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TMI Blog2014 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... mist group, such stand was not acceptable and that the accounts of all the three companies of the Alchemist Group for the relevant period remained unreconciled. The AO erroneously did not go through these details - The assessment order does not contain any reference to any of these documents filed by the assessee, though the AO observed that these were examined - Had these details been examined, obviously, it could not have been observed in the assessment order that there was absence of documentary/supportive evidence with regard to the stand of the assessee that he had incurred the expenses on behalf of Alchemist Group out of the amounts received by him from them - the assessee’s bank account with HDFC Bank showing the payments received by the assessee from the Alchemist Group, the copy of ledger account of business promotion and entertainment expenses in the books of the assessee, balance sheets and Profit & Loss Account of all the three Companies of the Alchemist Group for F.Ys. 2006-07, 2007-08 and 2008-09 and the Schedules of loans and advances in the books of all the three companies of the Alchemist Group, for all the three years were before the AO - None of the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) erred in restricting the disallowance made by the A.O. to 50% of ₹ 1,25,255/- on account of personal use of telephone, vehicle maintenance and depreciation on car etc. in absence of any documentary evidence that the said expenses were wholly and exclusively incurred for the business of the assessee. 2. Apropos Ground Nos.1 and 2, the Assessing Officer observed that there were current liabilities of ₹ 1,27,97,418/- against the name of Alchemist, Chandigarh in the balance sheet with the assessee as on 31.03.2009. On query, the assessee filed details vide letter dated 08.12.2011, submitting the following confirmations of the Alchemist Group of Companies:- (i) Alchemist Hospital ₹ 29,50,000/- (ii) Alchemist Holdings Ltd. ₹ 2,23,00,000/- (iii) Alchemist Ltd. ₹ 20,00,000/- The balance as on 31.03.2009 ₹ 2,72,50,000/- 3. The assessee also filed the confirmations along with the ledger accounts of these parties. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.8.2008 1500000.00 22.9.2008 1500000.00 14.11.2008 1000000.00 25.11.2008 800000.00 16.12.2008 1500000.00 5.2.2009 2000000.00 12.3.2009 1500000.00 Total 2950000.00 22300000.00 2000000.00 Grand Total 27250000.00 As per Confirmations 2950000.00 22300000.00 2000000.00 Grand Total 27250000.00 Confirmations Balance as per Alchemist as on 31.3.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had failed to furnish documentary evidence in support of his contention regarding the expense made out of the amounts received from the Alchemist Group of Companies. It was observed that in the absence of documentary/supportive evidence, the contention of the assessee with regard to the expenses claimed to have been incurred by him on behalf of all the three companies of the Alchemist Group and out of the amount received from them, was not acceptable. It was observed that the accounts of the assessee and all the three companies of the Alchemist Group, pertaining to the relevant period, remained unreconciled. It was as such, that the Assessing Officer added the amount of ₹ 1,44,52,582/- to the income of the assessee. 7. Before the Ld. CIT (A), the assessee contended that he was a renowned dentist running a dental clinic under the name and style of Swaran Dental Clinic; that the Alchemist Group of Companies had decided to take over the running business of the assessee and it had been mutually agreed between the assessee and the said companies, that new plant and machinery should be installed and the set up of the assessee be upgraded so as to enable him to train dentists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases/expenses to the account of Alchemist, but the expenses had yet to be recognized by the companies in their books after their formal approval by their Chairman; that confirmation dated 06.12.2011, issued by M/s Alchemist Hospitals Ltd., confirming the balance of ₹ 29,50,000/- as on 31.03.2009, along with a copy of the ledger account of the assessee in their books, had been furnished before the Assessing Officer and was being filed before the CIT (A); that confirmation dated 01.04.2009, issued by M/s Alchemist Holdings Ltd. (Mahindra) confirming the balance of ₹ 2,23,00,000/- as receivable by them from the assessee as on 31.03.2009, along with copy of ledger account of the assessee for the period 01.04.2008 to 31.03.2009, in their books, showing an opening debit balance of ₹ 50,00,000/- as on 01.04.2008 payable by the assessee to them, had been filed before the Assessing Officer and was being submitted before the Ld. CIT (A); that confirmation issued by M/s Alchemist Ltd., confirming the outstanding balance of ₹ 20 lac as on 31.03.2009 payable by the assessee to them, along with a copy of the ledger account of the assessee in their books, had also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by DHR Holdings India Pvt. Ltd., for ₹ 4,50,000/- in the name of Alchemist Hospitals Ltd. before the CIT (A); that however, the assessee had made payment of ₹ 50,000/-, which had been reimbursed for plant and machinery; that the payment was made by Alchemist Hospitals Ltd. to DHR Holdings by cheque No.669152 dated 03.02.2009; that the assessee was also filing copies of Profit Loss Account and balance sheet of the assessee as on 31.03.2007 and 31.03.2008 and a copy of the assessee s bank account showing the receipts from the Alchemist Group; that it was noteworthy that the assessee had shown the amount taken from the Alchemist Group and the Alchemist Group had not stated that the amount had not been given by them to the assessee; that in any case, the transaction was in the nature of a loan only till such time as the Alchemist Group did not recognize the same in their books of account, and it was not of the nature of income of the assessee; that further, the assessee had also not claimed any expense or depreciation; and that there was no evidence with the Assessing Officer to show that the payment was in the nature of income of the assessee. 8. By virtue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Alchemist Group u/s 133 (6) of the Act; that the Ld. CIT (A) failed to appreciate that the expenses which the assessee stated to have incurred on behalf of the Alchemist Group, were in the nature of reimbursement of expenses and that the same had not been accounted for in the books of account of the Alchemist Group, due to which reason, these expenses remained unexplained in the hands of the assessee; that the Ld. CIT (A) failed to appreciate that the assessee has not brought any documentary evidence to prove the alleged expenses incurred by him on behalf of the Alchemist Group; that the Ld. CIT (A) also failed to appreciate that the assessee miserably failed to reconcile the accounts of the assessee and the Alchemist Group; and that the Ld. CIT (A) has wrongly arrived at the conclusion that the amount in question was not the income of the assessee and that it was in the nature of a loan, without recording any finding as to how such conclusion was reached. 10. On the other hand, supporting the impugned order, the ld. Counsel for the assessee has contended that in the present matter, no addition u/s 68 of the Act has been made, nor did the Assessing Officer state that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intenance, staff welfare, telephone expenses and vehicle maintenance expenses, etc. APB 32-40 is a copy of reply dated 08.12.2011 filed by the assessee before the Assessing Officer in response to notice u/s 142 (1) of the Act. This reply also contains the confirmations of the Alchemist Group of Companies for the amount totaling to ₹ 2,72,50,000/-, along with copies of ledger accounts of the assessee, as appearing in their books. APB 44-54 is a copy of the assessee s reply dated 21.12.2011 filed before the Assessing Officer in response to notices dated 14.12.2011 and 20.12.2011. This reply contains the details of amounts received from the Alchemist Group, the details of the expenses incurred by the assessee and reconciliation of the difference of ₹ 1,44,52,582/-, between the confirmations filed and the current liability claimed in the balance sheet. APB 55-56 is a copy of invoice No. DHR/KAVO/001, dated 06.03.2009, raised by DHR Holdings India Pvt. Ltd., for ₹ 4,50,000/-, in the name of Alchemist Hospitals Ltd. It shows payment of ₹ 50,000/- made by the assessee, which was reimbursed for plant and machinery, and evidence of payment by cheque No.669152 dated 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auditor s Report, Balance Sheet along with Schedules and Cash Flow Statement of Alchemist Holdings Ltd. for F.Y. 2007-08 as on 31.03.2008. APB 21-26 is a copy of Schedule forming part of the Balance Sheet of Alchemist Holdings Ltd., for loans and advances for F.Y. 2007-08, showing amount given by them to the assessee at ₹ 50 lac and for F.Y. 2008-09 at ₹ 2,23,00,000/-. APB 127 is a copy of Schedule of loans and advances in the books of Alchemist Ltd. showing an amount of ₹ 20 lac as given by them to the assessee during F.Y. 2006-07. APB 128 is a copy of Schedule of loans and advances forming part of Balance Sheet as on 31.03.2009, of Alchemist Hospitals Ltd., showing an advance of ₹ 29,50,000/- made by them to the assessee. APB 129 is a copy of details of expenses for the period from 01.04.2007 to 31.03.2008, incurred by the assessee for and on behalf of the Alchemist Group of Companies, showing expenses of ₹ 15,81,629/-. APB 130 is a copy of balance sheet of Swaran Dental Clinic, as on 31.03.2008, showing an amount of ₹ 34,24,357/- as outstanding, payable by the assessee. APB 131 is a copy of the Profit Loss Account of Swaran Dental Clinic fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer. In the confirmations filed by all the three companies of the Alchemist Group, none of them denied having reimbursed these amounts to the assessee, though these amounts were not recognized by them in their books of account. The assessee, it is pertinent, did not claim any expense or depreciation concerning the funds utilized, as given to him by the Alchemist Group of Companies. Anyhow, it cannot at all be said that such receipt was in the nature of the assessee s income and no evidence whatsoever to the contrary was brought on record by the Assessing Officer. The stand of the assessee that the assessee and the Alchemist Group had agreed for the take over of the running business of the assessee by Alchemist, was never questioned by the Assessing Officer. It was in pursuance of this agreement, that new plant and machinery was decided to be installed and the set up of the assessee was decided to be upgraded, so as to enable training of dentists. It was decided that the assessee would head the new set up under the Alchemist Group. The research work required for the upgradation of the set up was to be done by the Alchemist Group. Plant and machinery were required to be purchased a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled and used. The copies of bills appended with the chart of repair and maintenance expenses (APB 62-73) are self-speaking as to the expenditure having been incurred mainly for petrol, parking, toll tax, new battery and tube, etc., necessary for the carrying on of the business of the assessee. The details contained in the assessee s bank account maintained with the HDFC Bank (APB 74-80) are the details of the payments received by the assessee from the Alchemist Group. Similarly, the ledger account (APB 81-85) depicts the business promotion and entertainment expenditure in the books of the assessee. Expenses shown at ₹ 15,81,629/-, for the period from 01.04.2007 to 31.03.2008, as incurred by the assessee on behalf of Alchemist Group (APB 129), all show the voucher type and the date. The same is the position for the expenditure incurred for the period from 01.04.2006 to 31.03.2007 (APB 133-134). 16. The Assessing Officer erroneously did not go through these details. The assessment order does not contain any reference to any of these documents filed by the assessee, though the Assessing Officer observed that these were examined. Had these details been examined, obviously, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision in Simbhaoli Sugar Mills vs. ACIT 17 SOT 19 (Del). 22. Here also, we do not find the order under appeal to be erroneous. The assessment order, as noted hereinabove, acknowledges the fact of production of books of account and examination thereof by the Assessing Officer. The books of account are undisputedly audited. No defect therein was found by the Assessing Officer. It was not alleged that any expenditure, which was not capable of being checked and verified, was incurred by the assessee. Only an ad hoc disallowance was made, without giving reasons for the amount being disallowed. This disallowance was entirely untenable and was rightly deleted by the Ld. CIT (A). 23. As such, Ground No.3 is rejected. 24. So far as regards Ground No.4, the Assessing Officer found that in the Profit Loss Account, the assessee had debited telephone expenses of ₹ 1,89,680/-, vehicle maintenance expenses of ₹ 2,15,978/- and depreciation on car and motorcycle, at ₹ 2,16,967/-, total amounting to ₹ 6,22,625/-. The Assessing Officer made disallowance of 1/5 of these expenses, amounting to ₹ 1,24,525, observing that the assessee s personal use of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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