M/S. SUNIL HOTELS PVT.LTD., MUMBAI V. DY.C.I.T.,RANGE-8(3), MUMBAI

ITA 6021/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7574 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H N MOTIWALA
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E BENCH BEFORE SHRI B.RAMA KOTAIAH(ACCOUNTANT MEMBER) AND SHRI VIVEK VARMA (JUDICIAL MEMBER) ITA NO.6021 /MUM/2008 ASSESSMENT YEAR: 2005-06 SUNIL HOTELS PVT LTD., KAKAD CORNER, KONDIVITA LANE, ANDHERI KURLA ROAD, ANDHERI(E), MUMBAI-59 PA NO.AAFCS 5261 D DY. CIT, RANGE 8(3), MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : MR H.N.MOTIWALA RESPONDENT BY : MR MANOJ MISHRA DATE OF HEARING : 06.03.2012 DATE OF PRONOUNCEMENT : 21.03.2012 ORDER PER VIVEK VARMA, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER DATED 27.4.2008 OF THE CIT(A)-29, MUMBAI, FOR THE ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS 1. THE LD CIT(A) ERRED IN UPHOLDING THE ADDITION O F RS. 1,14,44,964 IN RESPECT OF ADDITIONAL PACK UP INCOME. 2. THE LD CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 4,72,084 ON ACCOUNT OF SUPPRESSION OF LIQUOR SALE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY HAVING BUSINESS OF RUNNING OF DANCE BARS, LIQUOR AND FOOD SALE, HOTELS AND CONSTRUCTION AND DEVELOPMENT OF PROPERTY. THERE WAS A SEARCH AND SE IZURE OPERATION U/S.132 OF THE I.T.ACT, 1961 ON 23.1.2004 ON THE BUSINESS PREMISES OF THE ASSESSEE. IN THE ASSESSMENT PROCEEDINGS U/S. 153A CONSEQUENT TO SEAR CH, THE AO HELD THAT THE ASSESSEE HAD BEEN SUPPRESSING INCOME FROM THE BUSINESS ACTI VITIES BY DECLARING SUPPRESSED PACK ITA NO.6021 /MUM/2008 ASSESSMENT YEAR: 2005-06 2 UP INCOME AND LIQUOR SALES AND BY NOT SHOWING ENTER TAINMENT INCOME FROM ASSESSMENT YEARS 1998-99 TO 2004-05. THE AO, ON THE BASIS OF W ORKING FOR ASSESSMENT YEAR 2004-05, WORKED OUT PACK UP INCOME FOR THE CURRENT YEAR AT RS. 42,754 PER DAY AND THUS, FOR 346 DAYS, WHEN THE BAR WAS OPEN, ESTIMATE D THE SAME AT RS. 1,47,92,884 AS AGAINST RS. 33,47,920, MAKING AN ADDITION OF RS. 1, 14,44,964. THE AO FURTHER MADE ADDITION ON ACCOUNT OF SUPPRESSION OF LIQUOR SALE A T RS. 4,72,084, WHEREIN, THE AO OBSERVED THAT THE ASSESSEE WAS USING TWO SETS OF ME NU CARDS IN DIFFERENT HALLS AND ON DIFFERENT OCCASION. ACCORDING TO THE AO, RATES OF LIQUOR LIKE SCOTCH, RUM, VODKA, GIN, LIQUORS AND WINES WERE 15% TO 30% HIGHER AS COMPARE D TO LOWER RATES IN THE MENU CARD. HE, THEREFORE, HELD THAT THERE WAS AN OVERAL L SUPPRESSON OF RATES CHARGED AND MADE AN ADDITION OF RS. 4,72,084. 3. THE ASSESSEE AGGRIEVED BY THE FINDINGS OF THE AO FILED APPEAL BEFORE THE CIT(A) WHO, AFTER HEARING THE ASSESSEE SUSTAINED THE ADDIT IONS MADE BY THE AO. 4. THE ASSESSEE COMPANY, NOT SATISFIED IS NOW BEFOR E THE TRIBUNAL. 5. BEFORE US, THE LEARNED A.R. OF THE ASSESSEE, AT THE OUTSET SUBMITTED THAT THE IMPUGNED ASSESSMENT YEAR IS POST SEARCH, THE SEARCH HAVING BEEN CONDUCTED ON 23.1.2004. THE A.R. OF THE ASSESSEE DREW OUR ATTEN TION TO THE CONTENTS OF WRITTEN SUBMISSIONS FILED BEFORE THE AO ON 19.12.2007, WHIC H HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER ITSELF. THE AR POINTED OUT THAT T HE ASSESSEE COMPANY HAD ONE BAR IN THE NAME OF NIGHT LOVER BAR & RESTAURANT, IN WHICH THERE WERE 5 DANCING HALLS/STAGES. IN THE CURRENT YEAR, OUT OF THE 5 HALLS / STAGE, 2 WERE FULLY OPERATIONAL, ONE WAS USED OCCASIONALLY AND 2 HALLS WERE CLOSED FOR RENOVATION . THE SALES OF FOOD LIQUOR WERE BILLED FROM THE COMPANY AND TAKEN TO THE BOOKS OF ACCOUNT AND THE MONEY RECEIVED AS TIPS TO THE DANCE ARTISTS WERE SHARED BY THE PERFORMING ART ISTS ON THE STAGE AND THE COMPANY IN THE RATIO OF 70:30. 6. THE AR THRUST HIS ARGUMENTS ON THE FACT THAT TH E DANCE ACTIVITY DURING THE CURRENT YEAR WAS NOT ON FULL SWING AS TWO OF ITS HA LLS WERE UNDER RENOVATION. HE INVITED OUR ATTENTION TO THE CHART SHOWING THE REPAIR ACTIV ITY CARRIED OVER BY THE ASSESSEE AND POINTED OUT THAT IN THE CURRENT ASSESSMENT YEAR, TH ERE WAS A MAJOR REPAIR ACTIVITY WHICH ITA NO.6021 /MUM/2008 ASSESSMENT YEAR: 2005-06 3 AMOUNTED TO RS. 17.79 LAKHS AS COMPARED TO CERTAIN MINOR REPAIRS IN THE PRECEDING YEARS. THE AR POINTED OUT THAT THE ASSESSEE HAD BE EN MAINTAINING ITS BOOKS ON REGULAR BASIS AND WHICH WERE DULY AUDITED BY THE CA, HE FUR THER ARGUED THAT WHEN IN A CASE THE BOOKS ARE READILY AVAILABLE, THE AO CANNOT EXERCISE AN OPTION FOR FRAMING THE ASSESSMENT ON ESTIMATES. THE AR POINTED OUT THAT TH E AO HAD SIMPLY ADOPTED THE WORKING DONE BY THE DEPARTMENT FOR ASSESSMENT YEAR 2004-05, WHEREIN THE THEN AO HAD ESTIMATED TOTAL COLLECTIONS OF PACK UP MONEY PE R DAY AT RS. 46,740 FOR THE FULLY FUNCTIONAL DANCE BAR. 7. ON GOING THROUGH THE FACTS AS MENTIONED IN THE O RDERS OF THE REVENUE AUTHORITIES AND THE FACTS PLACED BEFORE US DURING THE COURSE OF HEARING, WE FIND THAT THE AO, WHILE DEALING WITH THE ISSUE OF PACK UP COLLECTION / TIPS , WENT ON TO MAKE AN ESTIMATION ON THE BASIS OF THE PRECEDING YEAR, WITHOUT GOING INTO THE FACTS, I.E. THE DANCE FLOORS WERE CURTAILED DURING THE YEAR TWO OF ITS DANCE FLOORS W ERE UNDER RENOVATION AND BEING REGULAR ASSESSMENT PROCEEDINGS, THE AO HAD TO GO IN TO THE FACTUAL DETAILS AS PER THE AUDITED ACCOUNTS. THE AO, ON BOTH THESE POINTS COMM ITTED AN ERROR. 8. COMING TO THE FACTUAL MATRIX, NOWHERE HAVE WE FO UND THAT THE AO HAS DISREGARDED THE BOOK RESULTS, WHICH WERE BEFORE HIM AND WHICH WERE DULY AUDITED. ON THE DIRECTIONS OF THE BENCH, THE AR SUBMITTED THE M ONTH WISE DETAILS OF PACK UP COLLECTION / TIPS RECEIVED BY THE ASSESSEE CO. DURI NG THE YEAR. IT IS OBSERVED THAT THE FACTS IN 2004-05 ON WHICH BASIS, THE AO HAD MADE HI S ESTIMATION IS DIFFERENT FROM THE FACTS OF THE CURRENT YEAR. FROM THE ORDERS, WE FIND THAT THE ASSESSEE, IN 2004-05 AND IN EARLIER PERIOD COULD NOT PROVIDE THE ACTUAL COLLECT ION DETAILS NOR WAS IT ABLE TO PROVIDE ANY ESTIMATE OF THE COLLECTIONS. IN THOSE CIRCUMSTA NCES, THE REVENUE AUTHORITIES AND EVEN THE COORDINATE BENCH WERE FORCED TO GO INTO ES TIMATING PACK UP COLLECTIONS. BUT IN THE CURRENT YEAR, WHICH IS THE PERIOD OF REGULAR AS SESSMENT AND WHERE THE ASSESSEE HAS PROVIDED NOT ONLY REGULAR BOOKS BUT HAVE PROVIDED A UDITED ACCOUNT, IN THESE CIRCUMSTANCES, WE HAVE TO TAKE INTO ACCOUNT THE ACT UAL RESULTS OF THE ASSESSEE, UNLESS THEY ARE OTHERWISE PROVED TO BE INCORRECT. 9. DURING THE COURSE OF HEARING, THE AR, AFTER BRIN GING ALL THE FACTS TO THE KNOWLEDGE OF THE BENCH, REFERRED TO THE DECISIONS O F EVERGREEN BAR & RESTAURANTS RESTAURANT VS. ACIT IN ITA NO. 6614 & 6615/M/2006, REPORTED IN 6 DTR(MUM)(TRI) 56 ITA NO.6021 /MUM/2008 ASSESSMENT YEAR: 2005-06 4 AND THE CASE OF CIT VS. C.J. SHAH (BOMBAY), REPORTE D IN 246 ITR 671, WHEREIN IT HAS BEEN HELD, ESTIMATION OF THE TURNOVER BY THE AO ON NOTIONAL BASIS WAS ARBITRARY. THE AR ALSO RELIED ON THE DECISION OF MUMBAI TRIBUNAL IN T HE CASE OF DCIT VS. K.K. SHAH, ITA NO. 1899 TO 1901/MUM/2008, WHEREIN THE COORDINATE B ENCH HELD THAT THERE WAS NO NEED FOR EXTRAPOLATION. THE AR ALSO RELIED ON THE D ECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANAND KUMAR DEEPAK KUMAR, REPOR TED IN 294 ITR 497, WHEREIN IT WAS HELD THAT THERE WOULD BE NO PRESUMPTION THAT UN ACCOUNTED SALE WOULD CONTINUE FOR THE POST SEARCH PERIOD, THE AO WAS NOT JUSTIFIED IN ASSUMING UNACCOUNTED SALES FOR ENTIRE YEAR, WHERE NO DISCREPANCIES ARE NOTED IN TH E BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. 10. TAKING THE ENTIRE FACTS AND ON GOING THROUGH TH E CITED CASE LAWS, WE ARE OF THE CONSIDERED OPINION THAT WHEN BOOK RESULT HAD NOT BE EN DISTURBED, ESTIMATION CANNOT BE GONE INTO. WE, THEREFORE, HOLD THAT THE CASE OF THE ASSESSEE CO. IS SQUARELY COVERED BY THE DECISIONS CITED BY THE AR. WE FIND NO JUSTIFICA TION TO SUSTAIN THE IMPUGNED ADDITION. WE, THEREFORE DELETE THE ADDITION MADE BY THE REVEN UE AUTHORITIES AT RS. 1,14,44,964. 11. ON THE ISSUE OF ADDITION ON ACCOUNT OF LIQUOR S ALES AT RS. 4,72,084, THE AR DREW OUR ATTENTION TO THE ORDER DATED 11.5.2009 OF THE I TAT IN ASSESSEES OWN CASE, WHEREIN, IN PARA 13, IT HAS BEEN OBSERVED AS UNDER: COMING TO THE ADDITION ON ACCOUNT OF LIQUOR SALES, WE FIND THAT THE ASSESSING OFFICER TOOK THE RATES MENTIONED IN A MENU CARD WHI CH WAS HIGHER THAN THE RATES SPECIFIED IN THE BILL AND MADE AN ADDITION OF THE D IFFERENCE. IN OR CONSIDERED OPINION, THIS ADDITION IS NOT WELL FOUNDED. THE UN DISPUTED FACT IS THAT THE BILLS THAT WERE AVAILABLE WERE MADE OUT AT THE RATES WHIC H WERE MENTIONED IN A MENU CARD WHICH WAS HAVING LESSER RATES. THE ASSESSEE E XPLAINED THAT A PARTICULAR SECTION OF THE HOTEL WAS CLOSED AND THAT THIS MENU CARD WITH HIGHER RATES WAS USED IN THAT PARTICULAR SECTION IS A PLAUSIBLE EXPL ANATION. AS THE ONLY EVIDENCE FOUND BY THE REVENUE IS A MENU CARD WHICH HAS RATES HIGHER THAN THE OTHER MENU CARDS AND AS NO OTHER EVIDENCE WAS FOUND, IT C ANNOT BE SAID THAT THE ASSESSEE HAD RECEIVED AMOUNTS WHICH ARE IN EXCESS O F THAT WHICH IS MENTIONED IN THE BILLS. FINDING A MENU CARD WITH HIGHER RATE DOES NOT MEAN THAT THE BILLING WAS DONE AT THAT HIGHER RATE AND THAT SALES WERE SU PPRESSED. NO EVIDENCE OF RECEIPT OF MONEY IN EXCESS OF THAT WHICH IS MENTION ED IN THE BILL BOOK WAS FOUND DURING THE COURSE OF SEARCH. ADDITION IS MADE ON A MERE PRESUMPTION. THUS, IN VIEW OF THE ABOVE DISCUSSION WE ALLOW THE GROUND PE RTAINING TO ADDITION ON ACCOUNT OF LIQUOR SALES FOR ALL THE YEARS. ITA NO.6021 /MUM/2008 ASSESSMENT YEAR: 2005-06 5 SINCE THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSE SSEES OWN CASE IN THE PRECEDING ASSESSMENT YEARS (SUPRA), HAVE DELETED THE SIMILAR ADDITION, WE RESPECTFULLY FOLLOW THE SAME, WE, THEREFORE DELETE THE ADDITION FOR THIS AS SESSMENT YEAR. 12. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2012 SD/- SD/- (B.RAMAKOTAIAH) ACCOUNTANT MEMBER (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATED : 21 ST MARCH, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XXIX, MUMB AI 4. COMMISSIONER OF INCOME TAX, 8, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI