Surya Hospitals, Karimnagar v. ACIT, Karimnagar

ITA 657/HYD/2009 | 2006-2007
Pronouncement Date: 19-03-2010 | Result: Allowed

Appeal Details

RSA Number 65722514 RSA 2009
Assessee PAN AAGFS3375Q
Bench Hyderabad
Appeal Number ITA 657/HYD/2009
Duration Of Justice 10 month(s) 1 day(s)
Appellant Surya Hospitals, Karimnagar
Respondent ACIT, Karimnagar
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 19-03-2010
Date Of Final Hearing 10-03-2010
Next Hearing Date 10-03-2010
Assessment Year 2006-2007
Appeal Filed On 18-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA-657 /HYD/2009 ASST. YEAR 2005-06 M/S SURYA HOSPITALS GODAVARIKHANI KARIMNAGAR (AAGFS 3375 Q) VS ACIT CIRCLE I KARIMNAGAR (APPELLANT) (RESPONDENT) ITA-658 /HYD/2009 ASST. YEAR 2006-07 ACIT CIRCLE I KARIMNAGAR VS M/S SURYA HOSPITALS GODAVARIKHANI KARIMNAGAR (AAGFS 3375 Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI E. NAGENDRA PRASAD O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE ANOTHER BY THE REVENUE ARE DIRECTED AGAINST THE COMMO N ORDER PASSED BY THE CIT(A)-III HYDERABAD DATED 6.3.2009 AND PER TAINS TO THE ASSESSMENT YEARS 2005-06 AND 2006-07. SINCE COMMON ISSUES AR E INVOLVED IN THESE TWO CROSS APPEALS THEY ARE CLUBBED TOG ETHER HEARD TOGETHER AND DISPOSED FOR THE SAKE OF CONVENIENCE VIDE T HIS COMMON ORDER. 2. THE ASSESSEE IS AGGRIEVED AGAINST SUSTAINING ADDITION OF RS.14 10 565/-. THE REVENUES GRIEVANCE IS GRANTING RE LIEF TO THE ASSESSEE AT RS.21 56 512/- OUT OF ADDITION OF RS.35 67 07 7. 2 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM RUNNING A HOSPITAL. A SURVEY U/S 133 A WAS CONDUCTED AT THE BUSINESS PREMISES ON 30.9.2005. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2006-07 DECLARING AN INCOM E AT RS.3 15 250/-. ON SCRUTINY OF THE SEIZED MATERIALS IT W AS FOUND THAT THE GROSS RECEIPTS OF THE ASSESSEE FOR SIX MONTHS COMMENCING FROM APRIL TO SEPTEMBER 2005 WAS AROUND RS.28.30 LAKHS WHICH WAS ADMI TTED BY THE MANAGING PARTNER. THIS WAS EVIDENT FROM THE IMPOUNDE D RECEIPT BOOKS SINCE NO BOOKS OF ACCOUNTS WERE FOUND MAINTAINED BY THE ASSESSEE DURING THE COURSE OF SURVEY AND NO BOOKS OF ACCOUNT WAS P RODUCED DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ESTIMA TED THE TOTAL RECEIPT OF THE YEAR AT RS.56 58 408/- ON THE BA SIS OF RECEIPT BOOKS IMPOUNDED DURING THE SURVEY. SINCE THE ASSESSEE HAS ADMIT TED ONLY GROSS RECEIPTS AT RS.20 91 331/- IN ITS PROFIT AND LOSS AC COUNT AND HE ADMITTED UNDISCLOSED INCOME AT RS.3 00 000/- THE ASSESSI NG OFFICER MADE AN ADDITION AT RS.35 65 077/- AS UNDISCLOSED INCOME OF THE ASSESSEE. ON APPEAL CIT(A) ESTIMATED THE INCOME AND GRO SS TURNOVER AT 30.55 % AND DETERMINED AT RS.17 25 815/-. SINCE T HE ASSESSEE HAD ALREADY DISCLOSED INCOME OF RS.3 15 250/- IN THE RETURN FILED THE BALANCE OF RS.14 10 565/- IS SUSTAINED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. AGAINST THIS ORD ER OF CIT(A) BOTH THE PARTIES ARE IN APPEAL BEFORE US. 4. THE AR FILED A COPY OF THE ORDER OF THIS TRIBUNA L IN ITA NOS.758 TO 795/HYD/2008 & ITA NOS.836/ TO 841/HYD/2008 DATED 26.6.09 IN THE CASE OF SMT. VASANTHA LAKSHMI NELLORE VS. DCIT NELLORE B BENCH OF HYDERABAD FOR THE PROPOSITION THA T THE INCOME TO BE DETERMINED AT 15%. 5. THE DR SUBMITTED THAT THE PROFIT TO BE ESTIMATED AFTER CONSIDERING THE LOCATION OF THE BUSINESS PREMISES COMPETIT ION IN THE 3 3 BUSINESS IN THAT LOCALITY AVAILABILITY OF EMPLOYEES ET C. HE SUBMITTED THAT IN THE PRESENT CASE THE HOSPITAL IS SITUATED IN A B EST LOCALITY AT KARIMNAGAR AND ESTIMATED INCOME BY ASSESSING OFFICER TO B E SUSTAINED . 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MAIN ISSUE IN THE PRESENT CASE IS RELATING T O ESTIMATION OF INCOME. THE ESTIMATION OF INCOME IN CASE OF ALL HOSPITA LS CANNOT BE UNIFORM IT IS DEPENDED UPON VARIOUS FACTORS LIKE LOCAT ION OF THE PREMISES COMPETITION IN THE FIELD EFFICIENCY OF THE D OCTORS AND NATURE OF SERVICE RENDERED. THE ASSESSEE WAS NOT ABLE TO SPECIFICALLY POINT OUT THE UNIFORMITY BETWEEN THE ASSESSEES CASE AND THE CASE WHICH WA S CONSIDERED BY THIS TRIBUNAL IN THE CASE OF SMT. T. VASANT HA LAKSHMI NELLORE CITED SUPRA AND HENCE WE ARE DECLINED TO APPLY THE RATE AT 15% OF RECEIPT AS INCOME OF THE ASSESSEE. 7. COMING TO THE POINT OF THE PRESENT CASE THE MAIN CONTENTION OF THE D.R. IS THAT ALL THE EXPENSES WAS AL READY CLAIMED BY THE ASSESSEE IN ITS REGULAR RETURN OF INCOME AND FURTHER DEDUCTION CANNOT BE ALLOWED. WE ARE NOT AGREEING WITH THIS PRO POSITION. THERE ARE TWO KINDS OF EXPENDITURE TO BE INCURRED BY THE ASS ESSEE. ONE IS FIXED EXPENDITURE AND THE OTHER ONE IS VARIABLE EXPE NDITURE. FIXED EXPENDITURE OF THE ASSESSEE IS FIXED AND DOES NOT CHANGE D EPENDING UPON THE GROSS RECEIPTS. HOWEVER VARIABLE EXPENDITURE WILL CHANGE DEPENDING UPON THE QUANTUM OF BUSINESS CARRIED ON. IN VIEW OF THIS IT CANNOT BE SAID THAT THE ASSESSEE IS NOT INCURRED ANY EXPEND ITURE TO EARN UNDISCLOSED RECEIPTS. KEEPING IN VIEW OF THESE FACTS WE ARE TO ARRIVE AT A CORRECT NET PROFIT FROM THE UNDISCLOSED RECEIPT IT IS TO BE NOTED THAT THE ASSESSEE CLAIMED REGULAR EXPENSES WHICH ARE FIXED IN NA TURE LIKE SALARY STATIONARY POSTAGE TELEPHONE TELEGRAM BAN K INTEREST AND COMMISSION TRAVELING EXPENSES ELECTRICITY EXPENSES INCIDEN TAL CHARGES RENT GRATUITY ADVERTISEMENT AUDIT FEES ENT ERTAINMENT 4 4 EXPENSES DEPRECIATION ETC. HOWEVER THERE ARE VARIABLE EXPENSES WHICH ACTUALLY INCURRED BY ASSESSEE WITH REFERENCE TO UNDISCLOSED R ECEIPTS. SINCE THE AMOUNT OF FIXED EXPENSES HAVE ALREADY BEEN T AKEN CARE IN REGULAR BUSINESS THERE IS NO QUESTION OF ALLOWING ANY FIXED EXPENSES. HOWEVER THE VARIABLE EXPENDITURE TO BE ALLOWED IN P ROPORTION AS INCURRED BY THE ASSESSEE FOR DISCLOSED RECEIPTS. THUS THE ASSESSING OFFICER IS REQUIRED TO BIFURCATE THE EXPENDITURE AS FIX ED AND VARIABLE EXPENSES AND THEREAFTER ASCERTAIN THE VARIABLE EXPENSES AND GIVE DEDUCTION FOR THE SAME. THE ISSUE IS SET ASIDE TO TH E FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. 9. IN THE RESULT BOTH THE APPEALS OF THE PARTIES I N ITA NOS.657 & 658/HYD/2008 ARE ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT : 19.3.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 19 TH MARCH 2010 COPY FORWARDED TO: 1. M/S SURYA HOSPITALS GODAVARIKHANI KARIMNAGAR 2. ACIT CIRCLE-I KARIMNAGAR 3. CIT(A)-III HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD.