Sri. YASHODA JAYAKAR SHETTY L/H OF JAYAKAR S. SHETTY, MUMBAI V. ITO - 21(1)(3), MUMBAI

ITA 5301/MUM/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62544 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 12-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 09-10-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: STANY SALDANA
• Keywords: Business income; Depreciation; Assessment record
• Section: 44AD; 133A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H , MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO.1093/MUM/2006 ASSESSMENT YEAR : 1999-2000 SMT. YASHODA JAYAKAR SHETTY L/H OF LATE SHRI JAYAKAR SHAMA SHETTY 1 ST FLOOR, VIRESHWAR CHAMBERS M.G. ROAD, VILE PARLE (EAST) MUMBAI-400 057. PAN NO. AAQPS 0742 R ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-21(1) C-10, PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA EAST MUMBAI-400 051. (APPELLANT) VS. (RESPONDENT) ITA NO.5301/MUM/2006 ASSESSMENT YEAR : 2003-04 SMT. YASHODA JAYAKAR SHETTY L/H OF LATE SHRI JAYAKAR SHAMA SHETTY 1 ST FLOOR, VIRESHWAR CHAMBERS M.G. ROAD, VILE PARLE (EAST) MUMBAI-400 057. PAN NO. AAQPS 0742 R ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-21(1) C-10, PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA EAST MUMBAI-400 051. (APPELLANT) VS. (RESPONDENT) ITA NO.5298/MUM/2006 ASSESSMENT YEAR : 2003-04 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-21(1) MUMBAI-400 051. SMT. YASHODA JAYAKAR SHETTY L/H OF LATE SHRI JAYAKAR SHAMA SHETTY MUMBAI-400 057. PAN NO. AAQPS 0742 R (APPELLANT) VS. (RESPONDENT) ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 2 ASSESSEE BY : SHRI STANY SALDANA DEPARTMENT BY : SHRI M. RAJAN DATE OF HEARING : 12.6.2012 DATE OF PRONOUNCEMENT : 20.06.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1999- 2000 AND THE CROSS APPEALS FOR ASSESSMENT YEAR 2003-04 AR E DIRECTED AGAINST THE ORDER DATED 28.11.2005 OF CIT(A ) FOR ASSESSMENT YEAR 1999-00 AND ORDER DATED 31.7.2006 FOR ASSESSMENT YEAR 2003-04. AS THESE APPEALS WERE HEARD TOGET HER AND ALSO INVOLVE SOME COMMON ISSUES, THESE ARE BEING DISP OSED OF BY SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 2. WE FIRST TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO.1093/MUM/2006 FOR ASSESSMENT YEAR 1999-2000 . THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON 12 DIFFERENT GROUNDS. HOWEVER AT THE TIME OF HEARING OF THE APPEA L, THE LD. AR FOR THE ASSESSEE ONLY PRESSED THE GROUND NO.5 WHICH REL ATES TO ADDITION ON ACCOUNT PAYMENT AND GROUND NO.12 WHICH IS REGARDING CHARGING OF INTEREST UNDER SECTION 234A, 234B AND 234C. THE OTHER 10 GROUNDS RAISED BY THE ASSESSEE ARE, THEREFORE, DISMISSED AS NOT PRESSED. 2.1 GROUND NO.5 IS REGARDING ADDITION ON ACCOUNT OF CASH PAYMENTS OF RS.8.50 LACS. A SURVEY UNDER SECTION 133A HAD BEEN CONDUCTED IN CASE OF THE ASSESSEE IN WHICH AN EXECUTIVE DIARY ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 3 WAS FOUND FROM THE POSSESSION OF SHRI JAYAKAR S. SHETTY IN WHICH ENTRIES FOR CASH PAYMENTS WERE FOUND RECORDED AGGREGATING TO RS.50.00 LACS. THE AO NOTED THAT DURING THE ASSESSMENT YEAR 1998-99, THE ISSUE OF CASH PAYMENTS OF RS.50.00 LACS HAD BEEN EXAMINED IN DETAIL. THE AO IN T HAT YEAR HAD EXAMINED 4 PERSONS FROM WHOM ASSESSEE HAD CLAIMED TO HAVE RECEIVED CASH LOANS. THE ASSESSEE HAD ALSO FILED LETTE RS FROM 4 PERSONS STATING THAT THEY HAD ADVANCED CASH LOANS TO THE ASSESSEE ON VARIOUS DATES. IN ASSESSMENT YEAR 1998-99, THE A O HAD NOT ACCEPTED THE EXPLANATION GIVEN AND HAD ADDED A SUM OF RS.41.5 LACS. THE PAYMENT PERTAINING TO THIS YEAR WAS R S.8.5 LACS. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FOR THIS YEAR FILED LETTER FROM SHRI B.K. SHEENA IN WHICH IT WAS CONFIRMED THAT HE HAD GIVEN A LOAN OF RS.5.00 LACS DURING 20 TH APRIL 1998 TO 23 RD APRIL 1998 TO THE ASSESSEE. IN THE SAID LETTER HE ALSO EXPLAINED THAT THE SOURCE OF LOAN WAS SALE PROCEEDS OF SHOP NOS. 13-22 SOLD BY THE ASSESSEE. SHRI B.K. SHEENA ALSO GAVE HI S PERMANENT ACCOUNT NUMBER (P.A. NO.). THE AO HOWEVER, OBSERVED THAT NO AGREEMENT FOR SALE OF SHOP WAS PRODUCED DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 1998-99 OR DURING THIS YEAR. NO PROOF OF CASH PAYMENT WAS ALSO G IVEN NOR THERE WERE ENTRIES IN THIS REGARD IN THE BOOKS OF ACCOU NT. THE AO ALSO OBSERVED THAT THOUGH LOAN IS CLAIMED TO HAVE B EEN TAKEN IN APRIL98, THE PAYMENT AGGREGATING TO RS.8.5 LACS HA D BEEN MADE IN JULY98 AND OCTOBER98. THE AO THEREFORE, DI D NOT ACCEPT THE CLAIM THAT THE ASSESSEE HAD TAKEN LOAN IN APRIL 98 FOR PAYMENT TO BE MADE IN JULY AND OCTOBER98. THE AO TH US, DID NOT ACCEPT THE GENUINENESS OF THE CLAIM OF LOAN TAKEN F ROM SHRI B.K. SHEENA AND ADDED THE SUM OF RS.5.00 LACS. IN REGAR D TO THE ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 4 BALANCE AMOUNT, THE ASSESSEE SUBMITTED THAT THE AMOUNTS WE RE ALREADY APPEARING IN THE BOOKS OF ACCOUNT. THE AO HOW EVER OBSERVED THAT THE ASSESSEE COULD NOT SHOW ANY ENTRY IN THE BOOKS REGARDING THESE PAYMENTS. THE AO HELD THAT THE P AYMENT OF RS.8.5 LACS MADE IN CASH AND APPEARING IN THE EXECUTIV E DIARY WAS OUT OF THE INCOME EARNED BY THE ASSESSEE FROM UNDISCLO SED SOURCES. THE AO, THEREFORE, ADDED THE SUM OF RS.8.5 LACS T O THE TOTAL INCOME OF THE ASSESSEE. 2.2 IN APPEAL, CIT(A) OBSERVED THAT IN ASSESSMENT YEAR 1998- 99, ALSO ADDITION OF RS.41.5 LACS HAD BEEN MADE ON ACCOUN T OF CASH PAYMENTS AND THE TRIBUNAL IN THE YEAR DATED 30.3. 2005 HAD NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE. SHRI B.K. SHEENA HAD NOT BEEN PRODUCED BY THE ASSESSEE IN ASSESSMENT YEAR 1998-99 ALSO NOR DURING THE PRESENT ASSESSMENT PROCEEDINGS. DURING THIS YEAR, SHRI B.K. SHEENA HAD ST ATED THAT HE WAS UNABLE TO ATTEND BEFORE AO FOR RECORDING STATEM ENT SINCE HE HAD LOST EYE-SIGHT DURING AN ACCIDENT. CIT(A) OBSERV ED THAT EVEN AFTER CONFIRMATION DATED 3.12.2004, THERE WAS EN OUGH TIME TILL 28.12.2005 WHEN THE ORDER WAS PASSED FOR PRODUCIN G SHRI B.K. SHEENA WHICH HAD NOT BEEN DONE. CIT(A) THEREFO RE, CONFIRMED THE ADDITION OF RS.5.00 LACS. SIMILARLY HE A LSO CON FIRMED THE BALANCE AMOUNT OF RS.3.5 LACS. AGGRIEVED BY THE SAID DECISION OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. 2.3 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT HE WAS PRESSING ONLY THE ADDITION OF RS.5.00 LACS WHICH HAD B EEN EXPLAINED BY THE ASSESSEE AS LOAN TAKEN FROM SHRI B.K. SHEENA. IT WAS POINTED OUT THAT SHRI B.K. SHEENA HAD CONFIRME D GIVING ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 5 HIS P.A. NUMBER AND, THEREFORE, EVEN IF PARTY WAS NOT PRODUCED, AO WAS NOT JUSTIFIED IN MAKING ADDITION WITHOUT MAKI NG VERIFICATION FROM ASSESSMENT RECORDS. IT WAS ALSO SUBMITTED T HAT CLAIM OF LOAN WAS GENUINE AND, ADDITION COULD NOT BE M ADE ONLY ON THE GROUND THAT THE LOAN HAD BEEN TAKEN IN CASH AN D PAYMENT HAD BEEN MADE MUCH LATER. IT WAS ALSO SUBMITTED THAT H E HAD NO OBJECTION IF THE MATTER WAS REFERRED TO AO FOR FRESH V ERIFICATION ON THIS POINT. LD. DR PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW AND HAD NO OBJECTION IF THE MATTER WAS RESTORED TO THE FILE OF AO. 2.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVA L CONTENTIONS CAREFULLY. THE ASSESSEE HAS PRESSED ONLY ADDITIO N OF RS.5.00 LACS AND, THEREFORE, THE BALANCE ADDITION OF RS. 3.50 LACS IS CONFIRMED. AS REGARDS ADDITION OF RS.5.00 LACS, WE FIN D THAT THE ASSESSEE HAD EXPLAINED THE SAME AS CASH LOANS TAKEN FROM SHRI B.K. SHEENA DURING APRIL, 1998, WHICH HAS ALSO BE EN CONFIRMED BY HIM GIVING HIS PERMANENT ACCOUNT NUMBER. THE AO HAD MADE ADDITION ON THE GROUND THAT THE CASH PAYM ENTS HAD BEEN MADE LONG AFTER THE CLAIM OF RECEIPT OF LOAN . IN OUR VIEW, ONLY ON THE GROUND THAT CASH WAS KEPT AND PAYME NTS WERE MADE MUCH LATER ADDITION CANNOT BE JUSTIFIED IN THE AB SENCE OF ANY MATERIAL TO SHOW THAT CASH LOANS HAD BEEN UTILIZED ELSEWHERE. THE ASSESSEE HAD FILED CONFIRMATION OF LOAN G IVING PERMANENT ACCOUNT NUMBER AND, THEREFORE, THIS COULD HAV E BEEN VERIFIED BY AO FROM ASSESSMENT RECORDS. IN CASE, LOANS WERE REFLECTED IN THE ASSESSMENT RECORDS OF SHRI B.K. SHEENA AN D SOURCE HAD BEEN EXPLAINED, ADDITION COULD NOT HAVE BEE N MADE ONLY ON THE GROUND THAT SHRI B.K. SHEENA HAD NOT BE EN ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 6 PRODUCED. IN OUR VIEW, THE CLAIM OF LOAN OF RS.5.00 L ACS REQUIRES FRESH VERIFICATION. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) ON THIS POINT AND RESTORE THE ISSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY VERIFICATION AND AFTER AL LOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. ITA NO.5301/MUM/2006 (APPEAL BY ASSESSEE) ITA NO.5298/MUM/2006 (APPEAL BY REVENUE) (ASSESSMENT YEAR 2003-04) : THERE ARE FOUR GROUNDS RAISED IN THE APPEAL BY THE ASSESSEE OUT OF WHICH ONLY GROUND NO.1 REGARDING THE ESTI MATION OF INCOME HAS BEEN PRESSED. THE REMAINING 3 GROUNDS ARE THEREFORE DISMISSED AS NOT PRESSED. 3.1 THE REVENUE ON THE OTHER HAND HAS RAISED DISPUTES O N THREE GROUNDS OUT OF WHICH THE MAIN DISPUTE WHICH RELA TES TO ESTIMATION OF INCOME IS COMMON WITH THE GROUND NO.1 OF THE ASSESSEE. 3.2 WE FIRST TAKE UP THE MAIN GROUND WHICH IS COMMON IN BOTH THE APPEALS, WHICH IS REGARDING ESTIMATION OF INCOME. T HE FACTS IN BRIEF ARE THAT A SURVEY UNDER SECTION 133A HAD BEEN CONDUCTED IN THIS CASE ON 31.10.2002. DURING THE COURSE OF SURVEY, TWO SETS OF TRADING, P&L ACCOUNT SHOWING DIFFEREN T FIGURES OF NET PROFIT HAD BEEN FOUND. AS PER LOOSE PA PERS BEARING PAGE NO.3, THE ANNUAL PROFIT AS ON 31.3.2003 WAS SHOWN AS RS.18,73,200/-. AT THE TIME OF SURVEY IN RESPONSE TO QU ESTION NO.19 THE ASSESSEE DECLARED ADDITIONAL INCOME OF RS.30.00 LACS OVER AND ABOVE THE BUSINESS PROFIT FOR DISCREPANCY IN LAB OUR CHARGES AND PURCHASE FOR ASSESSMENT YEAR 2003-04. HOWEVER, ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 7 SUBSEQUENTLY VIDE LETTER DATED 8.1.2003, THE ASSESSEE SUBM ITTED THAT DECLARATION OF RS.30.00 LACS WAS NOT BASED ON FACTS A ND FIGURES AND THEREFORE, DECLARATION OF ADDITIONAL INCOM E OF RS.30.00 LACS BASED ON IMAGINARY DISCREPANCY FOR ASSESSMENT YEAR 2003-04 DID NOT ARISE. 3.2.1 THE ASSESSEE DURING ASSESSMENT PROCEEDINGS SUBMITTED THAT P&L ACCOUNT FOUND AT THE TIME OF SURVEY WAS PURELY PROVISIONAL AND SUBSEQUENTLY BOOKS HAD BEEN AUD ITED AND AS PER AUDITED ACCOUNTS, NET PROFIT WAS RS.12,46,507/-. T HE AO HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS O BSERVED BY HIM THAT THE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNT AND ALL RELEVANT DETAILS. THE AO ALSO DID NOT ACCEPT THE CL AIM OF THE ASSESSEE THAT THE CHIEF ACCOUNTANT WAS MISSING. THE AO NOT ED THAT THE ASSESSEE WAS A TRADER AND AS PER IMPOUNDED PAPER S BEING THE TRADING CUM PROFIT AND LOSS ACCOUNT, TOTAL TUR NOVER WAS RS.12,32,40,000/- ON WHICH NET PROFIT HAD BEEN SHOW N AT RS.18,73,200/- @ 1.52%. THE AO DID NOT ACCEPT SUCH LOW N ET PROFIT RATE CONSIDERING NATURE OF BUSINESS. HE, ESTIMATE D NET PROFIT @ 8% AS PROVIDED IN SECTION 44AD AND THUS ASSESSE D INCOME FROM BUSINESS AT RS.98,59,200/-. 3.2.2 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE ADDITIONAL INCOME DI SCLOSED AT THE TIME OF SURVEY WAS CONDITIONAL AS WAS CLEAR FROM QUES.NO.20. THE ASSESSEE HAD SUBSEQUENTLY RETRACTED FROM T HE STATEMENT VIDE LETTER DATED 8.1.2003 AS THERE WAS NO DISCREPANCY. THE ASSESSEE POINTED OUT THAT THE BOOKS OF ACCOUNTS WERE AUDITED AND BASED ON WHICH HE HAD ORIGINAL LY FILED ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 8 THE RETURN OF INCOME AT RS.16,85,533/- THE ASSESSEE ALSO SUBMITTED THAT THE DOCUMENTS FOUND AT THE TIME OF SURVE Y GAVE ONLY PROJECTED FIGURES AS THE WORD PROJECTED WAS CLEARL Y INSCRIBED ON IT. IT WAS ALSO POINTED OUT THAT IN ASSESSMEN T YEAR 1998-99 ALSO, AO MADE ADDITIONS BASED ON PROJECTED FIGU RES. THE TRIBUNAL VIDE ORDER DATED 30.3.2005 HAD NOT UPH ELD SUCH ADDITION. CIT(A) AGREED THAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN 1998-99, INCOME COULD NOT BE COMPUTED ON T HE BASIS OF PROJECTED TURNOVER. IT WAS NOTED BY HIM THAT THE A SSESSEE AS PER P&L ACCOUNT FILED WITH THE RETURN OF INCOME HAD DE CLARED TURNOVER OF RS.2,80,04,290/- AND NET PROFIT OF RS.12, 46,507/- AS PROFIT OF THE PROPRIETARY CONCERN TECHNO MECH ENGINEERS. CIT(A), THEREFORE, HELD THAT NET PROFIT HAD TO BE ESTIMATED ON THE BASIS OF TURNOVER DECLARED AS PER AUDITED ACCOUNTS. CIT(A) A LSO NOTED THAT THE EXPENDITURE UNDER THE HEAD LABOUR AND PURCH ASES WAS NOT VERIFIABLE IN THE ABSENCE OF BOOKS OF ACCOUNT. FURTH ER THE STATEMENT OF THE ASSESSEE AT THE TIME OF SURVEY CLEARLY SH OWED THAT THE ASSESSEE ADMITTED THAT LABOUR CHARGES AND PURCHASE S WERE NOT RECONCILED AND, THEREFORE, BOOKS OF ACCOUNT WER E NOT RELIABLE. HE, THEREFORE, AGREED WITH THE AOS ESTIMATI ON OF NET PROFIT @ 8% WHICH IN HIS OPINION WAS MOST REASONABLE IN THE NATURE OF TRADE BEING CARRIED ON BY THE ASSESSEE. AGGRIE VED BY THE SAID DECISION, BOTH PARTIES ARE IN APPEAL. WHEREAS THE REVENUE IS AGGRIEVED WITH THE ORDER OF CIT(A) IN NOT ACCEPTING THE ESTIMATED ADDITION OF RS.30.00 LACS MADE BY AO, THE ASSESSEE HAS DISPUTED THE DECISION OF AO TO ESTIMATE NET PR OFIT @ 8% OF THE TURNOVER AS PER AUDITED ACCOUNT. ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 9 3.2.3 BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT THE P ROFIT COULD NOT BE ESTIMATED ON THE BASIS OF PROJECTED TURNOV ER WHEN THE TURNOVER AS PER AUDITED ACCOUNT WAS AVAILABLE. IT W AS ALSO SUBMITTED THAT PROVISIONS OF SECTION 44AD WERE NOT APPLI CABLE AS THE SAME WERE APPLICABLE ONLY IN CASE WHERE TURNOVER E XCEED RS.40.00 LACS. THEREFORE, THE ESTIMATE OF NET PROFIT A S PROVIDED IN SECTION 44AD WAS NOT JUSTIFIED. THE LD. AR ALSO FILED A COMPARATIVE CHART OF NET PROFIT RATE FROM 1998-99 TO 2003-04 AND POINTED OUT THAT NET PROFIT FROM 1998-99 TO 200 1-02 WAS AROUND @ 2% AND IN ASSESSMENT YEAR 2002-03 THERE WAS NE T LOSS WHEREAS NET PROFIT DECLARED BY THE ASSESSEE FOR ASSESSMEN T YEAR 2003-04 WAS @ 4.45% . IT WAS ACCORDINGLY REQUESTED THAT THE NET PROFIT DECLARED SHOULD BE ACCEPTED. THE LD. DEP ARTMENTAL REPRESENTATIVE ON THE OTHER HAND ARGUED THAT IN THE ABSENCE OF BOOKS OF ACCOUNTS, TURNOVER DECLARED IN P&L ACCOUNT COULD N OT BE ACCEPTED AND PROFIT HAD BEEN RIGHTLY ACCEPTED AS PER DOCUMENTS FOUND AT THE TIME OF SURVEY. IT WAS ALSO SUBMI TTED THAT ESTIMATION OF NET PROFIT @ 8% WAS VERY REASONABLE . 3.2.