Shri Suresh Kumar, Meerut V. CIT, Meerut

ITA 2031/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2761 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDRA
• Keywords: Depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.2031/DEL/2012 2031/DEL/2012 2031/DEL/2012 2031/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007- -- -08 0808 08 SHRI SURESH KUMAR, SHRI SURESH KUMAR, SHRI SURESH KUMAR, SHRI SURESH KUMAR, PROP. M/S HOTEL NAVEEN, PROP. M/S HOTEL NAVEEN, PROP. M/S HOTEL NAVEEN, PROP. M/S HOTEL NAVEEN, ABU LANE, ABU LANE, ABU LANE, ABU LANE, MEERUT. MEERUT. MEERUT. MEERUT. PAN : ADNPK9987A. PAN : ADNPK9987A. PAN : ADNPK9987A. PAN : ADNPK9987A. VS. VS. VS. VS. COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, MEERUT. MEERUT. MEERUT. MEERUT. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE. RESPONDENT BY : SHRI RAMESH CHANDRA, CIT-DR. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT, MEERUT DATED 10 TH FEBRUARY, 2012 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 FOR THE AY 2007-08. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDER:- THAT THE LEARNED CIT, MEERUT ERRED IN PASSING THE OR DER U/S 263 OF INCOME TAX ACT, 1961 SETTING ASIDE THE ORDE R PASSED U/S 143(3) OF INCOME TAX ACT, 1961 ON 26.06.200 9 BY THE INCOME TAX OFFICER, WARD 2(3), MEERUT. 3. THE OTHER GROUNDS ARE ONLY IN SUPPORT OF GROUND NO .1. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS RUNNING A HOTEL AND ICE-CREAM PARLOUR IN MEERUT. FOR THE YEAR UNDER CO NSIDERATION, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING NET INC OME OF ITA-2031/DEL/2012 2 ` 4,19,479/-. THE ASSESSING OFFICER MADE THE ASSESSMENT UND ER SECTION 143(3) IN WHICH HE MADE DISALLOWANCE OUT OF EXPENSES AMOUNTING TO ` 21,820/- AND, ACCORDINGLY, COMPLETED THE ASSESSMENT AT ` 4,41,299/-. LEARNED CIT SET ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER AND DIRECTED HIM TO PASS A FRESH ORDER AFTER G IVING PROPER OPPORTUNITY TO THE ASSESSEE. 5. AT THE TIME OF HEARING BEFORE US, NONE APPEARED O N BEHALF OF THE ASSESSEE BUT WRITTEN SUBMISSIONS HAVE BEEN FILED AND IT HAS BEEN REQUESTED THAT THE APPEAL MAY BE DECIDED ON THE BASIS OF WRITTEN SUBMISSIONS. THE LEARNED CIT-DR HAS BEEN HEARD. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF LEAR NED DR AS WELL AS THE WRITTEN SUBMISSIONS. IN PARAGRAPH 2 OF THE ORDER PASSED UNDER SECTION 263, LEARNED CIT HAS NOTED THE REASON W HICH WAS THE BASIS FOR INITIATING PROCEEDINGS UNDER SECTION 263. T HE SAME IS REPRODUCED BELOW:- 2. ON EXAMINATION OF THE RECORDS, IT IS EVIDENT THAT THE SAID ASSESSMENT WAS PASSED WITHOUT PROPER ENQUIRY IN SO FAR A) IN THE ASSESSMENT ORDER THE AO HAS MADE ADDITIONS ON AD HOC BASIS. IT IS SEEN THAT BEING IN HOTEL BUSINESS THE OVER ALL PROFIT SHOWN IS VERY LESS WHICH HAS BEEN ACCEPT ED BY THE AO WITHOUT ANY VERIFICATION. B) BY BIFURCATING DIFFERENT UNITS OF THE HOTEL IT H AD BEEN TRIED TO REDUCE INCOME BY SEPARATE SET OF SALARY TO EMPLOYEES, DEPRECIATION AND OTHER EXPENSES. ALL THE EXPENSES SHOULD HAVE BEEN VERIFIED BY THE AO AS PER THE INFLATED CLAIM. 7. FROM POINT NO.(A) ABOVE, IT IS EVIDENT THAT AS PER LEARNED CIT, THE OVERALL PROFIT FROM THE HOTEL BUSINESS WAS VERY LESS WHIC H HAS BEEN ITA-2031/DEL/2012 3 ACCEPTED BY THE ASSESSING OFFICER WITHOUT VERIFICATION . HOWEVER, WE FIND THAT IN THE WRITTEN REPLY FURNISHED BY THE ASSESSEE BEFORE THE LEARNED CIT, IT IS POINTED OUT THAT THE RATE OF NET PROFIT DISCLOSED BY THE ASSESSEE IS BETTER THAN IMMEDIATELY PRECEDING THREE YEA RS. THE SAME IS REPRODUCED BELOW FOR READY REFERENCE:- S.NO. AY NET PROFIT % HOTEL ICE-CREAM SHOP PCO 1. 2007-08 11.13% RECEIPTS 17,44,280 NP 1,94,122 10.61% RECEIPTS 31,09,396 NP 3,29,781 9.93% RECEIPTS 56,179 NP 5,576 2. 2006-07 10.70% RECEIPTS 18,44,530 NP 1,97,352 8.24% RECEIPTS 24,12,867 NP 1,98,893 9.66% RECEIPTS 66,850 NP 6,458 3. 2005-06 7.81% RECEIPTS 18,44,920 NP 1,44,136 -- -- 4. 2004-05 8.28% RECEIPTS 20,54,900 NP 1,70,298 -- -- 8. IN THE ORDER UNDER SECTION 263, LEARNED CIT HAS N OWHERE POINTED OUT ON WHAT BASIS, HE HELD THE PROFIT SHOWN TO BE VER Y LESS. THEREFORE, WE HOLD THAT THE ALLEGATION LEVELED BY THE LEARNED CIT IN POINT NO.(A) IS CONTRARY TO THE FACTS ON RECORD. SO FAR AS POINT NO. (B) IS CONCERNED, IT IS EXPLAINED BY THE ASSESSEE BEFORE THE LEARNED CIT HIMSE LF THAT THERE IS NO BIFURCATION OF THE HOTEL BUSINESS IN TWO DIFFEREN T UNITS BUT, ONE IS THE HOTEL BUSINESS AND ANOTHER IS THE ICE-CREAM PARLOUR WITH PCO. THEREFORE, TWO SEPARATE BOOKS WERE MAINTAINED FOR THE SE TWO UNITS. WE ARE ALSO UNABLE TO AGREE WITH THE PRESUMPTION OF T HE LEARNED CIT THAT BY BIFURCATION OF A BUSINESS INTO TWO UNITS, THERE IS AN INFLATION OF EXPENSES. IF THE PERSONS ARE EMPLOYED IN THE BUSINESS, WH ETHER THE SALARY EXPENSES ARE DEBITED IN ONE UNIT OR TWO DIFFERE NT UNITS, THE END ITA-2031/DEL/2012 4 RESULT WOULD BE SAME. SIMILAR IS THE POSITION WITH R EGARD TO DEPRECIATION. WE ARE UNABLE TO UNDERSTAND HOW DEBI T OF DEPRECIATION IN TWO UNITS ON THE BASIS OF ASSET USED IN EACH UNIT INFL ATES THE CLAIM OF DEPRECIATION. 9. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT BOTH THE REASONS GIVEN BY THE LEARNED CIT FOR SETTING ASIDE THE ASSESSMENT DO NOT HOLD GOOD. ACCORDINGLY, WE QUASH THE ORDER OF LEARNED CI T PASSED UNDER SECTION 263 AND RESTORE THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 26 TH JUNE, 2009. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2013. SD/- SD/- ( (( (I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 31.07.2013 VK. COPY FORWARDED TO: - 1. APPELLANT : SHRI SURESH SHRI SURESH SHRI SURESH SHRI SURESH KUMAR, KUMAR, KUMAR, KUMAR, PROP. M/S HOTEL NAVEEN, PROP. M/S HOTEL NAVEEN, PROP. M/S HOTEL NAVEEN, PROP. M/S HOTEL NAVEEN, ABU LANE, MEERUT. ABU LANE, MEERUT. ABU LANE, MEERUT. ABU LANE, MEERUT. 2. RESPONDENT : COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, MEERUT. MEERUT. MEERUT. MEERUT. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR