HOTEL MAYFAIR P.LTD, MUMBAI V. CIT CEN -I, MUMBAI

ITA 1921/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92852 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3); 263

Judgement Text

, H INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H,BENCH , , BEFORE S/SH. JOGINDER SINGH,JUDICI AL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1921 /MUM/201 5 , / ASSESSMENT YEAR - 20 11 - 12 M/S. HOTEL MAYFAIR PVT. LTD. HOTEL HERITAGE BUILDING SANT SAVTA MARG, BYCULLA MUMBAI - 400 027. PAN:AA ACH 1782 P VS CIT - CENT RAL - I 1002, 10 TH FLOOR OLD CGO BUILDING ANNEX MK ROAD MUMBAI - 20 ( / A PPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI AJAY R. SINGH / REVE NUE BY :MS. RUPINDER BRAR - CIT DR / DATE OF HEARING : 01 - 07 - 2015 / DATE OF PRONOUNCEMENT : 01 - 07 - 2015 , 1 961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 2 7.01.2015, OF CIT,CENTRAL - I,MUMBAI,PASSED U/S.263 OF THE ACT, THE ASS ESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT ERRED IN PASSING THE ORDER U/ S. 263 OF THE ACT TREATING THE ASSESSMENT ORDER PASSED U/ S. 143(3) OF THE ACT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, WITHOUT APPREC IATING THAT THE ASSESSMENT ORDER WAS PASSED AFTER PROPER ENQUIRY AND DUE APPLICATION OF MIND ON THE ISSUE, THEREFORE THE REVISION ORDER U/ S. 263 MAY BE QUASHED. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. ASSESSEE - COMPANY ,ENGAGED IN THE BUSINESS OF RUNNING A HOTEL, FILED ITS RETURN OF INCOME ON 27. 09. 2011, DECLARING INCOME OF RS.97,47,540/ - . THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT U/S.143(3)OF THE ACT ON 28.03.2014 DETERMINING THE IN COME OF THE ASSESSEE AT RS.1,11,91,100/ - . 2. EFFECTIVE GROUND OF APPEAL IS ABOUT REVOKING THE PROVISIONS OF SECTION 263 OF THE ACT BY THE CIT. AS PER THE CIT INFORMATION WAS RECEIVED FROM THE OFFICE OF THE DGIT(INV)REVEALED THAT THE ASSESSEE HAD OBTAINED A CCOMMODATION BILLS FOR PURCHASE IN VARIOUS ASSESSMENT YEARS I.E.2007 - 08 TO 2012 - 13, THAT FOR THE YEAR UNDER APPEAL SUCH PURCHASES AMOUNTED TO RS.84.91 LAKHS.AFTER GOING THROUGH THE ASSESSMENT ORDER PASSED BY THE AO,THE CIT HELD THAT THE AO HAD MADE AN ADDI TION OF RS. 14.43 LAKHS ON THE BASIS OF AVERAGE GP OF LAST THREE YEARS,THAT THERE WAS NO CORRESPONDING SALES AGAINST THE PURCHASES,THAT THE AO SHOULD HAVE DISALLOWED THE ENTIRE BOGUS 1921/MUM/2013 - AY.2011 - 12,MAYFAIR HOTEL 2 PURCHASES.THE CIT ISSUE D A SHOW CAUSE NOTICE TO THE ASSESSEE ON 04.09.201 4,WHICH READ AS UNDER INFORMATION RECEIVED FROM THE OFFICE OF THE DGIT(INV) REVEALED THAT ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FOR PURCHASES TO THE TUNE OF RS.84,91,525/ - FOR THE RELEVANT PREVIOUS YEAR. PERUSAL OF RECORDS SHOWS THAT WHILE COMPLE TING ASSESSMENT U/S. 143(3), THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.14,43 ,560/ - WORKED OUT ON THE BASIS OF AVERAGE GP OF LAST 3 YEARS. THE BILLS ARE OF CUTLERY REPAIRS ETC. THE ASSESSEE IS ENGAGED IN RUNNING A HOTEL AND THUS THERE IS NO CORRES PONDING SALES AGAINST THESE PURCHASES. THE ENTIRE ALLEGED BOGUS PURCHASE SHOULD HAVE BEEN DISALLOWED. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER DATED 28.03.2014 U/S. 143(3) PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF R EVENUE. HENCE, YOU ARE REQUESTED TO SHOW CAUSE WHY PROVISION OF SECTION 263 BE NOT INVOKED. THE HEARING IS FIXED ON 19.09.2014. AT 3PM.. IN RESPONSE TO THE 263 NOTICE , THE ASSESSEE VIDE ITS REPLY DATED 19.12.2014 STATED THAT FOR CARRYING OUT THE REPAIR S AND MAINTENANCE OF TO THE HOTEL PROPERTY IT WOULD PURCHASE VARIOUS ITEMS,THAT SUCH PURCHASE WAS CRUCIAL FOR RUNNING THE BUSINESS,THAT DURING THE ASSESSMENT PROCEEDINGS THE AO HAD INFORMED THE ASSESSEE THAT AS PER THE INFORMATION RECEIVED FROM THE SALES T AX DEPARTMENT CERTAIN PARTIES HAD NOT PAID VAT TO THE STATE GOVERNMENT,THAT DOUBT WAS EXPRESSED ABOUT CERTAIN PURCHASES MADE BY THE ASSESSEE BY THE AO,THAT THE AO HAD ISSUED A DETAILED SHOW CAUSE NOTICE TO THE ASSESSEE ON 28.02. 2014 IN THAT REGARD,THAT TH E AO HAD ASKED TO IT AS TO WHY ENTIRE ALLEGED NON GENUINE PURCHASE SHOULD NOT BE ADDED BACK TO ITS TOTAL INCOME,THAT IT HAD FILED THE LEDGER ACCOUNTS OF VARIOUS PARTIES ALONG WITH THE SAMPLE COPIES OF INVOICES AND CHALLANS,DETAILS OF SALES TAX TIN NO.,DETA ILS OF NATURE OF THE ITEMS PURCHASED FROM VARIOUS PARTIES,THAT PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES,THAT THE STATEMENT OF THE DIRECTOR OF THE COMPANY WERE RECORDED U/S.131 OF THE ACT,THAT THE ISSUE OF NON - GENUINE BILLS WAS PUT TO HIM,THAT THE DIRECT OR HAS EMPHATICALLY DENIED THE ALLEGATION,THAT THE AO REJECTED THE BOOKS RESULTS OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT,THAT THE AO MADE ADJUSTMENT TO THE GROSS PROFIT OF THE ASSESSEE .IT WAS FURTHER ARGUED THAT MERELY BECAUSE A DIFFERENT APPROACH ON A PARTICULAR ISSUE COULD ENHANCE THE TAXABLE INCOME COULD NOT BE EQUATED WITH PASSING AN ERRONEOUS ORDER THAT WAS PREJUDICIAL TO THE INTEREST OF REVENUE,THAT THERE WAS NO ERROR IN THE ORDER PASSED BY THE AO. AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER PASSED BY THE AO,THE CIT HELD THAT THE PARTIES FROM WHOM THE ASSESSEE HAD PURCHASED GOODS APPEARED AS ACCOMMODATION ENTRY PROVIDER ON THE WEBSITE OF THE SALES TAX DEPARTMENT,THAT THE AO HAD CALLED FOR CER TAIN DETAILS AND THE ASSESSEE HAD FILED THE SAME.REFERRING TO THE DECISIONS OF MALABAR INDUSTRIAL CO.LTD.(243ITR43),THE CIT HELD THAT THE AO BEING THE INVESTIGATOR HAD TO ASCERTAIN THE TRUTH OF THE FACTS BY DUE INQUIRY, THAT IF THERE WAS FAILURE ON PART OF THE AO TO MAKE INQUIRY ORDER PASSED BY HIM WOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE,THAT IN THE CASE OF ASSESSEE PURCHASE RELATED TO CONSUMABLES,THAT THE AO OUGHT TO HAVE CONDUCTED NECESSARY ENQUIRY REGARDING THE EXISTENCE OF SUPPLIERS ETC,THAT THE ASSESSEE HAD NOT PRODUCED THE SUPPLIERS BEFORE THE AO,THAT THE ASSESSEE HAD AGREED TO ADDITION OF GROSS PROFIT ON SUCH PURCHASES.CITING THE CASE OF INDIAN WOOLEN CARPET FACTORY(125TAXMAN763),HE HELD THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE. SETTING ASIDE THE ORDER,THE DIRECTED THE AO TO PASS A FRESH ORDER AFTER HEARING THE ASSESSEE. 3. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)ARGUED THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS ALL THE PURCHASES WERE VERI FIED AND EXAMINED BY THE AO,THAT THE AO HAD CONSIDERED 1921/MUM/2013 - AY.2011 - 12,MAYFAIR HOTEL 3 THE INFORMATION RECEIVED BY FROM THE SALES TAX DEPARTMENT,THAT HE HAD ISSUED A SHOW CAUSE NOTICE, THAT HE MADE ADDITION OF PROFIT ELEMENT,THAT THERE WAS TOTAL APPLICATION OF MIND BY THE AO, THAT THAT T HERE WAS NO LACK OF INQUIRY ON PART OF THE AO AS ALLEGED BY THE CIT,THAT THE AO HAD DISALLOWED 17% OF THE PURCHASES MADE BY THE ASSESSEE FOR THE YEAR UNDER APPEAL,THAT THE PROVISIONS OF SECTION 263 COULD NOT BE EXERCISED BY THE CIT FOR SUBSTITUTING HIS OWN OPINION FOR THAT OF THE AO.HE RELIED UPON