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ESTIMATED ADDITION MADE BY AO. THE ASSESSEE IS A CONTRACTOR AND HAD RETURNED NET PROFIT OF RS.12.46 LACS ON A TURNOVER OF RS.2.80 CRORES. A SURVEY UNDER SECTION 133A IN THIS CASE HAD BEEN CONDUCTED ON 31.10.2002 DURING THE COURSE OF WHICH P&L ACCOUNT HAD BEEN FOUND SHOWING TURNOVER OF RS.12.34 CROR ES AND NET PROFIT OF RS.18,73,200/- @ 1.52%. THE ASSESSEE IN RESPONSE TO QUES.NO.19 AT THE TIME OF SURVEY HAD DECLARE D ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 10 ADDITIONAL INCOME OF RS.30.00 LACS OVER AND ABOVE THE N ORMAL PROFIT FOR DISCREPANCY IN LABOUR CHARGES AND PURCHASES FOR ASSESSMENT YEAR 2003-04. THE AO THEREFORE MADE AN ADDIT ION OF RS.30.00 LACS BASED ON SUCH STATEMENT. THE AO ALSO ESTIMATE D PROFIT ON THE BASIS OF THE PROJECTED TURNOVER @ 8% A ND MADE ADDITION OF RS.98,59,200/-. THIS WAS IN ADDITION TO RS. 30.00 LACS ADDED ON THE BASIS OF STATEMENT DURING SURVEY. THE CASE OF THE ASSESSEE IS THAT THE TRADING-CUM-P&L ACCOUNT FOUND AT THE TIME OF SURVEY WAS ONLY PROJECTED AND THE WORD PROJECTED W AS CLEARLY INSCRIBED ON IT. THE BOOKS OF ACCOUNT WERE ACTUALL Y AUDITED AS PER WHICH THE TURNOVER WAS RS.2.80 CRORE AND NET PROFIT WAS RS.12.46 LACS WHICH HAS TO BE ACCEPTED. SOON AF TER SURVEY, ASSESSEE VIDE LETTER DATED 8.1.2003 HAD ALSO RETR ACTED FROM THE DISCLOSURE OF RS.30.00 LACS AS THERE WAS NO ACTUAL DISCREPANCY. 3.2.5 THE ISSUE OF ASSESSMENT OF INCOME ON THE BASIS OF PROJECTED TURNOVER HAD BEEN CONSIDERED BY THE TRIBUNAL IN 1998- 99 IN WHICH THE TRIBUNAL DID NOT ACCEPT THE ASSESSMENT ON THE BASIS OF PROJECT TURNOVER. FOLLOWING THE SAID DECISION OF THE TRIBUNAL, CIT(A) HAS DELETED THE ADDITION MADE ON T HE BASIS OF PROJECTED TURNOVER AND HAS HELD THAT ESTIMATION OF IN COME HAS TO BE MADE WITH RESPECT TO THE TURNOVER SHOWN IN THE AUDI TED ACCOUNTS. WE SEE NO INFIRMITY IN THE ORDER OF CITA) IN REJECTING THE ASSESSMENT BASED ON PROJECTED TURNOVER AS THE SAME IS IN CONFORMITY OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OW N CASE IN ASSESSMENT YEAR 1998-99. AS REGARDS THE ADDITION MADE BY AO ON THE BASIS OF DISCLOSURE MADE BY THE ASSESSEE, CIT(A) H AS HELD THAT INCOME HAS TO BE ESTIMATED BASED ON THE TURNO VER IN ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 11 THE AUDITED ACCOUNTS ON A REASONABLE BASIS WHICH IN HIS OP INION WAS @ 8% AS THE ASSESSEE HAD RETRACTED FROM THE DISCLOSURE SOON AFTER SURVEY VIDE LETTER DATED 8.1.2003. WE AGRE E WITH THE FINDING OF CIT(A) THAT ADDITION CAN NOT BE MADE ON T HE BASIS OF DISCLOSURE MADE BY THE ASSESSEE AT THE TIME OF SURVEY WHIC H HAD BEEN SUBSEQUENTLY RETRACTED AND DISCLOSURE WAS ALSO CONDITIO NAL AS PER QUES.NO.20 RAISED AT THE TIME OF SURVEY. WE ALSO AGREE WITH THE CIT(A) THAT ONCE TURNOVER IS AVAILABLE AS PE R AUDITED ACCOUNTS, INCOME HAS TO BE ESTIMATED ON A REASONABLE BASIS BASED ON TURNOVER AS LABOUR CHARGES AND PURCHASES ARE NOT VERIFIABLE IN THE ABSENCE OF BOOKS OF ACCOUNTS WHICH HAV E NOT BEEN PRODUCED. IN SUCH A CASE, ESTIMATION IS JUSTIFIED. FUR THER, ONCE THE PROFIT OF BUSINESS HAS BEEN ESTIMATED, NO FURTHE R ADDITION CAN BE MADE ON ACCOUNT OF ANY DISCREPANCY IN LAB OUR CHARGES AND PURCHASES. 3.2.6. WE AGREE WITH THE SUBMISSION OF LD. AR THAT ESTIMATION CAN NOT BE MADE @8% UNDER SECTION 44AD WHICH IS APPLICABLE ONLY IN CASE OF TURNOVER NOT EXCEEDING RS.40. 00 LACS. IN THE PRESENT CASE, TURNOVER IS RS.2.80 CRORES. THE LD. A R HAS SUBMITTED THAT NET PROFIT DURING ASSESSMENT YEARS 1998-99 TO 2001-02 WAS AROUND 2% AND, THEREFORE, NET PROFIT OF 4.45% DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. THE VERY FA CT THAT THE ASSESSEE HAS SHOWN NET PROFIT OF 4.45% THIS YEAR COMPA RED TO 2% DECLARED IN ASSESSMENT YEAR 1998-99 TO 2001-02 AND LOSS IN ASSESSMENT YEAR 2002-03, INDICATES THAT ANY COMPARISON W ITH THE PAST IS NOT RELIABLE. THE BOOKS OF ACCOUNT FOR THIS Y EAR ARE NOT AVAILABLE AND, THEREFORE LABOUR CHARGES AND PURCHA SES CAN NOT BE CROSS VERIFIED. NO COMPARATIVE CASE FOR THE CURRENT PERIOD ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 12 HAS BEEN BROUGHT TO OUR NOTICE IN SUPPORT OF THE CASE. ONCE THE BOOKS OF ACCOUNT ARE NOT AVAILABLE, BURDEN IS ON THE ASSE SSEE TO PRODUCE MATERIAL TO SUPPORT THE NET PROFIT RATE DECLAR ED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR V IEW, IT WOULD BE REASONABLE TO ESTIMATE NET PROFIT @ 6% TH IS YEAR. WE HOLD ACCORDINGLY. 4. THE SECOND GROUND RAISED IN THE APPEAL BY THE REVEN UE IS REGARDING ALLOWABILITY OF EXPENSES AGAINST ROYALTY INCO ME. THE ASSESSEE HAD DECLARED RECEIPT OF ROYALTY OF RS.3,60,000/- FROM HOTEL GOLDEN BIN WHICH WAS DECLARED AS INCOME FROM OTHER SOURCES AGAINST WHICH EXPENSES TOTALING TO RS .1.50 LACS HAD CLAIMED ON ACCOUNT OF PROPERTY TAX, MAINTENANCE CHARGES AND COLLECTION CHARGES. THE AO HOWEVER, TREATED THE INCOME AS INCOME FROM HOUSE PROPERTY AND ALLOWED DEDUCTION OF ON LY RS.1,08,000/- UNDER SECTION 24(A) AND ACCORDINGLY TAXED INCOME FROM HOUSE PROPERTY AT RS.2,52,000/-. 4.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE WAS CARRYING ON THE BUSINE SS OF HOTEL BUSINESS. DUE TO INCREASE IN CONSTRUCTION ACTIVITY, THE ASSESSEE HAD LEASED OUT THE HOTEL TO SHRI ANIL RAMKRISHNA SHETTY VIDE LEASE AGREEMENT DATED 1.11.2000. THE ASSESSEE HAD N OT STOPPED BUSINESS OF RUNNING THE HOTEL BUT HAD TEMPORAR ILY SUSPENDED THE SAID BUSINESS. THE ASSESSEE HAD DECLARED THE ROYALTY INCOME AS INCOME FROM OTHER SOURCES THOUGH CORRECTL Y IT COULD HAVE BEEN DECLARED AS BUSINESS INCOME. IT WAS ACCORDIN GLY ARGUED THAT THE ASSESSEE WAS ENTITLED TO EXPENSES BY WAY OF PROPERTY TAX, MAINTENANCE, LICENSE FEE, DEPRECIATION ON FURNITURE ETC. IT WAS FURTHER POINTED OUT THAT IN ASSESSMENT YEAR 2002-03, ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 13 THE AO HAD ASSESSED THE INCOME AS INCOME FROM OTHER SOURCES. CIT(A) NOTED THAT THE LEASE AGREEMENT WAS TITLED AS AGREEMENT OF LICENSE TO CONDUCT A HOTEL BUSINESS. IT WAS ASSESSED AS INCOME FROM OTHER SOURCES IN 2002-03 AS WELL AS IN SUBSEQ UENT YEARS. CIT(A) THEREFORE, DIRECTED THE AO TO RE-COMPUTE THE INCOME AS INCOME FROM OTHER SOURCES. AGGRIEVED BY THE SA ID DECISION, REVENUE IS IN APPEAL. 4.2 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDIN G NATURE OF INCOME FROM LEASE OF HOTEL AND ALLOWABILITY OF EXP ENSES. THE ASSESSEE WAS IN THE HOTEL BUSINESS BUT DUE INCREASE TO OTHER ACTIVITIES, HAD LEASED OUT THE HOTEL ON ROYALTY BASIS. THE ROYALTY INCOME IN THE EARLIER YEAR AND IN THE SUBSEQUENT YEAR HAS BEEN ASSESSED AS INCOME FROM OTHER SOURCES. THE HOTEL BUILDING HA D BEEN LEASED OUT ALONG WITH FURNITURE, FITTINGS ETC. F OR RUNNING THE HOTEL. THEREFORE, INCOME IN OUR VIEW HAS BEEN RIGHTLY ASSESSED AS INCOME FROM OTHER SOURCES. WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSE E AND THE SAME IS THEREFORE, UPHELD. 5. THE THIRD DISPUTE RAISED IN THE APPEAL BY THE REV ENUE IS REGARDING ADDITION OF RS.1.00 LACS ON ACCOUNT OF MANGALO RE PROPERTY. THE AO AT THE TIME OF ASSESSMENT ASKED THE ASS ESSEE TO EXPLAIN AS TO WHY THE INCOME FROM MANGALORE PROPER TY SHOULD NOT BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND ASSESSED THE SAME AT RS.1.00 LACS. IN APPEAL, ASSESSEE SUBMITTED THAT HE DID NOT HAVE ANY PROPERTY AT MANGALORE. THEREFORE, AO WAS NOT JUSTIFIED IN ASSESSING INCOME AT RS.1.00 LACS. CIT(A) NOTED THAT ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 14 THE AO HAD NOT GIVEN ANY DETAILS OF THE PROPERTY IN THE ASSESSMENT ORDER AND, THEREFORE, ASSESSMENT OF INCOME AT RS.1.00 LACS WAS NOT JUSTIFIED. ACCORDINGLY HE DELETED TH E ADDITION AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5.1 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER, PE RUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE AO HAD ASSESSED INCOME FROM MANGALORE PROPERTY WITHOUT GIVING D ETAILS OF THE PROPERTY. ASSESSEE HAS DENIED ANY PROPERTY AT MA NGALORE OTHER THAN AGRICULTURAL PROPERTY INCOME FROM WHICH HAS BEEN ASSESSED AS AGRICULTURAL INCOME. UNDER THESE CIRCUMSTANCES ADDITION ON ACCOUNT OF HOUSE PROPERTY IS NOT JUSTIFIED. WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE AD DITION THE AND SAME IS THEREFORE UPHELD. 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NO.1093/M/06 AND ITA NO.5301/M/06 AS WELL AS THE APPE AL OF THE REVENUE IN ITA NO.5298/M/06 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.06.2012 SD/- SD/- (D. MANMOHAN) VICE PRESIDENT (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 20.06.2012. JV. ITA NO.1093, C.O.- 5298 & 5301 A.Y.99-00 & 03-04 15 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT.REGISTRAR, ITAT, MUMBAI.