Smt. Vimal Chawla Charitable Trust vs ITO(Exemption), Ward, Faridabad

ITA No.- 5153/Del/2025 for A.Y. 2017-18

A. Addition of Rs. 39,30,831/- of total expenses (excluding water expenses , fooding expenses)

4.1

"Q. 1. Please furnish ledger account of all expenses and receipts giving nature and mode of payment alongwith supporting bills and vouchers.

4.2

Assessee's Reply: Ledger of Expenses and Receipts have already been submitted. The vouchers are bulky and it is not possible for submit vouchers".

4.3

Remarks: As the assessee itself has declined to submit any vouchers, Assessing Officer has no option left but to disallow expenses taking a rational view. The assessee has not even furnished bills to justify its expenses. Therefore, considering the activities of the society and previous assessment of assessee, 20% disallowance is made to the expenses incurred by assessee. The 20% of total expenses (excluding Water Expense, Fooding Expense) of Rs. 1,96,54,158/- works out to Rs. 39,30,831/-and added back to the income of the assessee.

Addition of Rs. 39,30,831/-

B. Addition of Rs. 5,00,000/- on Account of “food expenses”

4.4

Q. 3. As per books of accounts for A.Y. 2016-17 and A. Y. 2017-18, it has been noticed that expenditure on medicines and consumable during A.Y. 2017-18 has been halved whereas expenditure on food and expenses has increased by 150%. Please justify the reasons alongwith supporting documents. Has there been any change in the activities of the Trust.

4.5

Assessee's Reply: Food expenses are dependent upon in house treatment. This is as per actual expenses incurred.

4.6

Remarks: The reply of the assessee is found unsatisfactory as assessee could not justify this drastic change in application of funds among food and medicines. Assessee neither furnished any bills as discussed above and nor justified these expenses related to Food expenses. Moreover the Food expenses have increased manifold as compared to the last year. Also, the 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 during the year. You are requested to furnish your reply in respect of when and where in books the same amount has been accounted and during which assessment year.

4.8

Assessee's Reply: The receipts is Rs. 2,39,90,958/- and not the figure given in the notice. The month wise ledger of this receipt is attached herewith.

4.9

Remarks: 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.

4.9.1

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 of fact remains that the assessee could not pin point the debtors amounting to Rs. 1.33 Crores. Neither could the assessee explain beyond doubt when and in which year was the receipts from debtors was considered as income and submitted for taxation. The assessee failed in its onus to prove the income and taxability from the receipts from debtors. The assessee also did not furnish any documentary evidence in support of its contention that such income has been taxed already. Therefore, I am constrained to treat the said receipts of Rs. 1,33,91,236/- as income of the assessee of the current year and added back to income of the assessee.

Addition – Rs. 1,33,91,326/-

D. Addition of Rs. 20,00,000/- u/s 69A of the Act on account of cash deposits in the bank account of the assessee.

4.10

Q. 5. Please justify the expenses of Rs. 57,63,588/- incurred on Professional Charges doctor's alongwith supporting documentary evidence (Name, Address and PAN of the doctor).

4.11

Assessee's Reply: The List of Doctors who have rendered services to NIMS Hospital is attached herewith.

4.12

Remarks: Assessee in its reply has furnished a list of 17 Doctors out of which PAN number of two doctors Dr. Ashutosh, Dr. Amit Mohan were not even furnished by the assessee. Assessee did not even furnish what amount was paid to which Doctor. Neither any TDS payment details were furnished by the assessee. Therefore, in absence of PAN no and any clear payment details of Doctors, the said expenses remains unjustifiable to some extent. However, 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 asseessee'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 per the provisions of the section 69A of the Income Tax Act, 1961. An addition of Rs. 20,00,000/- (out of total cash deposits of Rs. 40,00,000/-) is thus being made.

Addition of Rs. 20,00,000/-

“ 1. This appeal is filed against the order of the Income Tax Officer, Exemptions Ward Faridabad passed u/s 143(3) of the Income-tax Act, 1961 dated 27.12.2019.

