The ACIT, 3(1), V. M/s Hotel Ranjeet,

ITA 58/IND/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1523 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 08-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Assessee Lawyers: SSH H P VERMA
• Keywords: Corroborative evidences

Judgement Text

PAGE 1 OF 11 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.58/IND/2008 AY : 2004-05 ACIT-3(1), BHOPAL APPELLANT V/S. M/S. HOTEL RANJEET, 3, HAMIDIA ROAD, BHOPAL (PAN AABFH 5410 J) RESPONDENT DEPARTMENT BY SHRI K.K. SINGH, CIT, DR ASSESSEE BY S/SH. H.P. VERMA & ASHISH GOYAL ORDER PER JOGINDER SINGH, JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF LD. CIT-(A)-II, BHOPAL DATED 24.10.2007 FOR THE AY 2004-05 ON THE GROUND THAT TH E LD. FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.80,05,866/- MA DE ON ACCOUNT OF SUPPRESSED SALES WITHOUT APPRECIATING THE FACT THAT THE SALES WERE ESTIMATED BY THE AO IN THE ABSENCE OF SALE BILLS. 2. DURING HEARING OF THE APPEAL, WE HAVE HEARD SHR I K.K. SINGH, LD. CIT, DR AND SHRI H.P. VERMA ALONG WITH SHRI ASHISH GOYAL, LD. C OUNSEL FOR ASSESSEE. THE CRUX OF THE ARGUMENTS ON BEHALF OF THE REVENUE IS IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTING THAT THE ASSESSEE IS A HOTELIER HAVING T WO UNITS I.E. ONE SITUATED AT HAMIDIA ROAD AND ANOTHER ONE AT VAN VIHAR ROAD, BHO PAL. IT WAS CONTENDED THAT PAGE 2 OF 11 VAN VIHAR ROAD UNIT COMMENCED OPERATION IN THE YEAR 2000 WHEREAS THE HAMIDIA ROAD UNIT IS VERY OLD. THE HAMIDIA ROAD UNIT WAS CL AIMED TO BE ON BUSY ROAD WHEREIN THERE ARE ABOUT 30 HOTELS IN NEARBY SURROUN DINGS. OUR ATTENTION WAS INVITED TO THE ASSESSMENT ORDER SPECIFICALLY PAGES 2 TO 5 C ONTAINING THE DETAILS OF RAW MATERIAL CONSUMED IN FOOD ITEMS AND SALE REALISATIO N OF COOKED FOOD. IT WAS POINTED OUT THAT NEITHER SALE BILLS WERE PRODUCED BY THE AS SESSEE NOR NECESSARY DETAILS WERE FURNISHED. IT WAS ARGUED THAT BEFORE THE LD. CIT(A) , THE ASSESSEE TOOK ALTOGETHER REVERSE STAND WHICH WAS ACCEPTED AND THAT TOO WITHO UT ASCERTAIN THE TRUE FACT. NO REMAND REPORT WAS SOUGHT FROM THE AO AS GENERALLY I N FOOD ITEMS, A VERY HIGH MARGIN WAS ARGUED TO BE OBTAINED. PLEA WAS ALSO RAI SED THAT THE APPEAL MAY BE REMANDED BACK TO THE FILE OF THE LD. CIT(A)/AO. IN NUTSHELL, THE ASSESSMENT ORDER WAS SUPPORTED. ON THE OTHER HAND, THE LD. COUNSEL F OR ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT NECESSARY DET AILS LIKE AUDITED BOOKS WERE FURNISHED BY THE ASSESSEE WHEREIN NO DEFECT WAS POI NTED OUT. IT WAS ALSO PLEADED THAT NO OUTSIDE SALES WAS DETECTED AND THE WHOLE AD DITION IS BASED ON ASSUMPTION AND PRESUMPTION AS NO EXPENDITURE WAS FOUND BOGUS O R DISALLOWED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS ARE THAT THE ASSESSEE HOTEL DE CLARED TAXABLE INCOME OF RS.8,35,390/- IN ITS RETURN FILED ON 27.12.2006. TH ERE ARE TWO UNITS OF THE ASSESSEE ONE IS SITUATED AT HAMIDIA ROAD AND ANOTHER ONE AT VAN VIHAR ROAD, BHOPAL, WITHOUT ANY STAR FACILITY. VAN VIHAR UNIT COMMENCED OPERATI ON IN THE YEAR 2000 WHEREAS HAMIDIA ROAD UNIT IS OLD ONE. THE STAND OF THE REVE NUE IS THAT THE ASSESSEE IS ONE OF THE BEST HOTELS IN BHOPAL. THE TOTAL AREA OF VAN VIHAR UNIT WAS ARGUED TO BE ABOUT 4000 SQ. FT., HAVING ABOUT 20 ROOMS WITH RESTAURANT . IT WAS POINTED OUT THAT THERE PAGE 3 OF 11 WAS NO LAWN IN THE ASSESSEE HOTELS. THE HAMIDIA ROA D UNIT IS ON THE BUSY ROAD WHEREIN THERE ARE ABOUT 30 HOTELS IN THE NEARBY ARE A HAVING NO PARKING FACILITY. THE LD. AO COMPARED THE CONSUMPTION OF RAW MATERIAL WIT H NET REALISATION OF COOKED FOOD. THE COMPARISON MADE BY THE LD. AO ARE AS UNDE R: M/S. RANJEET TURANT BAKERY FAST FOOD (BRANCH) RAW MATERIAL CONSUMED IN FOOD ITEMS AMOUNT SALES CONSIDERATION OF FOOD ITEMS AMOUNT OPENING STOCK 56715 FAST FOOD SALES 1585212 AATA & MAIDA 40595 CANTEEN RECEIPTS 17550 CHICKEN & VEGETABLES 202620 COLD DRINKS 66450 DAL & RICE 13652 FUEL 196574 ICE CREAM 45367 KITCHEN GOODS 194103 OIL & VEGETABLE GHEE 25685 PACKING MATERIAL 87 SUGAR 10980 TOTAL 852828 LESS: CLOSING STOCK 172620 NET CONSUMPTION OF RAW MATERIAL 680208 NET SALE REALIZATION OF COOKED FOOD 1602762 PAGE 4 OF 11 HOTEL RANJEET LAKE VIEW (BRANCH) RAW MATERIAL CONSUMED IN FOOD ITEMS AMOUNT SALES CONSIDERATION OF FOOD ITEMS AMOUNT OPENING STOCK 242106 FAST FOOD SALES 10838867 AATA & MAIDA 220639 CANTEEN RECEIPTS 2126559 CHICKEN & VEGETABLES 2636361 133650 COLD DRINKS 347048 DAL & RICE 130083 FUEL 925989 ICE CREAM 297350 KITCHEN GOODS 2471364 OIL & VEGETABLE GHEE 303882 PACKING MATERIAL 87021 SUGAR 33721 SWEETS 14181 TOTAL 7709745 TOTAL 13099076 LESS: CLOSING STOCK 103230 LESS: COMMERCIAL TAX ON FOOD 20000 NET CONSUMPTION OF RAW MATERIAL 7606515 NET SALE REALIZATION OF COOKED FOOD 13079076 PAGE 5 OF 11 HOTEL RANJEET HAMIDIA ROAD (H.O.) RAW MATERIAL CONSUMED IN FOOD ITEMS AMOUNT SALES CONSIDERATION OF FOOD ITEMS AMOUNT OPENING STOCK 491149 FAST FOOD SALES 10448555 AATA & MAIDA 202507 CANTEEN RECEIPTS 9332 CHICKEN & VEGETABLES 3284151 96300 COLD DRINKS 82659 DAL & RICE 177646 FUEL 1252775 ICE CREAM 104157 KITCHEN GOODS 1626768 OIL & VEGETABLE GHEE 618929 PACKING MATERIAL 80611 SUGAR 58492 SWEETS 17169 BREAD 475 TOTAL 7997488 TOTAL 10554187 LESS: CLOSING STOCK 262746 LESS: COMMERCIAL TAX ON FOOD 956615 NET CONSUMPTION OF RAW MATERIAL 7734742 NET SALE REALIZATION OF COOKED FOOD 9597572 PAGE 6 OF 11 4. ON THE BASIS OF ABOVE TABLES, THE AO CONCLUDED T HAT THE VALUE OF RAW MATERIAL CONSUMED IS RS.77,34,742/- WHEREAS THE COOKED FOOD REALISATION IS RS.95,97,572/- WHICH IS AROUND 124% OF THE COST OF RAW MATERIAL CO NSUMED BY THE ASSESSEE WHEREAS FOR RANJEET TURANT BAKERY FAST FOOD AND HOT EL RANJEET LAKE VIEW, IT WAS AROUND 235% AND 172% RESPECTIVELY. THE ASSERTION OF THE AO IS AS UNDER: DURING THE COURSE OF HEARING IT WAS SUBMITTED BY TH E ASSESSEE THAT NO RECORD OF SALE BILLS ISSUED TO THE CUSTOMERS HAVE B EEN KEPT. IT WAS STATED BY HIM THAT SALE BILLS ARE DESTROYED AFTER M AKING THEIR ENTRIES IN CASH BOOK. IN SUCH CIRCUMSTANCES CORRECT SALES CAN NOT ASCERTAINED IN CASE OF HOTEL LAKE VIEW RANJEET AND HOTEL RANJEET H AMIDIA ROAD. RECORDING OF CORRECT SALES IS AN INTEGRAL PART OF A CCOUNTING SYSTEM OTHERWISE CORRECT PROFIT CAN NOT BE ASCERTAINED. TH ERE WAS NO REASONS FOR LOSS IN HOTEL BUSINESS WHICH THE ASSESSEE HAS S HOWN DURING THIS ASSESSMENT YEAR. 5. BEFORE THE LD. CIT(A), THE ASSESSEE FILED WRITTE N SUBMISSIONS WHICH WERE DULY CONSIDERED, IT WAS CLAIMED THAT THE BOOKS WERE DULY PRODUCED BEFORE THE AO FOR HOTEL RANJEET HAMIDIA ROAD AND RANJEET TURANT RESTA URANT. HOWEVER, FROM THE PAPER BOOK, FILED BY THE ASSESSEE, WE HAVE FOUND TH AT THE ASSESSEE FURNISHED AUDITED ACCOUNTS OF FY 2003-04 (PAGES 1 TO 24), WRI TTEN SUBMISSIONS, DURING ASSESSMENT PROCEEDINGS (PAGES 25 TO 28), THREE YEAR S COMPARATIVE TRADING AND PROFIT & LOSS A/C (PAGES 29 TO 34), ILLUSTRATIVE PA XCARD (LAKE VIEW HOTEL) (PAGES 35, 36), ILLUSTRATIVE BILLS, RECEIPT AND DAILY SALE-SHE ET OF HOTEL RANJEET AND LAKE VIEW (PAGES 37 TO 42), WRITTEN SUBMISSIONS BEFORE THE LD . FIRST APPELLATE AUTHORITY (PAGES PAGE 7 OF 11 43 TO 53). IN THE INTEREST OF JUSTICE, WE ARE REPRO DUCING HEREWITH THE RELEVANT PORTION (PAGE 28) OF WRITTEN SUBMISSION FILED BEFOR E THE LD. AO: 15. THE PURCHASE ACCOUNTS RUN INTO OVER HUNDRED PA GES. WE ARE PRODUCING BEFORE YOU THE ENTIRE PURCHASE LEDGER AND ALL THE PURCHASE VOUCHERS. YOUR MAY PLEASE ASCERTAIN THE VOLUME OF R ECORD REQUIRED BY YOU. IF STILL YOU PERSIST, WE ARE PREPARED TO SUBMI T THE SAME ON YOUR RECORD. 16. ALMOST ALL EXPENSES DEBITED TO THE PROFIT & LOS S ACCOUNT OF THE HEAD- OFFICE AND BRANCHES ARE OVER RS.20,000/-. WE ARE PR ODUCING BEFORE YOU THE ENTIRE ACCOUNTS AND VOUCHERS FOR EXPENSES. YOU ARE REQUESTED TO VERIFY THE SAME AND RAISE SPECIFIC OBJECTIONS TO TH E EXPENSES INCURRED. 17. COPY OF SALARY AND WAGES ACCOUNTS ARE ENCLOSED. THE VOUCHERS ARE ALSO ENCLOSED. THE ASSESSEE HAS OVER HUNDRED EMPLOY EES. SALARY SHEETS WITH ALL DETAILS FOR EACH MONTH ARE MAINTAIN ED. THE SAME ARE PRODUCED. 18. THE SALES ACCOUNTS ALSO RUN INTO MANY PAGES. TH E ASSESSEE IS PRODUCING BEFORE YOU THE SALES LEDGER AND THE SALE VOUCHERS. THE SALES MAY BE VERIFIED. 19. THE RESTAURANT MENUS AND ROOM TARIFFS CHANGE FR OM TIME TO TIME. THE PRESENTLY APPLICABLE DETAILS ARE ENCLOSED. PAGE 8 OF 11 20. COPY OF ACCOUNT OF M/S ASHOK TRADERS RUNNING IN TO NINETEEN PAGES IS ENCLOSED. 21. BOOKS OF ACCOUNT, BILLS AND VOUCHERS WITH SUPPO RTING EVIDENCE ARE PRODUCED. 6. IF THE AFORESAID SUBMISSIONS OF THE ASSESSEE PRE FERRED DURING ASSESSMENT PROCEEDINGS ARE ANALYSED, ONE CLEAR FACT IS OOZING OUT THAT THE NECESSARY DETAILS INCLUDING SALE VOUCHERS WERE FURNISHED BY THE ASSES SEE, THEREFORE, THE CONTENTION OF THE REVENUE THAT SALE VOUCHERS WERE NOT PRODUCED IS NOT JUSTIFIED. EVEN THE ASSESSEE PRODUCED BOOKS OF ACCOUNT, BILLS AND VOUCHERS WITH SUPPORTING EVIDENCE. IN THE LIGHT OF THESE FACTS, THE ASSERTION MADE BY THE LD. AO AT PAGE 5 (REPRODUCED ABOVE AT PAGE 6) IS NOT CORRECT. THE AO HAS NOT BROUGHT ON R ECORD ANY COMPARABLE CASES TO SUBSTANTIATE ITS CONTENTION. EVEN OTHERWISE, NO TWO UNITS CAN BE COMPARED AS THE NET INCOME DEPENDS ON SO MANY CIRCUMSTANCES LIKE LO CATION OF THE HOTEL, FACILITIES AVAILABLE, NATURE AND NUMBER OF CLIENTAGE, WEATHER CONDITIONS, FINANCIAL STATUS OF CLIENTAGE, AVAILABILITY OF TOURIST PLACES ETC. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LD. CIT(A) WERE AS UNDER: (I) THAT THE STAFF IN THE HOTEL UNITS OF THE APPEL LANT IS ALSO CONSUMING FOOD AND BEVERAGES FROM WHICH NO REVENUE IS BEING GENERATED. THE CONSUMPTION OF RAW MATERIAL BY STAFF HAS NOT BEEN CONSIDERED. PAGE 9 OF 11 (II) RAW MATERIAL PURCHASES INCLUDE SAUNF, MISHRI, TOMATO SAUCE, PICKLES, CHUTNEY, TOOTH PICKS, PAPER NAPKINS ETC. WHICH ARE OFFERED FREE OF COST TO THE CUSTOMERS, BREAKFAST IS OFFERED COMPLIMENTARY TO THE CUSTOMERS STAYING IN THE HOTEL ROOMS. AT THE LAKEVIEW UNIT RO OMS ARE OFFERED TO CORPORATE CUSTOMERS UNDER PACKAGE, W HICH INCLUDE FREE MEALS. LIKEWISE MINERAL WATER BOTTLES ARE OFFERED TO THE ROOM CUSTOMERS EACH TIME WHEN THEY CHECK-IN AND CHECKOUT OF THE HOTEL. BISCUITS ARE OF FERED FREE WITH TEA AND COFFEE. IN THE BAR, SODA AND SNAC KS SUCH AS CHEESE-LINGS AND FRIED CHANA DAL ARE OFFERE D FREE WITH DRINKS. (III) HOTEL IS HOSPITALITY BUSINESS. THERE ARE VARI OUS GOVT. DEPARTMENT OFFICIALS WHO VISIT THE HOTEL ON GOVT. D UTY AND OTHERWISE ALSO, HOSPITALITY REQUIRES GOOD BEHAVIOUR WITH OTHERS. TEA, COFFEE, COLD DRINKS, SNACKS AND ALSO L UNCH OR DINNER ARE OFFERED TO THEM ACCORDING TO THE TIME OF VISIT. THERE ARE OCCASIONS WHEN THE HOTEL IS REQUIRED TO P ROVIDE MEALS AND OTHER FACILITIES ON DEMAND. HOTEL IS SUCH A BUSINESS WHERE HOSPITALITY HAS TO BE MAINTAINED AT ALL COSTS. 7. THE CONCLUSION DRAWN IN THE IMPUGNED ORDER IS AS UNDER: PAGE 10 OF 11 I HAVE SEEN THE MANNER IN WHICH THE ADDITION HAS BE EN MADE BY THE AO AND ALSO SEEN THE MATERIAL PRODUCED BY TH E AR AND EXAMINED THE ARGUMENTS MADE BY THE AR IN THIS REGAR D. I HAVE ALSO SEEN THE MATERIAL PLACED BEFORE ME. IN VIEW OF THE FACTS, CIRCUMSTANCES AND ALSO THE FACTS & FIGURES EXHIBITE D BY THE AR IN THE TABULAR FORM AS MENTIONED ABOVE, THE ADDITIO N MADE BY THE AO CANNOT BE SUSTAINED AND IT HAS TO BE DELETED . THUS, THE APPEAL OF THE APPELLANT ON THIS GROUND IS ALLOWED. 8. IF THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER/ IMPUGNED ORDER AND THE ARGUMENTS ADVANCED BY THE LD. RESPECTIVE COUNSELS A RE KEPT IN JUXTAPOSITION AND ANALYSED IT SEEMS THAT THE STAND OF THE AO IS BASED ON ASSUMPTION & PRESUMPTION AND HE HAS MADE THE IMPUGNED ADDITION BY COMPARING THE SAME WITH A STAR HOTEL FOR WHICH NO DOCUMENTARY EVIDENCE HAS BEEN PLACED ON RE CORD. EVEN OTHERWISE, A STAR HOTEL, A ROAD SIDE DHABA OR MEDIUM RANGE HOTEL CANN OT BE KEPT ON THE SAME FOOTING. THE ADDITION OF RS.21,33,954/- FOR ALLEGED SUPPRESS ION OF SALES OF FOOD WAS MADE FOR HOTEL RANJEET LAKE VIEW AND RS.58,71,912/- FOR HOTE L RANJEET AT HAMIDIA ROAD AND CONSEQUENTLY, THE TOTAL AMOUNT OF RS.80,05,866/- WA S TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. HOWEVER, THE LD. AO HAS NOT STATED ANY BASIS IN ARRIVING AT THE ESTIMATED COST/PARTICULAR CONCLUSION. EVEN OTHERWIS E, THERE IS NO DISPUTE TO THE FACT THAT IN COMPARISON TO THE PRECEDING YEAR, THE GROSS PROFIT DECLARED BY THE ASSESSEE IS HIGHER IN THE IMPUGNED AY NOT ONLY IN VOLUME BUT ALSO IN THE RATE OF PROFIT IN THE SALE OF FOOD ITEMS AS THERE IS A SUBSTANTIAL INCREA SE. IN THE IMPUGNED ORDER, A COMPARATIVE/EXHAUSTIVE ATTEMPT HAS BEEN MADE IN DEL ETING THE ADDITION. SINCE THE BOOKS ARE MAINTAINED REGULARLY, AUDITED ONE AND EAR LIER ACCEPTED BY THE DEPARTMENT, PAGE 11 OF 11 THEREFORE, WITHOUT BRINGING ANY CONCRETE LACUNA, NO ESTIMATED ADDITION CAN BE SAID TO BE JUSTIFIED SPECIALLY WHEN THE PURCHASES, SALES AND EXPENSES WERE FULLY AND EXHAUSTIVELY VOUCHED. THE ROOM RENT RECEIPT AND THE PROFIT SHOWN BY THE ASSESSEE HAS BEEN ACCEPTED BUT ONLY FOODS SALES HAVE BEEN DO UBTED. IN VIEW OF THESE FACTS, UNLESS AND UNTIL ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS POINTED OUT, NO PRESUMPTIVE ADDITION CAN BE MADE BECAUSE SUSPICI ON CANNOT TAKE THE SHAPE OF EVIDENCE, HOWEVER STRONG IT MAY BE. EVEN OTHERWISE, NO EXPENDITURE WAS FOUND TO BE BOGUS OR DISALLOWED, CONSEQUENTLY, WE HAVE NOT F OUND ANY INFIRMITY IN THE IMPUGNED ORDER, THEREFORE, IT IS UPHELD. 8. IN THE RESULT, APPEAL OF THE REVENUE IS HAVING N O MERIT, CONSEQUENTLY, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON .10.20 09. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: .10.2009 !VYAS! APPELLANT/RESPONDENT/CIT/ CIT(A)/DR