ACIT 1(3), MUMBAI V. PREMIER LEISURE P. LTD ( FORMERLY KNOWN AS WILFRED LEISURE INDIA P. LTD), MUMBAI

ITA 1435/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2236 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Additional evidence; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI T.R. SOOD, (AM) ITA NO.1435/MUM/2009 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX -1(3) ROOM NO.540/564, 5 TH FLOOR AAYAKAR BHAVAN, NEW MARINE LINES M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. M/S. PREMIER LEISURE PVT. LTD. (FORMERLY KNOWN AS WILFRED LEISURE INDIA PVT. LTD.) UNIVERSAL BUSINESS AND CORPORATE SERVICE CENTRE 3/11, KOTAK KUNJ 36 CHOWPATTY ROAD MUMBAI-400 007. ..( RESPONDENT ) P.A. NO. (AAACW 0044 M) APPELLANT BY : SHRI SUMEET KUMAR RESPONDENT BY : SHRI PR AKASH K. JOTWANI O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 5.12.2008 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN RUNNING ENTERTAINMENT CENTERS WHICH ENTAILE D OPERATING ITA NO.1435/M/09 A.Y:05-06 2 ELECTRONIC AMUSEMENT/SLOT MACHINES AT GOA. RETURN WAS FI LED DECLARING TOTAL INCOME OF RS.1,02,02,710/-. DURING TH E COURSE OF ASSESSMENT PROCEEDING IT WAS OBSERVED BY THE AO THAT THE A SSESSEE COMPANY HAS SHOWN GROSS RECEIPTS OF RS.37,91,00,310/- AND OUT OF THIS, THE ASSESSEE COMPANY HAS CLAIMED EXPENSES OF RS.33,82,20,620/- AS PAID OUTS AND SHOWN NET RECEIPTS O F RS.4,08,79,690/-. THE ASSESSEE WAS ASKED TO FILE THE DET AILS WITH RESPECT TO RECEIPTS, EXPENSES CLAIMED INCLUDING DOCUMENTARY EVIDENCE OF THE PRIZES AND PAID OUTS, GIVEN, MACHINE WISE ALONG WITH COMBINATIONS FOR WHICH SUCH PAID OUTS WERE GIVEN. THE ASSESSEE WAS ALSO REQUIRED TO FURNISH INDEPENDENT AND VERIFIABLE E VIDENCE TO SUPPORT THE CLAIM OF PAID OUTS OF RS.33,82,20,620/- AND THE DE TAILS OF MACHINES, MANAGED BY THE ASSESSEE. IN RESPONSE, THE ASSESSEE VIDE HIS LETTER DATED 29.11.2007 REITERATED ITS SUBMISSION M ADE IN EARLIER YEAR I.E. ASSESSMENT YEAR 2004-05 AND HAS ALSO SOUGHT REFE RENCE TO THE SAME STATING THAT SIMILAR CONTROL EXIST IN THIS YEAR ALSO AND ACCORDINGLY NO DISALLOWANCE MAY BE MADE. HOWEVER, THE A O WHILE OBSERVING THAT THE ASSESSEE HAS NOT PRODUCED ANY SUPPORTING EVIDENCE IN SUPPORT OF PAID OUTS OF RS.33,82,20,620/- IN RESPECT OF ENTERTAINMENT ACTIVITY, DISALLOWED AN AMOUNT OF RS.33, 82,206/- BEING 1% OF PAID OUTS OF RS.33,82,20,620/- AND ADDED TO THE INCOME OF THE ASSESSEE. THE AO AFTER MAKING SOME OTHER DISALLOWANCES COM PLETED ITA NO.1435/M/09 A.Y:05-06 3 THE ASSESSMENT AT AN INCOME OF RS.1,43,82,820/- VIDE ORDE R DATED 4.12.2007 PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961( THE ACT). ON APPEAL, THE LD. CIT(A) WHILE CONSIDERING THE EVIDE NCE FILED BY THE ASSESSEE IN RESPECT OF PAID OUT PERCENTAGE WHICH VARIES FROM 88% TO 98% AS PER MONTHLY SLOT/TABLE, RELIED ON THE RATIO OF THE DECISION OF HONBLE SUPREME COURT IN DHAKESWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) AND THE ORDER OF THE FIRST APPELLAT E AUTHORITY IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2004-05, DELETED THE DISALLOWANCE MADE BY THE AO ON ESTIMATE BASIS OF RS.33,82 ,206/- AND ACCORDINGLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A DDITION OF RS.33,82,206/- BEING 1% OF THE TOTAL PAID OUTS/PRIZ ES EXPENDITURE OF RS.33,82,20,620/- ON GAMES/AMUSEMENT S WINNING WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO PRODUCE COMPLETE EVIDENCE IN SUPPORT OF THE CLAI M OF SUCH EXPENDITURE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ADMITTING NEW E VIDENCE WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFI CER TO EXAMINE THE SAME, IN CONTRAVENTION OF RULE 46A OF T HE I.T. RULES. 4. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER, THE LD. CIT(A) WAS NOT JU STIFIED IN ITA NO.1435/M/09 A.Y:05-06 4 ADMITTING THE ADDITIONAL EVIDENCE AND IN DELETING TH E ADDITION MADE BY THE AO. HE THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE AO BE RESTORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE, A T THE OUTSET, SUBMITS THAT THE ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEE'S OW N CASE IN WILRED LEISURE INDIA LTD. VS. ITO IN ITA NO.7377/MUM/ 2004 FOR ASSESSMENT YEAR 2001-02 ORDER DATED 23.3.2010. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE AO AFTER REJECTING THE ASSESSEES EXPLANA TION THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CA SE FOR ASSESSMENT YEAR 2004-05 HAS MADE THE ADDITION OF RS.33,82 ,206/- BEING 1% OF PAID OUTS OF RS.33,82,20,620/- ON ESTIMATE BASIS WITHOUT BRINGING ON RECORD ANY SUPPORTING MATERIAL. WE FUR THER FIND THAT FOR THE ASSESSMENT YEAR 2004-05 THE AO DISALLOWED 1% OF TOT AL PAY OUTS WHILE COMPLETING THE ASSESSMENT AND WHEN THE MATTER REACH ED TO THE TRIBUNAL, THE TRIBUNAL SET ASIDE THE MATTER TO THE AO WITH DIRECTIONS TO ENTERTAIN CERTAIN ADDITIONAL EVIDENCE, WHICH THE ASSESSEE FILED BEFORE THE LD. CIT(A). THE AO AFTER EXAMINING THE SUPPORTIN G EVIDENCE PASSED ITA NO.1435/M/09 A.Y:05-06 5 FRESH ASSESSMENT ORDER DATED 17.11.2009 IN WHICH THERE WA S NO SUCH DISALLOWANCE OF ANY PART OF THE PAY OUTS. WE FURTHER FIND THAT FOR THE ASSESSMENT YEAR 2001-02 THE AO HAS ESTIMATED THE NET PRO FIT AT 1% OF THE TOTAL TURNOVER WHICH RESULTED IN AN ADDITION O F RS.7,74,655/-. ON APPEAL, THE LD. CIT(A) REDUCED THE ADDITION TO R S.5,51,035/-. ON FURTHER APPEAL TO THE TRIBUNAL, THE TRIBUNAL AFTER CONSIDERING THE STATEMENT SHOWING THE PAY OUT PERCENTAGE WHICH VARIED F ROM 84.33% TO 96.01%, HIT FREQUENCY, WIN FREQUENCY ETC., HAS DEL ETED THE ADDITION OF RS.5,51,035/- SUSTAINED BY THE LD. CIT(A) VIDE FINDING RECORDED IN PARA-8 OF ITS ORDER DATED 23.3.2010 AS UND ER : 8. ....... IT THUS SEEMS TO US THAT THERE ARE SEVE RAL CHECKS AND CROSS CHECKS ON THE OPERATIONS OF THE SL OT MACHINES AND ALSO THAT THE ASSESSEE HAS MAINTAINED SUFFICIENT DOCUMENTATION FROM WHICH THE OPERATIONS CAN BE VERIFIED OR CHECKED OR SUBSTANTIATED. NO SPECIFI C INSTANCE OF SUPPRESSION OF THE PAY-IN OR INFLATION OF PAY- OUT HAS BEEN BROUGHT OUT IN THE ORDERS OF THE DEPARTMENTAL AUTHORITIES. SO FAR AS THE INSTANCES G IVEN IN THE ASSESSMENT ORDER WHICH SHOW THAT THE METER READ INGS HAVE ACTUALLY GONE DOWN IN SOME MONTHS, WHICH ACCORDING TO THE ASSESSING OFFICER IS NOT POSSIBLE, THE ASSESSEE HAS EXPLAINED THAT IT IS NOT AS IF THE REA DINGS HAVE COME DOWN, BUT WHAT THE ASSESSING OFFICER REAL LY MEANT TO CONVEY WAS THAT THE METER READING ALL OF A SUDDEN CHANGES AND SHOWS DECREASE IN THE TOTAL COIN IN AND OUT IN THE METERS. THIS ONLY MEANS THAT THERE MAY NOT HAVE BEEN THAT MUCH INCREASE IN THE RECEIPTS AN D PAY-OUTS AND IT CANNOT MEAN THAT ACTUALLY METER REA DING HAS STARTED FALLING. IN OTHER WORDS, WHAT IT SHOWS IS THAT IN SOME PERIODS THE RECEIPTS MAY SHOW A DECLINE. BU T CONSIDERING THE TAMPER PROOF QUALITY OF THE MACHINE S WHICH ARE FACTORY SET AND THE FACT THAT THE ASSESSE E CANNOT DO ANYTHING WITH THE MACHINES EXCEPT IN THE PRESENCE OF HOTEL REPRESENTATIVES, IT SEEMS TO US T HAT IT IS DIFFICULT FOR THE ASSESSEE TO CHANGE THE METER READ INGS ITA NO.1435/M/09 A.Y:05-06 6 DOWNWARDS. TAKING ALL THESE FACTS INTO CONSIDERATI ON AND PARTICULARLY THE ASSESSMENT ORDER FOR THE ASSESSM ENT YEAR 2004-05 DATED 17.11.2009, WE ARE INCLINED TO H OLD THAT NO STRONG GROUNDS HAVE BEEN MADE OUT FOR MAKIN G AN ADDITION TO THE PROFIT FROM THE SLOT/AMUSEMENT MACHINES. WE ACCORDINGLY DELETE THE ADDITION OF RS.5,51,035/- SUSTAINED BY THE CIT(A). IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE AND KEEPING IN VIEW THAT THE ADDITIONAL EVI DENCE SHOWING THE ACTUAL PAY OUT PERCENTAGE RANGES FROM 88% TO 98% FOR T HE SLOT MACHINES HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL T HAT THE PAY OUTS VARIED FROM 84.33% TO 96.01% IN THE ORDER FOR T HE ASSESSMENT YEAR 2001-02, WE RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL (SUPRA), HOLD THAT THE ADHOC ADDITION OF RS.33,82,206 /- MADE BY THE AO IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY WE ARE INCLI NED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE SAME. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7.5.2010. SD/- SD/- (T.R. SOOD) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 7.5.2010. JV. ITA NO.1435/M/09 A.Y:05-06 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.1435/M/09 A.Y:05-06 8 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 27.4.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28.4.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 11.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER