ITO 24(3)1, MUMBAI V. HERITAGE RESTAURANT & BAR, MUMBAI

ITA 3092/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8194 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 26-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 142(1); 144

Judgement Text

ITA/3092HR&B/09-10 1 , , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH. . . , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3092/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 ITO-24(3)(1), BKC,BANDRA(EAST),MUMBAI. VS. ' M/S. HERITAGE RESTAURANT & BAR 6/12, NIVRUTI BIDG, AAREY ROAD, GOREGAON (EAST),MUMBAI-63 PAN:AMMPS576OK ( %& / APPELLANT) ( '(%& / RESPONDENT) ')* ')* ')* ')* + + + + / ASSESSEE BY : SHRI JAVED AKHTAR, , + / REVENUE BY : SHRI HARIDAS BHAT ' ' ' ' , ,, , *- *- *- *- / DATE OF HEARING : 26-08-2014 ./# , *- / DATE OF PRONOUNCEMENT : 26-08-2014 ' ' ' ' , 1961 , ,, , 254 254 254 254( (( (1 11 1) )) ) *6* *6* *6* *6* 7 7 7 7 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 11.02.2013 OF THE CIT(A )-34,MUMBAI ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE NET PROFIT AT 5% OF TOTAL TURNOVER AS AGAINST 61.69% ESTIMATED BY THE AO, IGNORING THE FACT THAT THE ASSESSEE DID NOT PRODUCE THE BOOK S OF ACCOUNTS IN ABSENCE OF WHICH THE PROFIT WAS ESTIMATED ON PRO RATA BASIS BASED ON THE ADDITIONAL INCOME DECLARED BY THE ASSESSEE ON UNACCOUNTED SALES IN THE PRECEDING YEAR DURING SURV EY ACTION. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAVES LEAVE TO AME ND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH MAY BE NECESSARY 2. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF RUNNING BA R & RESTAURANT FILED ITS RETURN OF INCOME ON 29.09.2009,DECLARING TOTAL INCOME AT RS.26,384/- . INITIALLY THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT.LATER ON NOTICES U/S.143(2) AND 142(1) OF THE ACT, ALONG WITH QUESTIONNAIRE WERE ISSUE TO THE ASSESSEE TO FURNISH VARIOUS DETAILS ON MANY OCCASIONS.NOTICE U/S.271 R.W. SECTION 274 WAS ALSO ISSUED TO THE ASSESSEE.AS PER THE AO, THE ASSE SSEE DID NOT APPEAR BEFORE HIM NOR DID HE FILE ANY DETAILS THOUGH AMPLE OF OPPORTUNITIES BY HEARIN G WAS GIVEN TO IT. HE LEVIED PENALTY U/S.271 (B) OF THE ACT.LATER ON AUTHORISED REPRESENTATIVE ( AR) OF THE ASSESSEE APPEARED BEFORE THE AO AND FILED CERTAIN DETAILS.DURING THE ASSESSMENT PRO CEEDINGS THE AO FOUND THAT THE ASSESSEE HAD SHOWN TURNOVER OF RS.52,68,898/-,THAT AFTER DEBITIN G ALL EXPENSES AND PURCHASES NET PROFIT AMOUNTING TO RS.26,384/-WAS SHOWN BY IT,THAT A SURV EY ACTION U/S.133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 29. 09.2007, THAT THE ASSESSEE HAS DISCLOSED ADDITIONAL INCOME TO THE TUNE OF RS.30,00,000/- ON ACCOUNT OF UNACCOUNTED SALES FOUND ON DATE ITA/3092HR&B/09-10 2 OF SURVEY, THAT THE SAID AMOUNT WAS SEPARATELY ADDE D IN THE COMPUTATION OF INCOME AS ADDITIONAL INCOME DECLARED U/S.133A OF THE ACT.THE AO,VIDE ORD ER SHEET NOTING,DATED 11.08.2011,ASKED THE ASSESSEE TO FILE STOCK REGISTER,EXCISE REGISTER, BA NK STATEMENTS, SALES TAX RETURN. HE FOUND THAT THERE WAS DIFFERENCE IN PURCHASES AS PER THE TCS AN D BOOKS OF ACCOUNTS. HE ALSO DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY NOT TO FOLLOW THE PRE VIOUS YEARS ORDER AND TO TAKE THE INCOME AS PER THE ASSESSMENT YEAR WHEN A SUREVEY WAS CARRIED OUT. HE OBSERVED THAT THE GROSS PROFIT SHOWN BY THE VERY LOW.AS PER THE AO THERE WAS NO COMPLIAN CE BY THE ASSESSEE. HE HELD THAT THE ASSESSEE HAD NOT PRODUCED ANY BOOKS OF ACCOUNTS OR SUPPORTING VOUCHERS, THAT IN THE ABSENCE OF FURNISHING OF NECESSARY DETAILS BY THE ASSESSEE THE RETURN OF INCOME AND THE RESULT SHOWN BY THE ASSESSEE IN THE RETURN COULD NOT BE VERIFIED, THAT DURING THE SURVEY IT WAS FOUND THAT ASSESSEE WAS NOT RECORDING ITS SALES CORRECTLY,THAT IT WAS CLAIM ING EXPENSES AGAINST THE ACCOUNTED SALES, THAT NON FURNISHING BOOKS OF ACCOUNTS, SUPPORTING VOUCHE RS, STOCK REGISTER AND OTHER DETAILS CALLED FOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS PROVED THAT WAS RESULT SHOWED BY IN ITS RETURN WERE NOT CORRECT,THAT THE SALE COULD NOT BE VERIFIED IN THE ABSENCE OF FURNISHING AND SUPPORTING DOCUMENTS.ACCORDINGLY,HE REJECTED THE BOOKS OF ACCO UNTS OF INVOKING IN THE PROVISIONS OF SECTION 145(3) OF THE ACT AND COMPLETED THE ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT.REFERRING TO THE PURCHASES OF ASSESSMENT YEAR 2008-09 AND DISCLOSURE MADE FOR THAT YEAR, THE AO CALCULATED THE INCOME ON PRO-RATA BASI S AT RS.33.76 LAKHS. HE FURTHER HELD THAT THE ASSESSEE HAS PAID REMUNERATION TO PARTNERS TO THE T UNE OF RS.95,500/-,THAT AFTER REDUCING THE REMUNERATION THE TOTAL INCOME OF THE ASSESSEE HAD T O BE ASSESSED AT RS.32.81 LAKHS. 3.AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PRE FERRED APPEAL BEFORE FIRST APPELLATE AUTHORI -TY(FAA).AFTER CONSIDER THE CONTENTIONS OF THE ASSS ESSEE MADE DURING THE APPEAL PROCEEDINGS AND THE ASSESSMENT ORDER,THE FAA HELD THAT THE ASSE SSEE DID NOT PRODUCE STOCK REGISTER, BANK STATEMENT AND SUPPORTING VOUCHER FOR EXPENSES ALONG WITH SALES TAX RETURN ON 16.11. 2011, THAT IT HAD NOT DISCHARGED ONUS CAST UPON IT BY NOT COMPLYI NG WITH THE REQUIRE DETAILS, THAT THE AO HAD NO OTHER OPTION EXCEPT REJECTION ITS BOOKS OF ACCOU NTS,THAT THE ASSESSEE PREVENTED THE AO FROM MAKING INVESTIGATION BY NOT FILLING ANY DETAILS,THA T THE AO WAS JUSTIFIED IN REJECTING THE BOOK OF ACCOUNTS OF THE ASSESSEE.HE FURTHER HELD THAT THE A O HAD MISPLACED HIMSELF BY ESTIMATING THE NET PROFIT AT 61 .69% ON THE TOTAL RECEIPTS OF RS.53,18 .514/-.,THAT HE HAD NO MATERIAL IN HIS POSSESSION TO COME TO THE CONCLUSION THAT THERE WERE UNACCOUNT ED SALES DURING THE YEAR,THAT FOR THE AY.2008-09 THE ASSESSEE ITSELF HAD AGREED TO ADDITI ONAL INCOME ON ACCOUNT OF UNACCOUNTED SALES FOUND DURING THE COURSE OF SURVEY,THAT IN THE ABSEN CE OF ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE APPELLANT HAD RESORTED TO UNACCOUNTED SALES DUR ING THE YEAR IT WAS NOT OPEN TO THE AO TO ESTIMATE THE NET PROFIT AT AN ASTRONOMIC RATE OF 61 .69%,THT THE AO HAD NOT BROUGHT ANY COMPARABLE CASES TO ADOPT SUCH ARBITRARY FIGURE AS NET PROFIT,THAT SURVEY DECLARATION IN THE PREVIOUS YEAR COULD NOT BE THE BASIS FOR ESTIMATING THE PROFIT ON PRO RATA BASIS.HE DIRECTED THE ASSESSEE TO FURNISH THE COMPARATIVE STATEMENT OF TU RNOVER/GROSS PROFIT AND NET PROFIT FOR A.YS.2006-07 TO 2008-09.AFTER ANALYSING THOSE FIGUR ES,HE HELD THAT THE ASSESSEE HAD BEEN CONSISTENTLY DECLARING THE NET PROFIT AT AN AVERAGE RATE OF 1.35%.,THAT THE ABNORMAL NET PROFIT DECLARED FOR A.Y.2008-09 AT 58.8% WAS ON ACCOUNT OF ADDITIONAL INCOME OFFERED AS A RESULT OF SURVEY U/S.133A WHICH COULD NOT BE TAKEN AS BASIS T O COMPUTE THE NET PROFIT FOR THE YEAR IN QUESTION.HE DIRECTED THE AO TO ESTIMATE THE NET PRO FIT AT 5% OF THE TOTAL TURNOVER WHICH WORKED OUT TO RS.2,65,925/-.AS A RESULT,ADDITION AMOUNTING TO RS.30,15,275/- WAS DELETED BY THE FAA. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE STATED THAT T HE ASSESSEE HAD NOT COOPERATED WITH THE ITA/3092HR&B/09-10 3 AO,THAT IT HAD NOT PRODUCED ANY DOCUMENT OR BOOKS T HAT COULD PROVE THE CORRECTNESS OF THE ACCOUNTS,THAT AO WAS COMPELLED TO ADOPT THE FIGURES OF EARLIER YEAR FOR ESTIMATING THE INCOME FOR THE YEAR UNDER CONSIDERATION,THAT THE FAA HAD REDUC ED THE GP RATE TO 5% WITHOUT ANY BASIS.AUTHORISED REPRESENTATIVE(AR)ARGUED THAT THE AO HAD ADOPTED THE FIGURES FOR THE YEAR WHEN A SURVEY WAS CONDUCTED,THAT FIGURES FOR THAT Y EAR COULD NOT BE APPLIED FOR THE YEAR UNDER APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RECORDS.WE FIND THAT THE ONLY ISSUE TO BE DECIDED BY US IS ESTIMATION OF GP RATE.THE AO HAD C ALCULATED THE GP @61.69% AND THE FAA HAD REDUCED THE SAME @5%.WHILE THE AO HAD REFERRED TO THE INCOME OF THE EARLIER YEAR WHEN AN ACTION U/S.133A OF THE ACT WAS CARRIED OUT AT THE B USINESS PREMISES OF THE ASSESSEE AND THE FAA HAS REFERRED TO THE LAST THREE YEARS GP AND NP RATE S.THUS,BOTH HAVE ADOPTED SOME KIND OF ESTIMATE.IT IS FACT THAT THE ASSESSMENT FOR THE OTH ER YEARS RELIED UPON BY THE FAA,WERE NOT COMPLETED U/S.143(3) OF THE ACT. AS PER THE SETTLED PRINCIPLES OF TAX JURISPRUDENCE THE AO IS AUTHORISED TO MAKE AN ASSESSMENT TO THE BEST OF HIS JUDGMENT AGAINST A PERSON WHO IS IN DEFAULT AS REGARDS SUPPLYING INFORMATION. COURTS ARE OF THE VIEW THAT THE AO MUST NOT ACT DIS HONESTLY, OR VINDICTIVELY OR CAPRICIOUSLY AND MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMAT E OF THE PROPER FIGURE OF ASSESSMENT,THAT FOR THIS PURPOSE HE MUST TAKE INTO CONSIDERATION LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES AND HIS OWN KNOWLEDGE OF P REVIOUS RETURNS OF THE ASSESSEE,AND ALL OTHER MATTERS WHICH HE THINKS WOULD ASSIST HIM IN ARRIVIN G AT A FAIR AND PROPER ESTIMATE.COURTS ARE ALSO OF THE VIEW THAT THOUGH IT WOULD NECESSARILY BE GUE SS-WORK BUT IT MUST BE HONEST GUESS-WORK.WE FIND THAT THE FAA HAS NOT GIVEN ANY REASON FOR ESTI MATING THE PROFIT @5% EXCEPT REFERRING TO THE DOCUMENTS PRODUCED BEFORE HIM FOR THE FIRST TIME.HE HAS NOT MENTIONED THE RATE OF GP SHOWN BY THE ASSESSEES CARRYING OUT SIMILAR KIND OF BUSINESS .IT IS A KNOWN FACT THAT THE PROFIT MARGIN OF AN ESTABLISHMENT SELLING LIQUOR IS ALWAYS HIGHER THAN THE NORMAL PLACE OF EATING AND DINNING. ESTIMATE FINALLY REMAINS ESTIMATE AND NO HARD AND F AST RULES CAN BE FIXED FOR DETERMINING ESTIMATE-IT DEPENDS UPON THE FACTS OF THE CASE.CONS IDERING THE FACTS THAT THE ASSESSEE IS SERVING LIQUOR AND THE NORMAL G.P.IN THE BUSINESS OF EATERY BUSINESS CANNOT BE SO LOW AS 5%, WE ARE OF THE OPINION THAT TO MEET THE END OF JUSTICE GP SHOU LD BE ESTIMATED AT 30% FOR THE YEAR UNDER APPEAL.WE WANT TO MAKE IT CLEAR THAT CONSIDERING TH E PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL,WE HAVE ESTIMATED THE GP AT A PARTICUL AR RATE-WE ARE NOT LAYING DOWN ANY GENERAL PRINCIPLE IN THIS REGARD. OUR DECISION IS RESTRICTE D TO THE FACTS OF THE CASE ONLY.EFFECTIVE GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE AO,IN PART. AS A RESULT, APPEAL FILED BY THE AO S TANDS PARTLY ALLOWED. 8*9 ')* - : ; , 6 <7 = > , * ?@ . ORDER PRONOUNC ED IN THE OPEN COURT ON 26 TH ,AUGUST 2014 . 7 , ./# A B' 26 6* , 201 4 / , 6 C SD/- SD/- . . / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, B' /DATE: 26.08 . 2014. ITA/3092HR&B/09-10 4 7 7 7 7 , ,, , '*D '*D '*D '*D E D#* E D#* E D#* E D#* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ F G , 4. THE CONCERNED CIT / F G 5. DR H BENCH, ITAT, MUMBAI / DH6 '*' , , . . . 6. GUARD FILE/ 6 8 (D* (D* (D* (D* '* '*'* '* //TRUE COPY// 7' / BY ORDER, I / ? DY./ASST. REGISTRAR , /ITAT, MUMBAI