Abhay Dattatraya Shelke, Ahmednagar V. Assistant Commissioner of Income-tax,

ITA 1544/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5277 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-01-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: C V DESHPANDE
• Keywords: Gross profit estimation; Rejection of books of accounts; Additional evidence; Cost of acquisition
• Section: 144

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1544/PUN/2015 / ASSESSMENT YEAR : 2010-11 ABHAY DATTATRAYA SHELKE, HOTEL SIDDHANT, NAGAR MANMAD HIGHWAY, AT POST SHIRDI, TALUKA RAHATA, DISTRICT AHMEDNAGAR, SHIRIDI 423109. PAN : ANRPS2167A. . / APPELLANT V/S THE ASST.COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE & SHRI C.V. DESH PANDE. REVENUE BY : SHRI MUKESH JHA, JCIT. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, PUNE DT.31.08.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- / DATE OF HEARING : 12.04.2018 / DATE OF PRONOUNCEMENT: 06.07.2018 2 ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE BUSINESS OF RUNNING A RESTAURANT AND LODGING BUSINESS AND PROPRIETOR OF HOTEL SIDDHANT AND HOTEL MOONLIGHT. ASSESSEE ELECTRONICALLY FILED HIS RETURN OF INCOME FOR A.Y. 2010-11 ON 14.09.2010 DECLARING TOTAL INCOME AT RS.1,36,39,060/-. THE CA SE WAS SELECTED FOR SCRUTINY AND THEREAFTER, NOTICE U/S 143(2 ) OF THE ACT DT.26.08.2011 WAS ISSUED AND SERVED ON THE ASSESSEE . THEREAFTER, ASSESSMENT WAS FRAMED U/S 144 OF THE ACT VID E ORDER DT.13.03.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.3,10,53,262/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.31.08.2015 (IN APPEAL NO.PN/CIT(A)-2/ACIT CIR./AN/71/2014-15) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING GROUNDS : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSES SING OFFICER OF REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ENHANCING THE NET PROFIT BY RS.1,63,15,953/- WITHOUT APPRECIATING THE FACTS AND DOCUMENTS PRODUCED IN SUPPORT OF THE FACTS BY THE A SSESSEE. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.7,50,000/- BY RES TRICTING THE SAID DISALLOWANCE AT 15% AMOUNTING TO RS.2,79,592/- ON AD-HOC BASIS WITHOUT ESTABLISHING ANY COGENT SUPPORT IN MA KING SUCH DISALLOWANCE. 3. FIRST GROUND IS WITH RESPECT TO REJECTION OF BOOKS OF ACCOUNTS AND ENHANCEMENT OF NET PROFIT. 3.1. DURING THE COURSE OF ASSESSMENT, AO NOTED THAT ASSESSEE IS THE PROPRIETOR OF TWO HOTELS NAMELY, HOTEL SIDDHANT AND H OTEL MOONLIGHT. HOTEL MOONLIGHT IS A NON-VEG RESTAURANT AND BA R AND 3 DURING THE YEAR THE BUSINESS OF THE HOTEL WAS RUN BY T HE ASSESSEE ONLY FROM MAY 2009 TO FEBRUARY 2010. ON PERUSING THE TRADING ACCOUNT FOR HOTEL MOONLIGHT, AO NOTICED THAT THE GROSS PR OFIT FOR THE FOOD BUSINESS AND LIQUOR BUSINESS CAN BE SEPARAT ED FROM THE CONSOLIDATED TRADING ACCOUNT AND ACCORDINGLY HE DRE W UP A SEPARATE TRADING ACCOUNT FOR FOOD BUSINESS AND LIQUOR BUS INESS TO SEE THE PROFITS DECLARED BY THE ASSESSEE. ON THE BASIS OF THE SEPARATE TRADING ACCOUNT PREPARED BY HIM, HE NOTICED T HAT PROFIT GENERATED FROM LIQUOR BUSINESS TO BE VERY LOW AND NOT COMMENSURATE WITH THE NATURE OF BUSINESS. THE ASSESSE E WAS THEREFORE ASKED TO PRODUCE THE BILLS AND INVOICES IN RESPE CT OF SALES AND PURCHASES. ON ANALYSIS OF THE SALE BILLS ON RAND OM BASIS, HE NOTICED THAT ASSESSEE HAS RECORDED SALES WITHO UT ANY CORRESPONDING PURCHASES AS PER THE PURCHASE INVOICES (THE BILLS OF WHICH ARE TABULATED BY HIM AT PARA 4.2.1. OF THE ASSESSM ENT ORDER). HE ALSO NOTICED THAT SINCE THERE WAS NO OPENING AND CLOSING STOCK OF LIQUOR DURING THE YEAR AND ALL THE PURCHAS ES MADE DURING THE YEAR HAS BEEN SOLD OUT WITHIN THE YEAR ITSELF, HE PROCEEDED TO MAKE AN ANALYSIS OF GROSS PROFIT MARGIN TH AT WAS DECLARED BY THE ASSESSEE. HE THEREAFTER MADE AN ANALY SIS AND COMPARED IT WITH THE SALES RECORDED IN THE INVOICES. HE N OTICED THAT ASSESSEE HAD A GROSS PROFIT MARGIN OF ALMOST 40% IN EACH BRAND BUT ASSESSEE HAD ONLY SHOWN 17% AS GROSS PROFIT MARGIN. THE ANALYSIS MADE BY THE AO IS REPRODUCED IN TABULAR FO RM AT 4.2.2. OF HIS ORDER. HE THEREFORE CONCLUDED THAT ASSESSEE HAS NOT BEEN DECLARING HIS SALES TRULY AND CORRECTLY AND THER E WAS SUPPRESSION OF SALES BY RECORDING SALES AT A REDUCED RAT E AND THEREFORE PROFIT DECLARED BY THE ASSESSEE IN RESPECT OF LIQUOR 4 BUSINESS CANNOT BE RELIED UPON. ON THE BASIS OF HIS ANALY SIS, HE ALSO CONCLUDED THAT ASSESSEE HAD RECORDED EXTREMELY LO W SALE PRICE IN HIS SALE BILLS WHICH WAS HIGHLY IMPROBABLE AS PER TH E PREVAILING MARKET CONDITIONS. HE THEREFORE HELD THE SALE BILLS AND SALE FIGURES FURNISHED BY THE ASSESSEE DESERVES TO BE RE JECTED AND PROFIT NEEDS TO BE ESTIMATED. HE THEREAFTER REJECTED TH E BOOKS OF ACCOUNT AS FAR AS THE LIQUOR BUSINESS IS CONCERNED FOR THE REASONS AS MENTIONED IN PARA 4.2.3 OF HIS ORDER. HE THEREAFTER CON CLUDED THAT ASSESSEE HAD A HUGE MARGIN PROFIT RANGING FROM 130 % TO 300%. HE ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE THEREAFTER PROCEEDED TO ESTIMATE THE PRO FITS FROM THE LIQUOR BUSINESS AT 125% OF ITS PURCHASE COST. HE NOT ICED THAT PURCHASE COST DEBITED IN THE PROFIT AND LOSS ACCOUNT W AS RS.1,60,86,141/- AND ACCORDINGLY, THE PROFIT AT 125% OF THE COST PURCHASES WAS WORKED OUT TO RS.2,01,07,676/. HE THERE AFTER CONSIDERING THE GROSS PROFIT FROM FOOD BUSINESS AS WORKED OUT BY HIM, DETERMINING THE NET PROFIT FROM HOTEL MOONLIGHT AT RS.2,34,99,266/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, UPHELD THE ORDER OF AO BY OBSERVING AS UNDER : 6. 2 I HAVE GONE THROUGH THE ADDITIONAL EVIDENCE F URNISHED, ASSESSING OFFICER'S REPORT AS WELL AS COUNTER REPLY OF THE APPELLANT. DURING THE ASSESSMENT PROCEEDINGS, THE A PPELLANT WAS PROVIDED SUFFICIENT OPPORTUNITY TO FURNISH DETA ILS WITH REGARD TO HIS SALE AND PURCHASE TRANSACTION BUT THE Y DID NOT FILE ANY DETAILS BEFORE THE ASSESSING OFFICER AND T HEREFORE THE ASSESSMENT WAS COMPLETED BY ASSESSING OFFICER TO TH E BEST OF HIS JUDGMENT. IT IS ALSO NOTICED THAT THE CASE OF THE APPELLANT DOES NOT FALL IN ANY OF THE FOUR EXCEPTIONAL CLAUSE S AS MENTIONED IN RULE 46A OF THE I T RULES (REPRODUCED SUPRA). THEREFORE, THE ADDITIONAL EVIDENCE FILED DURING THE APPELLATE PROCEEDINGS IS PRIMA FACIE INADMISSIBLE. 5 6.2.1 DURING THE ASSESSMENT PROCEEDINGS, THE APPELL ANT DID NOT PRODUCE THE COPY OF THE MENU CARD FOR THE RELEV ANT PERIOD, SO AS TO JUSTIFY THE RATE OF SALE OF VARIOUS BRANDS OF LIQUORS IN ITS RESTAURANT. THEREFORE, THE ASSESSING OFFICER WA S LEFT WITH NO OTHER ALTERNATIVE BUT TO ESTIMATE THE SALE PRICE ON THE BASIS OF MENU AVAILABLE OF THE SAME RESTAURANT OF THE SUB SEQUENT YEAR. THE ASSESSING OFFICER WHILE COMPUTING THE PRO FITS, HAS GIVEN DISCOUNT OF 20% TO THE SALE PRICE IN THE SUBS EQUENT YEARS MENU AND ACCORDINGLY COMPUTED THE SALE PRICE. THIS FORMS A VERY REASONA.ILE AND RATIONAL BASIS FOR COMPUTING P ROFITS OF THE BUSINESS OF THE APPELLANT. THE APPELLANT NE ITHER AT THE ASSESSMENT PROCEEDINGS NOR AT THE APPELLATE PROCEED INGS HAS BEEN ABLE TO REBUT THE SALE PRICE COMPUTED BY THE A SSESSING OFFICER ON THE BASIS OF SUBSEQUENT YEARS MENU OF TH E SAME HOTEL. NO CORROBORATIVE EVIDENCE HAS BEEN PROVIDED TO DISP ROVE THE FINDINGS OF THE ASSESSING OFFICER, THE CLAIM OF THE APPELLANT THAT IT COULD NOT PRODUCE THE MENU CARD OF THE RELEVANT YEA R AS IT WAS LOST DOES NOT DISCHARGE HIM OF HIS ONUS. THE APPELL ANT HAS FURTHER CLAIMED THAT DURING THE YEAR IT HAS SOLD ONLY 180ML BOTTLES OF VARIOUS WHISKY, RUM, GIN ETC. AND THERE IS NO LOOSE SALE OF 60ML/30ML. 60ML/30ML DENOTES SALE OF LARGE PEG OR S MALL PEG. THIS IS NOT TRUE AS BECAUSE IN ALMOST EVERY RESTAUR ANT & BAR SALE OF VARIOUS DRINKS IS MOSTLY BY WAY OF PEGS I.E. LAR GE PEG (60ML) OR SMALL PEG (30ML). EVEN THE SUBSEQUENT YEARS MENU OF THE HOTEL CLEARLY SHOWS THAT THE RATES OF VARIOUS LIQUORS AND DRINKS OF 60ML AS WELL. THE APPELLANT HAS NOT BEEN ABLE TO PROVE THAT IN THE PREVIOUS YEARS MENU, THERE WAS NO SALE OF LIQUOR O R DRINKS PEG WISE. ACCORDINGLY, THIS ARGUMENT HAS NO FORCE. 6.2 . 2 IT I S F URT H E R OB S ERV E D THAT TH E APPE LLANT HA S C L A I ME D T O HA VE S OLD V A R I O U S BRAND S OF LI Q U O R S W ITHOUT HAVING A N Y ST OC K. THIS F AC T W H I C H H AS B EE N R E CORD ED B Y TH E ASS ESSI N G OFFIC E R IN THE AS SESS M E NT ORDER, W HI C H H AS B EE N REPRODU C ED IN TH E FORM OF A TA BL E IN PAG E NO .6 OF T H I S ORDER . IN TH E CASE O F 'F U E L VODKA ' , TH E FIRST PURCH ASE IS ON 01 . 08 . 2009, HO WEVE R THE SALES HA VE B EE N MAD E RIGHTLY FROM 18.04.200 9 O NWARDS. SIMILARLY IN TH E CASE OF 'MAGIC MOMENT GREEN APPL E VODKA', TH E F IRST PURCHASE HAS BEEN SHOWN ON 17/1 2/ 2009, WHILE SALES HAD BEEN REFLECT E D FROM 02.05 . 2009 ITSELF. ALL THESE FAC T S CL E ARLY POINT OUT THAT THERE ARE SERIOUS D E FICIENCIES AND DISCREPANCIES IN BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT . TH E APPELLANT HAS NOT SHOWN ANY OPENING STOCK AND THEREFORE IT IS NOT UNDERSTANDABL E AS TO HOW THE SALE HAS BEEN MADE WITHOUT HAVING ANY STOCK OR CORR E SPONDING PURCHAS E S . THE ENTIRE ACCOUNT APPEARS TO BE FUDG E D ONE JUST TO C OV E R UP TH E DISCREPANCIES AND MANIPULATIONS IN THE BOOKS OF ACCOUNT. 6.2.3 COMING TO THE ADDITIONAL EVIDENCE PRODUCED DU RING THE APPELLATE PROCEEDINGS, IT IS SEEN THAT ON THE COVER OF THE SAID REGISTER NEITHER LICENSE NUMBER IS MENTIONED NOR NA ME OF THE LICENSEE OR THE ADDRESS MENTIONED AND ALL THESE COL UMNS ARE BLANK. THE ASSESSING OFFICER'S REMAND REPORT ALSO C LEARLY MENTIONS THAT HE FOUND THE ORIGINAL REGISTER WITHOU T BEARING ANY NAME OR LICENSE NUMBER AND THEREFORE AUTHENTICITY O F SUCH REGISTER IS DOUBTFUL. SUBSEQUENT TO REMAND PROCEEDI NGS, ONE PAPER WAS FILED CLAIMING THAT THE REGISTER PERTAINS TO THE HOTEL MOONLIGHT. IT IS NOT KNOWN AS TO WHY SUCH PAPER WAS NOT FURNISHED BEFORE THE ASSESSING OFFICER WHEN THE MAT TER WAS REMANDED TO HIM. THE VERACITY OF SUCH PAPER CANNOT BE RELIED UPON AS THE ORIGINAL REGISTER ITSELF DOES NOT CONTA IN ANY NAME OR 6 LICENSE NUMBER OR ADDRESS OF THE SAME. ACCORDINGLY THE ADDITIONAL EVIDENCE IS DEVOID OF ANY MERIT AND THER EFORE REJECTED. THEREAFTER, LD.CIT(A) REFERRED VARIOUS DECISIONS AND FINALLY HE LD THAT 6.2.8 IN THE LIGHT OF THE AFORESAID DISCUSSION, TH E DECISIONS CITED SUPRA AND SUBMISSIONS MADE, I AM OF THE CONSI DERED OPINION THAT THE ASSESSING OFFICER WAS JUSTIFIED I N REJECTING THE BOOK RESULTS AND ESTIMATING THE PROFIT. THE ASS ESSING OFFICER IN THE ASSESSMENT ORDER HAS ESTIMATED PROFI TS FROM THE LIQUOR BUSINESS AT 125% OF THE PURCHASE COST. AS PE R COMPARISON GIVEN IN THE ASSESSMENT ORDER, IT IS SEEN THAT THE APPELLANT HAS MADE PROFITS IN THE RANGE OF 130% TO 300% ON THE PURCHASE COST OF THE VARIOUS LIQUOR BRANDS. THE ASSESSING OFFICER HAS ALREADY BEEN REASONABLE IN ESTIMATING T HE PROFITS OF THE LIQUOR BUSINESS AS 125% OF PURCHASED COST WH ICH IS LESSER THAN THE PROFITS EARNED AS PER THE SUBSEQUEN T YEAR MENU. ACCORDINGLY, ESTIMATION OF PROFIT FROM LIQUOR BUSINESS AT RS. 2,01,07,676/-MADE BY THE AO IS HELD IN ORDER AN D THEREFORE CONFIRMED. THIS GROUND OF APPEAL IS THERE FORE DECIDED AGAINST THE APPELLANT. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A). LD.A.R. FURTHER SUBMITTED THAT ASSESSEE H AD BEEN RUNNING THE BUSINESS OF HOTEL MOONLIGHT AND HAD PURCHASED THE CLOSING STOCK FROM THE THEN CONDUCTOR OF BUSINESS NA MELY, MR. V.N. SHETTY AND THE STOCK WAS VALUED AT RS.6,12,070/- INCLUDING LIQUOR PURCHASES OF RS.5,89,980/- AND OTHER MATERIA LS. HE POINTED TO PAGES 61 AND 62 PLACED IN PAPER BOOK WH ICH CONTAINS THE DETAILS WITH RESPECT TO THE STOCK OF LIQUOR PURCHASED BY THE ASSESSEE ON 01.05.2009 ALONG WITH ITS QUANTITY AN D VALUE. HE THEREFORE SUBMITTED THAT THE SALES AFFECTED WERE OUT OF THE PURCHASES MADE FROM THE ERSTWHILE SELLER. HE THEREAFTER SUBMITTED THAT WITH RESPECT TO THE LESS GROSS PROFIT MAR GIN SHOWN 7 BY THE ASSESSEE, AO DID NOT CONFRONT WITH THE ASSESSEE WITH THE MATERIAL IN HIS POSSESSION. HE FURTHER SUBMITTED THAT AO W HILE DETERMINING THE LOW GROSS PROFIT HAS CONSIDERED THE PURCH ASES WITHOUT INCLUDING THE TAX. HE SUBMITTED THAT IF THE TAX IS INCLUDED IN PURCHASES, THE ACTUAL GROSS PROFIT WOULD WORK OUT TO 17.55% AND THE DETAILS OF WHICH ARE PLACED AT PAGE 80 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT SINCE THE ASSES SEE WAS ALSO DEALING THE SALE OF LIQUOR BUSINESS, HE IS ALSO REQUIRED T O FILE THE RETURNS WITH SALES TAX AND VAT AUTHORITIES. HE POINT ED TO THE SALES TAX RETURNS FILED DURING THE PERIOD AND SUBMITTE D THAT THE SALES HAVE BEEN ACCEPTED BY THE SALES TAX AUTHORIT IES AND NO DISCREPANCIES HAVE BEEN FOUND BY THEM. HE FURTHER SUBMIT TED THAT AO HAS REJECTED THE BOOKS OF ACCOUNT IN PART AN D THAT TO ONLY WITH RESPECT TO LIQUOR BUSINESS AND NOT WITH RESPEC T TO FOOD BUSINESS. HE SUBMITTED THAT THE REJECTION OF BOOKS OF AC COUNT CANNOT BE MADE IN PART AND THAT THE BOOKS OF ACCOUN T WERE REJECTED ON THE BASIS OF PRESUMPTION AND THAT THE REJE CTION OF BOOKS OF ACCOUNT ON PRESUMPTIONS IS NOT PERMITTED AS PE R LAW. HE THEREFORE SUBMITTED THAT THE AO HAD WRONGLY REJEC TED THE BOOKS OF ACCOUNT AND THEREAFTER ESTIMATED THE ADDITION W HICH IS UNCALLED FOR. AS AN ALTERNATIVE CONTENTION, HE SUBMITTED TH AT THE ADDITION MADE BY THE AO IS ON HIGHER SIDE AND IF AT ALL SO ME ADDITIONS ARE REQUIRED, THE SAME MAY BE MADE ON REASONA BLE BASIS. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS W ITH RESPECT TO THE REJECTION OF BOOKS OF ACCOUNT WITH RESP ECT TO LIQUOR 8 BUSINESS AND THEREAFTER ESTIMATING THE PROFITS FROM THEM. BEFORE US, LD.A.R. OBJECTED TO THE REJECTION OF BOOKS OF ACCOUNTS AND THEREAFTER MAKING ADDITION ON ESTIMATION BASIS. BEFORE US, LD.A.R. HAS ALSO RAISED AN ALTERNATE CONTENTION THAT THE A DDITION MADE BY AO IS ON A HIGHER SIDE AND THAT A REASONABLE AM OUNT BE DISALLOWED. CONSIDERING THE AFORESAID ALTERNATE CONTENTION O F LD.A.R. AND THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, IF THE ADDITIONS MADE TO THE EXTENT OF RS.25,00,000/- WOULD MEET THE ENDS OF JUSTICE. WE THUS, DIR ECT ACCORDINGLY. THUS, THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 6. SECOND GROUND IS WITH RESPECT TO AD-HOC DISALLOWANCE. 6.1. DURING THE COURSE OF ASSESSMENT AO ON PERUSING TH E PROFIT AND LOSS ACCOUNT NOTICED THAT ASSESSEE HAD INCURRED V ARIOUS EXPENSES FOR HOTEL SIDDANTH AND HOTEL MOONLIGHT. HE NOTICE D THAT THE EXPENSES WERE SUPPORTED ONLY BY SELF-MADE V OUCHERS AND THEREFORE NOT FULLY VERIFIABLE. HE ALSO NOTICED THAT THE MAJOR PURCHASES WERE MADE IN CASH. AO ACCORDINGLY MADE AD-H OC DISALLOWANCE OF RS.7,50,000/-. AGGRIEVED BY THE ORDER OF AO , ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF TO ASSESSEE BY OBSERVING AS UNDER : 7.3.1 I HAVE GONE THROUGH THE SUBMISSION AND DISCU SSION MADE BY ,THE ASSESSING OFFICER. IT IS SEEN THAT THE APPELLANT IS RUNNING TWO HOTELS I.E. HOTEL SIDDHANT AND HOTEL MO ONLIGHT. THE ASSESSING OFFICER HAS REJECTED BOOKS OF ACCOUNT PERTAINING TO HOTEL MOONLIGHT WHERE LIQUOR SALE IS ALSO CARRIE D ON, WHILE ASSESSING OFFICER HAS NOT DISTURBED THE RESULTS OF HOTEL SIDDANTH. ACCORDINGLY, NO ADDITION IS CALLED FOR WI TH REGARD TO THE EXPENSES CLAIMED IN THE HOTEL MOONLIGHT AS BECA USE, THE ASSESSING OFFICER HAS ALREADY REJECTED THE BOOKS OF ACCOUNT FOR THE HOTEL MOONLIGHT AND ESTIMATED THE P ROFIT. HOWEVER, WITH REGARD TO HOTEL SIDDANTH, THE BOOK RE SULTS HAVE NOT BEEN DISTURBED. CONSIDERING THE DEFICIENCIES PO INTED OUT BY THE ASSESSING OFFICER UNDER VARIOUS HEADS OF EXP ENSES, I 9 HOLD THAT IT WILL BE FAIR AND REASONABLE TO RESTRIC T TIE DISALLOWANCE AT 15% OF THE CLAIM OF HOTEL SIDHANT I.E. 15% RS. 18,6 3,944/- WHICH COMES TO RS. 2,79,592/-. THUS, THE DISALLOWAN CE IS RESTRICTED TO RS. 2,79,592/-. ACCORDINGLY, GROUND OF APPEAL NO.2 IS DISPOSED OF. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US. 7. BEFORE US, LD.A.R. SUBMITTED THAT AO HAD MADE ADDITION ON AD-HOC BASIS WITHOUT BRINGING ANY MATERIAL ON RECORD T O DEMONSTRATE THAT THE EXPENSES ARE BOGUS OR ARE NOT FOR THE PURPOSE OF BUSINESS. HE FURTHER SUBMITTED THAT THE BO OKS OF THE ASSESSEE WERE AUDITED AND NO DISCREPANCIES HAD BEEN POINTED OUT BY THE AUDITORS. HE THEREFORE SUBMITTED THAT IN SUCH CIRCUMSTANCES, NO AD-HOC DISALLOWANCE IS CALLED FOR. LD.D.R. O N THE OTHER HAND, SUPPORTED THE ORDER OF AO. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE OF EXPENSES ON ADHOC BASIS. AO M ADE A DISALLOWANCE OF RS.7,50,000/- FOR THE REASON THAT EXPENSES WERE BY SELF MADE VOUCHERS AND THE PURCHASES IN CASE OF FOOD BUSINESS WAS MADE THROUGH CASH. LD.CIT(A) HELD THAT SINC E THE AO HAD REJECTED THE BOOKS OF ACCOUNT PERTAINING TO HOT EL MOONLIGHT, NO ADHOC DISALLOWANCE IS CALLED FOR. BUT AS FAR AS THE DISALLOWANCE IN RESPECT OF HOTEL SIDDANTH IS CONCERNED, HE RESTRICTED THE DISALLOWANCE AT 15% AND THEREAFTER UPHELD THE ADDITION TO THE EXTENT OF RS.2,79,592/-. WE FIND THAT NO S PECIFIC INSTANCE OF THE EXPENSES OF NOT BEING FOR THE PURPOSE OF BUSINESS WERE POINTED BY AO MORE SO WHEN THE BOOKS OF ACCOUNTS OF 10 ASSESSEE ARE AUDITED AND NO DISCREPANCIES ARE POINTED OUT BY THE AUDITORS. WE THEREFORE HOLD THAT NO DISALLOWANCE OF EXPENSE S ON AD-HOC BASIS IS CALLED FOR IN THE PRESENT CASE. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 9. TO SUM UP, THE APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON 6 TH DAY OF JULY, 2018. SD/- SD/- /- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 6 TH JULY, 2018. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-2, PUNE. PR.CIT-1,PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.