ACIT, CC 15, Room no.354 3rd floor, Jhandewalan Extn New Delhi 110 055 Vs. Paras Healthcare P.Ltd. Paras Hospital C block Sushant Lok, Phase I, Sector 43 Gurgaon
September, 18th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "F", NEW DELHI
BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER
SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
ACIT, CC 15, Room no.354 Paras Healthcare P.Ltd.
3rd floor, Jhandewalan Extn Vs. Paras Hospital C block
New Delhi 110 055 Sushant Lok, Phase I, Sector 43
PAN: AADCP 0478 K
Appellant by : Sh. Vikram Sahay, Sr.D.R.
Respondent by : Sh. M.P.Rastogi, Adv.
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
This is an appeal filed by the Revenue and is directed against the
order of the Ld.CIT(A), Faridabad dated 26.12.2011 pertaining to the A.Y.
2. Facts in brief:- The facts of the case are brought out at para 4 of the
Ld.CIT(A)'s order, which is extracted for ready reference.
"4. The brief facts of the case are that the return of income
declaring NIL income was e-filed by the assessee on 07.11.2007. The
case was selected for scrutiny through CASS and a notice u/s 143(2)
of the Act was issued on 29.09.2008 requiring compliance on
15.10.2008. The assessee is engaged in the business of acquiring,
establishing, maintaining, managing and running speciality
hospitals/nursing homes. During the course of assessment
proceedings, the AO observed that the unsecured loans of
Rs.6,16,09,875/- were outstanding as on 31.03.2007 in the names of
directors showing increase of Rs.56,25,000/- over the preceding year.
The amount of Rs.5,56,09,875/- was outstanding in the name of Dr.
Dharminder Kumar Nagar and an amount of Rs.60,00,000/- was
outstanding in the name of Shri Rajender Singh. From the statement of
bank account filed in the case of Dr. Dharminder Kumar Nagar, the AO
noticed that there were several loan entries in his bank account before
extending loan to the assessee company and the funds were actually
routed through various group companies and the relatives of the
directors. Based on these observations, the AO, vide order sheet entry
dated 30.12.2009, asked the assessee to show cause as to why the
increase in unsecured loans should not be treated as bogus and
addition made on that ground. Since the assessee was not able to
furnish any reply, the AO has made addition of Rs.56,25,000/- as
bogus unsecured loans. In the balance sheet, the assessee had shown
outstanding patients advances of Rs.17,22,979/ - as liability, which
was included under the head sundry creditors. The AO asked for the
details of names of patients and certain other details in compliance to
which the assessee expressed its inability contending that such type of
details were not available. Consequently, the AO has made addition of
Rs.17,22,979/- on account of unexplained advances received from
patients. In respect of sundry creditors outstanding at Rs.1,88,14,222/-
, the AO has also made addition in absence of confirmations. The IPD
billing register checked by the AO revealed that certain bills were not
reflected in the billing register leading to inference that the receipts
were not included in the books of account. To protect the interest of
revenue, an adhoc disallowance of Rs.1,00,000/ - has been made.
While examining the books of accounts in CD form, the AO noticed that
as per journal voucher No.828 dated 31.03.2007, the IPD receipts of
Rs.78,87,060/- were debited in the receipt account instead of being
credited. The AO has, therefore, made addition of Rs.1,55,74,120/-
being twice the amount of Rs.78,87,060/-."
3. We have heard Sh.Vikram Sahay, Ld.Sr.D.R. on behalf of the Revenue
and Shri MP Rastogi, Ld.Counsel for the assessee.
4. On a careful consideration of the facts and circumstances of the case,
on perusal of orders of lower authorities, material placed on record, we hold
5. Ground no.1 reads as follows.
"1. That the CIT(A) erred in law and on facts of the case in deleting the
addition of Rs.56,25,000/- made by the AO u/s 68 of the Act on account of
unexplained cash credit."
5.1. The facts relating to this ground are as under.
5.2. The assessee is managing and running a hospital in Gurgaon. For the
year under appeal, after the claim of depreciation etc., the income-tax return
was filed declaring income at NIL. During the course of assessment
proceedings, the Assessing Officer observed that unsecured loans of
Rs.6,16,09,875/- were outstanding as on 31st March 2007, in the name of
directors, showing increase of Rs.56,25,000/-, over the preceding year. The
amount of Rs.5,56,09,875/- was outstanding in the name of
Mr.Dharmendra Kumar Nagar and an amount of Rs.60,00,000/- was
outstanding in' the name of Mr. Rajendra Singh. The assessee had filed a
statement of account, of both the directors. Citibank statements where from
the amount was advanced, copy of their personal balance sheet and copy of
income-tax return, the PAN details of Directors were also furnished. From
the bank statement of one Director Mr. Dharmendra Kumar Nagar, the
Assessing Officer noticed that there were several loan entries in his bank
account, before extending loan to the assessee-company and the funds were
actually routed through, various group companies and the relatives of the
director. Based on these observations, the Assessing Officer vide order sheet
entry dated 30th December 2009 asked the assessee to show cause as to
why, the increase in unsecured loan amount should not be treated as
bogus. He made an addition of Rs.56,25,000/ - on that ground.
Before the CIT(Appeals), the assessee explained the details of
unsecured loans and its increase as under:
Name Balance as on 31st Balance as on 31st
March, 2006 March, 2007
Dr.Dharmendra Kumar Rs.5,59,84,875.30 Rs.5,56,09,875.30
Mr.Rajendra Singh Nil Rs.60,00,000.00
Increase = Rs.56,25,000.00
The assessee explained that both the directors are income-tax
assesses since last so many years. Mr. Dharmendra Kumar Nagar
has PAN No. ADGPN5145E and Mr. Rajendra Singh has PAN No.
AAVPN4992R. Both the directors are duly assessed to tax with
Assessing Officer, Bulandshahr. The assessee stated that the
statement of account of directors, in the books of the assessee,
along with the copies of their respective bank statement with City
Bank, Gurgaon where from, the amount was transferred to the
assessee's account, were filed before the Assessing Officer. On the
evening of 30th December 2009, i.e. the day before the completion
of assessment, the Assessing Officer had required the assessee to
justify the deposits made by the assessee-company and in response
thereto the assessee had filed copies of their respective ITRs and the
personal balance sheet of both the directors as were immediately
available with the assessee to prove their creditworthiness and the
identity thereof. It was further explained that, in the assessment
order, the Assessing Officer has justified the additions based on
certain additions in the bank account of Mr. Dharmendra Kumar
Nagar and stated that certain amounts have been transferred from
the account of Dr. Gurdeep Kaur Nagar, wife of Mr. Dharmendra
Kumar Nagar, who is a non-resident.
It was explained before the CIT (Appeals) that the entries made in the
account of Mr. Dharmendra Kumar Nagar, as pointed out and
mentioned in the assessment order by the Assessing Officer, are not
in fact related to unsecured loans but are related to the share
application money provided to the assessee-company, for which
there is no dispute at all, because the same has been accepted by
the Assessing Officer while scrutinizing, the subscription of share
capitals. The increase in unsecured loan was basically on account of
the deposits made by Mr.Rajendra Singh. The assessee explained
before the CIT (Appeals) that all the deposits in the account of Mr.
Rajendra Singh have been made out of the amount transferred from
his saving bank account maintained with Citibank. However, in
order to clarify the availability of funds with Mr.Rajendra Singh, the
assessee further explained the source of credits as made in the
account of Mr. Rajendra Singh with Citibank as under:
"16 May, 2006:- The amount of Rs.8 lakhs in the bank account of
Mr.Rajendra Singh has been got transferred from the HUF account of M/s
Ved Ram & Sons (HUF), of which Mr.Rajendra Singh is the Karta. M/s Ved
Ram & Sons had transferred this amount from the account maintained in the
firm M/s Ved Ram & Sons (registered firm) of which it was a partner. After
crediting the said fund in the account of Mr. Rajendra Singh, the cheque, as
deposited on 16th May 2006 with the appellant-company, has been got
cleared from the account of Mr. Rajendra Singh on 18th May 2006. The
statement of account of Ved Ram & Sons (HUF) in the books of partnership
firm M/s Ved Ram & Sons are enclosed herewith. Ved Ram & Sons (HUF) is
assessed to tax by PA No. AADHV7767C and Ved Ram & Sons (Regd firm) is
assessed to tax vide PA No. AABFV9507G and is assessed to tax by Additional
02nd June, 2006: The amount of Rs.5,00,OOO/- was transferred from the
HUF of M/s Ved Ram & Sons out of withdrawal from the firm M/s Ved Ram
& Sons (registered firm) under debit to the HUF account on 1st June 2006.
This cheque was credited to the account of Mr. Rajendra Singh in Citibank
on 3rd June 2006 wherever the cheque issued by Mr. Rajendra Singh to the
appellant-company was got cleared on 5th June 2006.
31st March, 2007: The amount of Rs.60,00,000/- was deposited by Mr.
Rajendra Singh with the appellant-company vide cheque No. 011477. This
cheque was cleared from the amount of Mr. Rajendra Singh maintained with
Citibank on 16th April 2007 .. Prior to the clearance of this cheque from the
account of Mr. Rajendra Singh, there is a deposit of Rs.60 lakhs in the
account of Mr. Rajendra Singh in Citibank on 13th April 2007. The credit in
the Citibank account of Mr. Rajendra Singh on 13th April 2007 was made out
of the amount transferred from the account of Mr. Gajendra Kumar, real
brother of Mr. Rajendra Singh. To prove this fact, a photocopy of the account
of Mr. Gajendra Kumar in Citibank is also enclosed, which is self-
explanatory. The confirmation of Mr. Gajendra Kumar is also enclosed.
Mr. Gajendra Kumar is assessed to tax vide PAN No. ABBPKO 131E at
The above submission of the assessee was forwarded to the Assessing Officer
by the CIT (Appeals) for further clarification. It was claimed by the assessee
that in the remand proceedings, the Assessing Officer had verified these
amounts, but in the remand, the CIT (Appeals) noticed that instead of
reporting the outcome of the enquiries made in the assessment proceedings,
the Assessing Officer simply tried to justify the additions, as made by the
Assessing Officer, in his order, to which the assessee highly objected.
However, the CIT (Appeals), on verification of the evidences as available on
record and filed before him, accepted the explanation of the assessee, the
reasons whereof have been explained in detail by the CIT (Appeals) in his
order in paragraphs 6 to 6.2. He deleted the additions. In his order, the CIT
(Appeals) noticed that the additions made by the Assessing Officer on the
basis of transactions in the bank account of Mr. Dharmendra Kumar Nagar
has no relevance at all because the same relate to the share capital which has
already been accepted and the actual increase in unsecured loans is
attributed to the amount advanced by Mr. Rajendra Singh. Hence, the
genuineness of unsecured loans is required to be examined only in the case
of Mr. Rajendra Singh who advanced loan of Rs.60 lakhs. The CIT (Appeals)
noticed that Mr. Rajendra Singh is an old income-tax assessee and that the
entire amount has been advanced through banking channels and for that
purpose Mr. Rajendra Singh had not only filed a personal balance sheet but
had also filed copy of the saving bank account maintained with City Bank
and had further explained the source of the funds so advanced. Therefore,
the identity, source, capacity and genuineness of the transactions as
required for Section 68 of the Act has been prima facie established.
The learned DR could not controvert the finding of CIT (Appeals). He simply
relied upon the order of the Assessing Officer.
5.3. Under the above circumstances, we uphold these factual findings of
the Ld.CIT(A) and dismiss this ground of Revenue.
6. Ground no.2 reads as under.
2. That the CIT(A) erred in law and on facts of the case in deleting the addition
of Rs.17,22,979/- made by the AO on account of unexplained advances
received from patients.
6.1. The facts relating to ground no.2 of the Revenue are as under.
6.2. The assessee runs a hospital and has IPD and OPD Divisions. In IPD,
as and when a patient is admitted in the hospital for treatment, the
attendants of the patient are asked to deposit some amount to cover up the
intended cost of treatment. The amount deposited by the patient from time
to time is credited in the patient's advance account. At the time of discharge
of patient, the final bill is prepared and the advance so received from the
patient from time to time is adjusted and is offered for taxation in the year
in which the final bill is crystalised. This system of accounting is being
followed by the appellant since its inception. The patient advance as on 31st
March 2007 represents the amount received from the patients from time to
time, who are yet to be discharged. The patient advance which was
outstanding on 31st March,2007 has been adjusted against the final bills of
patients raised at the time of discharge, which has been made in
subsequent years and almost all the patient advance has been adjusted
against the final bills raised at the time of discharge and offered for taxation
in subsequent year.
Before the CIT (Appeals), the assessee had filed name-wise details of
the patients' advance outstanding as on 31st March 2007 and had also filed
copies of bills raised in subsequent years. All such submissions and details
were forwarded by the CIT(Appeals) to the Assessing Officer for verification
and comments. It was noticed by the CIT (Appeals), that in the remand
proceedings, the A.O. had examined the details and made verifications but
he has not made any comments about the outcome of enquiry so made. In
the remand order, the A.O. simply reiterated the stand as taken by him in
assessment order. The Ld.CIT (Appeals), after examining and verifying the
details, agreed with the assessee's contention. The CIT (Appeals) observed
that it is common practice that, when a patient is admitted in the hospital
for the treatment in IPD, the attendants of the patient are asked to deposit
some amount to cover up the intended cost. of treatment. The amount
deposited by the patient from time to time is credited in the patient's
advance account. At the time of discharge of patient, the final bill is
prepared and the advance so received from the patient is adjusted against
the final bill and this system of accounting is being followed not only by the
assessee but all the hospitals. Therefore, it cannot be said that the details of
receipts issued by the assessee were not reflected by the assessee in the
books of account. He deleted the addition of Rs.17,22,989/-.
By making the addition of Rs.17,22,989/- in the year under
consideration, no fruitful purpose shall serve to the Revenue because if the
patient's advance is sustained during the year under consideration, then the
consequential effect has to be given in subsequent years by way of reducing
the similar amount out of income offered in subsequent year. Otherwise it
will amount to double assessment. It is not the case of the Assessing Officer
that the patients' advance has not been offered for taxation at all in
The learned DR could not controvert the finding of CIT (Appeals). He
simply relied upon the order of Assessing Officer.
6.3. In view of the above discussion, we uphold the factual findings of the
Ld.CIT(A), and dismiss ground no.2 of the Revenue.
7. Ground no.3 reads as under.
3. That the CIT(A) erred in law and on facts of the case in deleting the addition
of Rs. 1,88,14,222/- made by the AO as the assessee failed to establish the
genuineness of creditors.
7.1. The facts pertaining to the above ground are as under.
7.2. The details of Sundry Creditors amounting to Rs.1,88,14,222/-
outstanding as on 31st March 2007 as filed before the Assessing Officer and
CIT (Appeals) are as under:
(i) Sundry creditors for equipment Rs.29,01,028/-
(ii) Sundry creditors for projects - Rs.74,15,739/-
(iii) Sundry creditors for expenses - Rs.84,97,455/-
TOTAL = Rs.1,88,14,222/-
As far as item No. (i) is concerned, it is stated that, the assessee had not
claimed any revenue expenditure against the purchases so made for
equipment against which such sundry creditors are outstanding, but it has
been capitalized under the fixed assets and the Assessing Officer, after
verification thereof, has allowed the depreciation thereon.
Item No. (ii) represents the sundry creditors for projects shown at Rs.74,
15,739/ - and the same has also not been claimed by the assessee as
revenue expenditure against which such sundry creditors are outstanding.
In fact, they relate to the expansion of the project and the purchases so
made against them have been capitalized and in subsequent years, the
Assessing Officer after verification, has allowed the depreciation on the cost
of completed projects.
Item No. (iii) represents the sundry creditors for expenses claimed at
Rs.84,97,455/- and relates to the expenses incurred by the assessee from
time to time and claimed as revenue expenditure.
