Ascension Hotels P Ltd. (formerly Rattha Hotels Pvt Ltd.), CHENNAI V. ACIT, CHENNAI

ITA 1957/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86239 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI .. , ! , ' #$ BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ ITA NO. 1957/MDS/2014 ' % &% / ASSESSMENT YEAR : 2009-10 M/S ASCENSION HOTELS PVT. LTD., (FORMERLY KNOWN AS M/S RATTHA HOTELS PVT. LTD.), NO.37, TTK ROAD, ALWARPET, CHENNAI - 600 018. PAN : AADCR 4629 L V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(3), CHENNAI - 600 034. (!(/ APPELLANT) (*+!(/ RESPONDENT) !( , - / APPELLANT BY : SHRI T. BANUSEKAR, CA *+!( , - / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT . , / / DATE OF HEARING : 20.01.2015 01& , / / DATE OF PRONOUNCEMENT : 20.01.2015 / O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 26-05-2014 PASSED BY LD CIT (APPEALS)-V AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. THE ASSESSEE IS AG GRIEVED BY THE DECISION RENDERED BY LD CIT(APPEALS) ON THE FOLLOWI NG ISSUES:- 2 I.T.A. NO. 1957/MDS/2014 (A) DISALLOWANCE MADE U/S 14A OF THE ACT R.W.RULE 8 D OF THE IT RULES. (B) DISALLOWANCE OF SALARY EXPENSES ` 3.45 CRORES (C) ADDITION RELATING TO THE DIFFERENCE IN THE GROS S RECEIPTS. (D) ADDITION MADE U/S 40(A)(IA) OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. WITH REGARD TO THE ISSUE RELATING TO THE DISALLOWANCE OF SALARY EX PENSES, THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS MADE T HE SAME BY CONDUCTING INDEPENDENT ENQUIRIES ABOUT THE PRESENT EMPLOYMENT OF THE EMPLOYEES. THE LD A.R SUBMITTED THAT THE ASSES SING OFFICER HAS CONDUCTED THE ENQUIRIES AFTER THE EXPIRY OF THR EE YEARS FROM THE END OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMEN T YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THERE IS NO GUARA NTEE THAT THE EMPLOYEES WHO WORKED WITH THE ASSESSEE IN THE YEAR UNDER CONSIDERATION SHALL CONTINUE TO WORK, EVEN AFTER TH E EXPIRY OF THREE YEARS. HE SUBMITTED THAT ALL THE EMPLOYEES HAVE WO RKED WITH THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND TH E ASSESSEE HAS PAID SALARIES TO THOSE EMPLOYEES AND HAS DEDUCT ED THE TDS ALSO. THE LD A.R SUBMITTED THAT THE SALARY EXPENSE S CLAIMED BY THE ASSESSEE CONSISTED OF TWO CATEGORIES OF EMPLOYEES, VIZ., (A) ITS OWN EMPLOYEES AND (B) EMPLOYEES SENT TO THE ASSESSEE ON DEPUTATION FROM ITS SISTER CONCERNS. HE SUBMITTED THAT THE AS SESSEE HAS REIMBURSED THE SALARY EXPENSES IN RESPECT OF SECOND ED EMPLOYEES 3 I.T.A. NO. 1957/MDS/2014 AND THE TDS HAS BEEN DEDUCTED BY THE RESPECTIVE SIS TER CONCERNS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAS EARNED GROSS RECEIPTS OF ABOUT ` 2.54 CRORES, WHEREAS THE ASSESSING OFFICER HAS ALLOWED SALARY EXPENDITURE ONLY TO THE TUNE OF ABOU T ` 15.00 LAKHS. WHEN IT WAS POINTED OUT BY THE BENCH THAT THE ASSES SEE HAS TO PROVE THAT THE EMPLOYEES, BOTH OWN AND THOSE SENT O N DEPUTATION, HAVE INDEED WORKED FOR THE ASSESSEE, THE LD A.R SUB MITTED THAT THE ASSESSEE WOULD BE IN A POSITION TO PROVE THE SAME I F ONE MORE OPPORTUNITY IS GIVEN AND ACCORDINGLY PRAYED THAT TH IS ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. TH E LD A.R FURTHER SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER CONSISTED OF SALARY OF ` 2.54 CRORES PAID TO OWN EMPLOYEES AND THE SAME HAS BEEN DISALLOWED WITHOUT PROPER REASONS. H E FURTHER SUBMITTED THAT THE LD CIT(APPEALS) CALLED FOR A REM AND REPORT FROM THE ASSESSING OFFICER DURING THE COURSE OF APPELLAT E PROCEEDINGS, BUT THE ASSESSING OFFICER HAS OFFERED COMMENTS ONLY IN RESPECT OF EMPLOYEES SENT ON DEPUTATION. 3. THE LD D.R SUBMITTED THAT THE ASSESSEE HAS F ILED TO PROVE THE SALARY EXPENSES AND HENCE THE LD CIT(APPEALS) HAS C ONFIRMED THE DISALLOWANCE. 4 I.T.A. NO. 1957/MDS/2014 4. HAVING HEARD RIVAL SUBMISSIONS ON THIS ISSUE , WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. AS SUBMITTED BY LD A.R, THE TOT AL DISALLOWANCE INCLUDED THE SALARY PAID TO OWN EMPLOYEES. FURTHER IT IS THE CLAIM OF THE LD A.R THAT THE ASSESSING OFFICER HAS ASCERTAIN ED THE POSITION OF PRESENT EMPLOYMENT OF THE EMPLOYEES AS ON THE DA TE OF ASSESSMENT, WHEREAS WHAT IS REQUIRED TO BE SEEN IS WHETHER THE SAID EMPLOYEES WERE WORKING WITH THE ASSESSEE IN TH E RELEVANT YEAR UNDER CONSIDERATION. FURTHER IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO CONFRONT THE RESULT OF HIS IN VESTIGATION WITH THE ASSESSEE, THUS VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. HENCE, WE FIND MERIT IN THE SUBMISSIONS OF LD A.R. ACCORDING LY, WE SET ASIDE THE ORDER OF LD CIT(APPEALS) ON THIS ISSUE AND REST ORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO EXAMINE THIS ISSUE AFRESH AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCOR DANCE WITH THE LAW. 5. THE NEXT ISSUE THAT WAS ARGUED BY THE LD A.R RELATES TO THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN GROSS REC EIPTS. THE ASSESSING OFFICER, ON EXAMINATION OF THE TDS CERTIF ICATES, NOTICED THAT THERE WAS SOME DIFFERENCE BETWEEN THE GROSS RE CEIPTS AS PER TDS CERTIFICATES AND THAT DISCLOSED IN THE BOOKS OF ACCOUNT. FOR 5 I.T.A. NO. 1957/MDS/2014 ARRIVING AT THE DIFFERENCE, THE ASSESSING OFFICER G ROSSED UP THE TDS AMOUNT BY ADOPTING THE TDS RATE AT 10.3%. ACCORDIN GLY HE ADDED THE DIFFERENCE IN GROSS RECEIPTS AS COMPUTED BY HIM . THE LD CIT(APPEALS) ALSO CONFIRMED THE SAME. 6. THE LD A.R SUBMITTED THAT THE APPLICABLE RAT E OF TDS WAS 11.3% AND HENCE THE ASSESSING OFFICER WAS WRONG IN ADOPTING THE RATE AT 10.3%. HE FURTHER FURNISHED A RECONCILIATI ON STATEMENT BEFORE THE BENCH AND SUBMITTED THAT THE ASSESSEE CO ULD RECONCILE THE DIFFERENCE IN THIS STATEMENT. ACCORDINGLY HE P RAYED THAT THIS MATTER MAY ALSO BE SET ASIDE TO THE FILE OF THE ASS ESSING OFFICER. THE LD D.R DID NOT OBJECT TO THE SAME. SINCE THE A SSESSEE HAS FILED A RECONCILIATION STATEMENT RECONCILING THE DI FFERENCE BETWEEN THE RECEIPTS AS PER TDS CERTIFICATES AND THE BOOKS OF ACCOUNT, WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES RECON SIDERATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(APPEALS) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RE-EXAMINE THIS ISSUE, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE, 7. THE NEXT TWO ISSUES RELATE TO THE DISALLOWANC ES MADE U/S 14A AND SEC. 40(A)(IA) OF THE ACT. THE LD A.R SUBMITTE D THAT THE LAW RELATING TO BOTH THE ISSUES HAS BEEN ELABORATED IN THE LATEST 6 I.T.A. NO. 1957/MDS/2014 DECISIONS OF THE TRIBUNALS AND HIGH COURTS AND ACCO RDINGLY PRAYED THAT THESE ISSUES MAY ALSO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. THE LD D.R DID NOT OBJECT TO THE SAME. A CCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(APPEALS) ON THE AB OVE SAID ISSUES AND RESTORE THEM TO THE FILE OF THE ASSESSIN G OFFICER WITH THE DIRECTION TO EXAMINE THEM AFRESH IN THE LIGHT OF LA TEST DEVELOPMENTS IN LAW RELATING THERETO, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 20 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( ! ) ( .. ) (VIKAS AWASTHY) (B.R. BASKARAN) ' /JUDICIAL MEMBER /ACCOUNTANT MEMBER /CHENNAI, A /DATED, THE 20 TH JANUARY, 2015. KRI. 7 I.T.A. NO. 1957/MDS/2014 B , *'/C D &/ /COPY TO: 1. !( /APPELLANT 2. *+!( /RESPONDENT 3. . E/ () /CIT(A)-V, CHENNAI 4. . E/ /CIT-V, CHENNAI-34 5. FG *'/' /DR 6. GH% I /GF.