Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: list of goods taxed at 4% :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: empanelment :: TDS :: cpt :: VAT RATES :: due date for vat payment :: form 3cd :: ACCOUNTING STANDARD
 
 
From the Courts »
  Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 CIT vs. Greenfield Hotels & Estates Pvt. Ltd (Bombay High Court)
 IndiaBulls Financial Services Ltd vs. DCIT (Delhi High Court)
 Maharao Bhim Singh of Kota vs. CIT (Supreme Court)
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)

ITO, Ward 37(2), Room No.N-404, Vikas Bhawan, New Delhi. Vs. Sanjay Arora, 103-104, Oriental House, Gulmohar Enclave, Commercial Complex, New Delhi.
March, 25th 2014
                   IN THE INCOME TAX APPELLATE TRIBUNAL
                       DELHI BENCHES : G : NEW DELHI

                   BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
                                    AND
                  SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

                            ITA No.5066/Del/2012
                          Assessment Year : 2009-10


ITO,                                  Vs.    Sanjay Arora,
Ward 37(2),                                  103-104, Oriental House,
Room No.N-404,                               Gulmohar Enclave,
Vikas Bhawan,                                Commercial Complex,
New Delhi.                                   New Delhi.
                                             PAN : AAEPA7069B

  (Appellant)                                    (Respondent)


                Assessee By             :   Shri Ashwani Taneja &
                                            Shri Somil Aggarwal, Advocates
                Department By           :   Smt. Renuka Jain Gupta, Sr. DR


                                     ORDER



PER A.D. JAIN, JUDICIAL MEMBER:

      This is Department's appeal for Assessment Year 2009-10 against the
order dated 30.07.2012, passed by the Ld. CIT (A)-XXVIII, New Delhi, taking
the following effective grounds:-

      "1.    The Ld. CIT (A) erred in deleting the additions made by the A.O.
      not appreciating the fact that the assessee could not reconcile and
      explain with necessary documentary evidences the differences found
      in amounts claimed by the assessee under the head "Current liabilities'
      w.r.t. amounts payable to alchemist group of companies and
      information as obtained from Alchemist Group of Companies u/s 133
      (6).
                                                                      ITA No.5066/Del/2012


            2.    The Ld. CIT (A) erred in not appreciating the fact that the
            expenses stated to be incurred by the assessee on behalf of M/s
            Alchemist Group of Companies are in the nature of reimbursement of
            expenses and the same were not accounted in the books of accounts
            of M/s Alchemist Group of companies and hence these expenses
            remained unexplained in the hands of the assessee.

            3.    The ld. CIT (A) erred in deleting the addition of Rs.72,698/- made
            under the head Business Promotion, staff welfare and entertainment as
            the assessee could not produce any documentary evidence that the
            said expenses were wholly and exclusively incurred for the business of
            the assessee.

            4.     The Ld. CIT (A) erred in restricting the disallowance made by the
            A.O. to 50% of Rs.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 Assessing Officer found there to be a
difference of ` 1,44,52,582/- between the said amount of ` 2,72,50,000/-, as
confirmed by the said parties and the amount of ` 1,27,97,418/-, shown in
the balance sheet of the assessee as on 31.03.2009. When asked to
reconcile such difference along with documentary evidence, vide written
submission dated 21.12.2011, the assessee submitted that the funds were
received by him from the Alchemist Group of Companies for purchase of

                                                2
                                                                         ITA No.5066/Del/2012


assets, expenses to upgrade the clinic and other expenses debited to their
ledger account in the books of account of Swaran Dental Clinic, the clinic of
the assessee; that however, these funds were not accounted for by the
Alchemist       Group    of    Companies,         perhaps       due     to   their     internal
miscommunication; that the said fixed items had not been capitalized in the
books of Swaran Dental Clinic and as such, the assessee had also not
claimed any depreciation thereon; that the balance confirmation of the
Alchemist Group of Companies showed that they had also not capitalized
such assets in their books and they were yet to account for these amounts in
their books; that all payments had been received through banking channels;
and that all the entries for the receipt of the funds matched with the bank
statements of the assessee. Along with the said                 written submissions, the
assessee also filed before the Assessing Officer the details of the receipts
and reconciliation thereof, as follows:-

"Details of amount received from Alchemist Group of Companies

Date                    Alchemist Hospital        Alchemist Holdings     Alchemist Limited
                                                  Ltd.
29.12.2008                       2500000.00
3.2.2009                           50000.00
3.2.2009                          400000.00
19.2.2007                                                                            1000000.00
31.3.2007                                                                            1000000.00
18.3.2008                                                  5000000.00
21.4.2008                                                  5000000.00
2.7.2008                                                   2500000.00
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


                                              3
                                                                    ITA No.5066/Del/2012


Balance as per Alchemist as on 31.3.2009                                       27250000
Less: Paid by Alchemist Hospitals Ltd. to DHR Holdings
Ltd. for a machine, debited to Swaran Dental Clinic but not
Accounted by Swaran Dental Clinic (Refer SDC Ledger a/c                           400000
Books of Alchemist Holdings Ltd.)
                                                                               26850000





Less: amount debited by SDC in various years but not
Accounted by Alchemist

                                                   Financial Year
Annexure-A                          58418.32          2006-07
Annexure-B                      15,81,629.11          2007-08
Annexure-C                    1,04,26,981.00          2008-09
Annexure-D                      19,35,554.00          2006-07

Total for above three years                                                    14002582
As per Books of a/c of SDC                                                     12847418

Details of outstanding as per Balance of Swaran Dental
Clinic as on 31.3.2009
    (a) Alchemist Chandigarh a/c                                             1,27,97,418
    (b) Payable to Alchemist (in a separate ledger a/c) as on                     50,000
        31.3.2009
Net Balance as per SDC                                                       1,28,47,418"


4.     Further, the assessee also furnished the details of the amounts debited
by him in various years, but not accounted for by the Alchemist Group of
Companies. These details are as under:-

      Annexure A
     "Annexure

     Date                  Particulars             Vch. Type         Debit

     15.7.2006             Expenses                Payment           1105.00
     16.7.2006             Expenses                Payment           1006.00
     4.10.2006             Expenses                Payment           458.00
     25.11.2006            Expenses                Payment           516.00
     17.12.2006            CREDIT CARD             Payment           7379
                           AMERICAN EXP
                           41006
     8.1.2007              Expenses                Payment           483.55
     2.2.2007              Expenses                Payment           1007.00
     8.2.2007              Expenses                Payment           2808.00
     11.2.2007             TRAVELING               Payment           34933.00
                           SEMINAR
                           CHANDIGARH
     8.3.2007              Expenses                Payment           6052.77


                                               4
                                            ITA No.5066/Del/2012


15.3.2007    Expenses             Payment    2670.00
                                  Total      58418.32

Annexure B

15.4.2007    Raj Dental Traders   Journal    91520.00
18.4.2007    Noble Bio Care       Journal    460112.00
             Implants
20.4.2007    Noble Bio Care       Journal    145648.00
             Implants
2.5.2007     N.K. Patel           Journal    16000.00
3.5.2007     Unicon Medident      Journal    13728.00
7.5.2007     N.K. Patel           Journal    27850.00
9.5.2007     Expenses             Payment    1582.00
5.7.2007     N.K. Patel           Journal    18075.00
25.7.2007    N.K. Patel           Journal    2310.00
27.7.2007    Expenses             Payment    3189.00
28.7.2007    N.K. Patel           Journal    10080.00
4.8.2007     N.K. Patel           Journal    16650.00
3.9.2007     N.K. Patel           Journal    15040.00
25.9.2007    Expenses             Payment    5211.00
5.10.2007    Unicon Medident      Journal    41600.00
12.10.2007   Expenses             Payment    3250.00
11.12.2007   N.K. Patel           Journal    9900.00
21.12.2007   Unicorn Medident     Journal    2496.00
29.12.2007   Expenses             Payment    3250.00
23.1.2008    Expenses             Payment    1745.00
6.2.2008     N.K. Patel           Journal    4575.00
11.2.2008    Noble Bio care       Journal    168682.00
             Implants
10.3.2008    Expenses             Payment    8608.00
12.3.2008    Expenses             Payment    1619.11
15.3.2008    Expenses             Payment    15127.00
18.3.2008    Noble Bio Care       Journal    103123.00
             Implants
24.3.2008    Noble Bio Care       Journal    199867.00
             Implants
26.3.2008    EDP services         Journal    2142.00
27.3.2008    Expenses             Payment    10000.00
28.3.2008    Expenses             Payment    15000.00
28.3.2008    Sahni Agencies P.    Journal    68500.00
             Ltd.
28.3.2008    Rama Colour          Journal    54500.00
28.3.2008    EDP Services         Journal    2050.00
29.3.2008    Tracom Service       Journal    13600.00
             Pvt. Ltd.
31.3.2008    Expenses             Payment    18000.00
31.3.2008    Expenses             Payment    7000.00
                                  TOTAL      1581629.11

                             5
                                                                       ITA No.5066/Del/2012


     ANNEXURE-C

     31.3.2009            Renovations            Journal                1070239.00
                          Transferred to
                          Alchemist A/c
     31.3.2009            Furniture & Fixture    Journal                461873
                          Transferred to
                          Alchemist a/c
     31.3.2009            Plant & Machinery      Journal                492440.00
                          transferred to
                          Alchemist a/c
     31.3.2009            Vehicles               Journal                280510.00
                          transferred to
                          Alchemist a/c
     31.3.2009            Plant & Machinery      Journal                6788232.00
                          transferred to
                          Alchemist a/c
     31.3.2009            Office equipment       Journal                251975.00
                          transferred to
                          Alchemist a/c
     31.3.2009            Fire & Safety          Journal                176009.00
                          transferred to
                          Alchemist a/c
     31.3.2009            Electronics            Journal                471284.00
                          transferred to
                          Alchemist a/c
     31.3.2009            Electrical             Journal                434419.00
                          equipments
                          transferred to
                          Alchemist a/c
                                                 TOTAL                  10426981.00


5.     The Assessing Officer also issued notice u/s 133 (6) of the Act to the
Alchemist Group of Companies, requisitioning their confirmations in this
regard.    All   the   three   companies    of    the      Alchemist   Group     furnished
confirmations dated 26.12.2011.

6.     From the above, the Assessing Officer observed that the assessee 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

                                           6
                                                            ITA No.5066/Del/2012


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 for the set up of the Alchemist Group and to later transfer
them to the facility of Alchemist; that the assessee was to head the new set
up; that in order to upgrade the set up, that the expenses for all plant and
machinery required to be purchased, for the research work to be done and
for upgrading the set up shall be incurred and borne by the Alchemist Group;
that certain expenses were incurred in the year under consideration, as also
in the earlier years, on purchase of new plants and machinery and for
upgradation of the business; that though in the assessee's balance sheet for
the year under consideration, the assessee had shown a liability of `
1,27,97,418/- to Alchemist under the head `Current liabilities', the Assessing
Officer had added an amount of ` 1,44,52,282/-, being the difference
between the sum of ` 2,72,50,000/-, as confirmed by the Alchemist Group of
Companies and the said amount of ` 1,27,97,418/-, shown as current
liabilities by the assessee, as not reconciled; that as such, first of all, the
addition could, in any case, not be beyond ` 1,27,97,418/-, the amount
shown by the assessee as current liability payable to Alchemist; that the
Alchemist Group of Companies had shown the total amount paid to the
assessee as outstanding, to be recognized in their books of account on
completion of the facility by the assessee; that this explained the amount of


                                       7
                                                            ITA No.5066/Del/2012


` 1,27,97,418/- shown by the assessee as current liability payable to
Alchemist; that Alchemist had given confirmation of the amount of `
2,23,00,000/- given by them to the assessee and had also certified that an
amount of ` 1,40,38,349/- had been incurred by the assessee towards
creating dental facility on their behalf; that they had also confirmed that the
facility would be recognized in their books on its completion by the assessee;
that this confirmation had been submitted by the party directly to the
Assessing Officer; that it had been explained in detail to the Assessing
Officer that the assessee was known to the Chairman of the Alchemist
Group; that it had been explained that for various strategic reasons, financial
assistance had been provided to the assessee interest free, to procure the
required equipment, marketing and other incidental expenses with a horizon
of 3-5 years; that it had been explained that the assessee had debited all
such 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
been submitted before the Assessing Officer and was being filed before the
Ld. CIT (A); that further replies had also been submitted before the Assessing

                                       8
                                                             ITA No.5066/Del/2012


Officer on 21.12.2011 and 23.12.2011, the contents whereof had been taken
note of by the Assessing Officer in para 3 of the assessment order; that as
such, it was clear that the assessee had shown the balance amount available
with him, received from the Alchemist Group, which had been shown as a
current liability and the Alchemist Group had shown the total amount given
by them to the assessee from time to time and hence, there was no
difference in the amount received by the assessee and shown by him as
current liability; that it was not the case of the Assessing Officer, either that
the assessee was showing a liability more than that shown by the Alchemist
Group; that the Assessing Officer had himself issued notices u/s 133 (6) of
the Act to the Alchemist Group, in response to which, the Alchemist Group
had filed their confirmations; that if the Assessing Officer entertained any
doubt, he could always have made further inquiry from the assessee, rather
than making the unwarranted addition; that this, however, had not been
done; that it was not a case where either the identity of the creditors had not
been established, or their credit worthiness not proved, or where the
transactions were not genuine; that the Assessing Officer had made the
addition without appreciating and understanding the accounting entries
made and without analyzing the complete details placed before him in
explanation of the query raised; that the assessee had produced all related
bills/vouchers and relevant ledger accounts along with complete books of
account before the Assessing Officer, which fact stood confirmed by the
Assessing Officer in the very first paragraph of the assessment order itself;
that it was evident from the details of the amounts received and expenses
incurred and the reconciliation filed, that the assessee had incurred
expenses of ` 58,418/- in F.Y. 2006-07, of ` 15,81,629/- in F.Y. 2007-08, of `
1,04,26,981/- in F.Y. 2008-09 and of ` 19,35,554 in F.Y. 2006-07, total
amounting to ` 1,40,02,582/-; that the details being bills/vouchers, of the
expenses incurred, had also been filed before the Assessing Officer; that the
assessee was filing 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

                                        9
                                                           ITA No.5066/Del/2012


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 the impugned order, the Ld. CIT (A) deleted the addition of
` 1,44,52,582/-, observing, inter alia, that the assessee had shown the
balance amount available with him received from the Alchemist Group,
which had been shown as current liability and the Alchemist Group had
shown the total amount given by the assessee from time to time; that thus,
there was no difference in the amount received shown as current liability by
the assessee; that it was not a case where the identity of the creditor was
not established, or creditor was not established or where their credit
worthiness was in doubt, or even where the transactions were not genuine;
that the Assessing Officer had made the addition without appreciating the
accounting entries made and without analyzing the complete details placed
before him to explain as to why the assessee had shown the amount of
current liability at ` 1,27,97,417.89 in respect of the Alchemist Group, as
against the amount confirmed by them at ` 2,72,50,000/-; that all relevant
bills, vouchers, and ledger accounts, with complete books of account had


                                      10
                                                           ITA No.5066/Del/2012


been produced before the Assessing Officer, which the Assessing Officer had
himself confirmed in the assessment order; that none of the creditors had
stated that the amount had not been given to them by the assessee; that in
any case, it could be said that the transaction was in the nature of a loan
only till the time the Alchemist Group did not recognize it in their books of
account; that the assessee had not claimed any expense or depreciation on
the funds utilized, which had been given to him by the Alchemist Group; that
in any case, it was not the income of the assessee; that there was no
evidence or material with the Assessing Officer to the contrary; and that as
such, the Assessing Officer was not justified in presuming it to be the income
of the assessee.

9.   Before us, the Ld. DR has contended that the Ld. CIT (A) has erred in
deleting the addition correctly made by the Assessing Officer; that while
doing so, the Ld. CIT (A) failed to appreciate that the assessee had remained
unable to reconcile and explain with documentary evidence, the difference
found by the Assessing Officer in the amounts claimed by the assessee as
current liability with regard to the amounts payable to the Alchemist Group
of Companies and the information as obtained by the Assessing Officer from
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


                                      11
                                                              ITA No.5066/Del/2012


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
ingredients of the provisions of Section 68 did not stand fulfilled; that the
matter is only of reconciliation; that since no expense has been claimed by
the assessee, no disallowance is possible; that in response to the notice u/s
133 (6) of the Act, the Alchemist Group duly filed confirmations before the
Assessing Officer and the Assessing Officer did not make any further inquiry
with the assessee, if he was entertaining any doubt with regard to the
recitals therein; and that rather, the Assessing Officer went on to make the
addition illegally, which was rightly deleted by the Ld. CIT (A).

11.   Having heard the parties in this regard, we find that on query by the
Assessing Officer, the assessee filed all details and documentary evidence in
the shape of bills/vouchers along with complete books of account. As per the
assessment order itself, these were examined. The Assessing Officer issued
notices u/s 133 (6) to the Alchemist Group of Companies, in response to
which, they duly filed their confirmations. They confirmed the amount of `
2,72,50,000/-, whereas the current liability shown by the assessee was of `
1,27,97,417.89.    The   difference   between    the   two,   amounting     to   `
1,44,52,282/-, was added by the Assessing Officer. At the outset, addition, if
any, as rightly observed by the Ld. CIT (A), could have been only to the
extent of the liability shown, i.e., of the amount of ` 1,27,97,417.89. Be that
as it may, even the said current liability was duly explained.

12.   APB 1-8 is a copy of the letter dated 02.08.2011 along with copy of
return, computation of income, balance sheet with relevant schedules, Profit
& Loss Account and Tax Audit Report filed by the assessee with the
Assessing Officer. Para 12 of the letter states that the accounts were being


                                       12
                                                             ITA No.5066/Del/2012


produced for verification by the Assessing Officer, as required. The Assessing
Officer, in the first para of the assessment order, acknowledges the assessee
having furnished his books of account, bills and vouchers. In the balance
sheet as on 31.03.2009 (APB-6), ` 12,79,07,417.89 has been shown under
the head `Current liabilities.' APB 9-30 is a copy of the assessee's reply dated
26.08.2011 filed before the Assessing Officer, giving the details of the
various expenses debited to the Profit & Loss Account, along with copies of
ledger accounts of various expenses, like repairs and maintenance, 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
03.02.2009 by Alchemist Hospitals Ltd. to DHR Holdings for ` 4 lac. APB 60 is
a certificate/confirmation from Alchemist Holdings Ltd., confirming having
advanced a sum of ` 2,23,00,000/- to the assessee during the period from
18.03.2008 to 12.03.2009 by different cheques drawn on HDFC Bank and
also certifying that the assessee had incurred a sum of ` 1,40,38,349/- as on
31.03.2009, towards creating Dental Facilities on behalf of Alchemist
Holdings Ltd. out of the above amount and that the balance of ` 82,61,651/-

                                       13
                                                          ITA No.5066/Del/2012


was outstanding and also that the Facility would be recognized in the books
of Alchemist Holdings Ltd. on completion thereof by the assessee. APB 61 is
a chart of telephone expenses incurred, showing the places where the
telephones were installed/used, along with number-wise chart of telephone
and the name of the person using the same. The telephone numbers have
also been given. APB 62-73 is a chart of repair and maintenance expenses
along with major bills of expenses, showing the expenses to have been
incurred mostly for petrol, parking, toll tax, new battery and tube, etc.,
incidental to the carrying on of the business of the assessee. APB 74-80 is a
copy of the assessee's bank account with HDFC Bank, debiting the payments
received by the assessee from the Alchemist Group. APB 81-85 is a copy of
ledger account of business promotion and entertainment expenses in the
books of the assessee. APB 86 is a copy of confirmation from Alchemist
Hospitals Ltd., certifying that Swaran Dental Clinic had a debit balance of `
29,50,000/- in the books of Alchemist Hospitals, as on 31.03.2009. APB 87 is
a copy of confirmation from Alchemist Ltd., certifying that Swaran Dental
Clinic had a debit balance of ` 20 lac, as on 31.03.2007, in the books of
Alchemist Ltd. APB 88 is a confirmation from Alchemist Holdings Ltd.
certifying that Swaran Dental Clinic had a debit balance of ` 50 lac, as on
31.03.2008 and of ` 2,23,00,000/- as on 31.03.2009 in the books of
Alchemist Holdings Ltd. APB 89-95 is a copy of Balance Sheet and Profit &
Loss Account along with Schedules of Alchemist Ltd. for Assessment Year
2006-07, as on 31.03.2007. APB 96-112     is a copy of the Auditor's Report,
Balance Sheet and Profit & Loss Account along with Schedules of Alchemist
Hospitals Ltd. for F.Y. 2008-09, as on 31.03.2009. APB 113-125 is a copy of
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

