TaxTMI 
TaxTMI 
2010 (9) TMI 1110
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....tion, 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 Department has to specifically object. The synopsis generally....
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....n (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. Before us, ld. Chartered Accountant of the assessee Shri C.B.M.Warrier, submitted that sec.153A was int....
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....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 section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 3.- xx xx xx ....
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....assessing officer allowed ₹ 19,336/- only. The CIT(A) estimated the value of complimentary treatment at ₹ 1,00,000/- without any evidence on estimated basis and allowed a further sum of ₹ 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 ₹ 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 to be a simple case of omission and therefore we have admitted this additional ground. 21. As for merits of this additional grounds are concerned, after....
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....iciaries 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 ₹ 92,211/- out of which AO himself had allowed a sum of ₹ 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 ₹ 2,88,704/- out of which AO had allowed a sum of ₹ 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 ₹ 2,53,780/- on this account AO had allowed only a sum of ₹ 83,780/- and balance was allowed by the CIT(A) and again department has not filed any appeal. In A.Y 2004-05 no disallowance has been made on account of complementary treatment by the AO himself. Therefore, even keeping the principle of consistency these disallowances ....
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....owed to the extent of 75% and ₹ 15,17,014/- is disallowed and allowed only 25% ₹ 5,05,672/- which is not correct. 4. The payment to doctors are supported by evidence and in these circumstances the disallowance of ₹ 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 prescribed in the I.T.Act for computation of income and as long as the computation is comprehensible same has to be accepted. He argued that ld. Chartered Accountan....
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....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 reject this ground of appeal. 30. Ground Nos.2, 3, 4 & 5 pertain to the common dispute i.e., regarding disallowance of the payments made to the doctors. 31. Brief facts of the case are that a ....
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....llowance under section 40A(3) and 25% ₹ 5,05,672/- is allowed. Relief ₹ 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 recorded u/s.132 and the said question No.4 and answer thereto read as under: Q.4 I am showing you a note book marked as 'SSA 54' seized from your cabin. Explain the contents of this book. Ans. I....
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....ses 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 concerned, the source of such expenditure is clearly available in the form of unaccounted receipts which have now been included in the return filed u/s.153A. The second submission regarding Explanation to sec.37 is concerned, th....
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....n 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 ground: 1.1 The learned CIT[Appeals] erred in allowing the additional claim of Rs. .4,76,267/- towards repairs of the hospital buildings on the basis of the Valuation report. The CIT[Appeals] failed to note that no such claim was made before the Assessing ....
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....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. . 76,50,527 Total Rs. .3,68,99,271 The matter regarding construction expenditure was referred to the DVO and as per the DVO's report, the details of expenditure were as under: Particulars Amount New Building Rs. .1,59,21,000 Extension of existing building Rs. .1,41,72,000 Rs. .3,00,93,000 43. In addition to above, DVO determined the cost of repairs at Rs. .66,90,000/- as per the certifica....
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....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 that when assessee was filing returns u/s.153A, assessee had all the right to claim the actual expenditure under the proper head. 47. As far as objection regarding violation of Rule 46A is concerned, ld. Chartered Accountant Shri Warrier referred to page-10 of the appellate order and invited our attention to paras 7 & 8 of the order which clearly shows that the matter was remanded on 20-4-2007 to the file of the AO for fresh consideration and the CIT had directe....
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....d 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. Therefore, while filing the return u/s.153A, assessee has full right to make the claim for correct amount under the appropriate head as long as it is recorded in the books of account maintained by the assessee. It was never argued before us that these expenses were not recorded in the books and, therefore, we are not inclined to interfere with the order of the CIT[A]. Accordingly, we reject the additional ground as well as ground No.2 of the revenue's appeal. 52. The other issue....
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....ing 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 reassess the total income in respect of each of the assessment year which has come under scanner because of the search. Further, the second proviso makes it clear that earlier assessment shall abate which means they are not in existence in the eye of the law. This also means that income has to be determined afresh as per the provisions of the Act. We have already reproduced Explanation 1 to sec.153A while dealing with the additional grounds of the assessee regarding levy of interest which clearly provides that provisions of the Act would ap....
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....ilding repairs, depreciation and salary, we reject main ground No.2 of the revenue's appeal. 61. Ground No.3: The issue regarding relief of ₹ 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 appeal through ground Nos.2 to 5 vide paras-36. Since we have allowed the relief in respect of whole of doctors payments, we reject this ground. 63. In the result, revenue's appeal in IT[SS]A No.19/Coch/08 is dismissed. 64. I.T.A.No.33/Coch/08 - [assessee's appeal]: In this appeal also an additional ground has been raised regarding levy of interest under sections 234A, 234B & 234C. 65. After hearing both the parties, we find that this issue is identical to the issue raised by the assessee in its I.T.A.No.32/Coch/08 for the A.Y 2000-01. This issue has been adjud....
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.... 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 2,140,533 4 2001-02 3,260,000 2,173,771 5 2002-03 1,471,000 Total 9,663,250 It was explained that this account was maintained on behalf of the assessee i.e. Lakshmi Hospital. AO noticed that these amounts were not recorded in the seized books of accounts. He observed that assessee's authorized representative had suggested that only peak deposits of the bank in excess of the cash available with the firm may be assessed in the hands of Dr. K.K.R.Warriyar. AO noted that on 4-12- 2000, peak deposit was of ₹ 17,23,234/- in excess of cash balance available with the firm and accordingly made an addition of this amount. ....
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....d 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 also been offered and, therefore, there was no justification for adding separate peak on the basis of peak deposits when total collection not recorded in the books found in the seized material is being assessed as such. He also submitted that no addition was made in the A.Y 2000-01 because AO was satisfied with the explanation of the assessee and, therefore, no addition should have been made in this assessment year also. He also submitted that he failed to understand the contention of the Ld.CIT DR that peak deposit has to be on a particular date and not during the year. He submitted that it is one and the same thing because the maximum balance outstanding on any of the date during the year is nothing but peak....
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....as 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/08 for A.Y 2000-01. Following that order we reject the same. 81. In the result revenue's appeal in IT[SS]A No.20/Coch/08 for A.Y 2001-02 is dismissed. 82. I.T.A.No.34/Coch/08 [ assessee's appeal]: In this appeal also an additional ground has been raised regarding levy of interest under sections 234A, 234B & 234C. 83. After hearing both the parties, we find that this issue is identical to the issue raised by the assessee in its I.T.A.No.32/Coch/08 for the A.Y 2000-01. This issue has been adjudicated by us vide paras 14-16 whereby the issue raised by the assessee has been rejected following that order. We, therefore, reject this additional ground. 84. The first ground relates to the legal objection and after hearing both the parties, w....
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.... 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 found to be correct and the total collection from O P is correctly to be taken at Rs. .71,46,390/- in the place of Rs. .78,13,395/- in Para-3 of the asst. order. The appellant is entitled to get the relief of different amount Rs. .6,67,005/-. Relief Rs. .6,67,005/-. Though the ld. CIT[A] has stated that he has verified the records, but from page 15 of the paper book it is seen that receipts seem to be of Rs. .78,13,395/-. The ld. Chartered Accountant Shri Warrier had tried to explain that there was some mistake regarding calculation but he could not explain the calculation. Therefore, in the interests of justice, we set aside the order of the ld. CIT[A] and remit this issue to the file of the AO with a direction to verify the receipts from OP section from the seized records and t....
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....ce .. .. 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 nothing wrong with the order of the ld. CIT[A] and confirm his order. 101. Ground No.6 is with regard to regard to building repair expenses. 102. After hearing both the parties, we find that an identical 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 ground raised by the revenue. 103. In the result, revenue's appeal in IT[SS]A No.21/Coch/08 is partly allowed for statistical purposes. 104. I.T.A.No.441/Coch/08- A.Y 2003-04 [assessee's appeal]: In this appeal also an additional ground has been raised regarding levy of interest under sections 234A, 234B & 234C. 105. After hearing both the parties, we find that this issue is identical to the issue raised by the assessee in its I.T.A.No.32/Coch/08 for the A.Y 2000-01. This issue has been adjudicated by us vide pa....
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....he 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 deleting the addition of Rs. .13,85,693/- made on account of difference in valuation of Bhagavat Building by holding that the cash flow filed by the partners of the appellant firm in respect of Assessment year 2003-04 amounting to Rs. .8,04,000/- was invested for the building construction and after considering the additional income of Rs. .14,72,640/- in the Assessment year 2003-04, the difference was only Rs. .40,256/- when no such claim or evidence was made before the Assessing Officer during the assessment. 3.1 The learned CIT[Appeal]'s decision is in contravention of Rule 46A(1) and deserves to be set aside as none of the perquisite conditions apply to the case of the assessee for admitting additional evidence. 4. The learned CIT[Appeal] also contravened Rule 46A(2) in failing to record his reasons for admitting the additional evidence. 4.1 Without prejudice to the above additional evidence could not hav....
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....ccount of the firm Lakshmi Hospital filed along with the return of income. It is found that the submission of the appellant is correct non deduction of tax at source and there is no omission of gross receipts in respect of the two units Lakshmi School of Nursing and Lakshmi Hospital - Panangad branch. The net profit of the Panangad branch and the net loss of the Lakshmi school of Nursing are entered in the consolidated profit & loss account of the appellant. As a result the addition of Rs. .1604459/- to the income returned is not justified and hereby cancelled. Relief granted Rs. .1604459/-." We are of the view that the ld. CIT[A] has already verified that receipts from these two units have already been consolidated in the over all profit & loss account and there is no need to make the separate addition and we agree with the conclusions arrived by the ld. CIT[A]. It was not disputed before us that the receipts have not been consolidated. 118. Ground Nos.3 & 4 relates to the issue regarding deletion on account of undisclosed investment in the building. 119. After hearing both the parties we find that the AO has referred the matter regarding the cost of construction to the DVO....