M/s. EAGLE STAR INTERNATIONAL HOTELS (P) LTD., MUMBAI V. ACIT - 10(1), MUMBAI

ITA 4978/MUM/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1604 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 18-09-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYULU
• Keywords: Unexplained expenditure; Corroborative evidences
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V D RAO, JUDICIAL MEMBER ITA NO 4978/MUM/2006 (ASSESSMENT YEAR: 2003-04) EAGLE STAR INTERNATIONAL HOTELS PVT LTD , JAYLAXMI INDL PREMISES CO-OP HSG SOCIETY LTD, 107/1, KHETANI ESTATE, BAZAR WADI, KURLA (WEST), MUMBAI -400 070 PAN: AAACF 4718 R VS ACIT-10(1) , AAYAKAR BHAVAN, MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI HIRO RAI RESPONDENT BY: DR U ANJANEYULU ORDER PER PRAMOD KUMAR 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 30 TH JULY 2006 PASSED BY THE CIT (A) IN THE MATTER OF A SSESSMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 FOR THE AY 2003-04. BY WAY OF THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES:- 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISA LLOWING / ADDING RS 10,00,000/- AS UNEXPLAINED CASH EXPENSES. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN ADDI NG RS 20,00,000 AS UNEXPLAINED EXPENDITURE ON THE BASIS OF DECLARATION GIVEN AT THE TIME OF SURVEY. 3. THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN UPHOLDING THE ABOVE ADDITIONS MADE BY THE ASSESSING OFFICER. 4. THE APPELLANT CRAVES TO LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF AP PEAL. 2. THE RELEVANT MATERIAL FACTS GIVING RISE TO THIS APPEAL ARE AS FOLLOWS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HOTEL AS ALS O IN THE BUSINESS OF WHOLESALE EAGLE STAR INTERNATIONAL HOTELS PVT LTD 2 LIQUOR DISTRIBUTION. HE RUNS A HOTEL BY THE NAME O F SHRI HOTEL SAI LEELA AT SHIRDI AND IS ALSO CARRYING ON BUSINESS IN THE NAME OF CA NDY WINES AT MUMBAI. ON 27TH JANUARY 2003 A SURVEY OPERATION U/S 133A WAS CARRIE D ON THE BUSINESS PREMISE OF THE ASSESSEE. IN THE COURSE OF THE SURVEY PROCEEDI NGS THE ASSESSEE DECLARED RS 1,50,00,000/- AS ADDITIONAL INCOME. THIS DECLARATI ON, INTER ALIA , INCLUDED DECLARATION OF RS 10 LAKHS ON ACCOUNT OF DEFICIENCIES IN SUPPOR TING VOUCHERS FOR CASH, LABOUR PAYMENTS AS ALSO DECLARATION OF RS 20 LAKHS ON ACCO UNT OF LACK OF PROPER BILLS AND VOUCHERS FOR EXPENDITURE UNDER THE HEAD COMMISSION , REPAIRS, CONSUMPTION OF FOOD AT HOTEL SAI LEELA. THE NATURE OF THESE TWO ITEMS IS ALSO EVIDENT FROM THE FOLLOWING EXTRACTS FROM ASSESSEES STATEMENT RECORDED DURING THE COURSE OF SURVEY BY ITS DIRECTOR SHRI DEEPAK KUNDANLAL AWATRAMANI, WHICH AR E AS FOLLOWS:- QN 12 ON VERIFICATION OF VOUCHERS IT IS NOTED THAT SOME OF THE VOUCHERS ARE NOT HAVING DETAILS SUCH PROPERTY ADDRESS, NAMES ETC FOR CROSS VERIFICATION. WHAT YOU WANT TO SAY IN THIS RESPECT. ANS: IN THE NATURE OF THE BUSINESS AND ON ACCOUNT OF THE ABOVE EXPENSES IT IS NOT POSSIBLE TO HAVE SUPPORTING EVIDENCES FOR ALL T HE VOUCHERS. IN VIEW OF THIS DISCREPANCIES, I AM OFFERING ADDITIONAL INCOME OF R S 10,00,000/-. QN 13 DURING THE COURSE OF SURVEY PROCEEDINGS AT HO TEL SAI LEELA SHIRDI OMN 27.1.2003, THE SURVEY TEAM HAS REPORTED THAT EXPEND ITURE DEBITED UNDER THE HEAD COMMISSION, REPAIRS, CONSUMPTION OF FOOD ETC A RE NOT SUPPORTED BY PROPER BILLS AND VOUCHERS. PLEASE EXPLAIN THE ANOM ALY. ANS: I HAVE NOT SEEN THE VOUCHERS MYSELF. TO COVER UP THE DISCREPANCY, I AM DISCLOSING AN ADDITIONAL INCOME OF RS 20,00,000/- O N ACCOUNT OF THE ABOVE. 3. HOWEVER, WHEN ASSESSEE FILED INCOME-TAX RETURN, NO SEPARATE INCOME FOR THE ABOVE ITEMS WAS OFFERED. INCOME WAS OFFERED IN RES PECT OF THE ABOVE ITEMS. AS REGARDS THE DISALLOWANCE OF RS 10 LAKHS ON ACCOUNT OF CASH PAYMENT OF LABOUR IT WAS ACCEPTED BY THE ASSESSEE THAT IT IS NOT POSSIBLE TO GIVE COMPLETE ADDRESS OF THE PERSONS TRANSPORTING LIQUOR BOTTLES BUT IT WAS ALSO EXPLAINED THAT SIMILAR EXPENSES IN PAST HAVE BEEN ACCEPTED IN THE COURSE OF THE ASSESS MENT PROCEEDINGS. WHILE THE AO NOTED THAT THE EXPENDITURE ON TRANSPORT / DELIVERY CHARGES WAS RS 57,17,934/- ON A TURNOVER OF RS 86,49,56,808/-, ARE THE VOUCHERS FOR THESE EXPENSES ARE SELF-MADE VOUCHERS WHICH, DO NOT CONTAIN PROPER ADDRESSES OF THE PARTIES, THE AO ALSO NOTED EAGLE STAR INTERNATIONAL HOTELS PVT LTD 3 THE ASSESSEES CONTENTION THAT THE TRANSPORT AND DE LIVERY CHARGES ARE ONLY .66% OF SALES, WHICH IS VERY WELL COMPARABLE EXPENDITURE IN THE EARLIER ASSESSMENT YEAR. HE, HOWEVER, HELD THAT DISALLOWANCE OF RS 10 LAKHS FOR WANT OF PROPER BILLS AND VOUCHERS IS CALLED FOR. HE, ACCORDINGLY, MADE THE ADDITION FOR THE SAME. AS REGARDS DECLARATION IN RESPECT OF EXPENSES AT HOTEL SAILEEL A, WHILE THE AO DID NOT FIND ANY FAULT WITH THE ASSESSEE, HE HELD THAT SINCE ASSESSE E ON HIS OWN HAS ADMITTED ADDITIONAL INCOME OF RS 20 LAKHS, THE SAME IS REQUI RED TO BE ADDED TO THE INCOME OF THE ASSESSEE. IT WAS IN THIS BACKGROUND OF THE AO HAS MADE ADDITION ON ACCOUNT OF RS 10 LAKHS ON ACCOUNT OF CASH EXPENSES AND RS 20,0 0,000/- ON ACCOUNT OF EXPENSE OF HOTEL SAILEELA, SHIRDI. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE CIT (A) AND WITHOUT ANY QUESTION AND AGGRIEVED THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. SHRI HIRO RAI, LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS N O BASIS FOR THE IMPUGNED ADDITION SAVE AND ACCEPT THE STATEMENT MADE BY SHRI DEEPAK K UNDANLAL AWATRAMANI, DIRECTOR OF THE ASSESSEE-COMPANY. IT WAS ALSO POINTED BY TH E LEARNED COUNSEL THAT IT IS A SETTLED LEGAL POSITION, THE STATEMENT GIVEN DURING THE COURSE OF CERTAIN PROCEEDINGS U/S 133A AND DOES NOT CONSTITUTE