ITA No. 61/Nag/2016. IN INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. No. 61/PAT/2016. Assessment Year : 2010-11. Dr. Kavita Barnwal, Asstt. Commissioner of Income-tax, Munger. Vs. Circle-2, Begusarai. Appellant. Respondent. Appellant by : S/Shri S.K. Rastogi, Rakesh Kumar & Ashish Agrawal. Respondent by : Shri S.K. Paul. Date of Hearing : 03 -08-2016 Date of Pronouncement : 27th Sept., 2016 ORDER This appeal by assessee is directed against order of learned CIT(Appeals) dated 18-04-2016 and pertains to assessment year 2010-11. grounds of appeal read as under : 1. For that Appellate order dated 18-04-2016 passed by learned CIT(Appeals), Bhagalpur in appeal No.16/A-1/B/20213-14 is not based on correct appreciation of facts of case and materials on record. 2. For that assessing officer added Rs.10,14,753 on ground of non production of purchase invoices for said amount whereas learned CIT(A) upheld addition on different grounds. 3. For ha there was no material or evidence on record that Pharma companies had provided free samples of medicine for Rs.10,14,753/- to appellant and such assumption of learned CIT(A) is not tenable. 4. For that reason assigned by appellant for not producing purchase invoices for Rs.10,14,753, in facts and circumstances of case, should have been accepted. 2 ITA No. 61/Nag/2016. 5. For that in case of Trading account reasonable Gross profit rate may be estimated in case of non production of some purchase invoices. 6. For that learned CIT(A) did not consider fact that samples of medicines are NOT FOR SALES which is normal presumption. 7. For that learned CIT(A) is not justified in not accepting submission of appellant that sec. 44 AD is indicative of net profit rate applicable by Department. 8. For that learned CIT(A) has erred in not accepting submission of appellant that addition of Rs.10,14,753 raised G.P. rate to 54.25% which is unreal and unimaginable. 9. For that in facts and circumstances of case and material and evidences of case and materials and evidences on record confirmation of addition of Rs.20,14,753 as income of appellant is unjustified and uncalled for. 2. Brief facts of case are that assessee is Gynecologist deriving income from profession as well as sale of medicines. In assessment order while making impugned addition AO held as under : assessee produced audit report in 3CB & 3CD for period ended on 31.03.2010 which stated that assessee maintained cash book, ledger etc. audit report showed net profit/turnover ration 36.65%. During course of assessment proceedings, it was observed from P/L account that assessee had purchased medicines worth Rs.22,22,418/- during this year. In this regard, assessee was asked to produce complete bills and vouchers of medicines purchased. In response assessee has produced bills of Rs.12,07,665/- only which could be examined and verified. Rest bills of Rs.10,14,753/- has not been produced by assessee. Hence, it is concluded that purchases of above amount are inflated and total amount is being disallowed. same is added back to total income of assessee. 3. Before learned CIT(Appeals) assessee submitted as under : During relevant previous year appellant made cash purchases of medicines for Rs.22,22,418/- for which purchase invoice were received. In course of assessment hearing in year 2013 appellant could produce purchase memos for Rs.12,07,655/- and could not produce cash memos of purchases for Rs.101475/- as these were misplaced and not 3 ITA No. 61/Nag/2016. traceable which fact was stated by appellant before learned AO on 14.03.2013. sellers have expressed their inability to give certificates to this affect as sales were cash 6 years back. Provision of sec. 44AD expressed department s view that in case of retail sales net profit should be 8% of sales. In view of this provision addition of Rs.10,14,753/- raised not profit at 54.25% which is not warranted. However, learned CIT(Appeals) confirmed AO s action by holding as under : After considering AO s finding and submission of appellant, I find that AO had added Rs.10,14,753/- pertaining to medicine purchases for which purchase bills could not be furnished by appellant at time of assessment proceedings. appellant had shown total medicines purchases of Rs.22,22,418/- during year and had produced bills of purchases of Rs.12,07,665/-. At time of appellate proceedings, A.R. of appellant retreated same position that bills for purchase of Rs.10,14,753/- was not traceable and seller is not giving any certificate. AR of appellant also produced copy of ledger account which indicate that all purchase of medicines were in cash. purchases of medicine of Rs.1014753/- remains unverifiable. Considering market practice of pharma companies providing free samples of medicines to Doctors, absence of purchase bills for medicines raises presumption against appellant as regard sale of such Doctors sample medicines. AR of appellant has not been able to produce any evidence pertaining to purchase of medicines worth Rs.10,14,753/- to rebut presumption of sale of free medicine samples. AR s contention regarding 8% estimate is not tenable as there nis specific findings of unverified purchases. Therefore, I have no reason to disagree with order of AO and hence addition of Rs.10,14,753/- is hereby confirmed. 4. Against above order, assessee is in appeal before ITAT. 5. I have heard both counsel and perused records. I find that assessee is Gynecologist and deals in gynecology as well as engaged in business of medicine sales. AO has made addition by holding that Rs.10,14,753/- worth of medicine purchases are not supported by proper 4 ITA No. 61/Nag/2016. purchase vouchers. Hence AO has held that purchases are inflated and he has disallowed amount of such purchases. 6. CIT(Appeals) while affirming AO s action has held that assessee being Doctor is receiving free samples and she might have sold those samples. I find that grounds for disallowance taken by AO as well as learned CIT(Appeals) are not at all sustainable. AO has not doubted sales. net profit turnover ratio of assessee as per books is 36.65%. After making proposed addition of AO it will be 54.25% which is correctly labeled as unreal and unimaginable by assessee. Hence disallowance of purchases dehorse AO s any comment upon profitability shown by assessee for making sales which has been accepted, is not at all sustainable. 7. As regards learned CIT(Appeals) observation that assessee might have sold samples received free of cost is again based on surmises and conjecture. Without any cogent material on record, guess work alone cannot be reason for making this allowance. Such presumption cannot make any valid basis for disallowance. Moreover this is surmise of learned CIT(Appeals) without any finding by AO in this regard. In background of aforesaid discussion I set aside orders of authorities below and delete disallowance. 8. In result, this appeal filed by assessee stands allowed. Order pronounced in Open Court on this 27th day of Sept., 2016. Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Dated: 27th Sept., 2016. 5 ITA No. 61/Nag/2016. Copy forwarded to : 1. Dr. Kavita Barnwal, Samarpan Hospital & Research Center, Basudeopur, Madhopul, Munger. 2. A.C.I.T., Circle-2, Begusarai. 3. C.I.T.- Patna. 4. CIT(Appeals)- , Patna. 5. D.R., ITAT, Patna. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Patna Bench, Patna. Wakode. Kavita Barnwal v. Asstt. Commissioner of Income-tax, Circle-2, Begusarai