THE CASES OF GABRIEL INDIA(203ITR108),GRASIM INDIA(321ITR92), ARVIND JEWELLERS(259ITR502)AND NIKUNJ EXIMP ENTERPRISES(216TAXMAN171). DEPARTMENTAL REPRESENTA TIVE(DR SUPPORTED THE ORDER OF THE CIT AND ARGUED THAT THE AO HAD NOT MADE PROPER INQUIRIES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD MADE INQUIRIES ABOUT THE PURCHASES MADE BY THE ASSESSEE IN PURSUANCE OF THE INFORMATION RECEIVED FORM THE SALES TAX DEPARTM ENT,THAT HE HAD ISSUED A DETAILED NOTICE TO THE ASSESSEE IN THAT REGARD,THAT HE HAD ALSO RECORDED THE STATEMENT OF THE DIRECTOR OF THE COMPANY,THAT HE MADE CERTAIN DISALLOWANCE WITH REGARD TO PURCHASES.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT IT W AS NOT CASE OF NO INQUIRY.THE AO HAD ADOPTED A PARTICULAR METHOD TO DEAL WITH THE ALLEGED PURCHASES.IF THE CIT WAS OF THE OPINION THAT THE ASSESSMENT SHOULD HAVE BEEN PASSED AFTER MAKING INQUIRIES IN DIFFERENT MANNER THEN IT CANNOT HELD THAT THE ORDER OF T HE AO WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. HERE,W E WOULD LIKE TO REPRODUCE RELEVANT PORTION OF THE DECISION OF J YOTI F OUNDATIO N( 357 ITR 388 )OF HONBLE DELHI HIGH COURT WHICH DEALS WITH THE SCOPE OF THE REVISIONARY POWERS OF THE CIT AND S AME READS AS UNDER: REVISIONARY POWER U/S. 263 OF THE ACT IS CONFERRED BY THE ACT ON THE CIT /DIRECTOR OF INCOME - TAX WHEN AN ORDER PASSED BY THE LOWER AUTHORITY IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ORDERS WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIGATION ARE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, BUT ORDERS WHICH ARE PASSED AFTER INQUIRY/INVESTIGATION ON THE QUESTION/ISSUE ARE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPER OR FURTHER SCRUTINY SHOULD BE UNDERTAKEN. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, THE CIT MUST RECORD A FINDING THAT THE ORDER / INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE AO , MAKING THE ORDER UNSUSTAINABLE IN LAW. AN ORDER OF REM IT CANNOT BE PASSED BY THE CIT TO ASK THE AO TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. IT WAS FURTHER HELD: .THAT INQUIRIES WERE CERTAINLY CONDUCTED BY THE AO . IT WAS NOT A CASE OF NO INQUIRY. THE ORDER U/S. 263 ITSELF RECORDED THAT THE DIRECTOR FEL T THAT THE INQUIRIES WERE NOT SUFFICIENT AND FURTHER INQUIRIES OR DETAILS SHOULD HAVE BEEN CALLED FOR. THE INQUIRY SHOULD HAVE BEEN CONDUCTED BY THE DIRECTOR HIMSELF TO RECORD THE FINDING THAT THE ASSESSMENT ORDER WAS ERRONEOUS. HE SHOULD NOT HAVE SET ASID E THE ORDER AND DIRECTED THE AO TO CONDUCT THE INQUIRY. IT IS POSSIBLE THAT HAD THE AO MADE THE INQUIRIES AS DESIRED BY THE CIT HE WOULD HAVE COLLECTED HIGHER REVENUE.BUT,THAT ALONE WOULD NOT JUSTIFY THE INVOKING OF THE REVISIONARY POWERS BY THE CIT.AS TH E AO HAD APPLIED HIS MIND AND PASSED THE ORDER AFTER REJECTING THE BOOK OF ACCOUNTS U/S. 145(3) OF THE ACT,SO,WE ARE OF THE OPINION THAT THE ORDER OF THE AO WAS NOT NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVEUNE.RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENT OF THE HONBLE DELHI HIGH COURT,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT A PPEAL OF THE ASSESSEE STANDS ALLOWED . 1921/MUM/2013 - AY.2011 - 12,MAYFAIR HOTEL 4 . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JULY,2015. 1, , 2015 SD/ - SD/ - ( / JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 01 .07.2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BE NCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.