TaxTMI 
TaxTMI 
2010 (9) TMI 1110
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....ed that as a matter of practice and convention, such synopsis is submitted only on the date of hearing and all the Benches of the Tribunal are accepting the same on dates of hearing. However, he further submitted that if the Department has made a big issue out of this, then he will not even press for accepting the synopsis. 5. We have considered this preliminary objection raised by the CIT-DR and find no force in the submissions of the ld. CIT-DR. The meaning of Synopsis is given in Income Tax Lexicon P.Ramanatha Aiyar as under:- "Synopsis. A view of the whole together; a general view of a single subject. Synopsis "Synopsis" means to cut short, diminish, reduce; a brief or partial statement, les than the whole; an epitome" 6. The above clearly shows that synopsis is basically a short summary of the matter being projected before the Tribunal in complicated issues. Such synopsis are regularly being filed by both the sides before various Benches since these kinds of synopsis are quite helpful to the Members of the Tribunal while dictating the orders and that is why they are being accepted. The synopsis does not include any document or material for which the Dep....
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....as per the provision of the section 234B[1] with explanation (2) and 234C [1] with explanation (2) which is not correct. 9. The ld. Chartered Accountant of the assessee submitted that this being a legal issue and does not require finding of any fresh facts, therefore, should be admitted. 10. On the other hand, Ld.CIT DR, objected to the admission of this ground because, according to him, charging of interest under sections 234A, 234B AND 234C was a question of fact. 11. We have considered the rival submissions carefully and find force in the submissions of the Ld.counsel of the assessee. Charging of interest under sections 234A, 234B AND 234C is purely a legal question, particularly, when the levy of interest itself is sought to be challenged. We further find that Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383 held as under" "that the Tribunal had jurisdiction to examine a question of law which arouse from the fact as found by the authorities and having a bearing on the tax liability." Since no new facts are required to be found and in view of the above decision of the Hon'ble Supreme Court, we admit this additional ground. 12. Bef....
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....erefore, there is no force in the submission that interest cannot be charged before 1-6-2003 and accordingly we reject this part of the argument. 15. We further find that sec.234B reads as under: 234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year [to the date of determination of total income under subsection (1) of section 143 [and where a regular assessment is made, to the date of such regular assessment, on an amount]] equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1. - xx xx xx Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or sect....
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....e assessee which is as under: "The complimentary expenditure as evidenced by the seized records is Rs. 3,36,302/- as in paper book Pages 142-176. But the assessing officer allowed Rs. 19,336/- only. The CIT(A) estimated the value of complimentary treatment at Rs. 1,00,000/- without any evidence on estimated basis and allowed a further sum of Rs. 80,664/-. The value of complimentary treatments, lab test, supply of drugs, chemicals and materials are supported by seized evidences and the appellant may submit that remaining amount of Rs. 2,36,302 also may be allowed as expenditure." 18. The ld. Chartered Accountant Shri Warrier submitted that this ground was omitted to be raised because of an over sight. The facts regarding this ground are already incorporated in the orders of the lower authorities and, therefore, same should be admitted. 19. On the other hand, Ld.CIT DR, objected to the admission of this ground because, according to him, this is a factual matrix. 20. After considering the rival submissions, we find that all the facts leading to the dispute in this additional ground are on record in the orders passed by the lower authorities and, therefore, it seems t....
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....ade before the lower authorities and emphasized that some complementary treatment has to be meted out to the staff, family members and close relatives of the staff, certain other beneficiaries who were well wishers and some free treatment on compassionate ground to the poor patients. These are well established practices in any hospital. Therefore, these expenses which were recorded in the seized material should have been allowed to be reduced from the gross receipts when no money was received. In any case, in assessment year 2001-02 assessee had claimed a sum of Rs. 92,211/- out of which AO himself had allowed a sum of Rs. 89,514/- and assessee did not file any appeal because of the smallness of the amount. However, in A.Y 2002-03 the claim on account of complementary treatment was of Rs. 2,88,704/- out of which AO had allowed a sum of Rs. 30,360/-. On appeal the balance whole amount was allowed by the CIT(A) against which no appeal has been filed by the department. Similarly, in A.Y 2003-04 out of the claim of Rs. 2,53,780/- on this account AO had allowed only a sum of Rs. 83,780/- and balance was allowed by the CIT(A) and again department has not filed any appeal. In A.Y 2004-05 ....
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.... the doctors to the extent of Rs. 65,61,775/- is supported by evidence as per the books of accounts and diary seized at the time of search, but payment is disallowed to the extent of 75% and Rs. 15,17,014/- is disallowed and allowed only 25% Rs. 5,05,672/- which is not correct. 4. The payment to doctors are supported by evidence and in these circumstances the disallowance of Rs. 15,17,014/- as expenditure is not justified. 5. The gross income as per the seized material are accepted whereas the expenditure such as payments to the doctors supported by the seized material are not allowed in full. 27. Ground No.1: The ld. Chartered Accountant of the assessee Shri Warrier submitted that the assessee had filed returns for various years on receipt of notice u/s.153A. While completing the assessment AO had started computation of income [page-4 para 10 of his order] from the income returned as per original return. Since the assessment was being framed u/s.153A r.w.s. 143[3], AO should have proceeded on the basis of income returned u/s.153A and, therefore, the assessment should be held as null and void. 28. On the other hand, Ld.CIT DR submitted that no rule has been ....
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....rovisions makes it clear that the AO has powers to make an assessment by an order which should be in writing and he has to determine the tax payable also. No particular method has been given for computation of such income and it is almost settled that as long as the assessment of income is comprehensible, no fault can be found for such determination and/or assessment. We had specifically asked the ld. Chartered Accountant of the assessee to point out as to how the interest of the assessee would be affected if the starting point of assessment of income was taken at income returned as per the original return. But he gave an evasive reply and argued that it may effect the penalty proceedings etc. It is a matter of common sense that AO starts the computation of income sometimes on the basis of returned income, sometimes on the basis of computation of income filed by the assessee and sometimes on the basis of profit & loss account and in our view, the assessing authorities are generally free to chose any of the methods. Merely because the starting point for assessment has been made as income originally returned, the assessment cannot be said to be bad in law. In these circumstances , we....
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....s I am not inclined to allow the full amount as expenditure, but considering the circumstantial evidence as per the seized books 75% of the claim of the appellant is disallowed which includes the disallowance under section 40A(3) and 25% Rs. 5,05,672/- is allowed. Relief Rs. 5,05,672/-." 33. Before us the ld. Chartered Accountant Shri Warrier submitted that the search was conducted on 7-10-2004 in the premises of the assessee wherein various documents were found and seized. It was found that the hospital has not recorded the receipts and the receipts which were collected were out of books and certain expenses were made out of such receipts. One of the items of such expenditure is with regard to doctors payments. In fact, a separate book was being maintained in which these receipts and expenses were being recorded by the Manager Shri K.Savadas. A statement of Shri K. Sivadas was recorded during the search and with reference to question No.4 it was specifically admitted that such books was being maintained in which collection from patients and paid to doctors was recorded. In this respect he referred to pages 107 to 109 of the paper book which is a copy of the statement r....
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....en the doctors' payments and the receipts. 36. We have considered the rival submissions carefully and agree with the submissions of the ld. Chartered Accountant Shri Warrier. It is a clear case where certain receipts and expenses were being recorded in a separate book and were not being disclosed to the department. During the search, it was noticed from the seized documents that certain receipts have not been declared to the department and the department has brought those receipts to tax which is correct because that is the purpose of the search. However, we fail to understand when once a particular document and/or a note book in which such receipts have been recorded and also certain expenses have been recorded, then how can such expenditure be ignored. In fact, it is the only income portion which can be subjected to tax. It is almost settled law that even if assessee is running an illegal business, even then, only net income of such illegal business can be subjected to tax. We are unable to agree with the submissions of the Ld.CIT DR. As far as the contention that this is the unexplained expenditure and, therefore, should be brought to tax u/s.69C because no source is there is....
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....place in the books of accounts and other documents seized during the search. Assessing Officer's action in completing the assessment adopting the difference in the collection as per the Computer Print out taken at the time of search and the amount shown in the original return after allowing the items claimed to be excluded by the assessee amounting to Rs. .38,69,326/- except complimentary bills and doctors fees, is correct. The CIT[A] ought to have find that out of the complimentary bills of Rs. .3,36,302/- the Assessing Officer has given deduction of Rs. .19,336/- towards complimentary treatment given to the staff and their family members. Hence CIT[A]'s action in allowing a further reduction of Rs. .80,664/- is unwarranted and is not correct in the absence of evidence. 4. The CIT[A] also erred in deleting 25% [Rs. .5,05,671] of the amount paid to doctors amounting to Rs. .20,22,686/-. The CIT[A] ought to have seen that the assessee could not produce any confirmation letters from the doctors about the receipt of the amount by them. Hence CIT[A]'s action in deleting 25% of the same is unwarranted. 39. In addition to above, the revenue has raised the additional following....
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....ilding required substantial repairs which were carried out from F.Y 1999-2000 to 7-10-2004 [the period with which we are concerned]. The following expenses have been incurred in respect of construction as well as repairs: Total Investment in the building construction and building repairs. [Paper Book Pages 110-114] From the asst.year 2001 to Asst. Year 2004-05 and upto 07-1-2004 [the date of search] Asst.year Building repair Building construction Total 2000-01 5,31,238 20,46,695 25,77,933 2001-02 2,46,139 27,35,337 29,81,476 2002-03 6,54,447 37,03,569 43,58,016 2003-04 4,73,364 36,05,278 40,78,642 2004-05 12,98,810 2,08,17,003 2,21,15,812 From 1-4- 2004 To 7-10-2004 [date of search] 4,28,3,59,000 3,59,000 7,87,391 Rs. .3,68,99,271 In the books of account these expenses were shown as under: Particulars Amount Bhagavath Building [i.e. new building] Rs. .1,45,35,307 Additional construction in the existing Building Rs. .1,47,13,437 Total Rs. .2,92,48,744 Add: expenditure incurred on repairs Rs. . 76,50,52....
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....eady allowed and, therefore, there was no justification for this further claim. 46. On the other hand, ld. Chartered Accountant Shri Warrier submitted that all the expenses were recorded in the books of account and perhaps there was some mix up that some of the expenses were booked under the head 'cost of construction'. In any case, when an additional income is being assessed on account of undisclosed receipts, then similarly undisclosed expenditure is also to be allowed. He argued that reference to DVO was not made at the instance of the assessee, but the reference was made by the AO on his own. Since some of the amounts were spent towards repairs which were in the nature of concrete flooring, plastering of the walls, painting and other repairs because the existing building was 25 years old and required substantial repairs. The DVO has estimated the cost of construction after verifying all the details and the total expenditure on account of cost of construction as well as repairs has been estimated by the DVO at Rs. .3,67,83,000/- whereas the assessee has already reflected the sum of Rs. .3,68,99,271/- as per the details filed at pages 110 to 140 of the paper book. He submitted....
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.... without revising the return and the Hon'ble Supreme Court has held that AO cannot entertain a claim for deduction otherwise than by filing of a revised return. In this case the claim has been made through return u/s.153A and, therefore, this ratio cannot be applied. 51. From the details of cost of construction and repairs filed at pages 110 to 114 of the paper book, it is clear that the total expenditure shown in the books of accounts towards cost of construction and repairs by the assessee is Rs. .3,68,99,271/- whereas the DVO has estimated the cost of construction in respect of new building and extension of existing building at Rs. .3,00,93,000/-, i.e. Rs. .1,59,21,000/- for the new building and Rs. .1,41,72,000/- for the extension of existing building. Further, DVO has estimated the cost of repairs at Rs. .66,90,000/-. Thus, the total expenditure on the cost of construction and repairs comes to Rs. .3,67,83,000/- which is less than the total expenditure shown in the books. Since there seems to be some mix up in the cost of construction and the repairs in the original return filed, the department has also assessed the undisclosed receipts as income of the assessee. Theref....
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....ch period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. The first proviso makes it very clear that AO shall assess or reass....
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....d record. He also referred to income returns filed by Sri K.Sivadas, copy of which is placed at pages 138 to 148 of the paper book. 59. We have considered the rival submissions carefully and find that the return filed by Sri K.Sivadas, copy of which is filed at pages 137 to 140 of the paper book, clearly shows that he has filed return for salary at Rs. 84,000/- and, therefore, this claim has been correctly allowed by the CIT(A) and we decline to interfere with the orders of the ld. CIT(A). 60. In view of the above discussion in respect of issues regarding building repairs, depreciation and salary, we reject main ground No.2 of the revenue's appeal. 61. Ground No.3: The issue regarding relief of Rs. 80,664/- towards complementary has already been adjudicated by us while adjudication the assessee's additional ground in respect of confirmation of disallowance for balance of the complementary amount vide para-25 wherein we have allowed the claim. Following that decision, we reject this ground. 62. Ground No.4: Through this ground revenue has challenged the part relief on account of doctors payments and this issue has been adjudicated by us while adjudicating the assessee's ....
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....e is regarding building repairs which has been adjudicated by us vide paras-49-51 and this issue has been adjudicated by us while adjudicating the revenue's appeal in IT[SS]A.No.19/Coch/08 for the A.Y 2000-01 and following that order, we reject the additional ground raised by the revenue. 73. Ground No.3 is as under: The CIT[A] is also erred in deleting addition of Rs. .17,23,234/- representing Peak credit holding that peak deposit is to be considered in all the relevant assessment years separately and in doing so, the available cash balance as per the seized cash book together with the income offered u/s.153A will be sufficient to cover up the peak deposits. The CIT[A] ought to have seen that these amounts were not recorded in the books of accounts and the assessee had no explanation for the same. 74. After hearing both the parties we find that on examination of the bank account maintained by Dr. K.K.R.Warriyar in Ernakulam Urban Co-Op. Society being A/c. No.931 the following deposits had been credited: S. No. Financial Year Amount Rs. . Peak amount 1 1998-99 459,500 376,599 2 1999-2000 1,887,500 1,939,840 3 2000-01 2,585,250 ....
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.... deposits for this asst. year and hence the assessment of Rs. .17,23,234/- as undisclosed income is not justified and hereby cancelled. Relief Rs. .17,23,234/-." 76. Before us Ld.CIT DR argued that peak has to be worked on a particular date and it cannot be found during a particular year. In any case, CIT(A) has no power to decide the issues in other years while deciding this appeal and, therefore, this decision is wrong. 77. On the other hand, ld. Chartered Accountant Shri Warrier, reiterated the submissions made before the AO and again gave us details of peak deposits in each of the year as well as the sources available. He pointed out that basically the receipts which were not being recorded in the books of accounts on the basis of which income tax returns were being filed, were mainly utilized for the purpose of hospital expenses through the bank account maintained in the name of managing partner Dr. K.K.R Warriyar. Since the account is being maintained right from the beginning of search period the peak has to be worked out on the basis of every year and then same has to be set off against the source available in the seized material. Some additional income has al....
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....required to be made. These figures have also been extracted by the ld. CIT(A) on page 16 of his order and the Ld.CIT DR has not disputed these figures before us. The logic is simple because whatever deposit was there in the earlier year that cannot be added back again because further deposits and withdrawals would start from those deposits. Since the revenue has never disputed that this account is maintained for the purpose of assessee firm out of undisclosed receipts, naturally credit also has to be given for the cash available in the seized records. Therefore, we find nothing wrong in the order of the ld. CIT(A) and confirm the same. 79. Ground No.4: Through this ground revenue has raised the issue regarding building repairs which has been adjudicated by us vide paras 49-51 of this order while adjudicating revenue's appeal in IT[SS]A No.19/Coch/08 for A.Y 2000-01. Following that order we hold that ld. CIT[A] has rightly disallowed the same. 80. Ground No.5: Through this ground, revenue has raised the issue regarding allowance of depreciation. This issue has also been adjudicated by us vide para-55 of this order while adjudicating the revenue's appeal vide IT[SS]A No.19/Coch....
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....er considering the same the ld. CIT[A] allowed the relief on account of difference in the amount of O.P. collection of Rs. .6,67,005/-. 93. Before us, Ld.CIT DR referred to page 15 of the paper book wherein receipts from OP section are shown at Rs. .78,13,397/-. He argued that it is not clear on what basis the CIT[A] had verified the figure and allowed the relief. 94. On the other hand, ld. Chartered Accountant Shri Warrier reiterated the submissions made before the lower authorities and submitted that as per the seized records receipt is only of Rs. .71,46,390/-. 95. We have considered the rival submissions carefully and find that the ld. CIT[A] had adjudicated this issue vide para 14(b) which is as under: 14(b). Difference in collection from the O P section as per para-3 of the Assessment order [Para 6 of this order] As per Para-3 of the assessment order the total collection from the O.P.is taken at Rs. .78,13,395/-. The appellants submitted that the seized records the total collection is only Rs. .71,46,390/- as per the details given in Para-6 of this order. The copy of the seized records filed by the appellant is verified. The appellants contention is....
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....posit amount in the bank account Rs. .596799/-. In these circumstances the appellant submitted that no further addition should be made towards the peak deposit amount. In view of the additional income as per return u/s.153A covering the peak deposit amount in the bank account the addition of this peak amount is not justified and hereby cancelled. Relief Rs. .5,96,799/-." 99. Before us, Ld.CIT DR reiterated the arguments made in A.Y 2001-02 whereas the ld. Chartered Accountant Shri Warrier reiterated the submissions and invited our attention to the figures given regarding fixed deposits in synopsis at page-5. 100. We have considered the rival submissions carefully and find that details regarding peak deposits are as under: Peak deposits as on 27-11-2001 Rs. .6,33,264 Less: opening balance Rs. .4,35,483 Balance .. .. Rs. .1,97,781 Out of this cash available was .. .. Rs. . 36,462 Final Balance.. .. Rs. .1,61,313 When we agree with the observations of the ld. CIT[A] that assessee has already offered an additional income of Rs. .8,56,150/-, therefore, no separate addition could be maintained. Accordingly, we find nothin....
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.... 110. Ground Nos.3 & 4 relates to building repairs. This issue has been adjudicated by us vide para-49-51 and this issue has been adjudicated by us while adjudicating the assessee's appeal in ITA.No.32 /Coch/08 for the A.Y 2000-01 and following that order, we reject the additional ground raised by the revenue. 111. In the result, revenue's appeal in I.T.A.No.620/Coch/08 for A.Y 2003-04 is dismissed. 112. I.T.A.No.621/Coch/08- A.Y 2004-05 [revenue's appeal]: The revenue has raised the following grounds of appeal: 2. The learned CIT[Appeals] erred in deleting the addition of Rs. .16,04,459/- representing difference in gross fee collection of the various branches of the hospital.. the assessee firm M/s Lakshmi Hospital vide its letter dated 22-11-2006 had shown the total collection at Rs. .10,87,58,765/- from Ernakulam, Tripunithura and Aluva Branches. But the assessee has omitted to disclose the collection from Nursing School, Ernakulam and Lakshi Hospital at Panangad branch totalling to Rs. .21,11,774/-. In these facts and circumstances of the case, the learned CIT[Appeal]'s order is not acceptable. 3. The learned CIT[A] erred in facts as well as law in ....
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....n the case of Panangad branch there was a net profit of Rs. .3,23,416/-. The copies of separate profit & loss account were filed before the CIT[A] and it was pointed out that the same were ultimately considered in the oral statement and, therefore, the addition was not justified. The ld. CIT[A] after considering these submissions deleted the addition by observing that net profit and/or loss from these separate units has already been entered in the consolidated profit & loss account. 115. Before us, Ld.CIT DR submitted that addition has been made clearly on the basis of seized document and, therefore, no relief was required to be given. 116. On the other hand, ld. Chartered Accountant Shri Warrier reiterated the submissions made before the lower authorities. 117. After considering the rival submissions carefully we find that the ld. CIT[A] has decided this issue vide following para at pages 3 & 4 as under: The separate profit & loss account of the Lakshmi School of Nursing and Lakshmi Hosptial Panangad Branch were verified with the consolidated profit & loss account of the firm Lakshmi Hospital filed along with the return of income. It is found that the submission ....
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....ial purchased or other expenditures incurred in respect of one building could have been booked under another building. It was also submitted that in the returns filed in respect of partners in the cash statement in the case of Sri K.K.R.Warriyar a further sum of Rs. .8,04,000/- was shown as investment in the construction of building which will reduce the difference to only Rs. .40,256/- and the same was negligible. 121. The ld. CIT[A] after considering the submissions decided the issue as under: "The construction of the two buildings are done simultaneously and the argument of the appellant that the investment in the construction of the two buildings should be considered together is accepted. As per the statement of cash flow filed by the partners of the appellant firm in respect of the asst. year 2003-2004 Rs. .804000/- is invested for the building construction. For the asst. year 2003-2004 the firm M/s Lakshmi Hosptial has offered an additional income of Rs. .1472460/- as per return u/s.153A. The difference in the total investments as per the value fixed by the valuation officer and the total investments as per the value fixed by the valuation officer and the total in....