M/s. Naveen Hotels Limited, Bengaluru V. Assistant Commissioner Of Income Tax, Circle- 2(3), Bangalore

ITA 433/BANG/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5299 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-05-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Business expenditure; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE Before Shri Chandra Poojari, AM & Smt. Beena Pillai, JM ITA No. 433/Bang/2020 (Assessment Year: 2012-13) M/s. Naveen Hotels Ltd. No. 14th, 7th Floor, No. 37 Naveen Complex, M.G. Road Bengaluru Vs. ACIT, Circle - 2(3) Bengaluru PAN – AAACN7433R Appellant Respondent Appellant by: Shri Ashok A Kulkarni, Advocate Respondent by: Dr. Manjunath Karkihalli, CIT-DR Date of Hearing: 16.03.2022 Date of Pronouncement: 04.04.2022 O R D E R Per: Chandra Poojari, AM This is an appeal filed by the assessee against the order of the learned CIT(A)-11, Bangalore in appeal ITA No. 326/CIT(A)-11/BNG/2014-15 dated 24.02.2020 for AY 20012-13. 2. In this appeal Ground No. 1 is general, which does not require adjudication. 3. Ground No. 2 & 3 are with regard to passing of the order in violation of natural justice. In this case the CIT(A) passed the order after giving due opportunity of hearing on following dates: - 14.08.2015, 03.12.2015, 27.07.2016, 28.09.2016, 05.01.2017, 17.04.2017, 02.08.2017, 15.12.2017, 20.01.2018, 22.03.2018, 04.12.2018, 07.02.2019, 19.02.2019 4. The assessee participated in the appellate proceedings and it cannot be said that there is any violation of principal natural justice as CIT(A) considered all arguments of the assessee’s counsel and decided the issue ITA No. 433/Bang/2020 Ms. Naveen Hotels Ltd. 2 in accordance with law. Therefore, we do not see any merit in this ground of the assessee. 5. Ground No. 4 with regard to upholding the addition of Rs.89,500/- made towards sundry payments without any material on record and Ground No. 5 is interrelated to this ground. 6. The assessee stated that there is no material to substantiate the claim. The facts of the issue are that : “10. Addition on account of Sundry Payments - Perusal of assessment order shows that AO during the course of assessment proceedings had considered all seized materials and sought explanations from appellant. AO states that payments under the head "SUNDRY PAYMENTS " were grouped under account codes GE SUN 01 and GE SUN 03 are found in the original books of account. The AO states that appellant's books of accounts contained in these 54 data files revealed the following 1. The recording in these books of account is day wise, systematic and comprehensive. 2. It contains cash book, bank and all ledgers including ledger under the head "sundry" 3. The details of sundry reflected in the ledger are complete with voucher number, date, narration, amount and transaction type. 4. The transaction type mentioned against sundry payments is CP suggesting that such payments are made entirely in cash. 5. Sundry payments are also getting reflected in the cash book. 6. The voucher number assigned to each sundry expense item suggests both chronological sequence and consistency of records relating to sundry payments vis-à-vis other receipt and expenditure details reflected in the books of account. 7. The details relating to sundry payments are forming part of the entire set of books of account which includes several other ledgers. 8. Large volume of sundry payments have been booked in the accounts of company ZNS, which is a dummy company created for the very purpose of accounting for expenses and receipts which are otherwise not reflected in the regular books'of accounts prepared by the assessee for statutory purposes. 9. Where sundry payments ate forming part of books of accounts maintained in the names of RNS, NHL, MPC or NMCC all other entries in the cash book and in ledgers except those relating to sundry payments have been found to be reflected in the regular books of accounts prepared by the assessee for statutory purposes. 10. Large part of the cash used for making sundry payments is shown in these books of accounts as having been generated out of withdrawals from bank accounts of RNSIL and of benami concerns listed in para 8.7 of this report . All such withdrawals have been found to be reflected on the given dates in the bank statements of RNSIL and the nine benami concerns.' ITA No. 433/Bang/2020 Ms. Naveen Hotels Ltd. 3 7. We have heard the rival submissions. In this case there is incriminating material seized showing various sundry payments made out of cash which are not allowable as business expenditure. Being so the lower authorities disallowed the same. Before us the AR is unable to show how these payments are related to the business of the assessee. In our opinion unless these expenditure is wholly and exclusively incurred for the purpose of carrying on the business of the assessee, the expenditure cannot be allowed. Being so the lower authorities are justified in disallowing the expenditure. These grounds of appeal of the assessee is dismissed. 8. With regard to the other arguments of the assessee that there no material to substantiate the claim of the assessee’s alleged sundry payments, the Managing Director of the assessee company Shri Naveen Shetty and also Shri Narayan Shetty confirmed the usage of BTW application by RSINL and its sister concern since 10 years. Regarding the books of accounts maintained and source of transactions pertaining to the company as per the BTW application files, Shri Naveen Shetty has stated in the statement that he did not remember and his replies remained evasive and non-committal. It is to be noted that document showing the sundry payment and expenditure retrieved from the computer system bear the system generated, time stamp of date of creation or modification or deletion of the document and these reveal that these documents have been created and accessed on different dates spread over several months and years thus implying that the explanation given by Shri Naveen Shetty that the sundry expenses and sundry payments had been fabricated and implanted in the computer system and else where in his office and residence by unknown persons with the aim of creating problems for M/s. RNS Infrastructure Ltd. is frivolous and untrue. The digital evidences gathered through the search are systematic and comprehensive and the total record of actual transactions and the evidences retrieved from the server system were also supported by the hard copies of various documents and soft copies and computers seized from multiple locations. ITA No. 433/Bang/2020 Ms. Naveen Hotels Ltd. 4 Further a perusal of the books of accounts contained in the BTW files reveal that the BTW files contain cash book and all ledgers including ledge under the head “Sundry” and it is complete with voucher number, date narration, amount and transaction type. The payments were reflected in cash book and the voucher number assigned to each sundry expense item suggest both chronological sequences and consistency of records relating to sundry payments and reflected in the books of account. Majority of such folders were also found to have been deleted from the hard disk. The sundry payments were forming part of books of accounts maintained in the names of RNS, NHL, MPC, NMCC or other entries in the cash book and in ledgers except those relating to sundry payments have been found to be reflected in the regular books of accounts prepared by assessee for statutory purposes. The digital evidences discussed above, has also been found from systems in Hubli office of RNSI as well as from systems in the site office of RNSI at Tarikere. There is also letter issued to RNSI vide circular dated 21.02.2012 directing the employees for prompt accounting of the sundry payments to various department on daily basis. Further the Vice President of RNSI, Shri Sunil Sahasrabudhey, also admitted these payments, though he retracted later. Considering these facts and circumstances of the case, we are of the opinion that there is no error in the order of the lower authorities in disallowing the payment of Rs.8,91,500/- Accordingly the grounds of appeal of the assessee are dismissed. 9. In the result, the appeal filed by the assessee is dismissed. Dictated and pronounced in the open Court on 4 th April, 2022. Sd/- Sd/- (Beena Pillai) (Chandra Poojari) Judicial Member Accountant Member Bengaluru, Dated: 4 th April, 2022 ITA No. 433/Bang/2020 Ms. Naveen Hotels Ltd. 5 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -11 4. The Pr. CIT - Central Bangaluru 5. The DR, ITAT, Bangalore 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.