TaxTMI 
TaxTMI 
2026 (7) TMI 1475
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.... convenience and brevity. ITA No.- 5153/Del/2025 for A.Y. 2017-18 2. Brief facts of the case: Return of income for the A.Y. 2017-18 was filed by the assessee on 31.10.2017. The case was selected for Complete Scrutiny through CASS. Accordingly statutory Notice u/s. 143(2) was issued on 14.08.2018 by this office fixing the case for hearing on 29.08.2018. The assessee filed its written reply through ITBA on 23.08.2018 and on 27.08.2018. Accordingly Notice u/s. 142(1) of the Income Tax Act, 1961 along with detailed questionnaire was issued on 21.01.2019 fixing the case for hearing on 12.02.2019. In response thereto the assessee filed its part replies through ITBA on 12.03.2019. 2.1 The AO noted that the assessee holds registration u/s. 12AA of the Income Tax Act, 1961 granted by the Commissioner of Income Tax, Rohtak w.e.f. 14.07.1998 and the assessee is engaged in running a hospital by the name of National Institute of Medical Sciences. The sources of income of the assessee as noted by the AO are income from Rent Receipt, Interest from Bank and Hospital Collection etc. The information/details asked were furnished, and placed on record by the AO. 2.2. On perusal of the repl....
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.... medicine expenses have gone down during the present year. So it appears quite irrational that when medicine expenses have gone down, the food expenses have increased. The irrationality of the expenses is also due to the fact that no supporting evidence could be produced by the assessee. Hence, taking a rational view and considering the previous year expense in the same head, the food expenses deserve to be disallowed. The food expenses when compared to last year give the following picture; 4.6.1 Percentage of Food expense out of Total Hospital Receipts in F.Y. 2015-16: 1.7% (Food expenses of Rs. 4,55,210 out of total expenses of Rs. 2,72,22,239/-) 4.6.2 Food Expenses claimed in F.Y. 2016-17 out of Total Hospital Receipts in F.Y. 2016-17: 5.6% (Rs. 11,80,832/- out of total expenses of Rs. 210,22,690/-) 4.6.3 Therefore taking a rational view from the above comparison, I disallow Food Expenses by Rs. 5,00,000 cumulatively. Addition of Rs. 5,00,000/- C. Addition of Rs. 1,33,91,236/- on account of sundry debtors 4.7 Q. 4. As per Receipt and Payment submitted by you, an amount of Rs. 1,33,99,326/- has been received from Debtors durin....
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....owever, a separate addition is not made in this respect considering the rationality adopted above and cumulative disallowances being made. 5. On perusal of the ITR filed by the assessee, it was observed that the assessee has deposited Rs. 40,00,000/- during demonetization period. Assessee was show cause vide Notice dated 21.11.2019 to furnish cash book in respect of his claim but assessee neither furnished any satisfactory reply nor any cash book was submitted in this regard. Considering the ledgers of receipts submitted by the assessee, the cash receipts of Rs. 40,00,000/- seem unjustified. The assessee has submitted simply its bank accounts but did not justify beyond doubt the nature of receipts in Cash along with-documentary evidence. Further, the assessee's ledgers also show that many expenses have been shown in cash. Thus, considering the incoming of cash with cash expenses, the cash available with the assessee for depositing during the demonetization period seem unjustifiable from every count. 5.1 The assessee has furnished ledgers showing cash receipts. I thus take a rational view and allow 50% of cash received and disallow the rest 50% Cash deposits as....
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....nal view and considering the previous year expense in the same head, the food expenses deserve to be disallowed. The food expenses when compared to last year give the following picture, i. Percentage of Food expense out of Total Hospital Receipts in F.Y. 2015- 16 : 1.7% (Food expenses of Rs. 4,55,210 out of total expenses of Rs. 2,72,22,239/-) ii. Food Expenses claimed in F.Y. 2016-17 out of Total Hospital Receipts in. F.Y. 2016-17: 5.6% (Rs. 11,80,832/- out of total expenses of Rs. 210,22,690/-) iii. Therefore taking a rational view from the above comparison, the AO has disallowed Food Expenses by Rs. 5,00.000 cumulatively. The addition of Rs. 5,00,000/- is confirmed." 5. During the year, as per Receipt and Payment account furnished by assessee, it has received Rs. 1,33,91,326/- as Decrease in Debtors whereas the same has not been accounted in utilization statement of the year. Assessee had not justified whether these receipts were accounted by it in any previous year. 5.1 The assessee has presented a comparative chart and tried to justify the figures of debtors theoretically vide its reply dated 26.12.2019. However, the matter....
