2018 (8) TMI 1253 - AT - Income Tax

Tribunal upholds income enhancement, disallows deductions, and deletes penalty in recent tax case.

The Tribunal dismissed the grounds challenging the validity of the assessment order and upheld the CIT(A)'s enhancement of income by disallowing ... Deduction u/s 80IB(11C) - additional income offered during survey - investment in building - excess cash found - additions for non deduction of TDS on security expenses, AMC charges and Medical and Surgical expenditure - Held that:- Merely stating that this amount pertains to the receipts from hospital would not absolve the assessee from the burden to prove that these amounts were part of the receipts from the hospital. The assessee has not placed any second material suggesting that the amount pertained to the receipts from hospital. - while confirming the additions, deduction 80IB(11C) disallowed. Issues Involved:1. Validity and legality of the assessment order.2. Enhancement of income by the CIT(A).3. Deduction under section 80IB(11C) on amounts surrendered during the survey.4. Disallowance under section 40(a)(ia) for non-deduction of TDS on various payments.5. Imposition of penalty under section 271(1)(c).Detailed Analysis:1. Validity and Legality of the Assessment Order:- Grounds 1 & 2: The assessee claimed that the assessment order was invalid, barred by limitation, illegal, bad in law, and void-ab-initio. However, no specific submissions were made by the assessee’s counsel on these grounds, and they were deemed general in nature. Consequently, these grounds were dismissed without separate adjudication.2. Enhancement of Income by the CIT(A):- Grounds 3 & 4: The CIT(A) enhanced the income by disallowing deductions under section 80IB(11C) on amounts surrendered during the survey. The assessee argued that the CIT(A) exceeded his jurisdiction in making this enhancement as it was not the subject matter of the original assessment. The Tribunal held that the CIT(A) has the power to enhance the assessment within the scope of the proceedings, and since the assessee had claimed deduction on the surrendered amount, the enhancement was justified. The Tribunal dismissed these grounds, stating that the assessee failed to prove that the surrendered amounts were part of the hospital receipts.3. Deduction under Section 80IB(11C) on Amounts Surrendered During the Survey:- The assessee contended that the surrendered amounts were income from the hospital and should be eligible for deduction under section 80IB(11C). The Tribunal noted that the assessee did not provide any material evidence to support that the surrendered amounts were part of the hospital receipts. Therefore, the Tribunal upheld the CIT(A)’s decision to disallow the deduction.4. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:- Grounds 5 to 7: The assessee challenged the disallowance of Rs. 3,49,949 under section 40(a)(ia) for non-deduction of TDS on security charges, AMC charges, and medical and surgical expenses. The Tribunal found merit in the assessee’s contention that disallowance cannot be made if the deductees have disclosed the amounts in their returns. The Tribunal directed the AO to delete the disallowance if the deductees had indeed declared the amounts in their respective returns. These grounds were partly allowed.5. Imposition of Penalty under Section 271(1)(c):- Ground 1 of ITA No.1541/Ind/2016: The CIT(A) imposed a penalty of Rs. 7,73,073 under section 271(1)(c) for disallowance of deduction on the amount disclosed during the survey. The assessee argued that the penalty notice was defective as it did not specify the charge of concealment or furnishing inaccurate particulars. The Tribunal, relying on the Karnataka High Court’s decision in CIT vs. Manjunath Cotton Mills, held that the penalty notice was indeed defective and deleted the penalty.Additional Appeals:- ITA No.1008/Ind/2016:- Grounds 1 & 2: These grounds were general in nature and dismissed without separate adjudication.- Ground 3: The assessee challenged the addition of Rs. 1,55,778 for non-deduction of TDS on payment to Hoswin Incinerator Pvt. Ltd. The Tribunal found merit in the assessee’s contention that disallowance cannot be made if the deductee has declared the amount in their return. The Tribunal directed the AO to delete this amount.Conclusion:- ITA No.1007/Ind/2016: Partly allowed.- ITA No.1541/Ind/2016: Allowed.- ITA No.1008/Ind/2016: Partly allowed.The order was pronounced in the open court on 21.08.2018.