M/s. Chogame Hotels Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(1), Surat

CO 24/AHD/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9511 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 21-05-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 04-02-2011
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Deemed to accrue or arise in india
• Section: 147; 69

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD 0 00 0 0 00 0 , , , , !'# !$ !'# !$ !'# !$ !'# !$0 00 0! !! !0 00 0 %$ %$ %$ %$, , , , &' ( &' ( &' ( &' ( & & & & BEFORE SHRI G.C. GUPTA, VICE-PRESIDENT AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA/CO NO. ASSESSMENT YEAR APPELLANT RESPONDENT ITA NO. 3419/A/2010 2003-04 ITO, WARD-1(1), SURAT M/S CHOGAME HOTELS PVT. LTD. (ROYAL PARK CLUB RESORT) 102, DUMAS MAGDALLA ROAD, SURAT. PAN: AAACC9547M ITA NO. 3420/A/2010 2004-05 REVENUE ASSESSEE CO NO. 24/A/2011 2003-04 ASSESSEE REVENUE CO NO. 25/A/2011 2004-05 ASSESSEE REVENUE REVENUE BY : SHRI P.L. KUREEL, SR. DR ASSESSEE(S) BY : NONE $') * +'/ // / DATE OF HEARING : 21/05/2014 -./ * +' / DATE OF PRONOUNCEMENT : 30/05/2014 &0 &0 &0 &0/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE APPEALS FILED BY THE REVENUE AND CROS S-OBJECTIONS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS O F THE COMMISSIONER OF INCOME TAX (APPEALS)-I, SURAT PASSED IN ASSESSMENT YEAR 2003-04 AND 2004- 05, BOTH DATED 23.09.2010. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE IN ASSESSMENT YEAR 2003-04 READS AS UNDER: ITA NOS. 3419 & 3420/AHD/2010 WITH CO NOS. 24 & 25/AHD/2011 M/S CHOGAME HOTELS PVT. LTD. FOR A.Y. 2003-04 & 2004-05 - 2 - ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S. 69 INSPITE OF THE FACT THAT THE DIFFERENTIAL AMOUNT WAS NOT SHOWN IN THE P & L ACCOUNT AND THE ASSESSEE DID NOT PRODUCE BOOKS OF A CCOUNTS BEFORE THE A.O. 3. WE HAVE HEARD THE DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILA BLE ON RECORD. IN THE ASSESSMENT YEAR 2003-04, ASSESSMENT WAS REOPENED U/ S. 147 OF THE ACT AND THEREAFTER, ADDITION OF RS 12,17,529/- WAS MADE U/S. 147 OF THE ACT ON THE GROUND THAT ON TRANSFER OF RS 22,59,037/- FROM RESERVES AND SURPLUS TO SECURED LOAN ACCOUNT, THE LOAN ACCOUNT WAS ENHANCED BY RS 10,41,508/- ONLY AND THEREFORE, IN THE OPINION OF THE ASSESSING OFFICER, THE AMOUNT OF RS 12,17,529/- WAS NOT RECORDED IN THE ACCOUNTS AND CO NSEQUENTLY THE SAME WAS DEEMED INCOME U/S. 69 OF THE ACT. 4. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) DELETED THE ABOVE ADDITION BY OBSERVING AS UNDER: 5.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSIONS MADE BY THE A.R. AND ALSO THE DOCUMENTS PRODUCED BE FORE ME. FOR SAKE OF CLARITY THE RELEVANT PART OF THE AUDITOR'S NOTE ON WHICH THE ADDITION HAS BEEN RELIED UPON IS REPRODUCED AS UNDE R: 'DURING THE YEAR UNDER CONSIDERATION THE DEVELOPMEN T CREDIT BANK BALANCE HAS BEEN TAKEN INTO CONSIDERATION ON R ECEIPT OF NOTICE FROM THE SAID BANK TO THE TUNE OF RS.22,59,0 37/- BY PASSING ENTRY DIRECTLY INTO RESERVE & SURPLUS ACCOU NT AS NO DATA IS AVAILABLE BUT WHICH IS NOT IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRACTICES.' IT IS QUITE OBVIOUS FROM THE ABOVE COMMENTS OF AUDI TOR THAT SOME OF THE DATE REQUIRED BY THE AUDITOR AT THAT TIME WAS NOT AVAILABLE TO HIM. HENCE SUCH COMMENTS CANNOT BE FUL LY RELIED UPON FOR TAKING ANY SUCH ACTION AS HAS BEEN TAKEN BY THE A.O . I AGREE WITH THE A.R.'S CALCULATION REGARDING LOAN AND INTEREST COMP ONENT. THE SUBMISSION OF THE A.R. IS IN AGREEMENT WITH THE BAL ANCE SHEET FILED ALONG WITH THE RETURN. FURTHER, NONE OF THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE APPELLANT AS SUBMITTED BY THE A.R. I NDICATES TOWARDS MAKING ANY NEW INVESTMENT DURING THE YEAR. THERE IS NOTHING TO SHOW IN THE AUDITOR'S REPORT ALSO WHICH INDICATES THAT B Y THE 'SO CALLED ENTRY' ITA NOS. 3419 & 3420/AHD/2010 WITH CO NOS. 24 & 25/AHD/2011 M/S CHOGAME HOTELS PVT. LTD. FOR A.Y. 2003-04 & 2004-05 - 3 - ANY NEW INVESTMENT HAS COME INTO EXISTENCE. HENCE I N VIEW OF THE ABOVE FACTS, THE ADDITION MADE U/S.69 OF THE ACT IS HEREBY DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 5. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. 7. WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE MADE INVESTMENT OF RS 12,17,529/-, THE SOU RCE OF WHICH WAS NOT EXPLAINED. WE FIND NO ERROR IN THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ADDITION OF RS 12,17,529/- M ADE U/S. 69 OF THE ACT IS UNSUSTAINABLE. WE, THEREFORE, CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 8. IN VIEW OF OUR ABOVE DECISION, THE CROSS-OBJECT ION OF THE ASSESSEE IN ASSESSMENT YEAR 2003-04 HAS BECOME MERE LY ACADEMIC IN NATURE AND HENCE REQUIRES NO SEPARATE ADJUDICATION BY US. 9. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 2003-04 AS WELL AS THE CROSS-OBJECTION OF THE ASSES SEE, BOTH ARE DISMISSED. 10. IN THE ASSESSMENT YEAR 2004-05, THE SOLE GROUN D OF APPEAL TAKEN BY THE REVENUE READS AS UNDER: ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S. 41(1) EVEN AS THE ASSESSEE DID NOT SUBMIT ITS BOOKS OF ACCOUNT TO THE A.O. FOR VERIFICATION. FURTHER ASSESSEES CLAIM THAT EN TIRE LOAN WAS SQUARED OFF IS CONTRADICTED AS IN THE RETURN FILED FOR AY 2008-09 THE WHOLE RELEVANT COLUMNS OF CAPITAL, RESERVE AND SURPLUS, DEBTORS, CREDITORS, SECURED LOANS IN PROFIT AND LOS S ACCOUNT WERE SHOWN AS NIL. ITA NOS. 3419 & 3420/AHD/2010 WITH CO NOS. 24 & 25/AHD/2011 M/S CHOGAME HOTELS PVT. LTD. FOR A.Y. 2003-04 & 2004-05 - 4 - 11. WE HAVE HEARD THE DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILA BLE ON RECORD. IN THE INSTANT CASE, A SUM OF RS 21,50,000/- WAS ADDED BY THE ASSESSING OFFICER IN THE REASSESSMENT ORDER PASSED U/S. 147 OF THE ACT B Y OBSERVING AS UNDER: 3. THE ASSESSEE COMPANY IS IN HOTEL BUSINESS DURING THE YEAR UNDER CONSIDERATION. ON GOING THROUGH THE OFFICE RE CORDS, IT IS SEEN THAT THE ASSESSEE COMPANY HAD TRANSFERRED A SUM OF RS. 22,59,037/- FROM RESERVES AND SURPLUS TO SECURED LOAN ACCOUNT, DURING THE ACCOUNTING PERIOD RELEVANT TO A.Y. 2003-04, CONSEQU ENT TO THE DEMAND RAISED BY THE DEVELOPMENT CREDIT BANK. IN THE AUDIT REPORT FILED BY THE ASSESSEE COMPANY ALONG WITH ITS RETURN INCOME, THE AUDITOR HAS, IN THE NOTES TO ACCOUNT, REPORTED THAT IN TERMS WITH THE C ONSENT TERMS EXECUTED BY THE COMPANY WITH THE BANK, THE AMOUNT O UTSTANDING AS ON 31.03.04 IS RS. 1,09,037/-. THE SAME IS EVIDENT FROM THE BALANCE SHEET AS ON 31.03.2004, FILED WITH THE RETURN OF IN COME. IT IS ALSO EVIDENT FROM THE BALANCE SHEET THAT THE AMOUNT OUTS TANDING AGAINST THE SECURED LOAN FROM THE DEVELOPMENT CREDIT BANK, AS ON 01.04.2003 WAS RS.22 V 59,037/-. IT MEANS, THAT LOAN TO THE EXTENT OF RS. 21,5.0,000/- (RS. 22,59,037/- - RS. 1,09,037/-) HAS BEEN WAIVED BY THE SAID BANK. THUS, THERE IS A CESSATION OF LIABIL ITY OF THE ASSESSEE TO THE TUNE OF RS.21,50,000/-. ACCORDINGLY, THE ASSESS EE WAS ASKED TO SHOW CAUSE VIDE LETTER NO. ITO/L(L)/SRT/SHOW CAUSE/ CHPL-04- 05/2009-10, DTD. 23.09.2009 AS TO WHY THIS DIFFEREN TIAL AMOUNT OF RS. 21,50,000/- SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY PREFERRED NOT TO RESP OND TO THIS SHOW CAUSE NOTICE. IT IS HENCE CLEAR THAT THE ASSES SEE HAS NOTHING TO SAY IN ITS DEFENSE IN THE CIRCUMSTANCES, THIS AMOUN T OF RS. 21,50,000/- IS ADDED TO THE TOTAL INCOME OF THE ASS ESSEE COMPANY U/S. 41 (1) OF THE ACT. 12. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE ADDITION BY OBSERVING AS UNDER: 6.2. GROUND NO-2: IN THIS GROUND OF APPEAL, THE AP PELLANT HAS REQUESTED TO DELETE THE ADDITION OF RS.21,50,000/- MADE U/S.41(1) OF THE ACT. I HAVE GONE THROUGH THE ASSESSMENT ORDER A ND THE SUBMISSIONS OF THE APPELLANT. THE PROVISIONS OF THE SECTION 41(1) STARTS WITH ' WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSM ENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILI TIES INCURRED BY THE ASSESSES ......'. IT IS QUITE CLEAR THAT BEFORE INVOKING SECTION 41(1 ) IT MUST EXAMINED WHETHER THE AMOUNT BEING CONSIDERED FOR ADDITION ON ACCOUNT OF ITA NOS. 3419 & 3420/AHD/2010 WITH CO NOS. 24 & 25/AHD/2011 M/S CHOGAME HOTELS PVT. LTD. FOR A.Y. 2003-04 & 2004-05 - 5 - CESSATION OF LIABILITY HAVE BEEN ALLOWED OR DEDUCTE D OR NOT IN EARLIER YEARS AS LOSS, EXPENDITURE OR TRADING LIABILITY. HE RE IN THE PRESENT CASE IT APPEARS FROM THE FACTS THAT THE APPELLANT WAS EX PECTING A WAIVER OF THE AMOUNT OF LOAN FROM THE BANK AND ACCORDINGLY WA S REDUCED IN THE NEXT YEAR'S BALANCE SHEET. THIS LOAN WAS NEITHER CLAIMED AS ANY EXPENDITURE NOR LOSS BY THE APPELLANT NOR WAS THIS ALLOWED AS DEDUCTION IN ANY ASSESSMENT YEAR BY THE REVENUE. HENCE THE PRIMARY CONDITION TO INVOKE THE SECTION 41(1) IS NO T FULFILLED IN THIS CASE. AT THE MOST THE INTEREST PART OF THE LOANS WA IVED WHICH MIGHT HAVE BEEN CLAIMED AND ALLOWED AS EXPENDITURE IN EAR LIER YEARS CAN BE TAXED U/S 41(1). MOREOVER, THIS AMOUNT WHICH WAS EX PECTED TO BE WAIVED BY THE BANK WAS NEVER WAVED AND WAS FULLY PA ID IN THE A.Y. 2004-05. NOT ONLY THAT, THE ENTIRE LOAN HAS BEEN SQ UARED OFF DURING THE A.Y. 2008-09. THE COPY OF THE STATEMENT FROM TH E BANK AND ALSO A LETTER FROM BANK DATED 10.04.2010 (ANNEX.-III TO AP PELLANT'S LETTER DATED 15.09.2010) HAVE BEEN PRODUCED BEFORE ME IN SUPPORT OF ITS CLAIM . HENCE IN VIEW OF THE ABOVE FACTS, THE QUESTION OF INVOKING OF SEC.41 (1) DOES NOT ARISE AT ALL. TH E A.O. HAS WRONGLY MADE ADDITION BY INVOKING THE PROVISIONS OF SECTION 41(1). THEREFORE THE ADDITION MADE ON THIS ACCOUNT IS DELETED AND TH IS GROUND OF APPEAL IS ALLOWED. 13. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 14. NONE APPEARED ON BEHALF OF THE ASSESSEE. 15. WE FIND THAT THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 IS ALSO IN APPEAL BEFORE US. IN THE REASSE SSMENT ORDER PASSED U/S. 147 ON 10.11.2009 FOR THAT ASSESSMENT YEAR, THE ASS ESSING OFFICER OBSERVED THAT THE ASSESSEE HAS TRANSFERRED RS 22,59,037/- FR OM RESERVE AND SURPLUS TO SECURED LOAN ACCOUNT OF DEVELOPMENT CREDIT BANK. 16. FURTHER, THE ASSESSING OFFICER OBSERVED THAT I N THE YEAR UNDER CONSIDERATION, OUT OF AFORESAID AMOUNT OF RS 22,59, 037/-, RS 21,50,000/- WAS WRITTEN OFF BY THE ASSESSEE. IN THE ABOVE FACT S, WE FIND NO ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I N OBSERVING THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSING OFF ICER TO SHOW THAT ANY PART OF RS 21,50,000/- WRITTEN OFF BY THE ASSESSEE DURING THE YEAR UNDER ITA NOS. 3419 & 3420/AHD/2010 WITH CO NOS. 24 & 25/AHD/2011 M/S CHOGAME HOTELS PVT. LTD. FOR A.Y. 2003-04 & 2004-05 - 6 - CONSIDERATION WAS ALLOWED AS A DEDUCTION OR ALLOWAN CE TO THE ASSESSEE IN COMPUTING ITS TAXABLE INCOME OF ANY EARLIER ASSESSM ENT YEAR. 17. FURTHER, THE DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT BRING ANY MATERIAL BEFORE US TO SHOW THAT DEDUCTION IN RE SPECT OF AFORESAID AMOUNT OF RS 21,50,000/- OR ANY PART THEREOF WAS AL LOWED TO THE ASSESSEE IN COMPUTING ITS TAXABLE INCOME OF ANY EARLIER ASSESSM ENT YEAR OR YEARS. THUS, WE FIND THAT THE CONDITION PRECEDENT FOR INVOKING T HE PROVISIONS OF SECTION 41(1) WAS NOT SATISFIED IN THE INSTANT CASE. THERE FORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) IN DELETING THE ADDITION OF RS 21,50,000/-. IT IS CONFIRMED. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 18. IN VIEW OF OUR ABOVE DECISION, THE CROSS-OBJEC TION FILED BY THE ASSESSEE HAS BECOME MERELY ACADEMIC IN NATURE AND R EQUIRES NO SEPARATE ADJUDICATION BY US. 19. IN THE RESULT, THE APPEAL OF THE REVENUE FOR A SSESSMENT YEAR 2004-05 AS WELL AS THE CROSS-OBJECTION OF THE ASSES SEE, BOTH ARE DISMISSED. 20. IN THE RESULT, THE REVENUES APPEALS FOR ASSES SMENT YEAR 2003- 04 AND 2004-05 AS WELL AS CROSS-OBJECTIONS OF THE A SSESSEE, ALL ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 30 TH OF MAY, 2014 AT AHMEDABAD. SD/- SD/- (G.C. GUPTA) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 30/05/2014 GHANSHYAM MAURYA, SR. P.S.