2.

The grounds of appeal object to the following additions made by AO in the assessment order:-

a)

Rs.39,30,831/- on account of 20% of expenses disallowed.

b)

Rs.5,00.000/-, on account of disallowance of food expenses.

c)

Rs. 1,33,91,326/-, on account of receipt of debtors being unutilized for charitable purposes.

d)

Rs.20,00,000/-, on account of 50% of cash deposited on demonetization period.

3.

As the assessee itself has declined to submit any vouchers, Assessing Officer has no option left but to disallow expenses taking a rational view. The assessee has not even furnished any bills to justify its expenses. Therefore, considering the activities of the society and previous assessment of assessee, 20% disallowance is made to the expenses incurred by assessee. The 20% of total expenses (excluding Water Expense, Fooding Expense) of Rs. 1,96,54,158/- works out to Rs. 39,30,831/-and added back to the income of the assessee.

The addition of Rs. 39,30,831/- being 20% of total expenses is confirmed.

4 Regarding the addition of Rs 5,00,000/-, The reply of the assessee is found unsatisfactory as assessee could not justify this drastic change in application of funds among food and medicines. Assessee neither furnished any bills as discussed above and rior justified these expenses related to Food expenses. Moreover, the Food expenses have increased manifold as compared to the last year. Also, the 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,

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 of fact remains that the assessee could not pin point the debtors amounting to Rs. 1.33 Crores. Neither could the assessee explain beyond doubt when and in which year was the receipts from debtors was considered as income and submitted for taxation. The assessee failed in its onus to prove the income and taxability from the receipts from debtors. The assessee also did not furnish any documentary evidence in support of its contention that such income has been taxed already. Therefore, the AO was constrained to treat the said receipts of Rs. 1,33,91,236/- as income of the assessee of the current year and added back to income of the assessee.

The addition of Rs. 1,33,91,236/- is confirmed.

6.

On perusal of the ITR filed by the assessee, it was observed that 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 asseessee'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.

6.1

The assessee has furnished ledgers showing cash receipts. The AO took take a rational view and allow 50% of cash received and disallowed the rest 50% Cash deposits as per the provisions of the section 69A of the Income Tax Act, 1961. An addition of Rs. 20,00,000/- (out of total cash deposits of Rs. 40,00,000/-) is thus being made.

The addition of Rs. 20,00,000/- u/s 69A r.w.s. 115BBE is confirmed.”

“The Ld CIT(A) has erred in sustaining the order of the Ld AG as Ld AG has erred in law and on facts of the case in making following additions (ADHOC BASIS) to the returned income of the assesse -39.30.831/-on account of 20% of expenses 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 RELATION TO CASH SALES / RECEIPTS FROM DEBTORS

3)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as the Impugned assessment Order of Ld AO is bad in Law and facts as the receipts of debtors taken as unutilized amount for charitable purposes, instead of the fact that such receipts are realization of debtors which have arisen due to rendering of charitable services, which already forms part of income/receipts; which has already offered for taxation, and any further additions will be DOUBLE TAXATION.

4)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has grossly and seriously erred on law and facts of the case, as the source of cash deposits has been explained as "CASH SALES / RECEIPTS, or "RECOVERY OF SALES CONSIDERATION FROM DEBTORS duly accounted in books of accounts and passed through Profit and Loss Account. The question of disallowance may be with respect to Expenses, but in respect of sales consideration, certainly there cannot be any question of any disallowance. Once a particular item is offered for taxation, the same can't be added back again and if done so the same will result into double taxation.

5)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has Gossly and seriously erred on law and facts of case, by not accepting the "CASH SALES/RECEIPTS" as the profession/business of rendering medical services in charitable hospital is almost done in even in last years or can be said from the inception of business. Its' against the desired expectations of consistency, uniformity and certainty. MOREOVER, all receipts have already been included in receipts/income, which has already been offered to taxation, THUS DOUBLE ADDITIONS.

GROUNS OF APPEAL IN RELATION TO ADHOC DISALLOWANCES

6)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has erred in law and facts by disallowing the adhoc disallowances (20% of all expenses) and Fooding Expenses to the tune of 5/-Lac; without providing any justification, and without providing any adverse material

GROUNS OF APPEAL IN RELATION TO CASH DEPOSIT DURING DEMONITIZATION

7)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has grossly and seriously erred on law and facts of the case, as the books of accounts, including cash flow, cash book and other ledgers (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 dictate or directions. Suspicion, however, grave, cannot take the place of proof. The suspicion / doubt may be the starting point of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly when deeming provision is sought to be invoked.

10)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as additions made are null and void because of no correlation to corresponding material / informations submitted during assessment proceedings under of the Income Tax Act, 1961, None of the replies / submission/information has been considered by the Ld AO and kept away / brushed away the genuine claim of the assesse without assigning any reasons.

11)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as Ld AO has grossly and seriously erred on law and facts of case, by applying his mind while framing the assessment order, and opened a Pendora Box of litigation, and is antithesis to Government Policy of less litigation (Refer to Hon'ble SC in the case of DIT vs SRMB Dairy Farming P Ltd (2018) 400 ITR 9, highlighting National Litigation Policy)

Violation of Audi Altrem partier (ie Principles of Natural Justice)

12)

The Ld CIT(A) has erred in sustaining the order of the Ld AO as the Assessment order of Learned Assessing Officer is bad in Law and facts as it is prejudice to the interests of the Assesse due to lack of natural justice or violation of principles natural justice, as

a)

No show-cause notice was issued before making any of the additions to the assessed income of the assesse.

b)

None of the replies/confirmation / submissions and other material were considered while framing the assessment order.

c)

The facts as appraised in the impugned assessment order in respect to script and in respect to assesse are factually wrong, and are far away from the truth. It seems that the assessment order has been framed on "CUT & PASTE™ technology.

d)

and many more, which will be appraised in detail at the time of hearing of the case.

13)

That the appellant prays for the grant of permission to add, alter, delete or modify, any or all the grounds of appeal at any time on or before or during the time of hearing before the Hon'ble CIT(A).”

ITA No.- 5154/Del/2025 (A.Y. 2018-19)

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 relief to the society. The object of the trust is already covered by the definition of "charitable purpose" as given in section 2(15) of the Act and the trust is already registered u/s 12A."

7.

Assessee's submission in this regard has been duly considered. However the same is not acceptable. On perusal of submissions it is seen that the activities of the assessee are not of any charitable activities as mentioned in section 2(15) of the Act, whereas it is carrying out business/commercial activities. Assessee is clearly hit by the proviso to section 2(15) of the IT Act, as it is systematically exploiting its property in commercial way by rendering hospital services to special class of people who have mediclaim or other insurance plans. From the submissions filed it is seen that the assessee has entered in various agreements with Insurance companies to execute insurance claim activities. It has also received huge payments from these companies. Normally, lower class people neither have Mediclaim plans for their medical treatments nor can they afford Mediclaim premiums. However, assessee's activities are that of rendering medical services based on medical insurance based reimbursements. This activity is in violation to section 2(15) of the Act. Hence, the main object of the assessee Trust is not fulfilled. The relevant para of assessee's trust deed is reproduced as under:

"a)

To establish, develop-, maintain and grant aid in cash or in kind to schools, hospital, medical collages, nursing institutions, dispensaries, maternity homes, child welfare centers, mental homes, mental asylums and/or other similar charitable institutions in India for the benefit and use of the general public...."

It would also be relevant to mention here that mere grant of certificate u/s 12A of the Act on 14.07.1998 does not absolve the assessee to deviate against the main objects of the assessee and indulge in business/commercial activity.

8.