During the course of assessment proceedings, the Assessing Officer had
required to file the confirmation of such sundry creditors having balance of
more than Rs. one lakh. The Assessing Officer thereafter required the
assessee to produce the statement of account of such persons in subsequent
years and has also required the assessee to produce the bank statements of
subsequent years, evidencing the payments to such sundry creditors have
actually been effected.
To prove this fact, the assessee had filed, not only the ledger account of
subsequent years of such parties, but also produced the bank statement
evidencing that the payments to such sundry creditors have also been
made. In spite of such evidences, the Assessing Officer had made the
additions of the consolidate figure of Rs. 1,88,14,222/ - merely on the
ground that, in the absence of confirmation, the creditors cannot be
ascertained to be genuine.
Before the CIT (Appeals), the assessee again reiterated its stand as was
made before the Assessing Officer. The CIT (Appeals) forwarded the
submissions of the assessee to the Assessing Officer for verification and
comments. As per the assessee, in remand proceedings, the Assessing
Officer not only verified the genuineness of payments from the accounts and
bank statements of the assessee for the year under consideration and
subsequent years but even the confirmation from the parties, as required,
were also filed before the Assessing Officer. The copies of the accounts of the
parties for the year under consideration and subsequent years along with
the copies of the bank statements of both the years and the confirmations as
filed before the Assessing Officer in remand proceedings have also been filed
before the CIT (Appeals).
The Assessing Officer, in spite of such exercises of verification, has not made
any adverse comment on any of the account but contrary to that has simply
tried to reiterate the stand of the then Assessing Officer made in assessment
The CIT (Appeals), after considering the evidence, held that as far as the
sundry creditors for equipment amounting to Rs.29,01,028/- and sundry
creditors for projects outstanding at Rs.74,15,739/-, the assessee had not
claimed any revenue expenditure against the purchases so made for
equipments and capital expenditure for projects. Therefore, in respect of
sundry creditors outstanding and corresponding to purchase of assets,
neither any addition can be made u/s 37 or 41(1) of the Act and at the best
the issue could be looked into from the angle of misappropriation of funds of
company in the wake of bogus capital expenditure, but that is not the case
of the Assessing Officer so much so the depreciation has been allowed by the
Assessing Officer on acquisition of assets.
The CIT (Appeals), after relying upon the judgment of the Delhi Tribunal in
the case of YFC Projects Pvt. Ltd. vs. DCIT in 134 TTJ 167 held that merely
due to non-filing of the confirmation of the supplier, it cannot be held that
the credit balances in the shape of sundry creditors appearing in the books
of account are unaccounted money of the assessee when" there is an
evidence that the cheques issued by the assessee have been cleared from the
bank in subsequent years and then deleted the whole amount of Rs.l,88,
7.3. He relied on the judgement of the Hon'ble Allahabad High Court in
the case of CIT vs. Panchanan Das Jain in 205 CTR 444 and held that, if
the purchases are made on credits, then no addition can be made.
7.4. The Assessing Officer, though had not mentioned under which
provision the additions are being made. It appears that the said additions
have been made u/s 68 of the Act because it is the only section under which
any sum found credited in the books of account can be added back. In the
case of Jatia Investment Co. in 206 ITR 718 at page 725, it is held that in
case no cash has been received by the assessee, then no addition can be
made u/s 68 of the Act. Similarly, the Pune Bench of the Tribunal also held
so in the case of Kanti Lal & Bros. vs. ACIT in 52 ITD 412.
7.5. In the instant case, the assessee had not received any amount in the
form of cash from the sundry creditors. In fact, they represented the
outstanding balance amount against the purchases which has been duly
verified by the Assessing Officer and found genuine.
7.6. The learned DR could not point out any fault of factual inaccuracy
in the order of CIT(Appeals) nor has brought any contrary arguments
evidence against the observation of CIT (Appeals).
7.7. In view of the above discussion, we uphold the factual findings of the
Ld.CIT(A), and dismiss ground no.3 of the Revenue.
8. Ground no.4 is general in nature.
9. In the result the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 16th September, 2015.
[I.C.SUDHIR] [J. SUDHAKAR REDDY]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dt. the 16th September, 2015
Copy forwarded to: -
4. CIT (A)
5. DR, ITAT
Assistant Registrar, ITAT, Delhi Benches