ADMISSIBLE EVIDENC E AGAINST THE ASSESSEE. OUR ATTENTION WAS INVITED TO HONBLE KERALA HIGH COURT JUDGMENT IN THE CASE OF PAUL MATHEWS AND SONS (263 ITR 101), HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS S KHADER KHAN SON (300 ITR 157) AND TO THE DECISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE CASES OF UNITEX PRODUCTS LTD V S ITO (22 SOT 429), ACIT VS SATYA NARAYAN AGARWALLA (255 ITR (AT) 69). THE LEARNED C OUNSEL ALSO INVITED OUR ATTENTION TO THE SPECIFIC DISALLOWANCE ON ACCOUNT O F CASH PAYMENT OF LABOUR CHARGES, THE TOTAL CASH PAYMENTS ON SUCH LABOUR CHARGES OF R S 31,12,095/- OUT OF TOTAL TRANSPORT AND DELIVERY CHARGES OF RS 57,44,824/-. IT WAS SUBMITTED THAT A DISALLOWANCE OF RS 20 LAKH OUT OF A TOTAL CASH PAYM ENT OF RS 31 LAKHS IS, IN ANY CASE IS HIGHLY EXCESSIVE AND UNREASONABLE. EXPLAINING T HE NATURE OF THESE PAYMENTS, THE LEARNED COUNSEL SUBMITTED THAT THESE PAYMENTS ARE M ADE TO VARIOUS PERSONS WHO DELIVER THE BOTTLES OF LIQUOR AT VARIOUS PLACES IN THE CITY AND MOST OF THESE PERSONS EAGLE STAR INTERNATIONAL HOTELS PVT LTD 4 ARE PEOPLE OF A SMALL MEANS AND SHORT ASSOCIATION W ITH THE ASSESSEE. THESE PERSONS ARE NOT EMPLOYEES ON A PERMANENT BASIS. LEARNED CO UNSEL ALSO INVITED OUR ATTENTION TO THE BENCH THAT THE IN THE PRECEDING YEARS SUCH C ASH PAYMENTS HAVE BEEN ACCEPTED IN ITS ENTIRETY. A COPY OF THE ASSESSMENT ORDER F OR THE ASSESSMENT YEAR 2001-02 WAS PLACED BEFORE US IN WHICH NO SUCH DISALLOWANCE IS MADE. A COPY OF ASSESSMENT ORDER FOR AY 2001-02 WAS ALSO PLACED BEFORE US IN W HICH AN ADHOC DISALLOWANCE OF RS 3,83,813/- WAS MADE BY THE AO BUT THE SAME WAS DELE TED BY THE CIT (A) VIDE ORDER DATED 8.11.2003 WHICH WAS NOT CHALLENGED BY THE AO IN THE FURTHER APPEAL. A COPY OF THIS ORDER WAS ALSO PLACED BEFORE US. LEARNED C OUNSEL SUBMITTED THAT NOW THAT IT IS A SETTLED POSITION THAT NO DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF SUCH CASH PAYMENTS, THERE IS NO GOOD REASON TO TAKE ANY DIFFE RENT STAND IN THE PRESENT YEAR. AS REGARDS THE ADDITION OF RS 20 LAKHS ON ACCOUNT O F EXPENSES INCURRED AT HOTEL SAILEELA AT SHIRDI, THE LEARNED COUNSEL HAS INVITED OUR ATTENTION OF THE BENCH TO THE FACT THAT NO DEFECT ARE NOTED IN THE BOOKS OF ACCOU NT AND THAT THE ENTIRE BASIS OF THE ADDITION IS STATEMENT MADE BY THE DIRECTOR OF THE C OMPANY, WHICH AS HAS ALREADY BEEN SUBMITTED, HAS NO EVIDENTIARY VALUE. ON THE S TRENGTH OF THESE SUBMISSIONS, THE LEARNED COUNSEL HAS URGED US TO DELETE THE IMPUGNED ADDITIONS. DR U ANJANEYULU, LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND VEHEMENTLY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE HIMSELF HAS ACCEPT ED THE DEFICIENCIES IN HIS SUPPORTING VOUCHERS AND ALL THE DEPARTMENT HAS DONE IS TO ACCEPT THE STATEMENT MADE BY THE ASSESSEE. IT WAS ALSO POINTED OUT THAT THE STATEMENT RECORDED BY THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDINGS HA S NOT BEEN RETRACTED. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER INVITED OUR ATTENTION TO THE BENCH THAT DESPITE ASSESSEE BEING GIVEN AMPLE OPPORTUNITIES TO PRODUCE THE EVIDENCE TO SUBSTANTIATE THE CASH PAYMENTS BY GIVING COMPLETE A DDRESSES OF THE PARTIES TO WHOM PAYMENTS ARE MADE, THE ASSESSEE HAS NOT DONE THE SA ME. UNDER THESE CIRCUMSTANCES, THE DISALLOWANCE IS QUITE JUSTIFIED AND REASONABLE. LEARNED DEPARTMENTAL REPRESENTATIVE ALSO SUBMITTED THAT ASS ESSEE, ON HIS OWN HAS ACCEPTED THE DEFICIENCIES IN BILLS AND VOUCHERS AT HOTEL SAI LEELA, AT SHIRDI AS WELL AND THAT THERE IS NO GOOD REASON FOR ASSESSEE TO RETRACT THE STATE MENT VOLUNTARILY GIVEN BY HIM. ACTION OF THE AUTHORITIES BELOW IS THUS SOUGHT TO B E JUSTIFIED. IN REJOINDER, LEARNED EAGLE STAR INTERNATIONAL HOTELS PVT LTD 5 COUNSEL FOR THE ASSESSEE AGAIN INVITED OUR ATTENTIO N TO THE CHARTS SHOWING EXPENSES IN OTHER ASSESSMENT YEARS, WHICH SHOWS THAT THE QUA NTUM OF EXPENDITURE COMPARES FAVOURABLY WITH OTHER YEARS. IT WAS ALSO SUBMITTED THAT FOR THIS REASON ALSO, THERE IS NO OCCASION FOR DISALLOWANCE. THE ARGUMENTS MADE E ARLIER WERE REITERATED. WE ARE ONCE AGAIN URGED TO DELETE THE DISALLOWANCES. 6. IN OUR CONSIDERED VIEW, IT IS NOW WELL SETTLED I N LAW THE STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A HA S NOT EVIDENTIARY VALUE AND BASED ON SUCH STATEMENT ALONE, NO ADDITIONS CAN BE MADE. THE CO-ORDINATE BENCHES OF THIS TRIBUNAL, HAVE CONSISTENTLY HELD SO AND THE VIEWS SO TAKEN IS FORTIFIED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHE WS AND SONS (SUPRA) AND HONBLE MADRAS HIGH COURT IN THE CASE OF S KHADER KHAN SON (SUPRA) AND NUMBER OF DECISIONS OF VARIOUS CO-ORDINATE BENCHES OF THIS TR IBUNAL SUCH AS IN THE CASE OF ACIT VS SATYA NARAYAN AGARWALLA (SUPRA), JAIN TRADING CO (17 SOT 574), DCIT VS PREMSONS (UNREPORTED ORDER DATED 15TH JANUARY, 2009 ITA NO. 4689/MUM/2006) AND UNITEX PRODUCTS LTD (SUPRA). IN ALL THESE CASES, I T HAS BEEN CONSISTENTLY HELD THAT MERELY BECAUSE A STATEMENT IS MADE IN THE COURSE OF ANY PROCEEDINGS U/S 133A, ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSE E. WE HAVE NOTED THAT SO FAR AS THE PRESENT CASE IS CONCERNED, ADDITION OF RS 20 LA KHS ON ACCOUNT OF UNVERIFIED EXPENSES AT HOTEL SAILEELA ARE BASED ON THE STATEME NT ALONE. THERE IS NO CONCRETE REASONS WHATSOEVER GIVEN IN SUPPORT OF THIS ADDITIO N. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING CO-ORDINATE BENCHES AND HON BLE HIGH COURTS WE HOLD THAT ADDITION OF RS 20 LAKHS BASED ON THE STATEMENT ALON E IS WHOLLY UNWARRANTED. WE DIRECT THE AO TO DELETE THE SAME. AS REGARD THE OT HER ADDITION OF RS 10 LAKHS ON ACCOUNT OF LACK OF PROPER BILLS AND VOUCHERS FOR TR ANSPORT AND DELIVERY EXPENSES, WE FIND THAT THE MAIN BASIS OF THIS DISALLOWANCE, OTHE R THAN RELIANCE ON THE STATEMENT RECORDED DURING THE COURSE OF SURVEY, IS THAT THE C OMPLETE ADDRESSES ARE NOT GIVEN ON THE BILLS AND VOUCHERS. WE HAVE ALSO NOTED THAT SIMILAR DISALLOWANCE WAS MADE BY THE AO IN PAST AND IT WAS DELETED BY THE CIT (A) . THE MATTER WAS ALLOWED TO REST THERE. THERE IS NO CHANGE IN THE FACTS AND CIRCUMS TANCES OF THE CASE INASMUCH AS IT IS ADMITTEDLY CONSISTENT PRACTICE, WARRANTED BY THE BUSINESS EXIGENCIES, TO MAKE CASH PAYMENTS FOR SUCH EXPENSES. EAGLE STAR INTERNATIONAL HOTELS PVT LTD 6 7. ONCE THE REVENUE AUTHORITIES HAVE ACCEPTED THE C IT (A)S ORDER OF DELETING ADHOC DISALLOWANCE ON ACCOUNT OF FULL ADDRESS NOT B EING GIVEN ON THE VOUCHERS IN EARLIER YEARS, THERE CANNOT BE ANY GOOD REASON TO M AKE SIMILAR DISALLOWANCE IN THE PRESENT YEAR. NO DOUBT, THE PRINCIPLE OF RES JUDICATA IS APPLICABLE TO THE ASSESSMENT PROCEEDINGS, BUT WHEN HAS OBSERVED BY HONBLE COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT (193 ITR 321) WHERE A FUNDAMENTAL A SPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT C HALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE C HANGED IN A SUBSEQUENT YEAR. ONCE THE DEPARTMENT DOES NOT DISPUTE CIT (A)S STAND OF DELETING THE SIMILAR DISALLOWANCE IN THE ASSESSMENT YEAR 2001-02 IT CAN BE REASONABLY INFERRED THAT BUSINESS EXIGENCIES AND BONA FIDES OF SUCH PAYMENTS HAVE BEEN ACCEPTED IN THAT YEAR. THAT IS ESSENTIALLY FACTUAL ASPECT AND THERE IS NO REASON T O DISTURB SUCH AN ASPECT IN THE PRESENT YEAR AS WELL. IN ANY EVENT, WE ARE OF THE CONSIDERED VIEW THAT CONSIDERING THE SMALLNESS OF THE AMOUNTS AND THE FACT THAT SUCH PAYMENTS ARE MADE TO LARGE NUMBER OF PERSONS, IT IS NOT ALWAYS POSSIBLE FOR TH E ASSESSEE TO PRODUCE ALL THOSE RECIPIENT OF LABOUR CHARGES OR TRANSPORT AND DELIVE RY CHARGES OR TO TAKE ON RECORD THEIR COMPLETE ADDRESSES, THE REASON ASSIGNED BY TH E AUTHORITIES BELOW FOR THIS DISALLOWANCE THEREFORE ARE NOT SOUND REASONS BASED ON COGENT MATERIAL EVEN ON MERITS, THEREFORE, THE DISALLOWANCE IS UNCALLED FOR . IN OUR CONSIDERED VIEW THEREFORE, THIS DISALLOWANCE OF RS 10 LAKHS IS ALSO DESERVES T O BE DELETED. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 26TH OCT OBER 2009. SD/- (V D RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATE: 26TH OCTOBER 2009 EAGLE STAR INTERNATIONAL HOTELS PVT LTD 7 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-X, MUMBAI. 4) THE CIT, MCX, MUMBAI. 5) THE D.R. E BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI EAGLE STAR INTERNATIONAL HOTELS PVT LTD 8 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 22.10.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 23.10.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER