DCIT Corporate Circle 4(2), CHENNAI V. New Woodlands Hotel Private Limited, CHENNAI

ITA 2509/CHNY/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6357 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 16-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BEEMA BHAT
• Assessee Lawyers: B SAGADEVAN
• Keywords: Wrong claim; Onus to prove

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , ! ' # , $ #% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.2412 & 2413/CHNY/2017 & '& /ASSESSMENT YEAR: 2013-14 & 2014-15 M/S. NEW WOODLANDS HOTEL PVT. LTD., 72-73, DR. RADHAKRISHNAN ROAD, MYLAPORE, CHENNAI 600 034. VS. ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV(2), CHENNAI. [PAN: AAACN 2043D] ( () /APPELLANT) ( *+() /RESPONDENT) ./ ITA NOS.2508 & 2509/CHNY/2017 & '& /ASSESSMENT YEAR: 2013-14 & 2014-15 DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-4(2), CHENNAI. M/S. NEW WOODLANDS HOTEL PVT. LTD., 71-75, DR. RADHAKRISHNAN ROAD, MYLAPORE, CHENNAI 600 034. [PAN: AAACN 2043D] ( () /APPELLANT) ( *+() /RESPONDENT) () , - / APPELLANT BY : SHRI BEEMA BHAT, C.A *+() , - /RESPONDENT BY : SHRI B. SAGADEVAN, JCIT . , /$ /DATE OF HEARING : 10.01.2019 01' , /$ / DATE OF PRONOUNCEMENT : 30.01.2019 ITA NOS.2412 & 2413/CHNY/2014 & 2508 &2509/CHNY/201 7 M/S. NEW WOODLANDS HOTEL PVT. LTD. (AY: 2013-14 & 2 014-15) :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE- COMPANY AS WELL AS REVENUE DIRECTED AGAINST THE COMMON ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI (C IT(A) FOR SHORT) DATED 26.07.2017 FOR THE ASSESSMENT YEAR (AY) 2013- 14 & 2014-15. 2. SINCE, THE IDENTICAL FACTS AND ISSUE IS INVOLVED IN THESE APPEALS, WE PROCEED TO DISCUSS THE SAME VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENT AND CLARITY THE FACTS RELEVANT FOR THE A Y 2013-14 IN ITA NO.2412 /CHNY/2017 FOR THE AY 2013-14 ARE STATED HE REIN. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 ENGAGED IN THE BUSINESS OF BOAR DING AND LODGING. THE RETURN OF INCOME FOR THE AY 2013-14 WAS FILED O N 27.09.2013 DISCLOSING TOTAL INCOME OF RS. 76,16,990/-. AGAINS T THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY ASST. COMMI SSIONER OF INCOME TAX, CORPORATE CIRCLE-4(2), CHENNAI VIDE ORD ER DATED 15.03.2016 TOTAL INCOME OF RS. 2,96,04,147/-. WHILE DOING SO, THE ASSESSING OFFICER (AO) HAS DISALLOWED THE CLAIM FOR DEDUCTION OF SERV ICE CHARGES PAID TO THE EMPLOYEES FOR RS. 2,16,80,648/- BY HOLDING THAT IT IS A BOGUS CLAIM AS ITA NOS.2412 & 2413/CHNY/2014 & 2508 &2509/CHNY/201 7 M/S. NEW WOODLANDS HOTEL PVT. LTD. (AY: 2013-14 & 2 014-15) :- 3 -: THE EMPLOYEES, WHO WERE EXAMINED BY THE AO HAD DENI ED HAVING RECEIVED ANY SERVICE CHARGES. THE RELEVANT FACTS R ELATING TO THIS CLAIM WERE SET OUT BY THE AO VIDE PARA 5 OF THE ASSESSMEN T ORDER. THE AO ALSO MADE ADDITION ON INTEREST OF IT REFUND OF RS. 3,06,509/-. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO AFTER ANALYZING THE NATURE OF CLAIM HELD THAT THE S ERVICE CHARGES PAID THROUGH THE BANKING CHANNELS TO THE PERMANENT EMPLO YEES AND THE SERVICE CHARGES PAID IN CASH TO THE OTHER TEMPORARY EMPLOYEES IS ALLOWABLE AND HELD THAT THE BALANCE OF EXPENDITURE IS NOT ALLOWABLE. THE LD. CIT(A) HAD CONSIDERED THE TOTAL AMOUNT OF SERVI CE CHARGES COLLECTED BY THE ASSESSEE-COMPANY AND OUT OF WHICH THE SERVIC E CHARGES PAID TO THE PERMANENT EMPLOYEES THROUGH BANKING CHANNEL WAS REDUCED TO ARRIVE AT THE AMOUNT OF SERVICE CHARGES PAID TO THE TEMPORARY EMPLOYEES IN CASH. OUT OF THE SERVICE CHARGES CLAIMED TO HAV E BEEN PAID IN CASH. THE SERVICE CHARGES DEEMED TO HAVE BEEN PAID TO THE TEMPORARY EMPLOYEES WAS REDUCED AND THE BALANCE OF SERVICE CH ARGES CLAIMED TO HAVE PAID IN CASH TO THE PERMANENT EMPLOYEES WAS DI SALLOWED. BEING AGGRIEVED BY THAT PART OF ORDERS OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US IN ITA NO.2412 & 2413/CHNY/2017 FOR THE A Y 2013-14 & 2014- 15. BEING AGGRIEVED, THAT PART OF THE LD. CIT(A), WHICH IS AGAINST THE ITA NOS.2412 & 2413/CHNY/2014 & 2508 &2509/CHNY/201 7 M/S. NEW WOODLANDS HOTEL PVT. LTD. (AY: 2013-14 & 2 014-15) :- 4 -: REVENUE, THE REVENUE IS IN ITA NO.2508 & 2509/CHNY/ 2014 FOR THE AY 2013-14 & 2014-15. 5. WE HAD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE NATURE OF THE CLAIM WAS EXPLAINED BY THE ASSESS EE-COMPANY BEFORE THE AO AS UNDER: 5. WHEN ASKED TO EXPLAIN THE NATURE OF SERVICE DON E BY THE STAFF FOR GETTING THESE SERVICE CHARGES, THE ASSESSEE-COMPANY SUBMITTED A NOTE AS UNDER: SERVICE CHARGES ARE PAID IN LIEU OF TIPS, PREVIOUS LY, THE ROOM BOYS WHO HAD OPPORTUNITIES TO CARRY FOOD ITEMS TO T HE ROOMS OF THE CUSTOMERS, RECEIVED TIPS FROM THEM AND POCKETED THE M. IN THE COURSE OF TIME, THE AMOUNT SO CORNERED BY A FEW, CREATED B ICKERING AMONG THE STAFF THE ENTIRE EMPLOYEES OF THE HOTEL FELT THAT T HE TIPS THAT ARE GIVEN BY THE CUSTOMERS MUST GO TO EACH AND EVERY INDIVIDU AL. SEVERAL MEETINGS TOOK PLACE AND FINALLY A SOLUTION HAS BEEN ARRIVED AT BY WHICH CERTAIN PERCENTAGE ON THE TOTAL AMOUNT OF THE BILL PREPARED FOR THE OCCUPANTS OF THE HOTEL AND ON THE SALE OFFOOD ITEMS IN THE RESTAURANT WAS TO CHARGE AS SERVICE CHARGES AND THE AMOUNT S O COLLECTED WOULD BE DISTRIBUTED TO ALL EMPLOYEES. THIS PAYMENT IS IN ACCORDANCE WITH THE AGREEMENT WITH THE EMPLOYEES WHEREIN ALL THE EMPLOY EES GET BENEFIT OUT OF IT SINCE THE CLAIM OF THE ASSESSEE-COMPANY APPEA RS TO BE STRANGE, THE ASSESSEE-COMPANY WAS ASKED TO PRODUCE THE REGIS TERS, VOUCHERS RELATING TO THESE PAYMENTS AND ALSO THE STAFF MEMBE RS TO WHOM THE SERVICE CHARGES ARE CLAIMED TO HAVE BEEN PAID. ON E XAMINATION OF THE PERSONS, REGISTERS AND THE VOUCHERS PRODUCED BY THE ASSESSEE- COMPANY, IT WAS FOUND THAT THE CLAIM OF THE ASSESSE E REGARDING PAYMENT OF SERVICE CHARGES IS TOTALLY INCORRECT A ND THE ASSESSEE- COMPANY HAS RESORTED TO CONCEALMENT ITS TRUE INCOME BY INFLATING THE EXPENDITURE IN THE GUISE OF SERVICE CHARGES. IN THI S REGARD, A SHOW CAUSE NOTICE CUM OPPORTUNITY LETTER WAS ISSUED ON 2 5.02.20 16 TO THE ASSESSEE-COMPANY REQUIRING IT TO SUBSTANTIATE ITS C LAIM. THE SHOW CAUSE LETTER IS REPRODUCED BELOW. 6. FROM THE ABOVE, IT IS VERY CLEAR THAT WHAT IS PA ID TO THE EMPLOYEES IS ONLY OUT OF THE AMOUNT COLLECTED FROM THE CUSTOM ERS IN THE FORM OF THE SERVICE CHARGES BUT THE TOTAL SERVICE CHARGES PAID TO THE EMPLOYEES FAR EXCEEDS THE AMOUNT COLLECTED. THIS FACT UNDOUBTEDL Y RAISES DOUBTS AS TO ITA NOS.2412 & 2413/CHNY/2014 & 2508 &2509/CHNY/201 7 M/S. NEW WOODLANDS HOTEL PVT. LTD. (AY: 2013-14 & 2 014-15) :- 5 -: THE GENUINENESS OF THE CLAIM MADE. PERHAPS, THIS W OULD HAVE TRIGGED THE ASSESSING OFFICER TO ENQUIRE INTO THE GENUINENE SS OF THE CLAIM. AS A PART OF INQUIRY INTO THE CLAIM, THE ASSESSING OFFIC ER HAD EXAMINED CERTAIN EMPLOYEES, WHO HAD DENIED HAVING RECEIVED ANY SUCH SERVICE CHARGES. HOWEVER, THIS WOULD NOT LEAD TO A CONCLUSION THAT T HE CLAIM IS UNTENABLE IN VIEW OF THE FACT THAT THE EMPLOYEES, WHO WERE EX AMINED BY THE AO MAY NOT BE WORKING DURING THAT RELEVANT TIME. HOWEV ER, THE ONUS OF PROVING THE CLAIM ALWAYS LIES ON THE ASSESSEE. BUT , THE PRESENT CASE, THE ASSESSEE-COMPANY FAILED TO LEAD ANY EVIDENCE TO PROVE THE CLAIM. THE LD. CIT(A) HAD MERELY BASED ON THE PRESUMPTIONS THAT THE ASSESSEE- COMPANY WOULD HAVE PAID TO THE EMPLOYEES TO THE EXT ENT OF THE SERVICE CHARGES COLLECTED AND ALLOWED THE CLAIM TO THE EXTE NT OF SERVICE CHARGES COLLECTED. FURTHER, THE LD. CIT(A) HAD NOT EVEN EXA MINED WHETHER THE SERVICE CHARGES ARE REALLY COLLECTED BY THE ASSESSE E-COMPANY NOR WAS ANY EVIDENCE WAS DISCUSSED IN THE ORDER IN SUPPORT OF THE CLAIM FOR THE EXPENDITURE. THUS, THE LD. CIT(A) HAD PROCEEDED ON ASSUMPTIONS AND PRESUMPTIONS WHILE GRANTING THE PARTIAL RELIEF. THU S, THE ORDER OF THE LD. CIT(A) IS ALSO NOT SUPPORTED BY ANY MATERIAL ON REC ORD. THE LD. CIT(A) ALSO FAILED TO NOTE THAT THE FACTS NECESSARY TO PRO VE THE CLAIM WOULD BE WITHIN KNOWLEDGE OF THE ASSESSEE AND IT IS THE DUTY OF THE ASSESSEE ALONE TO PROVE THAT WHAT IS CLAIMED IS TRUE AND COR RECT. ( GANGA RAM ITA NOS.2412 & 2413/CHNY/2014 & 2508 &2509/CHNY/201 7 M/S. NEW WOODLANDS HOTEL PVT. LTD. (AY: 2013-14 & 2 014-15) :- 6 -: BALMOKAND VS. CIT (5 ITR 464), LAL MOHAN KRISHNA LAL PAUL VS. CIT (12 ITR 441)(CAL.) AND SECTION 106 OF THE EVIDENCE ACT) . THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT OF CALCUTTA I N THE CASE OF LAL MOHAN KRISHNA LAL PAUL (SUPRA) IS AS FOLLOWS: THE QUESTION AS FRAMED FOR THE OPINION OF THIS COU RT IS WHETHER THERE IS ANYTHING IN LAW WHICH CASTS THE BURDEN OF PROOF ON THE INCOME-TAX OFFICER OR THE APPELLATE AUTHORITY TO PROVE BY POSITIVE EVI DENCE THAT THEY ARE ITEMS ASSESSABLE TO TAX. THIS QUESTION WAS DEALT WI TH BY A BENCH OF THE LAHORE HIGH COURT IN A CASE (GANGA RAM BALMOKAND V. COMMISSIONER OF INCOME-TAX, PUNJAB) REPORTED IN 1937, 5 INCOME-TAX REPORTS, 464 AT PAGE 475 : 'I AM NOT, HOWEVER, PREPARED TO HOLD,' SAYS M R. JUSTICE DIN MOHAMMAD, 'THAT ANY BURDEN IS IMPOSED ON THE INCOME -TAX AUTHORITIES TO PROVE BY 'POSITIVE EVIDENCE' THAT THE ACCOUNTS ARE UNRELIABLE OR THAT THE FIGURE AT WHICH THEY ASSESS IS THE CORRECT FIGURE. IN THE FIRST PLACE, THE QUESTION OF UNRELIABILITY OF ACCOUNTS IS A QUESTION OF FACT AND PRIMARILY FALLS FOR THE DETERMINATION OF THE INCOME-TAX AUTHORITIES ALONE................SECONDLY, THE INCOMETAX OFFICE R CANNOT BE FIXED WITH THE KNOWLEDGE OF THE STATE OF THE ASSESSEE'S ACCOUNTS A ND CANNOT CONSEQUENTLY BE EXPECTED TO LEAD EVIDENCE TO PROVE THE ASSESSEE'S TRANSACTIONS FOR THE ACCOUNTING YEAR. UNDER SECTION 106 OF THE EVIDENCE ACT, THE ONUS OF PROVING A FACT ALWAYS LIES ON THE PERSON WITHIN WHOSE KNOWLEDGE ESPECIALLY THAT FACT IS AND IT CANNOT BE DENIED THAT IT IS THE ASSESSEE WHO IS THE PERSON CONTEMPLATED BY THIS SEC TION.' WE HAVE ALSO BEEN REFERRED IN THE COURSE ARGUMENT T O SECTION 114 OF THE EVIDENCE ACT WHICH PROVIDES IN ILLUSTRATION (G) THAT THE COURT MAY PRESUME THAT EVIDENCE WHICH COULD BE, AND IS NOT, P RODUCED WOULD, IF PRODUCED, BE UNFAVOURABLE TO THE PERSON WHO WITHHOL DS IT. THE INCOME- TAX OFFICER MAY SIMILARLY PRESUME THAT IF THERE IS EVIDENCE WHICH MIGHT HAVE BEEN PRODUCED, IN SUPPORT OF THE ASSESSEE'S CA SE AND THAT EVIDENCE HAS NOT BEEN PRODUCED, THE REASON IS THAT IT WOULD NOT ASSIST THE ASSESSEE'S CONTENTION. 7. KEEPING IN VIEW THE PRINCIPLE OF LAW ENUNCIATED IN THE ABOVE DECISION, WE OF THE OPINION THAT THE ASSESSING OFFI CER WAS JUSTIFIED IN DRAWING ADVERSE INFERENCE ON THE CLAIM AND THE LD. CIT(A) OUGHT NOT HAVE GRANTED ANY RELIEF IN THE ABSENCE OF ANY EVIDE NCE IN SUPPORT OF THE ITA NOS.2412 & 2413/CHNY/2014 & 2508 &2509/CHNY/201 7 M/S. NEW WOODLANDS HOTEL PVT. LTD. (AY: 2013-14 & 2 014-15) :- 7 -: CLAIM. THEREFORE, THE APPEALS FILED BY THE ASSESSE E ARE DISMISSED AND THE APPEALS FILED THE REVENUE ARE ALLOWED. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED AND THE APPEALS FILED BY THE REVENUE ARE ALLOWED. ORDER PRONOUNCED ON THE 30 TH DAY OF JANUARY, 2019 IN CHENNAI . SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' # ) (INTURI RAMA RAO) $ /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 30 TH JANUARY, 2019. EDN, SR. P.S , */34 54'/ /COPY TO: 1. () /APPELLANT 4. . 6/ /CIT 2. *+() /RESPONDENT 5. 47 */ /DR 3. . 6/ ( )/CIT(A) 6. 8& 9 /GF