This Issue Is Covered In Favour Of The Assessee By The Judgment Ot A Division Bench Ot This Court Dated 07.10.2014 In Ita v. M/S Foremost International Pvt. Ltd. Where It Is Held That Section 40(A)(Ia)_ Of The Act Is Retrospective

IN THER HIGH COURT OF PUNJAB & HARYANAATCHANDIGARH. Income Tax Appeal No. 76 of 2015 (O&M) |Date of Decision: 09.09.2016. Commissioner of Income Tax$2, Chandigarh ..Appellant: VeTSUS M/s International Institute of Neuro Sciences and Oncology Ltd. Chandigarn..Respondent. CORAM:HON'BLE MR. JUSTICE S.J.VAZIFDAR, CHIEF JUSTICE,HON'BLE MR. JUSTICE DEEPAK SIBAL, JUDGE.| Present:Ms. Urvashi Dugga, Advocate, for the appellant. Mr. B.M.Monga, Advocate and |Mr. Rohit Kaura, Advocate, for the respondent(s).Mr. Rohit Kaura, Advocate, for the respondent(s). AK AI S.J.VAZIFDAR, CHIEF JUSTICE This is an appeal against the order of the Income Tax AppellateTribunal in respect of the assessment year 2005-06. 2.The assessee filed a return of income declaring a business profitof=47,81,166/-. The profits were set off against the brought forwarddepreciation and the return income was shown as ‘nil’. 3.The assessee runs a hospital. The assessment was completedunder section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) at anincome oftL71,41,939/-. The Commissioner of Income Tax (Appeals)confirmed the order of the Assessing Officer to a large extent. The Tribunalupheld certain additions and restored to the file of the Assessing Officercertain issues for further verification/adjudication. | 4The assessee has raised the tollowing questions of law:- i)Whether on the tacts and in the circumstances of the|case, the Hon’ble ITAT is right in deleting the addition of=1,22,35,474/- made by the AO u/s 40O(a)(ia) forassessment year 2005-06 whereas the assessee has failed|to deposit the tax deducted prior to 28.02.2005 on or'before|31.03.2005|as|perprovisions|etfective(OTassessment year 2005-06 as amended by the Finance|Act, 2008 effective from April, 2005?case, the Hon’ble ITAT is right in deleting the addition of=1,22,35,474/- made by the AO u/s 40O(a)(ia) forassessment year 2005-06 whereas the assessee has failed|to deposit the tax deducted prior to 28.02.2005 on or'before|31.03.2005|as|perprovisions|etfective(OTassessment year 2005-06 as amended by the Finance|Act, 2008 effective from April, 2005? 11)Whether on the tacts and in the circumstances of the|case, the ITAT was right in holding that amendment|brought in Section 4O(a)(ia) by Finance Act, 2010 are|applicable to the assessment year 2005-06 also whereas|no retrospective applicability was incorporated by the|Parliament and as per Circular No.1 of 2011 dated|06.04.2011, CBDT has clarified that this amendment|takes effect from 1st July, 2010?case, the ITAT was right in holding that amendment|brought in Section 4O(a)(ia) by Finance Act, 2010 are|applicable to the assessment year 2005-06 also whereas|no retrospective applicability was incorporated by the|Parliament and as per Circular No.1 of 2011 dated|06.04.2011, CBDT has clarified that this amendment|takes effect from 1st July, 2010? 111)Whether on the tacts and in the circumstances of the|case, the order of the Tribunal is not perverse in allowing|relief ot=16,75,/771/- (1.e.L21,75,/71-|=09,00,000/-) tothe assessee by restricting the addition to|=5 lacswithout assigning any basis even after conforming with)the orders of the authorities below that the disallowance|on account of commission paid to the Doctors for'referring the patients to the hospital are to be added as_income in the hands oft the assessee in view oft thprovisions of section 69C of the Act?case, the order of the Tribunal is not perverse in allowing|relief ot=16,75,/771/- (1.e.L21,75,/71-|=09,00,000/-) tothe assessee by restricting the addition to|=5 lacswithout assigning any basis even after conforming with)the orders of the authorities below that the disallowance|on account of commission paid to the Doctors for'referring the patients to the hospital are to be added as_income in the hands oft the assessee in view oft thprovisions of section 69C of the Act? Re: Question No. (1) Re: Question No. (1) 5 |The assessee contended that the main reason for delay indepositing the TDS was due to financial crisis and that the deposit was madesuo-moto without any notice from the department. It was further contendedthat the Finance Act, 2008 made the amendment to section 40(a)(ia) of theAct w.e.f. the assessment year 2005-06. The Tribunal noted that the assesseehad deposited the entire amount of TDS before the due date of filing of the return of income. The ‘Tribunal held that the amended provisions wereretrospective. The Jribunal, however, directed the Assessing Officer toverify the claims of the assessee as to the date of deposit and to recompute —the disallowance, if any, in respect of such payments where the tax deductedat source had not been deposited before the due date of filing of return ofincome. We see no reason to interfere with this order of remand to thislimited extent. The Tribunal could have as a fact finding body decided theissue itself. However, the Iribunal is not prevented from directing theAssessing Officer to verify such an aspect. Question No. (i) therefore, does ©not raise a substantial question of law. It does not even affect the appellant’srights. The appeal in this regard is, therefore, dismissed. Re: Question No. (11) 6.This issue is covered in favour of the assessee by the judgmentot a Division Bench ot this Court dated 07.10.2014 in ITA No. 179 ot 2014Commissioner of Income Tax, Faridabad v. M/s Foremost International Pvt.Ltd. where it is held that section 40(a)(ia)|of the Act is retrospective. Re: Question No. (i111 7 |It is necessary to refer to the assessment order for it deals withthe issue in detail. [The statement of the assessee’s accountant one ShriS .K.Sharma was recorded under section 131 of the Act. He admitted that theassessee had been paying commission to various Doctors for referring thepatients to the hospital and that payments were not recorded in the regularbooks of account. He stated that the details of the Doctors who referred thepatients were noted by the person at the counter preparing bills. Thesedetails were sent to the marketing personnel; the marketing personneldecided the amount to be paid to such Doctors; the details prepared by the marketing personnel were checked and signed by the Director who in turnsent the same to the accountant for payment. The accountant thereaftersigned the details sheet and gave the same to the cashier for makingpayments. It was stated that the payments were in the range of=15,000/-CO|L20,000/- per month. The payments were collected by the marketingpersonnel to handover the same to the Doctors concerned. The payments tothe Doctors were made in cash and separate accounts were maintained inrespect thereof. Daily/weekly reports submitted by the cashier reflected thepayments. It is of vital importance to note that admittedly the records in thisregard were destroyed and were not produced for the examination of theAssessing Officer. 8The assessment order records that there was no responsefurnished to the Assessing Officer’s query as to why additions should not bemade to the assessee’s income in view of the above facts. It is also importantto note that the assessee was put to notice by the Assessing Officer that if itfailed to respond to the query the Assessing Officer proposed estimating thepayments at 5% of the total receipt. As rightly pointed out by Ms. Dugga,learned counsel appearing on behalf of the appellant, it was not contendedon behalf of the assessee that the patients in the hospital were other thanthose referred by the Doctors. The statement of another employee of theassessee regarding these payments was also recorded. He was not cross-examined on behalf of the assessee. OQIn the circumstances the fact that the payments were made to.the Doctors who referred the patients to the assessee is established. Thequestion is whether the Assessing Officer was justified in estimating thepayment as 5% of the total receipt. OQIn the circumstances the fact that the payments were made to.the Doctors who referred the patients to the assessee is established. Thequestion is whether the Assessing Officer was justified in estimating thepayment as 5% of the total receipt. 10.The Assessing Officer as we noted earlier dealt with the facts inconsiderable detail. He rightly observed that the facts are within theknowledge of the assessee. The assessee, however, never disclosed the same.The Assessing Officer further noted as under:- “So the said claim of the assessee cannot be|accepted that the said cash received against bogus|purchases may be assumed to have been paid to the|Doctors. Another aspect which comes into picture is that|by claiming the above aspect the assessee indirectly|admits that the quantum of such payment of commissionis covered by the quantum of such bogus purchases|which is=28,10,500/- (=19,75,000/- relating to bogus|purchases|shownfrom|M/s.Kind=15,07,500/-from|M/sP.K.Enterprises=3,28,400/- from M/s Amit Juneja & Co.) and thus it is"not disputing the quantum of commission determined by|applying rate of 5% on the hospital receipts. Considering|all these aspects, the addition on account of commission|payment is treated as from sources not disclosed by the|assessee and no benefit, as claimed by the assessee is|given.” Remedies, | and 11.The Assessing Officer thereafter determined that an amount of44.35 crores was received by the asseseee and computed the commission at59% of the same which amounted to=21,75,771/-. The Assessing Officer|infact took a balanced approach. He noted that the normal practice in theprofession was to give a commission of 10% of the billed amount to theDoctor referring the patients but that it was possible that some patients camewithout reference and that some Doctors did not take such commission.Considering the same the Assessing Officer computed the commission at 5% and not 10% of the total medical receipts. The approach adopted by the Assessing Officer was reasonable and fair and after considering all therelevant facts. It is important to note at the cost of repetition that the assesseehad admittedly destroyed the documents relating to these payments. TheTribunal agreed with the finding on facts. Infact the Tribunal did so afterfurnishing detailed reasons itself. Having done so the Tribunal in onesentence in the concluding paragraph observed as under:- EHowever, we restrict the said addition to=5 lacs tor the.year under consideration. The ground of appeal No.9|raised by the assessee is thus partly allowed.” The Tribunal has furnished no reason whatsoever for differing with the order of the Assessing Officer in this regard which is confirmed bythe CIT(A). There is no basis on which a sum of45 lacs was computed. Theorder of the Iribunal is, therefore, perverse. | 12.In the circumstances, question No. (ili) 1s answered in favour ofthe department and against the assessee. The addition made by the AssessingOfficer is confirmed. 13. The appeal is accordingly disposed ot. (S.J.VAZIFDAR)CHIEF JUSTICE 09.09.2016 |‘ravinder’|Whether speaking/reasoned √Yes/No Whether reportable Yes/No√ (DEEPAK SIBAL)JUDGE