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TMI Blog2014 (1) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... is under obligation to demonstrate the claim of expenditure made in the return/financial statements – thus, the AO is justified in resorting to make disallowance on account of "consumption of medicine and disposables. The basis adopted by both the authorities rejected, ie flat rate of 20% or 5% of the claim - some amount of guesswork is accepted in such estimation based additions and however, complete guesswork is unacceptable - considering the failures of the assessee in discharge of the onus and to establish that said medicine and disposables are consumed for the patients, making round sum disallowance out of the claim in the return, must meet the needs of the justice - Such a measure may motivate the assessee in directing his account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, which is subject matter of the present appeal before us, relates to the disallowances of expenses amounting to Rs 7,68,83 on account of consumption of medicine and disposables. Relevant facts are given in para-4 of the Assessment Order. "4. From the perusal of I E A/C., it is noticed that the assessee has claimed expenses of Rs. 38,44,119/- on account of medicines and disposables. The assessee was required to file details of medicine purchased and also produced records for consumption of medicine. Therefore, the assessee has filed the details of purchase of medicine, he has failed to produce records with regard to consumption of the medicine. It was stated by the assessee vide his submission dated 19.11.2010 which is as under: "The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be maintained. Therefore, the assessee maintained only the opening and closing stock of Medicines and the same is duly verified physically which is confirmed by the Auditors during the Tax Audit Exercise. This method of maintaining of records is consistently followed by the assessee and the same is accepted by the concerned AO of the assessee. Therefore, the assessee vehemently objects to the said disallowance on ad-hoc basis adopting the flat rate of 20% of the expenses. The assessee pleaded for deletion of the disallowances. On hearing the submissions of the assessee, the CIT(A) granted part relief as per discussion given in para 1.3. of the impugned order. The same reads as under. 1.3. I have considered the facts and the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable", in view of the assessee's failure to produce the consumption records of the said account, AO made disallowance amounting to Rs. 7,68,833/- ie @ 20 % of Rs 38,44,119/-. Ld AR for assessee also mentioned that the CIT(A) granted part relief stating that 20% making disallowances @ 20 % is higher side instead of deleting the entire addition. Further, Ld AR mentioned that the CIT(A) erroneously restricted the disallowances to 5% of the expenditure. Further also, Ld Counsel mentioned that the assessee filed copies of the documents few cases of patients on sample basis, which demonstrate the fact of consumption of Medicines. Therefore, as per the assessee's counsel, the question of consumption of Medicines by the assessee for patient is a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and there is no need to maintain records showing the use of medicine/disposable for the patients. Of course, assessee also relies on the principle of consistency, where the Department accepted the assesse's books in this regard over the years in the past. Assessee objects to the principle of estimations based on the ad-hoc basis. In this regard, assessee's counsel filed various decisions before us in his favour. On the other hand, it is the argument of the revenue that, when the claim of deduction is made, the assessee is under obligation to maintain records to demonstrate the fact of consumption of medicine for the patients. When the assessee has failed on his duty, the AO is justified to make disallowance. We have considered the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k is unacceptable. The decisions relied upon by Ld Counsel for the assessee supports the same. Therefore, we reject the very manner of quantifying the disallowance. Instead, considering the failures of the assessee in discharge of the onus and to establish that said medicine and disposables are consumed for the patients, making round sum disallowance out of the claim in the return, must meet the needs of the justice. Such a measure may motivate the assessee in directing his accounting staff to maintain proper records or evidences on this account of 'consumption of medicine and disposables' too. Therefore, we restrict the disallowance to round sum amount of Rs. 1 lakh. Thus, the AO is directed to restrict the disallowance and modify his orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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