ACIT, Jaipur V. SHIVAM COLONIZERS PVT. LTD., Jaipur

ITA 570/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2023 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 26-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL
• Assessee Lawyers: S L PODDAR DHK
• Keywords: Depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 570/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-02, JAIPUR CUKE VS. M/S SHIVAM COLONIZERS PVT. LTD., 12-PRATAP NAGAR, NEAR GLASS FACTORY, TONK ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AAGCS0016D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI S. L. CHANDEL (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/07/2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 07/07/2017. VKNS'K@ ORDER PER:SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)- 01, JAIPUR DATED 02.06.2014 WHEREIN THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ONS OF RS. 15,60,341/- ON ACCOUNT OF RECEIPTS SUPPRESSED BY ASSESSEE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 58,15,229/- ON ACCOUNT OF UNVERIFIABLE EXPENSES DEBITED IN P&L ACCOUNT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ESTIMATING THE INCO ME BY APPLYING N.P. ITA NO. 570/JP/2014 ACIT, JAIPUR VS M/S SHIVAM COLONIZERS PVT. LTD., JAIPUR 2 RATE OF 10% WITHOUT CONSIDERING THE FACT THAT ASSES SEE HAD SUPPRESSED THE RECEIPTS AND INFLATED THE EXPENSES. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS SHOWN INCOME FROM RUNNING OF THEATRE AND FOOD PLANET FOR PART OF THE YEAR AND THE THEATRE WAS SUBSEQUENTLY GIVEN ON LEASE TO ADLABS FILMS LTD . IN ORDER TO VERIFY THE GENUINENESS OF THE RECEIPTS & EXPENSES WITH REFEREN CE TO BOOKS OF ACCOUNTS AND BILLS & VOUCHERS, ASSESSEE WAS ASKED BY THE AO TO FURNISH BOOKS OF ACCOUNTS AND SUPPORTING BILLS & VOUCHERS. THE ASSES SEE SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE LOST IN AN A CCIDENT WHERE THE ACCOUNTANT OF THE ASSESSEE ALSO DIED. THE AO OBSER VED THAT THE ASSESSEE FAILED TO FURNISH THE BOOKS OF ACCOUNTS ALONG WITH VOUCHERS AND IN THE ABSENCE OF BOOKS OF ACCOUNT, IT IS NOT VERIFIABLE T HAT RECEIPTS & EXPENDITURE SHOWN BY THE ASSESSEE ARE CORRECT & TRUE. THUS IN T HE CASE GIVEN, IN THE ABSENCE OF PRIMARY RECORDS & BOOKS OF ACCOUNT, TRAD ING RESULTS SHOWN BY THE ASSESSEE ARE NOT VERIFIABLE, HENCE CANNOT BE TAKEN AND ACCEPTED AS AUTHENTIC. IN THESE CIRCUMSTANCES, ONLY WAY OR RECOURSE LEFT I S TO ESTIMATE THE INCOME OF THE ASSESSEE KEEPING IN VIEW OF THE PAST HISTORY OF THE ASSESSEE WHICH IS BEST GUIDE FOR ESTIMATION OF INCOME AS HAS BEEN HELD BY VARIOUS COURTS. 3. THE AO FURTHER OBSERVED THAT ON PERUSAL OF PROFIT & LOSS ACCOUNT IT WAS OBSERVED THAT ASSESSEE HAS SHOWN RECEIPTS OF RS. 45 ,11,355/- AND RS. 40,663/- FROM SALES OF THEATRE TICKETS & FROM SALE IN FOOD PLANET RESPECTIVELY. IT IS WORTH WHILE TO MENTION HERE THAT DURING THE Y EAR UNDER CONSIDERATION ASSESSEE RAN THEATRE FOR 3 MONTHS ON ITS OWN, AFTER THAT THE SAME WAS LET OUT. DURING THE YEAR EARLIER TO THE YEAR UNDER CONSIDERA TION, PER MONTH INCOME FROM SALE OF THEATRE TICKETS & RUNNING OF FOOD PLAN ET WAS RS. 19,29,568/- & RS. 1,07,884/- RESPECTIVELY. HOWEVER, UNDER THE SAM E HEADS, DURING THE YEAR, ASSESSEE HAS SHOWN MUCH LESSER INCOME. MOREOVER, IN THE ABSENCE OF PROPER BOOKS OF ACCOUNT, FALL IN RECEIPT CANNOT BE JUSTIFI ED & HENCE NOT ACCEPTABLE. IN ITA NO. 570/JP/2014 ACIT, JAIPUR VS M/S SHIVAM COLONIZERS PVT. LTD., JAIPUR 3 VIEW OF THE ABOVE, THE BASE OF EARLIER YEARS RECEIP T IS APPLIED FOR CONSIDERATION OF RECEIPT DURING THE YEAR UNDER CONSIDERATION. THE REFORE, RECEIPT FROM RUNNING THEATRE DURING THE YEAR UNDER CONSIDERATION IS ESTIMATED AT RS. 3,23,654/-. THEREFORE, ADDITION OF RS. 15,60,341/- (12,77,350 + 2,82,991) WAS MADE ON ACCOUNT OF UNDER STATEMENT OF RECEIPT. 4. THE AO FURTHER OBSERVED THAT ASSESSEE HAS CLAIMED E XPENDITURE OF RS. 1,16,30,458/-. DURING THE PREVIOUS YEAR PERCENTAGE OF EXPENSES TO INCOME WAS 92% WHILE THE SAME FOR THE YEAR UNDER CONSIDERA TION IS 130%. IN THE ABSENCE OF BILLS & VOUCHERS & EVEN BOOKS OF ACCOUNT , VERIFICATION OF THESE EXPENDITURE CANNOT BE MADE. MOREOVER, INCREASED EXP ENDITURE CLAIMED BY THE ASSESSEE IS NOT JUSTIFIABLE SPECIALLY IN THE SCENAR IO OF CHANGED NATURE OF BUSINESS DURING MAJOR PORTION OF THE YEAR. LETTING OUT OF THE THEATRE IS MUCH LESS EXPENDITURE ORIENTED THAN RUNNING OF THEATRE O N ITS OWN. THEREFORE, CLAIM OF THE ASSESSEE REGARDING INCREASED EXPENSES CANNOT BE ACCEPTABLE LOGICALLY. THE SAME CAN ALSO NOT BE ACCEPTED AS ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM OF EXP ENDITURE. FURTHER, REGARDING EXPENDITURE CLAIMED BY THE ASSESSEE, ONUS IS ON THE ASSESSEE TO PROVE THEIR GENUINENESS & VERIFIABILITY OF THE SAME IS TO BE EXAMINED IN THE LIGHT OF VARIOUS PROVISION OF THE IT ACT 1961. THE ABOVE DISCUSSION CLEARLY SHOWS THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVID E ANY SATISFACTORY BASIS OR RECORDS FOR THE EXPENDITURE CLAIMED BY IT & DOES NO T FULFIL THE CRITERIA AS LAID DOWN BY THE ACT.THEREFORE, CLAIM OF EXPENDITURE MAD E BY THE ASSESSEE CANNOT BE ACCEPTED. IN VIEW OF THE FACTS & CIRCUMST ANCES AS MENTIONED ABOVE, THE AO HELD THAT IT IS FAIR & APPROPRIATE TO DISALLOW 50% OF THE EXPENSES CLAIMED I.E. RS. 58,15,229/- FROM EXPENDIT URE & ADDED BACK TO THE INCOME OF THE ASSESSEE. ITA NO. 570/JP/2014 ACIT, JAIPUR VS M/S SHIVAM COLONIZERS PVT. LTD., JAIPUR 4 5. WE NOW REFER TO THE RELEVANT FINDING OF THE LD. CIT (A) WHICH ARE UNDER CHALLENGE BEFORE US. THE SAME ARE REPRODUCED IS AS UNDER:- 4 I HAVE CONSIDERED SUBMISSIONS OF THE APPELLANT A ND HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS NOTED THAT THE AO HAS MADE THE ADDITION ON THE GROUND THAT THE APPELLANT HAD F AILED TO FURNISH THE BOOKS OF ACCOUNT AND VOUCHERS IN SUPPORT OF THE REC EIPTS AND EXPENDITURE SHOWN BY IT. THE AO COMPARED THE RESULT S OF THIS YEAR FROM SALE OF THEATRE TICKETS AND RESTAURANTS AND ON THAT BASIS ESTIMATED THE RECEIPTS FROM THEATRE AT RS. 57,88,705/- AND FROM F OOD PLANET AT RS. 3,23,654/-. 4.1 THE CLAIM OF THE APPELLANT IS THAT THE FACTS OF THE YEAR UNDER CONSIDERATION ARE TOTALLY DIFFERENT FROM THE FACTS OF THE EARLIER YEAR. DURING THE YEAR UNDER CONSIDERATION THE CINEMA HALL AND CANTEEN WAS RUN ONLY FOR ONE AND HALF MONTH AND FOR ANOTHER ONE AND HALF MONTHS THERE WERE NOT ACTIVITIES. AFTER 3 MONTHS, THE PROP ERTY WAS LET OUT. IN THE EARLIER ASSESSMENT YEAR, THE THEATRE AND RESTAU RANTS WERE RUN BY THE APPELLANT ITSELF. IN SUCH A SITUATION, THE RESU LTS OF THE YEAR UNDER CONSIDERATION CANNOT BE COMPARED WITH THE RESULTS O F THE IMMEDIATELY PRECEDING YEAR. 4.2 IT IS, HOWEVER, NOTED THAT THE NATURE OF THE BU SINESS CARRIED OUT BY THE APPELLANT IN THE YEAR UNDER CONSIDERATION IS ESSENTIALLY THE SAME AS WAS IN THE IMMEDIATELY PRECEDING YEAR. THE DIFFE RENCE IS THAT AFTER ABOUT FOUR MONTHS, THE THEATRE AND CANTEEN WAS LET OUT AND THE APPELLANT WAS ENJOYING INCOME FROM LEASE RENT. THUS , THE METHOD OF BUSINESS HAS CHANGED BUT THE NATURE OF THE BUSINESS I.E., RUNNING OF THEATRE AND RESTAURANT IS THE SAME. THERE IS NO APP ARENT REASON AS TO WHY THE PROFIT SHOULD SUDDENLY GO DOWN FROM RS. 19, 56,0000/- TO LOSS OF RS. 27,17,342/-, SINCE THE BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS ARE NOT AVAILABLE WHICH ACCORDING TO THE APPELLANT HAS BEEN LOST DUE TO ACCIDENT OF THE ACCOUNTANT, THE BEST METHOD AVAILAB LE TO DETERMINE THE INCOME IS TO ESTIMATE THE INCOME ON THE BASIS OF TH E RESULTS OF THE IMMEDIATELY PRECEDING YEAR. THE NATURE OF THE BUSIN ESS OF THE APPELLANT REMAINS ESSENTIALLY THE SAME, ALTHOUGH INSTEAD OF D OING THE BUSINESS ITSELF, THE SAME HAS BEEN LEASED OUT. A COMPARISON WITH THE IMMEDIATELY PRECEDING YEAR SHOWS THAT THE NP RATE I N THAT YEAR, AFTER DEPRECIATION, WAS 7.34% ON THE TOTAL TURNOVER OF RS . 2,66,50,667/-. IT ITA NO. 570/JP/2014 ACIT, JAIPUR VS M/S SHIVAM COLONIZERS PVT. LTD., JAIPUR 5 WOULD, THEREFORE, BE APPROPRIATE TO DETERMINE THE I NCOME OF THE APPELLANT BY APPLYING NP RATE OF 10% ON THE TOTAL T URNOVER OF RS. 89,44,560/-. THIS WOULD RESULT IN THE NET PROFIT OF RS. 8,94,455/-.AFTER DEPRECIATION. THE REST OF THE ADDITION IS DELETED. 6.1 HOWEVER, SINCE THE INCOME OF THE APPELLANT HAS BEEN ESTIMATED BY APPLYING NP RATE AS PARA 4.2 ABOVE, FURTHER ADDI TION ON ACCOUNT OF EXPENSES DEBITED IN THE P&L ACCOUNT DOES NOT APPEAR TO BE JUSTIFIED. THE ADDITION MADE ON THIS ACCOUNT IS, THEREFORE, UN CALLED FOR AND IS, ACCORDINGLY, DELETED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS EARNED INCOME FROM RUNNING OF THEATRE BY WAY OF SALE OF TICKETS AND FROM SALE IN FOOD PLANET FOR A PART OF THE YEAR AND THEREAFTER, THE THEATRE WAS LEASED OUT TO ADLABS FILMS. BOTH THE AO AND LD CIT(A) HAS RELIED ON ASSESSEES PAST HIST ORY IN DETERMINING APPROPRIATE PROFIT CHARGEABLE TO TAX IN ABSENCE OF BOOKS OF ACCOUNTS WHICH HAVE BEEN LOST IN AN ROAD ACCIDENT. THE AO HAS EST IMATED ADDITIONAL REVENUES TO THE TUNE OF RS 15,60,341 FOR THE PERIOD DURING WHICH THEATRE AND FOOD PLAZA WAS RUN BY THE ASSESSEE BASED ON PAST YE AR TURNOVER AND FURTHER, HAS DISALLOWED 50% OF THE EXPENSES ON ACCOUNT OF NO N-VERIFIABILITY AND HOLDING THAT LETTING OUT OF THEATRE IS MUCH LESS EX PENDITURE ORIENTED THAN RUNNING OF THEATRE ON ITS OWN. THE LD CIT(A) HAS A PPRECIATED THE AOS CONCERN THAT BOOKS OF ACCOUNTS ARE NOT AVAILABLE AN D ALSO THE FACT THAT THERE IS NO APPARENT REASON THAT PROFIT WILL SUDDENLY GO DOWN FROM RS 19,56,000 TO LOSS OF RS 27,17,342. HE FURTHER OBSERVED THAT THE NATURE OF BUSINESS REMAINS ESSENTIALLY THE SAME ALTHOUGH METHOD OF DOING THE B USINESS HAS CHANGED. HE ACCORDINGLY COMPARED THE NET PROFIT FOR THE LAST YE AR AND APPLIED N.P RATE OF 10% ON THE TOTAL TURNOVER. IT IS NOT THE CASE OF T HE REVENUE THAT LEASING INCOME OF THE ASSESSEE IS NOT IN THE NATURE OF BUSI NESS INCOME AND ALL THE REVENUES CONTENTION IS THAT THE EXPENSES ARE ON A HIGHER SIDE AS COMPARED TO LAST YEAR MORE SO ON ACCOUNT OF LEASING OUT OF T HE THEATRE FOR A PART OF THE ITA NO. 570/JP/2014 ACIT, JAIPUR VS M/S SHIVAM COLONIZERS PVT. LTD., JAIPUR 6 YEAR. THERE IS NO MATERIAL AVAILABLE ON RECORD TO D ETERMINE THE RUNNING AND FIXED COST AND THE COST PART TO RUNNING OF THEATRE AND LEASING OF THEATRE. BASED ON MATERIAL AVAILABLE ON RECORD, WE FIND THE APPROACH OF THE LD CIT(A) AS REASONABLE AS HE HAS FOLLOWED THE ASSESSEES PAS T HISTORY AND INSTEAD OF DISALLOWING INDIVIDUAL EXPENSES, HAS COMPARED THE N ET PROFIT OF THE LAST YEAR WILL THE NET PROFIT DECLARED BY THE ASSESSEE AND HE HAS ESTIMATED NET PROFIT AT 10% AS AGAINST 7.34% LAST YEAR, THUS TAKING INTO AC COUNT LOW OPERATING COST IN RELATION TO LETTING OF THEATRE. IN THE RESULT, GROUNDS OF THE REVENUE ARE DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/07/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 07/07/2017 *GANESH VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - ACIT, CIRCLE-02, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT - M/S SHIVAM COLONIZERS PVT. LTD., JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 570/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.