Further, on perusal of submissions furnished by the assessee and on careful analysis of the funds received by the assessee trust, it is very much clear that major portion of receipts earned by NIMS Hospital are through an activity in the nature of trade or business for a fees which are not in the nature of charitable activity as per proviso of section 2(15) of the I.T. Act. These receipts are mainly from 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 books of account are maintained for such business With effect from 01.04.2009 (i.e., from assessment year 2009-10 onwards), however, the advancement of any other object of general public utility" shall not qualify as a "charitable purpose" if the same involves the carrying on of any activity in the nature of trade. commerce or business, or rendering of any service in relation to any trade, commerce or business, for a consideration. This new restriction applies irrespective of the nature of use or application of the income arising from such activity. However, the rigour of this amendment has been reduced somewhat by a subsequent amendment brought in by the Finance Act, 2010 (with retrospective effect from 1-4-2009) to the effect that the said restriction shall not apply if the aggregate value of receipts from such activity during the given financial year does not exceed 20% of the total receipt of the trust or institution undertaking such activities during that previous year."

9.

Here it may be mentioned that with reference to the first proviso to section 2(15) of the IT Act, object/activities need not be business itself, but it being "in the nature of business, trade or commerce" is sufficient for disqualification. Further, "rendering any service in relation to trade, commerce or business of parties from whom fees or consideration in lieu of service rendered is received is sufficient for disqualification. In this case during the year under consideration the assessee trust has received net hospital receipts of Rs.2,02,03,016/- which are more than 20% of gross receipts of Rs. 2,03,93,377/-received during F.Y.2017-18.

10.

Here, it would be important to mention that in assessee's own case for A.Y. 2016-17 exemption u/s 11 of the Act is disallowed and for A.Y.2017-18 various expenses are disallowed for the want of supporting evidences like vouchers etc. Likewise, following the precedent assessee's exemption u/s 11 is disallowed and expenses are disallowed for the year under consideration.

11.

In view of the above facts and circumstances, assessee's gross hospital receipts amounting to Rs.2,30,03,929/- are assessed under the head of income from business & profession and taxed accordingly

B. Disallowance of Rs. (16,27,400/- u/s 40a(ia) of the Act.

12.

Vide notice u/s 142(1) of the Act dated 21.01.2021 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 pald 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 provisions of section 40(a)(ia) of the Act, 30% of the said expenses amounting to Rs.16,27,400/- are disallowed and added to the total income.

c. Disallwoance of exemption u/s 11(1)(a) of the Act.

14.

As discussed in above paras and since the assessee is engaged in the hospital business, amount accumulated or set apart for application to charitable purpose or religious purpose to the extent it does not exceed 15% of income derived from property held in trust wholly or in part only for such purpose u/s.11(1)(a) amounting to Rs.20,63,609/- is brought under taxation. Accordingly, accumulated/set apart amount of Rs.20,63,609/- is added to the total income of the assessee.

15.

In view of the facts described in the order, the income of the assessee is recomputed as under:

“ The total assessed income of Rs. 82,53,893/- only is confirmed 3. The appeal filed by the assessee is dismissed.”

“1)

The Ld CIT(A) has erred in sustaining the order of Ld AO as Ld AO has erred in laws and on facts of the case in making additions to the tune of Rs. 42.39,845/-Rs. 548836/- & Rs. 1627400/- u/s 40(a)(ia) & Rs. 20,63.609/-disallowing exemption u/s 11(1)(a) inspite the fact that whole of the excess of receipts over expenses has already treated as income) without any evidence/reasons to the returned income of the assesse and 40,14,048/-considering the trust's charitable activity as business activity, due to which the impugned 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 assesse, as the Ld AO has in its mind to make additions to the returned income of the assesse.

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 has made a serious error in making the additions by violating the principles of audialterm pattern i.e. Principles of natural justice, because  The basis of additions and reasoning thereof has never been communicated to the assesse in the form of show cause notice  In facts no Show-cause Notice has been given before finalization of assessment.

 No draft assessment order has been provided (Mandatory Requirement) under Faceless Assessment Scheme  No opportunity of personal hearing has been provided

6)

that the appellant prays for the grant of permissions to add, alter, delete, modify, any or all of ground of appeal at any time on or before or during the time of hearing before the Hon'ble CIT(A)”

“Date of Assessment Order - 08-03-2021 Date of CIT(A) Order - 08-07-2025 Detail of Additions Made

SN	Particualrs	Amount
I	By disallowing exemption u/s 11 and taxing the Income over Expenditure as Business Profits	40,14,408
II	30% of Rs 18,29,455/- Expenses on Repair & Maintenance [u/s 40(a)(ia) for non- submission of TDS Returns/payment Proof	5,48,836
III	30% of Rs 54,24,666/ [Testing Expenses Rs 4,09,111/-Professional Charges Rs 50,15,555/ [u/s 40(a)(ia) for non-submission of TDS Returns and proof of payment	16,27,400
IV	15% of income derived from Trust property as denied the trust for AY 2018-19-Plesae note its double taxation, as when whole of the excess of income over expenses is added now further adding 15% is double taxation	20,63,609/-
	Total Assessed Income	82,53,893/-

3(i)- By invoking Proviso to S.2(15) AO Concluded that the Society is doing Trade/Business and Relying Asstt Order for AY 2016-17, where in Similar view was taken [Refer Asstt Para-10 at Order Page 41

BUT failed to take into consideration Ld CIT(A) Order dt 28-03-2019, where in appeal of the appellant was allowed on same ground stating the appellant is not covered in Proviso to u/s 2(15)

3(ii) & (iii)- Disallowance @ 30% u/s 40(a)(ia) for non- submission of TDS Returns and proof of payment

Submitted all the ledgers evidencing the TDS has been deducted -Submitted Bank Statement evidencing TDS has been deposited

= All TDS Retruns / 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

Balance Excess of Receipts over payments Rs. 20,63,609

15% of Rs. 2,03,93,377 Rs. 30,59,007

Lower of Above allowed as accumulated profits set apart Rs. 20,63,609/-

We hope your good-self after going through the above shall take an egalitarian (justified) view in the matter and our submission shall receive your imprimatur (approval). On basis of above, assessee, prays for total lancination and deletion of additions / penalty and quashing of order passed by Ld. AO. We are confident that your good-self shall consider all the aforesaid arguments and written submissions place on record in the manner of rule of law.”

“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.”

“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 Act. In the circumstances the AO has not allowed the benefit of exemption u/s 11 of the Act.

6.

During the appellate proceedings, it has been stated by the appellant that the hospital being run by the appellant has been situated in the Industrial belt of Faridabad and therefore, most of the patients have been covered under ESIC or other medical claims. However, the medical treatment has been given to the general public, the receipts from ESIC/ TPA are only the source of payments. It was argued that there is no bar that treatment given to the patients covered under ESIC/TPA is not covered under the charitable activities u/s 2(15) of the Act. It was explained that the case of the appellant is covered under the main limb of the provision of section 2(15) of the Act under head "Medical Relief" and proviso to section 2(15) was not applicable to the facts of the present case. The detailed submission of the Ld. AR has been reproduced as above.

7.

The facts of the case along with the material on record along with the order passed by the AO have been gone through. There is no dispute to the facts of the case that the appellant during the year has been running a Hospital in the name of "National Institute of Medical Sciences' at Faridabad. The appellant is registered u/s 12AA of the Act vide order dated 01.04.1998. The AO has observed that out of total receipts, the majority receipts are from the patients who have availed benefit under ESIC/ TPA for the payment to the Hospital for the treatment taken. On the basis of these facts, the AD has drawn the conclusion that the appellant has undertaken its activities of providing medical services to a limited group of patients and not to the general public. In the facts of the case it is noted that such inference drawn by AO is not justified. The availing of benefit under ESIC/TPA is only a mode of payment by the patients for the treatment taken from the hospital being run by appellant. There is no material on record to show that the appellant has discriminated in given admission only to those patients who have been registered under ESIC or other medical insurance schemes. The appellant is registered u/s 12AA of the Act and has carried out the similar activities which are mentioned in its Trust deed (aims and objects) and for which registration u/s 12AA has-been granted. The case of the appellant has 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)