M/s.VMGR HOtels & Resorts P. Ltd, Palakkad V. The ACIT, Palakkad

ITA 57/COCH/2015

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9942 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: KURYAN THOMAS
• Keywords: Business income
• Section: 143(3)

Judgement Text

ITA NO 57/COCH/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & GHEORGE GEORGE.K , J M ITA NO . 57/COCH/2015 (ASST YEAR 2010 - 11 ) M/S VM G R HOTELS & RESORTS (P) LTD VALLANGHY NENMMARA PALAKKAD 678 508 VS THE ASST COMMR OF INCOME TAX CIR CLE 1 PALAKKAD ( APPELLANT) (RESPONDENT) PAN NO. AACCV5338H ASSESSEE BY SHRI KURYAN THOMAS REVENUE BY SHRI K P GOPAKUMAR, SR DR DATE OF HEARING 07 TH JULY 2015 DATE OF PRONOUNCEMENT 08 TH JULY 2015 OR D ER PER GEORGE GEORGE. K. J M: TH IS APP EAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 11 TH NOV 2014. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 THE ASSESSEE HAS RAISED FOUR GROUNDS OF APPEAL. HOWEVER, ALL THE GROUNDS RELATE TO THE SOLITARY ISSUE NAMELY WHETHER THE ADDI TION MADE BY THE AO AMOUNTING TO RS. 18,97,587/ - OUGHT TO HAVE BEEN REDUCED BY THE CIT(A) TO RS. 8,11,647/ - . 3 THE BRIEF FACTS IN RELATION TO THE ABOVE ISSUE ARE AS FOLLOWS: 3.1 THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE B USINESS OF RUNNING A BAR ATTACHED HOTEL. FOR THE RELEVANT ASSESSMENT YEAR, RETURN OF INCOME WAS FILED ON 26 TH SEPT 2010 DECLARING THE TOTAL INCOME OF RS. 40,03,860/ - . ITA NO 57/COCH/2015 2 THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT AND T H E SCRUTINY ASSESSMENT WAS COMPLETED VIDE ORDER DATED 20.3.2013 U/S 143(3) OF THE ACT ASSESSING THE TOTAL INCOME AT RS. 59,01,447/ - . THE AO MADE AN ADDITION OF RS. 18,97,587/ - BEING THE DIFFERENCE IN SALE AS PER BOOKS OF ACCOUNT OF THE ASSESSEE AND THE AMOU NT OF SALE WORKED OUT BY THE COMMERCIAL TAX DEPARTMENT. THE INTELLIGENCE WING OF THE COMMERCIAL TAX DEPARTMENT HAD CONDUCTED AN INSPECTION AT THE BUSINESS PREMISES OF THE ASSESSEE ON 26 TH NOV 2009 . THE COMMERCIAL TAX DEPARTMENT ESTIMATED THE ASSESSEES GP AT 6 7.26 % AND ARRIVED AT THE TOTAL SALES TURNOVER AT RS. 3,55,21,870/ - AS AGAINST THE TOTAL SALES CREDITED IN THE P&L ACCOUNT AMOUNT ING TO RS. 3,36,24,283/ - . THE DIFFERENCE OF TURNOVER COMPUTED BY COMMERCIAL TAX DEPARTMENT AND SALES TURNOVER CREDITED I N P&L ACCOUNT (RS 3,55,21,870 RS. 3,36,24,283 = RS 18,97,587/ - ) WAS ADDED BY THE AO UNDER THE INCOME TAX PROCEEDINGS WITHOUT ANY INDEPENDENT FINDING. THE RELEVANT CONCLUSION OF THE AO READS AS FOLLOWS: 5. THE ASSESEERS CONTENTION HAVE BEEN PURSUED. H OWEVER, AS PER THE PRESENT STATUS, THE ORDER OF THE COMMERCIAL TAX OFFICER AND THE REASONING GIVEN IN THE SAID ORDER HOLDS GOOD AND THE APPELLATE AUTHORITY IS STILL TO DECIDE ON THE ISSUE. I, THEREFORE, DO NOT INTEND TO DEVIATE FROM THE STAND TAKEN BY THE COMMERCIAL TAX AUTHORITY AT THIS STAGE. THE ADDITION OF RS. 18,97,587/ - BEING THE DIFFERENCE IN SALES AS PER BOOKS AND THE WORKING OF THE COMMERCIAL TAX DEPARTMENT IS MADE HERE AS UNDISCLOSED PROFITS OF THE ASSESSEE FOR THE YEAR. 4 AGGRIEVED BY THE ASSESSMENT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. IT WAS CONTENDED THAT THE PROCEEDINGS OF THE COMMERCIAL TAX DEPARTMENT WAS TAKEN UP BEFORE ITS APPELLATE AUTHORITY AND ITA NO 57/COCH/2015 3 THE ADDITION OF RS. 18,97,584/ - WAS REDUCED TO RS. 8,11,649/ - . IT WAS FURTHER SUBMITTED THAT A SIMILAR REDUCTION OUGHT TO BE GIVEN TO THE ASSESSEE IN THE INCOME TAX PROCEEDINGS ALSO. THE CIT(A), HOWEVER, REJECTED THE CONTENTION RAISED BY THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE CIT(A) AT PARA 4 OF THE IMPUGNED ORDER READS AS FOLLOWS: 4 . GOING BY THE FACTS OF THE CASE, IT IS SEEN THAT THE AO HAS TAKEN A VIEW BASED ON THE QUANTIFICATION OF GP MADE BY THE INTELLIGENCE WING OF THE COMMERCIAL TAX DEPAR TMENT. INCOME ASSESSED BY THE AO CANNOT BE LINKED WITH THE SUBSEQUENT DECISION TAKEN IN APPEAL WITHIN THE COMMERCIAL TAX DEPARTMENT. MOREOVER, THE SUBMISSION THAT THE COMMERCIAL TAX DEPARTMENT HAS NOT GONE INTO FURTHER APPEAL IS ALSO SUBJECTIVE AS NEITHER ANY BASIS FOR THE SAME HAS BEEN EXPLAINED NOR ANY SUCH AUTHORIZATION ISSUED BY THE DEPARTMENT OF COMMERCIAL TAXES HAS BEEN FILED. AT TIMES, THE TAXATION DEPARTMENT, IN ORDER TO REDUCE THE LITIGATION, OFTEN PRESCRIBES A CEILING FOR THE TAX RELIEF OVER WHI CH THE DEPARTMENT COULD FILE FURTHER APPEALS. THIS IS HOWEVER, A PROCEDURAL ASPECT FOR REDUCING THE NUMBER OF LITIGATION BUT, THIS DOES NOT MEAN THAT THE UNDERLYING PRINCIPLES, ON WHICH THE TAXES WERE RAISED, WERE NOT SUBSTANTIABLE ON THE FACTS. THE APPELL ANTS CLAIM FOR A SIMULTANEOUS EFFECT GIVEN IN THE CASE OF INCOME SO QUANTIFIED, BASED ON THE MODIFICATION OF THE QUANTUM OF THE GP ON LOWER SIDE BY THE FIRST APPELLATE AUTHORITY OF THE COMMERCIAL TAXES DEPARTMENT COULD NOT BE ACCEPTABLE, WHICH IS OTHERWIS E ALSO A POST FACTO EXERCISE, THE FINALITY OF WHICH IS YET TO BE CONFIRMED, AS NO SUCH RELATING DOCUMENT HAS BEEN FILED. IN VIEW OF THIS, THE ADDITION MADE BY THE AO IS UPHELD AND THE APPELLANTS APPEAL ON TIS GROUND IS DISMISSED . 5 THE ASSESSEE BEING AGGRIEVED HAS FILED THIS APPEAL BEFORE US. 6 THE LD AR SHRI KURYAN THOMAS REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. THE LD DR ON THE OTHER HAND RELIED ON THE CONCLUSIONS OF THE CIT(A) . ITA NO 57/COCH/2015 4 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE INSTANT CASE, A DMITTEDLY THE ADDITION IN THE INCOME TAX ASSESSMENT IS SOLELY BASED ON THE FINDINGS AND THE QUANTUM FIXED IN THE ORDER OF THE AUTHORITIES UNDER KERALA GENERAL SALES TAX ACT. THE ADDITION M ADE UNDER KERALA GENERAL SALES TAX ACT HAS BEEN REDUCED FROM RS. 18,97,587/ - TO RS 8,11,647/ - . THERE IS NO INDEPENDENT FINDINGS BY THE AO IN THE INCOME TAX PROCEEDINGS FOR ADDING RS 18,97,587/ - ; BUT HAS MERELY INCORPORATED THE A DDITION MADE UNDER KERALA GENERAL SALES TAX ACT . WHEN THE ADDITION UNDER KERALA GENERAL SALES TAX ACT HAS BEEN REDUCED FROM RS 18,97,587/ - TO RS 8,11,647/ - , AS A NECESSARY COROLLARY, A SIMILAR VIEW IS ALSO TO BE ADOPTED UNDER INC OME TAX PROCEEDINGS. THEREFORE, WE MODIFY THE ADDITION AND REDUCE THE SAME FROM RS. 18,97,587/ - TO RS 8,11,647/ - . IT ORDERED ACCORDINGLY. 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF JULY 2015 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 8 TH , JULY 2015 RAJ* ITA NO 57/COCH/2015 5 COPY TO: 1. APPELLANT 2. R ESPONDENT 3. CIT(A) 4. CIT , 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN