Assistant Commissioner of Income Tax, Circle - Shillong, Shillong V. M/s. Pegasus Hotels Pvt. Ltd., Shillong

ITA 23/GTY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0064 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 01-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K BHARDWAJ
• Assessee Lawyers: N O N E
• Keywords: Business income; Set aside
• Section: 194C

Judgement Text

1 ITA NOS.21 TO 23/GAU/2018 PEGASUS HOTELS (P) LTD. AY: 2012-13 TO 2014-15, IN THE INCOME TAX APPELLATE TRIBUNAL GUWAH ATI BENCH, E COURT AT KOLKATA ( ) . . , . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NOS. 21 TO 23/GAU/2018 ASSESSMENT YEARS: 2012-13 TO 2014-15 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE SHILLONG VS. M/S. PEGASUS HOTELS (P) LTD., SHILLONG APPELLANT RESPONDENT DATE OF HEARING 17.05.2019 DATE OF PRONOUNCEMENT 01.07.2019 FOR THE APPELLANT SHRI A. K. BHARDWAJ, ADDL. CIT FOR THE RESPONDENT N O N E ORDER PER A.T.VARKEY, JM ALL THESE THREE APPEALS HAVE BEEN PREFERRED BY THE REVENUE AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), SHIL LONG DATED 30.11.2017 FOR AYS. 2012- 13 TO 2014-15. SINCE GROUNDS ARE COMMON AND FACTS A RE IDENTICAL, WE DISPOSE OF ALL THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN REDUCING THE ESTIMATED PROFITS FROM 10%, 20%, 30% FOR THE AY S. 2012-13, 2013-14 AND 2014-15 RESPECTIVELY TO 7% AT FLAT RATE. 3. BRIEF FACTS OF THE CASE ARE THAT ACCORDING TO AO , AS PER 26AS, IN A.YS. 2012-13, 2013-14 AND 2014-15 RESPECTIVELY, ASSESSEE WAS FOUN D TO HAVE RECEIVED RS.70,09,635/-, RS.98,73,538/- AND RS.96,15,238/- ON WHICH TAXES WE RE DEDUCTED U/S. 194A, 194C & 194I OF THE ACT. ACCORDING TO AO, DETAILS OF THE SAME W ERE NOT FURNISHED TO HIM BY ASSESSEE. ACCORDING TO THE AO, THE LAST RETURN FILED BY ASSES SEE PERTAINED TO A.Y. 2011-12. TOTAL INCOME SHOWN BY ASSESSEE IN THAT YEAR WAS RS.36,15, 200/-. THE AO ESTIMATED THE INCOME FOR A.Y.2012-13 AT 10% OVER AND ABOVE WHAT WAS SHOW N BY ASSESSEE IN A.Y. 2011-12. HE 2 ITA NOS.21 TO 23/GAU/2018 PEGASUS HOTELS (P) LTD. AY: 2012-13 TO 2014-15, ARRIVED AT A BUSINESS INCOME OF RS. 39,76,720/-. ON TOP OF THAT, THE AO ADDED RS.70,09,635/- (FIGURE OF 26AS) TO THE INCOME. RESU LTANTLY ASSESSED INCOME FOR A.Y. 2012- 13 CAME TO RS.1,09,86,355/-. FOR A.YS. 2013-14 AND 2014-15, THE AO ESTIMATED THE INCOME BY ADDING 20% AND 30% RESPECTIVELY OVER WHAT WAS RE TURNED BY ASSESSEE IN A.Y. 2011-12. ON THE FIGURES ARRIVED AT, THE AO ADDED THE TOTAL R ECEIPT SHOWN IN 26AS AS TAXABLE INCOME AND COMPUTED THE TOTAL INCOME AT RS.1,42,11,778/ AN D RS.1,43,14,998/- FOR A.YS. 2013-14 AND 2014-15 RESPECTIVELY. AGGRIEVED, ASSESSEE PREFE RRED APPEALS BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE LD. AR CONTESTED THE ASS ESSMENTS MADE BY THE AO AND HE SUBMITTED THAT THE ADDITION OF 10%, 20% AND 30% IN THE THREE YEARS IN EXCESS OF THE TAX RETURNS FILED WAS TOO HIGH-PITCHED. HE STATED THAT THE PROFIT NEED NOT NECESSARILY RISE IN EACH YEAR AS ASSUMED BY AO. HE GAVE AN EXAMPLE OF ASSESS EES OWN CASE WHEREIN THE NET PROFIT DECLINED IN A.Y. 2010 AS COMPARED TO A.Y 2009-10. L D. AR ALSO POINTED OUT TO LD. CIT(A) THAT IN EARLIER YEARS, THE RENTAL AND OTHER RECEIPT S WERE SHOWN AS PART OF BUSINESS INCOME. IT WAS POINTED OUT TO LD CIT(A) THAT THE AO NOT ONLY T AXED THE 26AS RECEIPTS SEPARATELY, BUT HE ADDED THE WHOLE SUM TO THE INCOME. THE LD. AR PL EADED THAT THE HIGH-PITCHED ASSESSMENT WAS NOT IN CONSONANCE WITH THE BOARD'S I NSTRUCTION NO. 767 DATED 04.10.1974. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT(A) E STIMATED THE TOTAL INCOME FOR AY 2012- 13 BY INCREASING 7% OVER AND ABOVE WHAT WAS DECLARE D IN AY 2011-12. THE INCOME FOR AY 2013-14 WAS ESTIMATED BY INCREASING 7% OVER AND ABOVE WHAT WAS ARRIVED AT FOR AY 2012-13 AND THE INCOME FOR AY 2014-15 ESTIMATED BY INCREASING 7% OVER AND ABOVE WHAT WAS ARRIVED AT FOR AY 2013-14 I.E. FOR AY 2012-13 ( RS.36,15,200 + 7% OF 36,15,200) RS.38,68,264/-, FOR AY 2013-14 (RS.38,68,264 + 7% O F RS.38,68,264) RS.41,39,042/- AND FOR AY 2014-15 (RS.41,39,042 + 7% OF RS.41,39,042) RS.44,28,774/-. AGGRIEVED, REVENUE IS IN APPEALS BEFORE US. 4. AT THE OUTSET, WE NOTE THAT THE ASSESSEE IS NOT APPEARING DURING HEARING EVEN THOUGH THE MATTER WAS LISTED AND NOTICES HAVE BEEN SENT SE VERAL TIMES. DESPITE SEVERAL NOTICES, THE ASSESSEE DID NOT BOTHER TO APPEAR SO WE ASSUME THAT ASSESSEE IS NOT INTERESTED TO CONTEST THE APPEAL OF REVENUE SO WE ARE INCLINED TO PROCEED EX PARTE. SINCE THIS IS A CASE WHERE ESTIMATION OF INCOME IS ONLY THE QUESTION, WHEN THE APPEAL WAS LISTED ON 16.05.2019, WE ASKED THE LD. DR TO FIND OUT THE TURNOVER OF THE AS SESSEE IN THE EARLIER YEARS SINCE THIS IS A CASE FOR ESTIMATION OF PROFITS SO THAT WE CAN COMPA RE THE EARLIER RESULTS OF THE ASSESSEE TO 3 ITA NOS.21 TO 23/GAU/2018 PEGASUS HOTELS (P) LTD. AY: 2012-13 TO 2014-15, ESTIMATE THE INCOME OF THE ASSESSEE IN THESE ASSESS MENT YEARS BEFORE US. THEREFORE, THE LD. DR REQUESTED FOR A DAYS TIME SO THAT HE CAN COMPIL E THE RESULTS OF TURNOVER FOR EARLIER YEARS AND THESE YEARS; AND WHEN THE APPEAL WAS HEARD, TOD AY I.E. ON (17.05.2019) THE LD. DR BROUGHT TO OUR NOTICE THAT FOR AY 2009-10 AS PER T HE 26AS THE ASSESSEE RECEIVED RS. 55 LAKHS, FOR AY 2010-11 AS PER 26AS IT WAS RS.59 LAK HS , THE SYSTEM UPDATION OF THE DEPARTMENT AS PER 26AS SHOWS THAT FOR AY 2011-12 SH OWS THAT IT WAS RS.1.2 CR INSTEAD OF RS. 60 LAKHS AS SHOWN BY ASSESSEE. ACCORDING TO LD. DR, FOR AY 2012-13 DURING ASSESSMENT PROCEEDINGS, THE 26AS REFLECTED APPROXIM ATELY RS. 70 LAKHS. HOWEVER, NOW DUE TO UPDATION THE SYSTEM LATEST POSITION IS SHOWING R S.1.2 CR. LIKEWISE, FOR AY 2013-14 THE 26AS DURING THE ASSESSMENT PROCEEDINGS SHOWS RS.98 LAKHS WHEREAS NOW AFTER THE UPDATION OF 26AS IN THE SYSTEM SHOWS RS.1.79 CR. LIKEWISE, FOR AY 2014-15 DURING THE ASSESSMENT PROCEEDINGS, THE 26AS REFLECTED RS.96 LAKHS WHEREAS NOW DUE TO SYSTEM UPDATION LATEST POSITION IS SHOWING RS. 2 CR. THEREFORE, THE LD. DR CONTENDED THAT THE LD. CIT(A) HAS NOT EXERCISED HIS CO-TERMINUS POWERS AND HAS SIMPLY GON E BY THE CONTENTION OF THE ASSESSEE AND HAS GIVEN RELIEF WITHOUT MAKING ANY KIND OF ENQUIRY OR CALLING FOR THE REMAND REPORT FROM THE AO. ACCORDING TO LD. DR, THE ASSESSEE HAS NOT COOPERATED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS AND THIS IS EVIDENT FROM THE ASSESSEES CONDUCT DURING THE ASSESSMENT PROCEEDINGS WHEREIN THE ASSESSEE DID NOT EVEN PRODUCE THE BOOKS OF ACCOUNT ON THE SPECIOUS PLEA THAT THERE IS SOME DISPUTE BETWEE N THE PARTNERS/DIRECTORS AND DID NOT BOTHER TO EVEN FILE RETURN OF INCOME FOR THESE ASSE SSMENT YEARS, AND IT WAS POINTED OUT THAT THE AO HAS TAKEN NOTE THAT THE LAST RETURN FIL ED BY ASSESSEE PERTAINED TO A.Y. 2011-12. THE AO, THEREFORE, ONLY ON THE BASIS OF 26AS DATA E STIMATED THE INCOME WHEREAS BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THAT THE ESTIMATI ON WAS HIGH PITCHED AND HIGH-HANDED AND HE SIMPLY REDUCED IT TO 7% FROM WHAT AO ESTIMAT ED AT 10%, 20% AND 30% WHICH IS ERRONEOUS. ACCORDING TO LD. DR, THE INCOME OF THE ASSESSEE COULD NOT BE PROPERLY ASSESSED FOR NON-COOPERATIVE CONDUCT AND NON-EFFECTIVE PARTI CIPATION ON THE PART OF THE ASSESSEE. IN THE LIGHT OF THE ABOVE, THE LD. DR PRAYS THAT THE M ATTER MAY BE RESTORED BACK TO THE AO TO CORRECTLY ESTIMATE THE INCOME. 5. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FA CTS AND CIRCUMSTANCES OF THE CASE. THE FACTS STATED AFORESAID ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN REDUCING THE ESTIMATED INCOME 4 ITA NOS.21 TO 23/GAU/2018 PEGASUS HOTELS (P) LTD. AY: 2012-13 TO 2014-15, COMPUTED BY THE AO. ACCORDING TO LD. DR, THE LD. C IT(A) HAS SIMPLY TAKEN THE CONTENTION OF THE ASSESSEE AS GOSPEL TRUTH AND HAS PASSED THE ORDER WITHOUT EVEN COMPARING THE EARLIER RESULTS OF THE ASSESSEE. AFTER THE AFO RESAID DISCUSSION, WE ALSO CONCUR WITH THE VIEW OF LD. DR THAT LD. CIT(A) HAS REDUCED THE ESTI MATED INCOME WITHOUT ANY BASIS AND THUS EXPOSES THE NON-APPLICATION MIND WHILE CONSIDE RING THE APPEAL OF THE ASSESSEE AND WITHOUT HEARING THE AO NEED TO BE SET ASIDE. ACCORD ING TO US, THE ESTIMATION OF INCOME SHOULD BE MADE BY THE AO IN A REASONABLE MANNER. T HE ESTIMATION OF INCOME SHOULD BE REASONABLE AND COMPARABLE CASES OF THIRD PARTIES WH O ARE INTO IDENTICAL BUSINESS AND SIMILARLY PLACED IF AVAILABLE WOULD BE THE BEST. IF NOT THEN ASSESSEES OWN RESULT/EARLIER PERFORMANCE CAN GUIDE THE AO WHILE ESTIMATING THE I NCOME. NEEDLESS TO SAY IF AO BRINGS IN COMPARABLES AFTER GIVING OPPORTUNITY TO THE ASSESSE E TO BRING ITS OWN COMPARABLES AND OBJECT TO THE COMPARABLES BROUGHT BY AO, THEREAFTER A REASONABLE ESTIMATION OF INCOME SHOULD BE COMPUTED. HERE, WE NOTE THAT THE LD. CIT (A) HAS NOT DONE ANY SUCH EXERCISE TO ESTIMATE THE INCOME OF THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY FOR BOTH THE PARTIES, WE SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO TO FRAME DE NOVO ASSESSMENT OF THE INCOME OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS UNDER APPEAL IN ACCORDANCE TO LAW AFTER HEARI NG THE ASSESSEE. THE ASSESSEE IS AT LIBERTY TO PRODUCE DOCUMENTS TO SUBSTANTIATE ITS CLAIM IF A NY AS PER LAW. WE ALSO DIRECT THE AO TO CARRY OUT THE DE NOVO ASSESSMENT UNINFLUENCED BY TH E OBSERVATION AND DISCUSSION REGARDING THE FACTS OF THE CASE (SUPRA). THE AO TO INDEPENDEN TLY FRAME ASSESSMENT BASED ON MATERIAL / EVIDENCE TO ASSESS THE INCOME AS CONTEMPLATED AND E NVISAGED BY LAW. ALL THE APPEALS OF REVENUE ARE THUS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, ALL THE APPEALS OF REVENUE ARE AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JULY, 2019. SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1ST JULY, 2019 JD.(SR.P.S.) 5 ITA NOS.21 TO 23/GAU/2018 PEGASUS HOTELS (P) LTD. AY: 2012-13 TO 2014-15, COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT, CIRCLE-SHILLONG, AAYAKAR BHAWA N, SHILLONG. 2 RESPONDENT .M/S. PEGASUS HOTESL PVT. LTD., POLIC E BAZAR, SHILLONG- 793001. 3. 4. CIT(A), SHILLONG, AAYAKAR BHAVAN, M. G. ROAD, SHILL ONG -793001. ACIT, CIRCLE-SHILLONG. 5. DR, ITAT, GUWAHATI BENCH, GUWAHATI / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR