this cash receipt is duly recorded as receipt. Based on these observations of the facts we are of the considered view that the amount deposited in the bank account though SBNs addition cannot be sustained also from the record that the books of account of the assessee are maintained and audited in the regular course of profession and in the absence of any default on this books addition is not sustainable. The Bench also noted that the ld. AO did not bring on record any concrete and conclusive evidence of back dating of entries of cash receipts or bogus receipt and not disclosing of the identity and treatment so offered. The Bench also noted that the books of account are regularly audited under the Company Act under the Income Tax Act. There is no adverse observation in the audit report and this audited of books of account had not been rejected u/s 145(3) of the Act. Therefore, we hold that the assessee has already discharged this burden and proved in the cash deposited in the bank account in the form of demonetization currency was received and explained the cash receipt for which the same has already been accepted by the Revenue while finalizing the assessment of books of account without mentioning any default and the assessment has been completed u/s 143(3) r.w.s. 153A Addition being advance for outsourcing medical shop at Mandsour Center (MP) on protective basis - Here we note that till the second stage of dispute of the addition has been sustained by the Revenue in the case of Shri Manish Chhaparwal to the extent of Rs. 15,00,000/- and before us the Revenue did not bring anything contrary to the findings of the ld. CIT (A) in the case of Shri Manish Chhaparwal so as to support the reasons as to why the said protective addition in the case of the assessee should sustain. Once it is already considered at the two level at the Assessing Officer and the ld. CIT (A) that related to amounting pertains to Shri Manish Chhaparwal in absence of the revenue not demonstrating before us in support we confirmed the reasoned finding of the ld. CIT (A) and we see no reason to sustain the addition.

Summary

Issues Involved:
1. Legality of assessment under section 143(3) read with section 153A of the Income Tax Act.
2. Rejection of books of account under section 145 of the Income Tax Act.
3. Addition on account of anesthesia payment to consulting doctors.
4. Addition on account of handmade cash vouchers related to petty payments.
5. Addition on account of commission payment to various persons.
6. Addition on account of suppression of x-ray receipts.
7. Addition on account of discount allowed on bills of patients.
8. Addition on account of cash deposit during demonetization period.
9. Protective addition on account of cash found during search.

Detailed Analysis:

1. Legality of Assessment under Section 143(3) read with Section 153A:
The assessee challenged the legality of the assessment on the grounds that the addition was made based on a document that was not incriminating. The tribunal referred to the Supreme Court's decision in PCIT vs. Abhisar Buildwell P. Ltd., which held that in the absence of incriminating material, no addition can be made in respect of completed assessments. The tribunal found no incriminating material justifying the addition and allowed the assessee's appeal on this ground.

2. Rejection of Books of Account under Section 145:
The CIT(A) invoked section 145(3) to reject the trading results declared by the assessee and directed the AO to estimate the income by applying the average gross profit rate of the last three years. The tribunal found this approach erroneous, as the revenue failed to justify that the figures on the seized document were not estimates but actual receipts. The tribunal allowed the assessee's appeal, holding that the entire gross receipts could not be taxed as income.

3. Addition on Account of Anesthesia Payment to Consulting Doctors:
The AO disallowed anesthesia payments made in cash, citing non-deduction of TDS. The tribunal noted that the year under consideration was a completed assessment year, and no incriminating material was found during the search. Hence, the addition was deleted, following the principle that no addition can be made in the absence of incriminating material.

4. Addition on Account of Handmade Cash Vouchers Related to Petty Payments:
The AO disallowed petty cash payments, citing self-serving documents. The tribunal found that the books of account were regularly audited, and no defects were pointed out by the auditors. The tribunal held that the AO's addition was not justified in the absence of incriminating material and allowed the assessee's appeal.

5. Addition on Account of Commission Payment to Various Persons:
The AO disallowed commission payments, citing unverifiable cash payments. The tribunal found that the payments were made to drivers and other persons who brought patients to the hospital, and the details were recorded in the regular books of account. The tribunal allowed the assessee's appeal, noting that the AO failed to establish any TDS default or provide corroborative evidence.

6. Addition on Account of Suppression of X-ray Receipts:
The AO made an addition based on the difference between the number of X-ray films used and the X-rays done. The tribunal noted that the addition was based on an estimate and not supported by any material evidence. The tribunal allowed the assessee's appeal, following the decision in the assessee's own case for the previous year.

7. Addition on Account of Discount Allowed on Bills of Patients:
The AO added the discount allowed on bills as income, citing unverifiable claims. The tribunal found that the discount was given as per the hospital's policy and was duly recorded in the books of account. The tribunal allowed the assessee's appeal, noting that the addition was based on suspicion and not supported by evidence.

8. Addition on Account of Cash Deposit During Demonetization Period:
The AO added the cash deposit during the demonetization period as unexplained income. The tribunal found that the cash receipts were duly recorded in the books of account and supported by patient details. The tribunal allowed the assessee's appeal, holding that the cash deposit was not unexplained.

9. Protective Addition on Account of Cash Found During Search:
The AO made a protective addition of cash found during the search. The tribunal noted that the substantive addition was already made in the hands of the director, and there was no reason to sustain the protective addition in the assessee's case. The tribunal allowed the assessee's appeal on this ground.

Conclusion:
The tribunal allowed the appeals filed by the assessee in ITA No. 139 to 142/Jodh/2022, partly allowed ITA No. 143 and 144/Jodh/2022, and dismissed the appeals filed by the revenue in ITA No. 167 to 169/Jodh/2022.