Ramesh Chand Goel, New Delhi V. ACIT, Circle-63(1), New Delhi

CO 225/DEL/2018

AI Insights

The case revolves around a dispute concerning the estimation of kitchen sales by the Assessing Officer based on a percentage of room sales, which was contested by the assessee, Shri Ramesh Chand Goel. The survey conducted in 2016 led to the estimation of kitchen sales for the Assessment Year 2014-15, which the assessee argued was illogical and without basis as it was based on data from two years post the relevant financial year. The CIT(A) had partially accepted the addition but reduced the estimated profit to 5% on the remaining sales after accounting for the sales already reported by the assessee. The Tribunal, however, found the entire addition to be without justifiable basis and directed its deletion.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300918 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 26-12-2018
• Laws Referred To: Delhi Value Added Tax, 2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘E’ BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. ASTHA CHANDRA, JUDICIAL MEMBER CO No. 225/DEL/2018 ITA No. 6128/DEL/2018 [A.Y. 2014-15] Shri Ramesh Chand Goel Vs. The A.C.I.T 7787/-88, Ram Nagar, Pahar Ganj Circle - 63(1) New Delhi New Delhi PAN: AETPG 0967 R (Applicant) (Respondent) Assessee By : Shri T.R. Talwar, CA Department By : Shri M.K. Pandey, Sr. DR Date of Hearing : 03.07.2023 Date of Pronouncement : 07.07.2023 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This cross objection by the assessee is in relation to the appeal of the Revenue in ITA No. 6128/DEL/2018 pertaining to Assessment Year 2014-15. This Tribunal, vide order dated 07.02.2022 has dismissed the appeal of the Revenue for want of tax effect. 2 2. Grounds of cross objections read as under: “On the facts and in the circumstances of the case, the ld. CIT(A) has erred in: 1. In accepting kitchen sales at Rs. 78,50,227/- as worked out by the Assessing Officer on the basis of percentage (%) of room rent as prevalent in the F.Y. 2016-17 when the F.Y. 2013-14 was the first year of kitchen sales when a turnover of Rs. 40,73,162/- was achieved and accepted by the Sales Tax Department. 2. In estimating profit @ 5% on the balance assumed kitchen sale of Rs. 37,77,065/- [78,50,227/- (-) 40,73,162/-] when no such additional kitchen sales was done by the assessee.” 3. Both the grounds are inter-related and the underlying facts are that survey was conducted on 01.09.2016 at the premises of the assessee wherein it was found that the assessee was running restaurants in three hotels, namely, M/s Hotel Baba Deluxe, M/s Hotel Baba Inn and M/s Hotel Krishna. Certain documents were impounded alongwith computer, hard disk and mobile phones and on examination of the same, it was found that one Shri Nitin Goel was reporting daily kitchen room sales on the basis of which, chart was prepared and it was noticed that kitchen sale over room sale is approximately 30%. 3 4. Applying this percentage over room sales of three hotels for the year under consideration, the Assessing Officer computed kitchen sales at Rs. 78,50,227/- and added back the same to the income of the assessee. 5. When the addition was agitated before the ld. CIT(A), the ld. CIT(A) was of the opinion that the assessee has disclosed sales in its return of income. Therefore, estimation of 30% of food sales over room rent cannot be applied as the assessee has also disclosed gross receipts on sale of food items amounting to Rs. 40,73,162/- in its Profit and Loss Account. 6. Deducting this amount from the total addition of Rs. 78,50,227/-, the ld. CIT(A) was of the opinion that the estimate of net profit of 5% on the remaining estimated sales of Rs. 37,77,065/- only should be added and, accordingly, restricted the addition to the extent of Rs. 1,88,853/-. 7. Before us, the ld. counsel for the assessee drew our attention to the Certificate of Registration under Delhi Value Added Tax, 2004 and pointed out that the assessee was allowed to make in-house food sales 4 from 04.02.2013 and food supply accepted by the Sales Tax Department was Rs. 40,73,162/-, which is gross receipts shown by the assessee in its return of income filed with the department. 8. It is the say of the ld. counsel for the assessee that the entire estimation has been made on the basis of survey operation conducted in the month of September 2016 and on the basis of the same, the Assessing Officer has estimated the profits of the year under consideration, which is prior to two years from the date of survey and, therefore, is illogical and without any basis. The ld. CIT(A) further erred in estimating the net profit @ 5% on the estimated sales and the sales shown by the assessee in its return of income, which is also illogical and baseless. 9. The ld. DR strongly supported the findings of the Assessing Officer. 10. We have given thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee has shown gross sales on food supply at Rs. 40,73,162/-, which has been assessed as such by the department of Value Added Tax, Government of NCT of 5 Delhi. It is also not in dispute that the financial statements of the assessee are audited by the Chartered Accountant. The Assessing Officer has not pointed out any error or infirmity or defect in the financial accounts of the assessee. The entire addition has been made on the basis of survey operation, which was conducted more than two years after close of the accounting year under consideration. 11. In our considered view, the entire addition is without any justifiable basis. We, therefore, direct the Assessing Officer to delete the impugned addition sustained by the ld. CIT(A). 12. In the result the cross objection of the assessee in CO No. 225/DEL/2018 is allowed. The order is pronounced in the open court on 07.07.2023. Sd/- Sd/- [ASTHA CHANDRA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07 th JULY, 2023. VL/ 6 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order