                                     14
                                                                ITA No.5066/Del/2012





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 for the year ended 31.03.2008. APB 132 is a copy of extract from the
Tax Audit Report in Form 3CB, u/s 44AB of the IT Act, in the case of Swaran
Dental Clinic, for F.Y. 2007-08. APB 133-134 are the details of expenses
incurred by the assessee during the period from 01.04.2006 to 31.03.2007.
APB 135 is a copy of the Balance Sheet of Swaran Dental Clinic as on
31.03.2007, showing an amount of ` 5,986.68 as payable to Alchemist. APB
136 is a copy of Profit & Loss Account of Swaran Dental Clinic for the year
ended 31.03.2007. APB 137 is a copy of Schedule-I to the Balance Sheet of
Swaran Dental Clinic as on 31.03.2007, showing the fixed assets as on
31.03.2007. All these documents are reported to have been filed before the
Assessing Officer. There is no denial to this.

13.   To   reiterate,   the   Assessing   Officer   has   himself   stated   in   the
assessment order that the details filed by the assessee were examined by
her. All the three companies of the Alchemist Group duly furnished
confirmations dated 26.12.2011 before the Assessing Officer on query u/s
133 (6) of the Act. However, the Assessing Officer observed that since the
assessee had failed to furnish documentary evidence in support of his stand
regarding the expenses made on behalf of the Alchemist 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. These


                                          15
                                                             ITA No.5066/Del/2012


observations of the Assessing Officer, it is seen, are not sustainable either on
facts, or in law and the Ld. CIT (A) has correctly decided this issue in favour
of the assessee.

14.   The assessee has incurred the following expenses for F.Y.s 2006-607 to
2008-09:-

                                    (in `)

      F.Y. 2006-07      -          58,418/-

      F.Y. 2006-07      -       19,35,554/-

      F.Y. 2007-08      -       15,81,629/-

      F.Y. 2008-09      -     1,04,26,981/-

      Total             -     1,40,02,582/-

                              ========

      Though these expenses were incurred and debited, for and on behalf
of the Alchemist Group, by Swaran Dental Clinic, the proprietorship clinic of
the assessee, they were not accounted for by the Alchemist Group of
companies. It remains undisputed that bills/vouchers of these expenses were
duly furnished before the Assessing Officer. 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

                                       16
                                                              ITA No.5066/Del/2012


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 and the expenditure on
such purchase of plant and machinery and on the upgradation of the set up
was also to be incurred by the Alchemist Group. The assessee received
interest free financial assistance from the Alchemist Group for purchase of
the required equipment, marketing and other incidental expenses, with a
horizon of 3-5 years. The assessee showed such amount as current liabilities,
having debited all the purchases/expenses to the Alchemist account in his
books of account. In turn, the Alchemist Group had shown the total amount
given by them from time to time. The confirmations filed by the Alchemist
Group before the Assessing Officer were never questioned by him and no
further investigation in this regard was carried out, evincing that the
Assessing Officer was satisfied with such response to the notices issued u/s
133 (6) of the Act. Moreover, the Assessing Officer nowhere alleged that the
assessee was showing a liability more as payable, as shown by the Alchemist
Group. Also, the Assessing Officer did not conclude that it was a case of non-
establishing the identity of the creditor. The credit worthiness of the
Alchemist Group was never doubted. Even the transactions were not stated
to be not genuine. The result arrived at by the Assessing Officer, as such, is a
result of complete misreading and non-reading of the voluminous material
documentary evidence brought on record by the assessee.