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....enses disallowed on adhoc basis -5.00.000/- on account of disallowance of Fooding Expenses disallowed on adhoc basis - 1,33,91,326/ on account of receipts of debtors being unutilized for charitable purposes, which was used for paying the expenses of the trust. -20,00,000/- on account of 50% of cash deposited in demonetization period, on adhoc basis without having any concrete material in hand Due to which the Assessment Order is bad in law, void-ab-initio and is liable to set aside in full. 2) The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has based on Seminal (formative) Notice u/s. 143(2) issued by Assessing Officer. was issued without any intimation that the case is taken for LIMITED SCRUTINY or COMPLETE SCRUTINY, (Even till completion of assessment), is fiouting (intentionally not obeying a rule, law or custom) mandate of Hon'ble CBDT Instruction 19 & 20/2015 Dt 29-12-2015 (and other instructions in this regard), which has a fatal impact on assessment made. Its scrupulous and strict implementation is called for and any deviation there from must result in making the assessment as null and void. GROUNDS OF APPEAL IN R....
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....(audited and defect free) were never doubted u/s. 145 of the Act, where in source of cash deposits has been justifiably explained (Cash Sales), and also no-where shown that it is not possible to compute assessee's income from given books for which burden lies upon revenue. Such audited books carry a huge relevance and cannot be brushed aside lightly. Further books of accounts (Sec 2(12A) of the Act) were never rejected by the Ld AO and accepted as such. 8) The Ld CIT(A) has erred in sustaining the order of the Ld AO as it is bad in Law and facts as the prescribed procedure / SOPs in case cash deposits during demonetization period, by Hon'ble CBDT before making assessment is not followed. Necessary approvals u/s. 144A of the Act are not obtained before making any such additions. OTHER GROUNDS OF APPEAL 9) The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has is grossly lacking of inundated jurisprudence, as the adverse inference has been drawn on the basis of statistical non justification. Further, the primordial significance is objective, judicious and exclusive opinion of Ld AO can't be substituted by any authority's d....
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....is reproduced as under: BRIEF SYNOPSIS = 19/03/2026 Hon'ble ITAT Delhi Bench-E ITA-5153/Del/2025 AY 2017-18 Appellant - Vimal Chawla Charitable Trust [PAN-AACTS6248N]-Faridabad 1- Date of Assessment Order = 27-12-2019 2- Date of CITA Order = 08-07-2025 3-Detail of Additions Made S. N. Particulars Amount Rs i Adhoc-Disallowance @ 20% 1,96,54,158/-of Expenses [Excluding Water, Food Expenses] 39,30,831 ii Adhoc Disallowance / estimated disallowance of Food Expenses 5,00,000 iii Decrease in Debtors 1,33,91,326 iv Adhoc / Estimated disallowance @ 50% of Cash Deposit of Rs 40,00,000/- 20,00,000 3(i)-(ii) & (iv)-Adhoc Disallowances - Not permissible under Law. Catena of Judgements of Hon'ble ITAT and Hon'ble HC are there a-Appellant books are audited AND NO adverse opinion by Auditor b-Never rejected at any point of time c-no defect what-so-ever has been provided in audited books d-No allegation of inflation of Expenses e-Concept of token disallowances is bad in law, as these are inherently based on 'surmises and conjectures'....
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....ng FY 2016-17 Directly to Patients 23,01,791.50 Billing of Renting of ATM 1,26,324.00 Less : Payment Received from Debtors 4,01,53,415.92 Closing Balance of Debtors 74,16,378.05 From the above, its' evident that any payment received from the Debtors has nothing to do with the Income of the Year in which these are received. 3(iv)-Cash Deposited in Bank - 50% (on estimated basis) of cash deposited added to Income: Detail of CASH (Opening and Closing) is as follows: Reconciliation of Opening to Closing Cash in Hand Opening Cash in Hand 1,06,519.00 Add : Cash Billing to Patients 53,50,306.00 Cash Withdrawn from Bank 39,40,000.00 Less : Cash Deposited in Bank 42,50,000.00 Expenses incurred in Cash 50,75,979.00 Closing Cash in Hand 70,846.00 -Ld AO admitted that CASH BOOK during assessment proceeding have been submitted, BUT no adverse have been found by Ld AO -Whole of the CASH RECEIPTS are part and parcel of INCOME during the year under consideration We hope your good-self after going through the above shall t....
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.... assessee in ITA No. 5153/Del/2025 is allowed for statistical purpose. ITA No.- 5154/Del/2025 (A.Y. 2018-19) 8. Return of income for the A.Y. 2018-19 was filed by assessee on 09.10.2018 declaring Nil income. The same was processed u/s. 143(1) of the Act. Thereafter, the case was selected for Complete Scrutiny through CASS on the following reasons:. • Trust executing contracts or providing professional services and • High refund claimed by Trusts. 8.1 During the course of assessment proceedings, the AO vide notice u/s. 142(1) of the Act requested the assessee to furnish the justification for eligibility for deduction u/s. 11/12 of the Act for conducting charitable activities. 8.2 The reply of the assessee and the reasons for non-acceptance of the explanation of the assessee and subsequent addition / disallowance by the AO as discussed by the AO in the assessment order are reproduced as under: A. Treatment of entire hospital receipts amounting to Rs. 2,30,03,929/- as Income from other sources 6. Assessee filed reply which is read as under: "The trust is running a charitable hospital with an object to provide medical rel....
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.... insurance companies, third party administrators (TPA) etc. and not from General Public as defined in section 2(15) of the I.T. Act. and also in contravention of the objects mentioned in Trust deed of the assessee as stated above. The assessee's major collection from Hospital Receipts during F.Y. 2017-18 is Rs. 2,02,03,016/- as per their Income & Expenditure account. Thus, it is clear that the assessee is hit by provisions of first proviso to section 2(15) of the IT Act. Contents of said section are as under: 1. The expression "charitable purpose" has been defined under Section 2(15) of the Act to include: (a) relief of the poor, (b) education, (c) medical relief, (d) preservation of environment (including water sheds, forests and wild life) (e) preservation of monuments or places or objects of artistic or historic interest and (f) any other object of public utility 2. Prior to Assessment Year 2009-10, business income of a charitable trust or institution was also eligible for exemption subject to conditions that such business should be incidental to the attainment of its objects, and that separate ....
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.... assessee was specifically reminded to furnish details of TDS deducted and paid to govt. treasury on the expenses incurred on Repairs & Maintenance amounting to Rs. 18,29,455/-. However, assessee did not furnish or state anything about these expenses. This entails belief that, assessee has neither deducted any tax and paid to govt. nor has anything to say in this matter. Hence, as per the provisions of section 40(a)(ia) of the Act, 30% of the said expenses amounting to Rs. 5,48,836/- are disallowed and added to the total income. 13. Vide notice u/s. 142(1) of the Act dated 21.01.2021, assessee was specifically called for TDS payment details along with proof as well as proofs of all TDS quarterly returns of F.Y. 2017-18 in respect of following expenses: S. No. Expenses Amount 1 Testing Charges 4,09,111/- 2 Professional Charges 50,15,555/- Total 54,24,666/- However, assessee submitted the statement of TDS details in respect of the above expenses, but failed to furnish proof of payment and quarterly TDS returns. Thus it appears that assessee has not paid to govt. treasury nor filed any TDS quarterly return. Hence, as per the....
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....pugned Assessment Order (Dt 08- 03-2021) is bad in law, void-ab-initio and is liable to set aside in full. 2) The Ld CIT(A) has erred in sustaining the order of Ld AO as Ld AO as the prescribed procedure before making Faceless Assessment has not been followed; as no draft assessment order has been provided to the assessee, as the Ld AO has in its mind to make additions to the returned income of the assessee. 3) The Ld CIT(A) has erred in sustaining the order of Ld AO as the replies /submissions has not considered before making the assessment and as such liable to be quashed. Moreover, the facts/assessment orders of earlier years have been considered for making the additions, but the appellate orders to the subject facts/assessment orders has neither been asked /questioned nor has been considered: due to which subject alleged assessment order is legally fragile. 4) The Ld CIT(A) has erred in sustaining the order of Ld AO as the charitable activities of the trust has been questioned theoretically, dehors any valid facts in possession and failed to delve into the practical facts. 5) The Ld CIT(A) has erred in sustaining the order of Ld AO as Ld AO h....
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....the TDS has been deducted -Submitted Bank Statement evidencing TDS has been deposited = All TDS Returns / Challans for Deposit of TDS- submitted before Ld. CIT(A) Qtr/ FY 2017-18 Acknowledgment No. Date of TDS Return Q1 092479600125430 14-07-2017 40-46 Q2 770000014019386 27-10-2017 47-53 Q3 770000018661543 31-01-2018 54-60 Q4 770000027843152 61-72 61-72 Copies of all TDS challan have been attached at Page 72-81 Moreover S. 40(a)(ia) is for non-deduction of TDS and not submission of TDS Returns 3(iv)- ONCE the relief has been granted stating Proviso to S.2(15) not applicable, THEN this will automatically deleted. Moreover, its double addition BECAUSE if whole of the excess of income over expenditure is taxed then any fund kept aside out of it will be never be taxable over and above the whole excess of income over expenditure Total Receipts Rs. 2,03,93,377 Total Payments Expenses [2,03,93,377 -Income 40,14,048]= Rs. 1,63,79,329 Fixed Assets Purchases [Rs. 3,71,69,649- Rs. 3,52,19,210] = Rs. 19,50,439 Rs. 1,83,29,76 Balan....
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....agree with the findings of the AO and allowed exemption u/s. 11 of the Act to the assessee. The ground raised by the assessee before the Ld. CIT(A) in the said appeal was as under: "Whether in fact and circumstances of the case, the AO is right in treating the charitable activity as business activity of the Trust. The Trust is registered u/s. 12AA as charitable Trust carrying out the medical services." 13.1 In this regard, the relevant order of the ld. CIT(A) allowing the appeal of the assessee is reproduced as under: "5. Ground No. 1 The appellant in this case has been registered u/s. 12A/. of the Act vide order of the CIT, Rohtak dated 14.07.1998. The appellant during the year is engaged in the running of a Hospital in the name of 'National Institute of Medical Science' at Faridabad. The AO has observed that the appellant has provided medical services to a limited group of patients availing benefits from ESIC and TPA. Thus the AO came to the conclusion that the appellant has not provided medical relief to the general public and therefore, the activities of the appellant have not been held as charitable as defined u/s. 2(15) of the Income Tax ....
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....s been found as covered under of Section 2(15) of the Act under the head "Medical Relief". There is no logic in the inference drawn by the AO that the appellant has provided the treatment to limited group of persons and not to general public. In this case proviso to section 2(15) read with section 13(8) has not been found applicable to the facts of the present case as the case of the appellant has been found covered under the main limb of medical relief, and not under the head 'advancement of any other object of general public utility'. In view of these facts and discussion it is held that the appellant has carried out the charitable activities during the year under consideration as defined u/s. 2(15) of the Act as 'medical relief'. Accordingly, the addition made by AO by treating the surplus of Rs. 47,26,893/- as taxable (as income from business) and consequently denial of exemption u/s. 11 of the Act is hereby deleted. Ground No. 1 of the appellant is allowed." (emphasis supplied by us) 13.2 Upon careful consideration, we are of the considered view that the case of the assessee is found as covered under of Section 2(15) of the Act under the head "Medic....