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TMI Blog2014 (9) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... question of raising any construction prior to it. There is no substantial difference between the value of construction estimated by the DVO and that reported by the assessee - CIT(A) was justified in holding that no construction was raised in the year and that the record would also reveal that only part of the land was purchased in the year which have been duly shown in the books of account of the assessee – the order of the CIT(A) is upheld – Decided against revenue. Discount allowed to the patients – Held that:- CIT(A) failed to take note of the finding of the AO on this issue - The AO has specifically noted in the assessment order that though the receipts of the assessee are increasing and expenses are also increasing, but the net profit ratio is going down in the year - the net profit ratio of the assessee was found at 29.90% as against net profit rate disclosed in the preceding AY 34.85% and 32.83% - The AO specifically noted that the assessee has earned income during the year and has given discount - It would mean that substantial income is returned back to the patients on account of rebate and discount, which is highly improbable - net profit ratio of the assessee is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case are that the assessee filed return of income at ₹ 5,89,950/- plus agricultural income at ₹ 80,000/-.The assessee derives income from running of nursing home / ambulance, consultancy, dispensary, X-ray etc. The assessee maintained proper books of account and the same were audited. The AO considering the comparative chart and history of the assessee found that the assessee's receipts are increasing year by year and expenses are also increasing, but the net profit ratio is going down each year. In the assessment year under appeal, the assessee has shown net profit ratio of 29.90% whereas in preceding assessment years 2007-08 and 2008-09, the same was shown at 34.85% and 32.83%. The AO observed in the assessment order that there was information with the department that the assessee has constructed a guest house in the name and style of Vandhan guest house (in short guest house), Farrukhabad in financial year 2007-08 and 2008- 09.The Inspector was deputed to visit the hospital premises of the assessee and the building of guest house. The Inspector gave his report, which was confronted to the assessee, in which it was intimated that the guest house is situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uest house building u/s. 142A.The report of the DVO was not provided to the assessee and to the knowledge of the assessee, there is no substantial difference in the report of the DVO and the expenses reported by the assessee on construction. Therefore, there is no basis, whatsoever, to make any addition against the assessee. 5.2 The ld. CIT(A) considering the explanation of the assessee and the material on record deleted the addition. His findings in para 5.10 of the impugned order are reproduced as under : 5.10. G.O.A.No.12 This is the main ground. The A.O. has added a sum of ₹ 1,33,17,372/- on the ground of unexplained investment u/s 69 of the act. The A.O. discusses regarding investment made by assessee in Vandhan Vatika and then goes on to estimate not only the Registration expenses regarding the plots purchased by the assessee, but also the A.O. tabulates the value of plots, stamp duty paid and estimated registration expenses in respect of plots purchased by other persons. The total of various amounts of purchases, stamp duty paid and estimated registration expenses as on page 14 of assessment order comes to ₹ 25,53,372/-. There-after the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21,500 The above investments are as per accounts and records and are also found debited, in the capital account of the assessee. Thus, it is found that there is neither any un-explained investment in registry expenses, nor there is any construction at all during the year and that what-ever investments have made are duly accounted for and are part of accounts. Hence entire exercise of A.O. estimate various amounts of registry expenses and of construction expenses is held to be futile, irrelevant and improper. The entire addition of ₹ 1,33,17,372/- has no logical basis and reasoning and thus requires to be deleted. 6. The ld. DR relied upon the order of the AO and submitted that the ld. CIT(A) did not examine the facts of the case. The ld. DR referred to the order sheet of dated 16.12.2011 recorded by the AO to show that the AO has investigated the issue of unexplained investment in the building. He has also referred to the report of Income-tax Inspector dated 31.10.2011 to show that the assessee has made unexplained investment in building. The ld. DR referred to the report of DVO dated 23.05.2012, in which the DVO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructions Developers Ltd., 42 Taxman.com 410, in which it was held as under : Section 142A of the Income-tax Act, 1961 Assessment Estimation by valuation officer [Conditions precedent] Assessment year 2006-07 whether reference made to DVO was not proper where Assessing Officer did not record any findings on entries recorded in books of account, nor rejected account books before making such reference Held, yes. 7.3 He has referred to capital account of the assessee ending 31.03.2009 (PB-26), in which the value of the plot purchased in the year under appeal was mentioned at ₹ 3,17,790/-. PB-89 is acknowledgement of return filed for subsequent assessment year 2010-11 on 20.09.2011 prior to completion of assessment order, in which the assessee has mentioned the same value of plot rectification entry (PB-102) in a sum of ₹ 3,17,790/- and the value of construction in assessment year 2010-11 (PB-103). PB-106 is acknowledgement of filing of return for the assessment year 2011-12, in which also at page 122, land and construction have been mentioned of guest house. PB-139 is balance sheet of assessment year 2012-13, in which also net income from gues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year under consideration, which have been duly shown in the books of account of the assessee. Considering the totality of facts and circumstances in the light of above case laws, we do not find any justification to interfere with the order of ld. CIT(A) in deleting the addition. Ground No. 2 of appeal of the Revenue is accordingly dismissed. 9. On ground No. 3, the Revenue challenged the deletion of addition of ₹ 2,27,935/- on account of discount allowed to the patients. The AO noted that the assessee has debited the amount of ₹ 4,55,870/- under the head rebate and discount. On verification of books of account and bills etc., it was found that same are not verifiable as to whether the bills have been given to all the concerned persons. The AO observed that he cannot believe the accounts of the assessee. The AO noticed that the assessee has earned income during the year at ₹ 6,72,555/- and has given discount of ₹ 4,55,870/-. Therefore, it was nothing but adjustment of profit / income of the year. 50% of the expenses were, accordingly, disallowed. Before the ld. CIT(A), the assessee claimed that it is a consistent practice to give rebate and discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... register, it is found that no true picture has been reflected in the books of account. The repetition of the same names was found regularly and different names were not found in whole of the year. This fact was also mentioned in the report of the Inspector, which was confronted to the assessee also. The AO, therefore, estimated the income under this head at ₹ 1,65,162/- and made addition of ₹ 1,00,000/-. The ld. CIT(A) agreed to the submissions of the assessee that many of the patients came repeatedly for follow up treatment. Therefore, the addition was deleted. 12. On consideration of the rival submissions, we are of the view that the ld. CIT(A) without any justification should not have deleted the addition. The AO has also noted that the net profit rate of assessee is decreasing. The AO has given specific finding against the assessee that the patient register and visiting register is not disclosing true picture because of the repetition of the same names were found regularly and different names were not found in whole of the year. The finding of the AO that names are repeated during whole of the year is not rebutted by the assessee through any material on record be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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