15.   Such non-application of mind by the Assessing Officer is also evident
from the following facts. Complete details and vouchers for F.Y.s 2006-07 to
2008-09    were    produced     before      the   Assessing   Officer.    Invoice
No.DHR/KAVO/001 dated 06.03.2009 (APB-55) shows purchase of one piece
G-Healzone 2130C 1.000.0100 equipment, for ` 4,50,000/- against buyer
order No.KGI/2009/001 dated 22.01.2009, placed by Alchemist Hospitals Ltd.,


                                       17
                                                          ITA No.5066/Del/2012


New Delhi on DHR Holding India Pvt. Ltd., New Delhi. In this invoice, `
50,000/- has been shown paid by Swaran Dental Clinic and ` 4 lac has been
shown as paid by Alchemist. ` 50,000/- has been shown as reimbursed for
plant and machinery. The amount of ` 4 lac was paid by Alchemist Hospitals
Ltd. vide cheque No.669152 (APB 56), dated 03.02.2009, drawn on HDFC
Bank, Panchkula, in favour of DHR Holdings India Pvt. Ltd. The chart of
telephone expenses (APB 61) gives all possible details of the numerous
telephones installed 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 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. As noted above, the assessee's bank
account with HDFC Bank (APB 74-80), showing the payments received by the
assessee from the Alchemist Group, the copy of ledger account of business


                                     18
                                                            ITA No.5066/Del/2012


promotion and entertainment expenses in the books of the assessee (APB
81-85), 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 (APB 89-95,
113-125 and 92-112, respectively) and the Schedules of loans and advances
in the books of all the three companies of the Alchemist Group, for all the
three years (APB 126, 127 and 128, respectively) were all, undisputedly,
before the Assessing Officer. None of these documents, however, finds even
as much as a mention in the assessment order. Still, the Assessing Officer
goes on to hold the explanation of the assessee to be untenable.

17.   And last, but not the least, the assessee not having claimed any
expenses, rightly contended, no disallowance is possible.

18.   For the above reasons, we do not find any error in the impugned order
on this issue and the same is hereby confirmed. Ground Nos.1 and 2 raised
by the department are, therefore, rejected.

19.   Apropos Ground No.3, the Assessing Officer made an ad hoc
disallowance of ` 72,698/- on account of expenses out of expenses claimed
as business promotion expenses (` 1,81,688/-), staff welfare expenses (`
75,844/-) and entertainment expenses of ` 1,78,653/- (as debited in the
Profit & Loss Account). While doing so, the Assessing Officer observed that in
the absence of proper bills and vouchers, it did not stand proved that the
expenses had been incurred wholly and exclusively for the business activity
of the assessee. The Ld. CIT (A) deleted this addition.

20.   The Ld. DR has contended that the Ld. CIT (A) has erred in deleting the
addition correctly made by the Assessing Officer in the absence of
documentary evidence in the shape of proper bills and vouchers, for want of
proof. The ld. Counsel for the assessee, on the other hand, has placed strong
reliance on the impugned order.




                                       19
                                                           ITA No.5066/Del/2012


21.   On this issue, the CIT (A) has placed reliance on 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 the telephone and
car could not be ruled out. The Ld. CIT (A) restricted the disallowance of the
expenses to 1/10 of the total expenses, amounting to ` 62,262/-.

25.   The Ld. DR has relied on the assessment order, whereas the ld.
Counsel for the assessee has placed reliance on the CIT (A)'s order.

26.   The CIT (A), we find, has placed reliance on the decision of the Delhi
Bench of the Tribunal, dated 29.02.2012, in ITA No.2884/Del/2010, for
Assessment Year 2007-08, in the case of `Shukal Chand Jain'. No decision to
the contrary has been cited before us. This is a case of an estimate versus
another estimate. Finding the restriction of the disallowance, as ordered by
the Ld. CIT (A), to be reasonable, we sustain the same. Accordingly, Ground
No.4 is also rejected.

                                          20
                                                                ITA No.5066/Del/2012


27.       Ground Nos. 5 and 6 are general, requiring no adjudication.

28.       In the result, the appeal filed by the department is dismissed.

          The order pronounced in the open court on 21.03.2014.

                Sd/-                                                Sd/-

       [SHAMIM YAHYA]                                         [A.D. JAIN]
     ACCOUNTANT MEMBER                                     JUDICIAL MEMBER


Dated, 21st March, 2014.

dk

Copy forwarded to:

     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT

                                                             AR, ITAT, NEW DELHI.




                                          21

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Achievements

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions