ACIT, UDAIPUR V. The Lake Palace Hotels & Motels Pvt. Ltd., UDAIPUR

ITA 612/JODH/2008

• Counselvise Citation: 61223314 RSA 2008
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 10-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N M RANKA
• Keywords: Capital asset; Gift; Business income; Depreciation; Search and seizure; Accommodation entries; Commercial expediency; Retraction; Revenue expenditure; Capital expenditure
• Section: 69C; 143(3); 131; 68; 69; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH , JODHPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 612/ JU/2008 ASSESSMENT YEAR : 2003-04 PAN: AAACT 7433 M THE ACIT VS. THE LAKE PALACE HOTELS & MOTELS ( P) LTD. CIRCLE- 2 CITY PALACE UDAIPUR UDAIPUR (APPELLANT ) (RESPONDENT) C.O. 23/JU/2009 (ARISING OUT OF IT NO. 612/ JU/2008) ASSESSMENT YEAR : 2003-04 PAN: AAACT 7433 M THE LAKE PALACE HOTELS & MOTELS (P) LTD. VS. THE A CIT CITY PALACE CIRCLE- 2 UDAIPUR UDAIPUR (APPELLANT ) (RESPONDENT) ITA NO. 613/ JU/2008 ASSESSMENT YEAR : 2004-05 PAN: AAACT 7433 M THE ACIT VS. THE LAKE PALACE HOTELS & MOTELS ( P) LTD. CIRCLE- 2 CITY PALACE UDAIPUR UDAIPUR (APPELLANT ) (RESPONDENT) C.O. 24/JU/2009 (ARISING OUT OF IT NO. 613/ JU/2008) ASSESSMENT YEAR : 2004-05 PAN: AAACT 7433 M THE LAKE PALACE HOTELS & MOTELS (P) LTD. VS. THE A CIT CITY PALACE CIRCLE- 2 UDAIPUR UDAIPUR (APPELLANT ) (RESPONDENT) 2 ITA NO. 500/ JODH/2010 ASSESSMENT YEAR : 2005-06 PAN: AAACT 7433 M THE ACIT VS. THE LAKE PALACE HOTELS & MOTELS ( P) LTD. CIRCLE- 2 CITY PALACE UDAIPUR UDAIPUR (APPELLANT ) (RESPONDENT) C.O. 01/JODH/2011 (ARISING OUT OF IT NO. 500/ JU/2010) ASSESSMENT YEAR : 2005-06 PAN: AAACT 7433 M THE LAKE PALACE HOTELS & MOTELS (P) LTD. VS. THE A CIT CITY PALACE CIRCLE- 2 UDAIPUR UDAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI SUNIL MATHUR ASSESSEE BY : SHRI N.M. RANKA DATE OF HEARING: 01-12-2011 DATE OF PRONOUNCEMENT: 20-01-2012 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED APPEALS AGAINST RESPECTIVE ORDERS OF THE LD. CIT(A) , UDAIPUR FOR THE ASSESSMENT YEAR 2003-04 TO 2005-0 6 . THE ASSESSEE HAS FILED THE CROSS OBJECTIONS. 2.0 FIRST OF ALL, WE WILL TAKE UP THE APPEAL OF TH E REVENUE AND C.O. OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 ITA NO. 613/JU/2008 (REVENUE ) A.Y.. 2004-05 3 3.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 49.00 LACS MADE BY THE AO ON ACCOUNT OF UNACCOUNTED /UNEXPLAINED CASH. 3.2 THE FACTS OF THE ISSUE ARE AS UNDER:- DURING THE YEAR, THE ASSESSEE HAD GIVEN AN ADVAN CE OF RS. 50.00 LACS TO M/S. ANU CONSTRUCTION AND DEDUCTED TDS @2.1% I. E. RS. 1,10,000/-. THE AR SUBMITTED THAT THE SAID ADVANCE WAS GIVEN AGAINST T HE CONTRACT FOR RENOVATION OF GARDEN HOTEL, GULAB BAGH ROAD, UDAIPUR. A COPY OF AGREEMENT ENTERED INTO WITH M/S. ANU CONSTRUCTION WAS FURNISHED BEFORE TH E AO. HOWEVER, THE CONTRACT COULD NOT MATERIALIZE. THE ADVANCE IS ST ILL OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND YET TO BE RECOVERED FR OM THE PARTY. IN THE MEANTIME, AN AFFIDAVIT WAS RECEIVED FROM ACIT, CENERAL CIRCLE -1, UDAIPUR FILED BY SHRI GAJENDRA PORWAL WHO IS KARTA OF PROPRIETORSHIP HUF OF M/S. ANU CONSTRUCTION. IN THIS AFFIDAVIT, SHRI GAJENDRA PORWAL, PROPRIETOR OF M/.S. ANU CONSTRUCTION AT PAGE NO. 5 OF HIS AFFIDAVIT HAS STATED AS UNDER: YSD ISYSL GKSVY] FKO FUOKL GKSVY DS LACA/K ESA ;G LI'V DJUK PKGRK GWW FD ESA DKSBZ BSDSNKJH DK DK;Z UGHA DJRK GWWA ESJS ;GKW RYKKH DS NKSJKU FDLH HKH IZDKJ DK DKSBZ BSDSNKJH DK LKEKU EKY [KJHN DK FCY @HKQXRKU DH JLHNSA] FDLH VU; BSDSNKJ }KJK DK;Z DJK;K TKUS DS LAC/K ESA DKSBZ DKXTKR HKH UGHA FEYS GSA BL LACA/K ESA ESJS }KJK DGS X;S C;KU DKS XYR S BSDSNKJH DK;Z DK DKSBZ VUQHKO GH GSA BSDSNKJH DS ACCOMODATION BILL TKJH DJUK EK= ESJS 4 O;OLK; DK GH ,D FGLLK GS O EQ>S DSOY DEHKU FN;K X;K GSA FTLDKS ESUS ESJH VK;DJ FOOJ.KH ESA HKH NKKZ NH GSA LATER ON, THE STATEMENT OF SHRI GAJENDRA PORWAL REC ORDED ON 8.12.2006 BY ACIT, CENTRAL CIRCLE-1, UDAIPUR U/S. 131 OF THE ACT WAS ALSO RECEIVED BY THE AO WHICH IS AS UNDER:- IZ-9 ESA VKIDK /;KU VK;DJ VF/KFU;E DH /KKJK 131 DS V/KHU FNUKAD 24-03-2005 DKS FN;S X;S C;KU DH VKSJ VKD`'V DJRK GWWA BL C;KUKS ESA IST 9 IJ VKIUS CRK;K GS FD ESLLZ YSD ISYSL GKSVYL ,AM EKSVYL FYFEVSM LS :IK;S 50 YK[K DK DKBZ FMIKSFTV GSA NJLY BULSA ESAUS OKF'KZD FJUKSOSKU DK BSDK YSUS DS ISVS DKS :IK;S FY;S FKS IJURQ CKN ESA ;G DK;Z UGH DJOK IK;K BL DKJ.K ;G :I;K MUGSA OKIL NSUK CDK;K GSA FDURQ FNUKAD 01-11-2006 DS KIFK I= TKS ESJS LE{K VK;DJ FU/KKZJ.K IZFDZ;K DS NKSJKU GKSVYL ,.M EKSVYL FYFEVSM DS CKJS ESA VKIUS FUEU FVII.KH NH GSA YSD ISYSL GKSVY] FKO FUOKL GKSVY DS LACA/K ESA ;G LIV DJUK PKGRK GWW FD ESA DKSBZ BSDSNKJH DK DK;Z UGHA DJRK GWWA ESJS ;GKW RYKKH DS NKSJKU FDLH HKH IZDKJ DK DKSBZ BSDSNKJH DK LKEKU EKY [KJHN DK FCY @HKQXRKU DH JLHNSA] FDLH VU; BSDSNKJ }KJK DK;Z DJK;K TKUS DS LAC/K ESA DKSBZ DKXTKR HKH UGHA FEYS GSA BL LACA/K ESA ESJS }KJK DGS X;S 5 C;KU DKS XYR S BSDSNKJH DK;Z DK DKSBZ VUQHKO GH GSA BSDSNKJH DS ACCOMODATION BILL TKJH DJUK EK= ESJS O;OLK; DK GH ,D FGLLK GS O EQ>S DSOY DEHKU FN;K X;K GSA FTLDKS ESUS ESJH VK;DJ FOOJ.KH ESA HKH NKKZ NH GSA MRRJ MIJKSDR O;OGKJ DS CKJS ESA ESA OKLRFOD YSU NSU DKS LI'V DJRS GQ, VIUK LI'VHDJ.K FUEU IZDKJ LS ISK DJRK GSWA FNUKAD 29-03-2004 DKS 48]90]000@& DK PSD EQ>S 1]10]000@& DK VHMH,L DKVUS DS IPKR~ ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM LS IZKIR GQVK GSA BL PSD DKS ESUS ESLLZ VUQ DULVDKU DS CSD VKWQ CMKSNK] MN;IQJ DS [KKRK LA[;K 202703 ESA FNUKAD 29- 03-2004 DKS TEK DJOK;KA BLDS MIJKUR PSD LA[;K 965215 DS EK/;E LS UDN JDE 49]00]000@& FNUKAD 29-03-2004 DKS FUDKY YH RFKK BL FUDKYH GQBZ JDE ESA GH ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM DKS NS NHA BL IZDKJ VHMH,L ISVS CPH 1]00]000@& DH JKFK ESUS VIUS DEHKU ISVS EKAX JGK GWW FTLDK IZEK.K I= VHKH RD EQ>S IZKIR UGHA GQVK GS RFKK BL O;OGKJ ESA MYVK EQ>S ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM DKS 10]000@& T;KNK HKQXRKU GKS X;KA ESA ;G 6 ;GKW LIV DJUK PKGRK GWW FD ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM DKS YSUK NSUK CDK;K UGHS GSA MIJKSDR C;KU ESUS I< DJ LQUK FN;S] TKS DQN DGK GS LR; DGK GS LR; DS VYKOK DQN UGHA DGK GS] C;KU FCUK NCKO DS FN;S] LOLFK FPRR] FCUK UKS DS FN;S GSA BZOJ ESJH ENN DJSA 2.2. IN THE ABOVE BACKGROUND, THE ASSESSEE WAS GIV EN AN OPPORTUNITY TO CROSS-EXAMINE SHRI GAJENDRA PORWAL BY ISSUING SU MMONS U/S. 131 OF THE ACT. SHRI GAJENDRA PORWAL ATTENDED ON 15.12.2006/22.12.2 006 AND WAS CROSS- EXAMINED BY THE COUNSEL OF THE ASSESSEE. IN THE CR OSS-EXAMINATION, SHRI GAJENDRA PORWAL REAFFIRMED THAT HIS ONLY BUSINESS W AS PROVIDING ACCOMMODATION ENTRIES. THE LAKE PALACE HOTELS & MOTELS WAS ENGAG ED IN OBTAINING BOGUS BILLS FROM HIM AND HIS CONCERNS. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS. 49 LACS SHOULD NOT BE ADDED IN ITS IN COME AS UNEXPLAINED CASH. IN REPLY TO THE ABOVE SHOW CAUSE, THE ASSESSEE HAD SU BMITTED THAT ADVANCE WAS GIVEN AGAINST CONTRACT WHICH COULD NOT BE MATERIALI ZED. IN THE MEANWHILE, THE ASSESSEE FILED AN APPLICATION U/S. 144A OF THE ACT TO THE OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-2,UDAIPUR ON 18.1 2.2006 TO GIVE HIS DIRECTION IN THE MATTER. THE ADDITIONAL COMMISSION ER OF INCOME-TAX, RANGE-2, UDAIPUR EXAMINED THE ISSUE IN DETAIL AND FOUND THAT SHRI GAJENDRA PORWAL KARTA OF PROPRIETORSHIPHUF OF M/S. ANU CONSTRUCTION HAD FILED AN AFFIDAVIT TO THE OFFICE OF THE ACIT, CENTRAL CIRCLE-1, UDAIPUR AND T HE SAME WAS FORWARDED TO THE ACIT, CIRCLE-2, UDAIPUR. THE ACIT, CIRCLE-2, UDAIP UR MADE THE COPY OF RELEVANT EXTRACT OF ABOVE AFFIDAVIT OF SHRI GAJENDR A PORWAL AND MADE IT AVAILABLE TO THE ASSESSEE. IN THE SAID AFFIDAVIT, SHRI GAJEN DRA PORWAL HAD MADE SPECIFIC STATEMENT IN CONNECTION WITH THE ABOVE ADVANCE OF R S. 50 LACS. THE STATEMENT OF SHRI GAJNEDRA PORWAL AS MADE IN THE AFFIDAVIT WAS C ONTRARY TO THE SUBMISSION AS MADE BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESS EE IN HIS APPLICATION U/S. 144A OF THE ACT. 3.3 BEFORE THE LD. CIT(A), THE FOLLOWING SUBMISSION S WERE MADE. 7 I) THAT THE ASSESSEE COMPANY GAVE AN ADVANCE OF RS. 50 LACS THROUGH ACCOUNT PAYEE CHEQUE OF RS. 48,90,000/- TO M/S. ANU CONSTRUCTION AND THE BALANCE OF RS. 1,10,000/- BEIN G TDS WAS DEPOSITED. THE SAID CHEQUE WAS DULY CLEARED THROUGH BANK OF BA RODA, MAIN BRANCH, UDAIPUR. II) SHRI GAJENDRA PORWAL HAS ADMITTED THAT HE HAD F ILED INCOME TAX RETURN FOR A.Y. 2004-05 BUT HAS NOT PROVIDED ITS CO PY BECAUSE THE SAID TRANSACTION STANDS DULY SHOWN IN HIS BOOKS AND THE RETURN. III) THAT THE CHEQUE OF RS. 48,90,000/- ISSUED BY T HE ASSESSEE WAS DEPOSITED WITH M/S. ANU CONSTRUCTION WITH BANK OF BARODA, MAIN BRANCH, UDAIPUR AND THEREAFTER HE HAS TRANSFERRED T HIS AMOUNT TO M/S. JALKANTA TECHNICAL & FINANCIAL SERVICES PVT. LTD. ( JTFSPL). THE COPY OF CERTIFICATE ISSUED BY THEIR BANKER M/S. UTI BAN K, CHETAK MARG, UDAIPUR WAS ALSO FURNISHED TO THE AO IN SUPPORT OF THE ABOVE CONTENTION. 2.4. IT IS TO BE MENTIONED HERE THAT THE SEARCH AND SEIZURE PROCEEDINGS U/S. 132(1) OF THE ACT WERE CARRIED OU T AT DIFFERENT PREMISES OF SHRI GAJENDRA PORWAL AND HIS ASSOCIATE CONCERNS ON 11.3.2005. DURING THE COURSE OF SEARCH PROCEEDINGS, BOOKS OF A CCOUNT CPU ALONGWITH HARD DISC AND INCRIMINATING DOCUMENTS FOU ND AND SEIZED. IT WAS ALSO FOUND THAT SHRI GAJENDRA PORWAL AND HIS AS SOCIATE CONCERNS WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES THROUGH A CHAIN OF BANK ACCOUNTS AT V ARIOUS PLACES LIKE UDAIPUR, JAIPUR, MUMBAI, INDORE, RAIPUR AND PRATAPG ARH. THE EVIDENCE OF ASSESSEES INDULGENCE IN THE ACTIVITY OF PROVIDI NG ACCOMMODATION ENTRIES WERE NOT ONLY FOUND DURING THE SEARCH AND S EIZURE OPERATION BUT WAS ALSO ADMITTED BY SHRI GAJENDRA PORWAL IN HIS A FFIDAVIT AND THE STATEMENT RECORDED U/S. 131 OF THE ACT. THE DETAIL DESCRIPTION OF HIS MODUS OPERANDI HAS BEEN DESCRIBED BY SHRI GAJENDRA PORWAL IN REPLY TO Q. NO. 1 OF HIS STATEMENT RECORDED ON 11.3.2005 U/S . 132 OF THE ACT. THE RELEVANT PORTION OF HIS STATEMENT IS REPRODUCED HER EUNDER:- ESJS IKFJOKFJD LNL;KSA ,OA O;KIKFJD IZFR'BKU )KJK BL IZDKJ DH TKS ,DKSEKSMSKU ,UVHT NH TKRH GS MUDK USPJ EQ[;R% FUEU IZDKJ GENUINENESS 8 1- IKVHZ;KSA DKS ,DKSEKSMSKU ,UVHT LO:I YKSU DS :IK ESA Q.ML NSUKA BLESA FTL IKVHZ DKS HKH YKSU DH VKO;DRK GKSRH GS] MULS MRUS GH JDE JKSDM ESA ESJH DEHKU TKSMDJ YS YSRK GWW] BL JKSDM DKS VIUS CSDKSA ESA [KKSYS GQ, [KKRKSA FTLDK FOOJ.K ESA VIUS ?KJ IJ FN;S C;KUKS ESA NS PQDK GWW TEK DJK NSRK GWW O LACF/KR IKVHZ DKS MRUK GH JDE PSD B;Q DJK NSRK GWWA ,SLS YKSUL TC ESJH FDLH DEIJH )KJK FN;S TKUS NKKZ;S TKRS GS RKS LKY DS VKF[KJ ESA C;KT LO:I FEYUS OKYH JDE TKS IKVHZ )KJK PSD LS EQ>S VH-MH-,L- DKV DJ NH TKRH GS] ML CSAD DKS CSAD ESA TEK DJ MLDS CJKCJ DH JDE JKSDM ESA FUDKY DJ LACF/KR IKVHZ DKS OKFIL DJ YSRK GWWA,SLS FLFKFR ESA EQ>S IZKIR GKSUS OKYK VH- MH-,L- GH DEHKU GKSRK GSA VYX LS DKSBZ DEHKU UGHA YSRK GWWA FN;S TKUS OKYS YKSUL DKBZ CKJ INTEREST BEARING GKSRK GSA O DBZ CKJ INTEREST FREE HKH GKSRK GSA 9 2- ESJS )KJK CUKBZ GQ, CONCERNS ESA DBZ CKJ IKVHZZ;KS DS FY, MUDH T:JR VUQLKJ CKSXL FCFYXA DH ,UVHT HKH NH TKRH GS ,SLS DSLST ES IKVHZ;KS DKS FTRUH JDE DK FCY PKFG;SA GKSRK GS MRUH GH JDE OS GESA PSD )KJK NS NSRS GSA BL PSD DKS CSD ESA TEK DJOK DJ CJKCJ JDH JDE DK JKSDM FUDKY DJ IKVH DKS OKIL NS NSRS GSA T;KNKRJ ,SLS DSLST ESA IKVHZ GELS [KPSZ LACF/KR CONTRACT GLRK{KJ FD;K GQVK NKKZRH GS O GESA HKQXRKU LO:IK PSD ESA ,SLS TDS GH GEKJS ,SLS DSLST ESA DEHKU GKSRK GSA 2.5. AS PER STATEMENT OF SHRI GAJENDRA PORWAL ON 8. 12.2006 AN AMOUNT OF RS. 49 LACS WITHDRAWN IN CASH FROM THE ACCOUNT OF M/S. ANU CONSTRUCTION AND THE CASH WAS GIVEN TO THE ASSE SSEE AS PER HIS MODUS OPERANDI. THESE FACTS ARE CLEAR FROM THE COU NTERFOIL OF THE CHEQUE AND ALSO FROM THE COPY OF ORIGINAL SELF-CHEQUE ISS UED. THIS COPY OF CHEQUE WAS OBTAINED FROM THE BANK BY THE ACIT, CENT RAL CIRCLE-1, UDAIPUR. SHRI PORWAL FURTHER STATED THAT HE HAS PE RUSED VOUCHERS REGARDING DEPOSIT OF RS. 50 LACS IN BANK ACCOUNT OF JTFSPL WITH BANK OF BARODA ON 29.3.204. ACCORDING TO SHRI GAJENDRA POR WAL WORD TRANSFER USED FOR THIS ENTRY BY THE BANK IS NOT CORRECT A S THERE HAS BEEN CASH DEPOSIT OF RS. 49 LACS IN THE ABOVE BANK ACCOU NT OF JTFSPL. SINCE THE LAKESHORE PALACE HOTEL PVT. LTD. , UDAIPUR WANT ED ACCOMMODATION ENTRY OF LOAN FROM JTFSPL AND THEREFORE THIS PARTY OBTAINED PAY SLIPS OF RS. 1 LAC AND RS. 49 LACS FILLED UP FROM HIM AND DE POSITED THE SAME TO ITS BANK ACCOUNT. IT IS, THUS, CLEAR THAT A SELF CHEQU E OF RS. 49 LACS OBTAINED BY THE LAKE PALACE HOTELS & MOTELS PVT. LTD. FROM S HRI GAJENDRA PORWAL IN LIEU OF ACCOUNT PAYEE CHEQUE OF RS. 48,90 ,000/- GIVEN BY IT TO M/S. ANU CONSTRUCTION HAS BEEN GIVEN TO M/S. LAKE SHORE PALACE HOTEL PVT. LTD. IT WAS DEPOSITED BY THE PARTY TO THE ACC OUNT OF JTFSPL WITH 10 THE SAME BANK I.E. BANK OF BARODA, MAIN BRANCH, UDA IPUR AFTER GETTING PAY SLIP FILLED UP BY SHRI GAJENDRA PORWAL. (1) THE ADDITIONAL COMMISSIONER OF INCOME-TAX FINAL LY CONCLUDED THAT SHRI GAJENDRA PORWAL HAS AGAIN AND AGAIN AFFIR MED THAT HE HAS PROVIDED ACCOMMODATION ENTRIES TO THE LAKE PALACE H OTELS & MOTELS PVT. LTD. (2) THAT SHRI GAJENDRA PORWAL WAS OPERATING SEVERAL BOGUS CONCERNS SUCH M/S. ANU CONSTRUCTION, M/S. JAIN INDUSTRIES AND M/S. JTFSPL AND BANK ACCOUNTS WERE OPENED IN THE NAME OF THESE CONC ERNS. THE BANK ACCOUNTS WERE USED AS GATEWAYS TO SHIFT THE MONEY F ROM UNACCOUNTED SYSTEM TO THE BOOKS OF ACCOUNT AND VICE-VERSA. HUG E AMOUNT IN LACS AND CRORES OF RUPEES WERE DEPOSITED AND WITHDRAWN FROM THE SAME. IT CONCLUSIVELY PROVES THAT NO GENUINE BUSINESS WAS C ARRIED OUT BY THESE CONCERNS. IT IS FURTHER PROVED BY THE FACT THAT M/ S. ANU CONSTRUCTION WAS NEVER ENGAGED IN ANY TYPE OF CONSTRUCTION WORK AND NO EVIDENCES HAVE BEEN FOUND EITHER DURING THE COURSE OF SEARCH ACTION OR SUBSEQUENTLY. (3) THE TRANSACTIONS BETWEEN THE LAKE PALACE HOTELS & MOTELS PVT. LTD., M/S. JTFSPL AND LAKESHORE PALACE HOTELS PVT. LTD. HAVE TAKEN PLACE ON THE SAME DATE I.E. 29.3.2004. FURTHER EVE N AFTER THE PERIOD OF ALMOST THREE YEARS, THE SAID CONTRACT HAS NOT MATER IALIZED AND NO LEGAL ACTION HAS BEEN TAKEN BY THE ASSESSEE FOR RECOVERY OF SUCH HUGE AMOUNT OF RS. 50 LACS. (4) THE ADDITIONAL COMMISSIONER OF INCOME-TAX HAS A LSO CITED THE DECISION OF DELHI HIGH COURT IN THE CASE OF BHAGAT CONSTRUCTION CO., PVT. LTD. VS. CIT (165 CTR 181) AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE CIT VS. DUGA PRASAD MORE (82 ITR 540) AND SUMATI DAYAL VS. CI T (214 ITR 801), CALCUTTA HIGH COURT I N THE CASE OF CIT VS. DALMIA 207 ITR 89. THE ADDITIONAL COMMISSIONER OF INCOME-TAX HAS GIVEN FINAL VERDICT THAT THIS SUM IS LYING WITH THE ASSESSEE OUT OF BOOKS WHICH IS LIABLE TO BE TAXED AS UNEXPLAINED AN D UNACCOUNTED CASH IN THE HANDS OF THE ASSESSEE AND ULTIMATELY THE ASSE SSEE IS BENEFICIARY OF THIS AMOUNT BY UNDERSTATING HIS ASSET SIDE. 11 3.4 THE LD. CIT(A) HAS ALSO CONSIDERED THE LETTER V IDE WHICH M/S. ANU CONSTRUCTION WAS REMINDED TO COMPLETE THE WORK AND ALSO THE LETT ER VIDE WHICH THE WORK ORDER WAS CANCELLED. IT WILL BE USEFUL TO REPRODUCE PARA 2.6 TO 2.10 OF LD. CIT(A)S ORDERS 2.6. THE AR HAS ALSO FURNISHED COPY OF LETTER DATED 15.6.2004 BY THE ASSESSEE TO M/S. ANU CONSTRUCTION REMINDING TO COM PLETE THE WORK AT THE EARLIEST DURING THE CURRENT SEASON ITSELF, THE COPY OF LETTE R DATED 20.8.2004 CANCELLING THE WORK ORDER NO. 71954 DATED 9.1.2004 AS M/S. ANU CO NSTRUCTION WAS NOT IN A POSITION TO CARRY OUT ABOVE REFERRED WORK, COPY OF LETTER DATED 3.11.2004 ASKING M/S. ANU CONSTRUCTION TO REFUND THE AMOUNT ALONGWI TH INTEREST @18% P.A., THE COPY OF LETTER DATED 28.2.2007 FROM SHRI SUSHIL KUM AR DANGI, ADVOCATE ON BEHALF OF THE ASSESSEE TO SHRI GAJENDRA PORWAL BEIN G LEGAL NOTICE TO REPAYA THE SAID AMOUNT, THE FAILURE OF WHICH THE ASSESSEE SHAL L BE CONSTRAINED TO PROCEED FOR ITS RECOVERY WITH COST, DAMAGE AND INTEREST IN THE COURT. THE AR HAS FURTHER FURNISHED COPY OF LETTER DATED 27.4.2004 ADDRESSED TO M/S. ANU CONSTRUCTION REQUESTING TO BE IN TOUCH WITH THE PROJECT MANAGER, MR. PUNIT SAXENA FOR DETAILING OUT THE TIME SCHEDULE AND WORK TO BE DONE AT GARDEN HOTEL. THE AR FURTHER FURNISHED COPY OF BALANCE SHEET OF THE LAKE PALACE HOTELS & MOTELS PVT. LTD. AS ON 31 ST MARCH, 2004, P&L ACCOOUNT FOR THE YEAR ENDED 31 ST MARCH, 2004 WITH SCHEDULE K, L, M, & N AND LEDGER ACCOU NT OF M/S. ANU CONSTRUCTION IN HIS BOOKS FOR THE PERIOD 1.4.2003 T O 31.3.2004 AND 1.4.2004 TO 31.3.2005 AND LETTER DATED 25.3.2004 FROM THE VICE PRESIDENT (COMPANY AFFAIRS) OF THE LAKE PALACE HOTELS & MOTELS PVT. LTD., TO MR . ASHISH BASINS, ASSTT. GENERAL MANAGER, STATE BANK OF INDIA, INDUSTRIAL FI NANCE BRANCH, CREDIT DIVISION , 14 TH FLOOR, JAWAHAR VYAPAR BHAWAN, 1, TOLSTOY MARG, NEW DELHI ALONGWITH A COPY OF COMPANYS LOAN ACCOUNT FOR SANC TION OF LOAN FOR DISBURSEMENT OF RS. 2.50 CRORES. 2.7. THE APPELLANT FILED THE RETURN OF INCOME ON 29 .10.2004 DECLARING LOSS OF RS. 2,28,30,552/-. THE APPELLANT RUNS BELO W MENTIONED HOTELS: (1) GARDEN HOTEL AT UDAIPUR (2) AODHI HOTEL AT KUMBHALGARH (3) FATEHBAGH HOTEL AT RANAKPUR (4) FATEH PRAKASH HOTEL AT UDAIPUR (5) LAKE PALACE HOTEL AT UDAIPUR (GIVEN TO INDIAN HOTEL S COMPANY LTD., FOR OPERATIONAL PURPOSE). THE RESTAURANT WAS ALREADY BEING RUN WITHIN THE PRE MISES OF GARDEN HOTEL. THE APPELLANT THOUGHT TO START IT FOR THE HOTEL PUR POSE ALSO. A CONTRACT WORK WAS 12 GIVEN TO M/S. ANU CONSTRUCTION ON 9.1.2004 FOR AN AMOUNT OF RS. 63,47,000/- INCLUDING CIVIL AND ELECTRICAL WORKS. AN ADVANCE O F RS. 50 LACS MINUS RS. 1,10,000/- = RS. 48,90,000/- WAS GIVEN TO M/S. ANU CONSTRUCTION ON 29.3.2004 AND REMINDING HIM VIDE LETTER DATED 27.4.2004 ATO B E IN TOUCH WITH THE PROJECT MANAGER, SHRI PUNIT SAXENA FOR CARRYING OUT HIS TIM E SCHEDULE AND WORK TO BE DONE AT GARDEN HOTEL. VIDE LETTER DATED 15.6.2004, THE APPELLANT REMINDED M/S. ANU CONSTRUCTION TO COMPLETE THE WORK AT THE EARLIE ST VIDE LETTER DATED 20.8.2004,. THE APPELLANT ASKED M/S. ANU CONSTRUCT ION TO REFUND THE AMOUNT OF ADVANCE OF RS. 50 LACS CANCELLING THE WORK ORDER. VIDE LETTER DATED 3.11.2004, THE APPELLANT REMINDED M/S. ANU CONSTRUCTION TO RE FUND THE AMOUNT. IN CASE OF FAILURE M/S. ANU CONSTRUCTION WOULD BE HELD RESPON SIBLE FOR ANY LEGAL CONSEQUENCES. 2.8. A SEARCH AND SEIZURE OPERATION U/S. 131 OF THE ACT WAS CARRIED OUT IN THE RESIDENTIAL AND BUSINESS PREMISES OF SHR I GAJENDRA PORWAL GROUP, UDAIPUR ON 11.3.2005. DURING SEARCH ACTIVITY, IT W AS FOUND THAT SHRI GAJENDRA PORWAL GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES UNDER VARIOUS HEADS I.E. UNSECURED LOAN, SHARE APPLICATION MONEY, SHARE CAPITAL, BOGUS BILLING AND GIFT ETC. FOR THIS PURPOSE, SHRI GAJENDRA PORW AL WAS RUNNING NUMBER OF CONCERNS THROUGH WHICH THESE ACCOMMODATION ENTRIES WERE PROVIDED TO VARIOUS PARTIES SITUATED AT UDAIPUR, JAIPUR, PRATAPGARH, NI MBAHERA, RAIPUR AND MUMBAI. THE NAME OF THE CONCERNS BELONGING TO SHRI GAJENDRA PORWAL GROUP THROUGH WHICH ACCOMMODATION ENTRIES WERE GIVEN UNDER VARIOU S HEADS MENTIONED ABOVE ARE AS UNDER:- 1) M/S. JALKANTA TECHNICAL & FINANCE SERVICES PVT . LTD. 2) M/S. ABHAVYA INVESTMENT PVT. LTD. 3) M/S. JAIN CONSTRUCTION & BUILDERS (PROP. CONCER N OF SHRI GAJENDRA PORWAL) 4) M/S. SARJAN HOUSING FINANCE DEVELOPMENT LTD. 5) M/S. ANU CONSTRUCTION, PROP. SHRI GAJENDRA PORW AL, HUF THE BANK ACCOUNT OPENED AND UTILIZED BY SHRI GAJEND RA PORWAL GROUP FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES BY ITS V ARIOUS CONCERNS OPERATING THROUGH DIFFERENT BANK ACC0UNT ARE AS UNDER:_ A. M/S. JALKANTA TECHNICAL & FINANCE SERVICES P. LTD. 1. SANGLI BANK, FORT BRANCH, MUMBAI 2. VIJAYA BANK, BHULESHWAR BRANCH, MUMBAI 3. VIJAYA BANK, NEAR RAILWAY STATION, INDORE 4. VIJAYA BANK, NEW EXCELCIAR BRANCH, MUMBAIA 5. CENTRAL BANK OF INDIA, CHITTORGARH, COLLEGE BRANCH, RAIPUR. 6. SBBJ, PRATAPNAGAR CHITTORGARH 7. VIJAYA BANK, AHINSA CIRCLE, C-SCHEME, JAIPUR 13 8. UNION BANK OF INDIA, BAPU BAZAR, UDAIPUR 9. VIJAYA BANK, BAPU BAZAR, UDAIPUR 10. BANK OF RAJASTHAN, BAPU BAZAR, UDAIPUR 11. ICICI, MADHUVAN, UDAIPUR 12. UDAIPUR URBAN COOPERATIVE BANK, BADA BAZAR, UDAIPUR 13. VIJAYA BANK, OD A/C. BAPU BAZAR, UDAIPUR 14. CANARA BANK, ST. GREGARIOUS SCHOOL BRANCH, UDAIPUR 15. BANK OF BARODA, BAPU BAZAR, UDAIPUR 16. PUNJAB NATIONAL BANK, KALAJI GORAJI BRANCH, UDAIPUR 17. HDFC BANK, INDOARE (MP) B. M/S. JAIN CONSTRUCTION & BUILDERS (PROP. CONCERN O F SHRI GAJENDRA PORWAL) 1. SBBJ, SECRETARIAL BRANCH, JAIPUR 2. BANK OF INDIA, DELHI GATE, UDAIPUR C. M/S. ABHAYA INVESTMENT PVT. LTD. 1. UNION BANK OF INDIA, TOWN HALL, UDAIPUR 2. SBBJ, CHETAK CIRCLE, UDAIPUR 3. KARNATAKA BANK, GANPATI PLAZA, UDAIPUR D. M/S. ANU CONSTRUCITON; PROP. SHRI GAJENDRA PORWAL, HUF. 2.9 DURING POST SEARCH ACTIVITIES, THE DEPARTMENT R ECORDED THE STATEMENT OF SHRI GAJENDRA PORWAL U/S. 131 OF THE ACT ON 24.3.20 05 WHERE HE HAD STATED THAT: ABSTRACTS OF STATEMENT RECORDED OF SHRI GAJENDRA PO RWAL RECORDED ON 24.3.2005 U/S. 131 BY DDIT (INV) -1, UDAIPUR. YSD ISYSL GKSVYL ,.M EKSVYL FY- LS : 50 YK[K DK DKBZ FMIKSFTV GSAA NJVLY MULS ESUS OKF'KZD FJUKSOSKU DK BSDK YSUS ISBS ;S :IK;S FY;S FKSA IJURQ CKN ESA ;G DK;Z ESA DJOK UGHA IK;K BL DKJ.K MUGS OKIL NSUK CDK;K GSA ABSTRACT OF STATEMENT RECORDED OF SHRI GAJENDRA POR WAL RECEIVED ON 28.3.2005 U/S. 131 BY DDIT (INV)-1, UDAIPUR. FKO FUOKL ISYSL DKS VIUH IQJKUH CAPITAL O VK; ESA LS GENUINELY 50 YK[K :IK;S DK YKSU FN;K FKKA LATER ON, THE AO RECEIVED AN AFFIDAVIT OF SHRI GAJE NDRA PORWAL DATED 1.11.2006 FROM ACIT, CENTRAL CIRCLE-1, UDAIPUR AND THE STATEMENT U/S. 131 OF 14 THE ACT DATED 8.12.2006 WHERE SHRI GAJENDRA PORWAL RETRACTED FROM HIS EARLIER STATEMENT DATED 24.3.2005 MENTIONING THAT HE USED T O GIVE ACCOMMODATION ENTRIES AND CHARGE COMMISSION. IN CASE OF THE LAK E PALACE HOTELS & MOTELS PVT. LTD. ALSO HE DID NOT DO ANY RENOVATION WORK. M/S. ANU CONSTRUCTION DID NOT HAVE INFRASTRUCTURE TO DO THIS TYPE OF WORK. THE RETURN OF THE APPELLANT WAS PROCESSED U/S. 143 (1) OF THE ACT ON 5.10.2005. LATER ON, A NOTICE U/S. 143(20 OF THE A CT ISSUED ON 10.8.2005 AND SERVED TO ASSESSEE ON 26.8.2005. THE ASSESSMENT OR DER U/S. 143(3) OF THE ACT WAS PASSED ON 27.12.2006. THE AO HAS MADE THE BASI S FOR TREATING THE AMOUNT OF RS. 49 LACS AS UNACCOUNTED CASH. THE STATEMENT OF SHRI GAJENDRA PORWAL WAS RECORDED U/S. 131 ON 8.12.2006 BY THE DEPARTMENT WH EREIN HE STATED THAT : IZ-9 ESA VKIDK /;KU VK;DJ VF/KFU;E DH /KKJK 131 DS V/KHU FNUKAD 24-03-2005 DKS FN;S X;S C;KU DH VKSJ VKD`'V DJRK GWWA BL C;KUKS ESA IST 9 IJ VKIUS CRK;K GS FD ESLLZ YSD ISYSL GKSVYL ,AM EKSVYL FYFEVSM LS :IK;S 50 YK[K DK DKBZ FMIKSFTV GSA NJLY BULSA ESAUS OKFKZD FJUKSOSKU DK BSDK YSUS DS ISVS DKS :IK;S FY;S FKS IJURQ CKN ESA ;G DK;Z UGH DJOK IK;K BL DKJ.K ;G :I;K MUGSA OKIL NSUK CDK;K GSA FDURQ FNUKAD 01-11-2006 DS KIFK I= TKS ESJS LE{K VK;DJ FU/KKZJ.K IZFDZ;K DS NKSJKU GKSVYL ,.M EKSVYL FYFEVSM DS CKJS ESA VKIUS FUEU FVII.KH NH GSA YSD ISYSL GKSVY] FKO FUOKL GKSVY DS LACA/K ESA ;G LI'V DJUK PKGRK GWW FD ESA DKSBZ BSDSNKJH DK DK;Z UGHA DJRK GWWA ESJS ;GKW RYKKH DS NKSJKU FDLH HKH IZDKJ DK DKSBZ BSDSNKJH DK LKEKU EKY [KJHN DK FCY 15 @HKQXRKU DH JLHNSA] FDLH VU; BSDSNKJ }KJK DK;Z DJK;K TKUS DS LAC/K ESA DKSBZ DKXTKR HKH UGHA FEYS GSA BL LACA/K ESA ESJS }KJK DGS X;S C;KU DKS XYR S BSDSNKJH DK;Z DK DKSBZ VUQHKO GH GSA BSDSNKJH DS ACCOMODATION BILL TKJH DJUK EK= ESJS O;OLK; DK GH ,D FGLLK GS O EQ>S DSOY DEHKU FN;K X;K GSA FTLDKS ESUS ESJH VK;DJ FOOJ.KH ESA HKH NKKZ FN;K GSA MRRJ MIJKSDR O;OGKJ DS CKJS ESA ESA OKLRFOD YSU NSU DKS LIV DJRS GQ, VIUK LIVHDJ.K FUEU IZDKJ LS ISK DJRK GSWA FNUKAD 29-03-2004 DKS 48]90]000@& DK PSD EQ>S 1]10]000@& DK VHMH,L DKVUS DS IPKR~ ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM LS IZKIR GQVK GSA BL PSD DKS ESUS ESLLZ VUQ DULVDKU DS CSD VKWQ CMKSNK] MN;IQJ DS [KKRK LA[;K 202703 ESA FNUKAD 29- 03-2004 DKS TEK DJOK;KA BLDS MIJKUR PSD LA[;K 965215 DS EK/;E LS UDN JDE 49]00]000@& FNUKAD 29-03-2004 DKS FUDKY YH RFKK BL FUDKYH GQBZ JDE ESA GH ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM DKS NS NHA BL IZDKJ VHMH,L ISVS CPH 1]00]000@& DH JKFK ESUS VIUS DEHKU ISVS EKAX JGK GWW FTLDK 16 IZEK.K I= VHKH RD EQ>S IZKIR UGHA GQVK GS RFKK BL O;OGKJ ESA MYVK EQ>S ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM DKS 10]000@& T;KNK HKQXRKU GKS X;KA ESA ;G ;GKW LI'V DJUK PKGRK GWW FD ESLLZ YSD ISYSL GKSVYL ,.M EKSVYL FYFEVSM DKS YSUK NSUK CDK;K UGHS GSA MIJKSDR C;KU ESUS I< DJ LQUK FN;S] TKS DQN DGK GS LR; DGK GS LR; DS VYKOK DQN UGHA DGK GS] C;KU FCUK NCKO DS FN;S] LOLFK FPRR] FCUK UKS DS FN;S GSA BZOJ ESJH ENN DJSA 2.10 THE AR HAS REBUTTED THE FACT BY SAYING THAT ON PERUSAL OF BANK STATEMENT OF M/S. ANU CONSTRUCTION THERE IS TRANSF ER OF RS. 49 LACS ON 29.3.2004 TO HIS ANOTHER CONCERN M/S. JALKANTA TECHNICAL &N FINANCE SERVICES PVT. LTD. WHEREIN MR. PORWAL WAS CHAIRMAN MANAGING DIRECTOR . THE PROCEEDS OF SAID CHEQUE STANDS DULY CREDITED TO THE ACCOUNT OF M/S. JTFSPL WITH BANK OF BARODA, MAIN BRANCH, UDAIPUR ON SAME DATE. THERE IS NO EVI DENCE THAT RS. 49 LACS WERE PAID BY CASH TO THE APPELLANT BY THE BANK FROM THE SAID ACCOUNT ON 29.3.2004. LASTLY, THERE IS NO EVIDENCE OR ACKNOWLEDGEMENT OR RECEIPT FOR THE ALLEGED REPAYMENT OF RS. 49 LACS BY CASH ON 29.3.2004 OR AN Y SUBSEQUENT DATE. MR. PORWAL HAD CLEARLY ADMITTED GENUINENESS OF ADVANCE OF RS. 50 LACS IN HIS STATEMENT ON OATH RECORDED ON 24.3.2005. MR. PORWA L ALSO FAILED TO NAME ANY PERSON OF THE APPELLANT TO WHOM HE HAD PAID RS. 49 LACS IN CASH ON 29.3.2004 OR SUBSEQUENTLY FOR AND ON BEHALF OF THE APPELLANT COM PANY. 3.5 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S DELETED THE ADDITION AFTER OBSERVING AS UNDER:- 17 2.11 IT IS TO BE MENTIONED HERE THAT THE LAKE PALACE HOT ELS & MOTELS PVT. LTD. HEREINAFTER CALLED (LPHMPL) AND M/S. THE LAKESHORE PALACE HOTEL PVT. LTD. ARE SISTER CONCERNS., THE LAKESHORE PALA CE HOTELS PVT. LTD, HAD TAKEN LOAN OF RS. 50 LACS FROM M/S. JTFSPL ON 29.3.2004. ON GOING THROUGH BANK STATEMENT OF JTFSPL FOR THIS PERIOD, IT IS FOUND TH AT THERE IS NO CASH DEPOSIT OF EQUAL AMOUNT TO FURTHER ISSUE THE CHEQUE IN FAVOUR OF THE LAKESHORE PALACE HOTEL PVT. LTD. AT THIS JUNCTURE, THE STATEMENT O F SHRI GAJENDRA PORWAL THAT RS. 49 LACS WITHDRAWN BY CASH FROM THE ACCOUNT OF M/S. ANU CONSTRUCTION AND GIVEN TO THE APPELLANT DOES NOT SOUND PROPER. AS AGAINST ITS, THE SUBMISSION OF THE AR THAT M/S. ANU CONSTRUCTUION ISSUED A CHEQUE OF RS. 49 LACS IN FAVOUR OF M/S. JTFSPL AND FURTHER M/S. JTFSPL ISSUED CHEQUE IN FAV OUR OF M/S. THE LAKE SHORE PALACE HOTEL PVT. LTD. GETS AUTHENTICATED/SUB STANTIATED. IT IS FURTHER STRENGTHENED BY THE FACT THAT THE APPELLANT ADVANCE D A LOAN OF RS. 50 LACS TO M/S. ANU CONSTRUCTION BY CHEQUE (AND NOT IN CASH). HER E A QUESTION ARISES AUTOMATICALLY AS TO WHY THE APPELLANT WOULD TAKE BA CK THE ADVANCE AMOUNT IN CASH AS THE SAME IS STILL BEING SHOWN AS OUTSTANDIN G IN THE BALANCE SHEET. AFTER ALL, THE APPELLANT WOULD BE AT LOSS TO THE EXTENT O F THIS AMOUNT OF RS. 50 LACS. IT IS FURTHER CONFIRMED BY VARIOUS LETTERS OF THE WORK CO NTRACT, REMINDERS TO COMPLETE THE WORK OR CANCELLING THE WORK CONTRACT AND ASKING FOR REFUND AND GIVING LEGALA NOTICE TO M/S. ANU CONSTRUCTION TO REFUND THE ADVA NCE AMOUNT. FURTHER ON GOING THROUGH THE BALANCE SHEET AND P&L ACCOUNT OF THE APPELLANT, IT IS FOUND THAT IN SCHEDULE G, THERE IS TOTAL ASSET OF RS. 6 8,49,78,136/-. AS PER COPY OF THE LEDGER ACCOUNT OF M/S. ANU CONSTRUCTION IN THE BOOKS OF THE APPELLANT FOR THE PERIOD 1.4.2003 TO 31.3.2004M THERE IS CLOSING BALA NCE OF RS. 50 LACS. SIMILARLY, DURING THE PERIOD 1.4.2004 TO 31.3.2005, THE OPENIN G AND CLOSING BALANCE IS THE SAME I.E. RS. 50 LACS. THERE IS ALSO NO CASH DEPOS IT IN THE BANK ACCOUNT OF THE APPELLANT PRIOR TO 29.3.2004 AT THE TIME OF GIVING ADVANCE OF RS. 50 LACS. IN FACT, THE APPELLANT HAS RECEIVED INSTALLMENT OF RS. 2.50 CRORES LOAN FROM SBI, INDUSTRIAL BRANCH, NEW DELHI ON 26.3.2004. IN THE P&L ACCOUNT , NEITHER THE APPELLANT HAD DEBITED ANY EXPENDITURE IN THIS RESPECT NOR HAS WRI TTEN OFF THIS AMOUNT. THUS, IT IS FOUND THAT THERE IS NO IMPACT OF THIS ADVANCE A MOUNT OF RS. 50 LACS TO THE INCOME OF THE APPELLANT. THE ADVANCE AMOUNT OF RS. 50 LACS IS STILL BEING SHOWN AS AN AASSET IN THE BALANCE SHEET NOT YET RECOVERED FROM M/S. ANU CONSTRUCTION AND THE APPELLANT HAS GIVEN A LEGAL NOTICE TO M/S. ANU CONSTRUCTION FOR THIS PURPOSE. THE APPELLANT HAD CROSS EXAMINED SHRI GAJ ENDRA PORWAL ON 15.12.2006 AND 22.12.2006 WHEEREIN IT WAS CLEARLY ASKED AS TO WHEOM THE CASH OF RS. 49 LACS WAS GIVEN BY MR. GAJENDRA PORWAL BUT MR. PORWAL COU LD NOT NAME ANY PERSON OF THE APPELLANT COMPANY. HE REPEATED HIS REPLY THAT HE DID NOT REMEMBER SUCH OLD TRANSACTION. AT THIS JUNCTURE, EVEN IF IT IS ACCEP TED THAT SHRI GAJENDRA PORWAL WITHDREW CASH AND HANDED OVER TO THE APPELLANT THE MOOT QUESTION STILL REMAINS UNANSWERED THAT WHEREFROM JTFPS ISSUED A CHEQUE OF RS. 50 LACS TO M/S. THE LAKESHORE PALACE HOTEL PVT. LTD. THE FACT IS THAT THE CHEQUE ISSUED IN THE NAME 18 OF M/S. ANU CONSTRUCTION WAS TRANSFERRED TO M/S. JTFSPL AND FURTHER TO M/S. THE LAKE SHORE PALACE HOTEL LTD. IF AT ALL, THE AD DITION AS UNACCOUNTED/UNEXPLAINED CASH OF THIS AMOUNT CAN BE MADE, IT CAN BE MADE IN LAKESHORE PALACE HOTEL PVT. LTD. AND NOT IN THE CAS E OF THE LAKE PALACE HOTELS & MOTELS PVT. LTD. THEREFORE, THE ADDITION OF RS. 49 LACS AS UNACCOUNTED/UNEXPLAINED CASH IS NOT JUSTIFIED. THE SAME IS DELETED AND APPEAL IS ALLOWED. 3.6 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE REVENUE HAS FILED ONE PAPER BOOK CONTAINING 53 PAGES. THERE IS ANOTHER PAPER BOOK CO NTAINING 128 PAGES. THE PAPER BOOK CONTAINING 128 PAGES CONTAIN THE COPY OF THE ASSESS MENT ORDER FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02 AND COPY OF THE APPELLATE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02 AND COPY OF THE STATEMENT OF THE SHRI GAJENDRA PORWAL RECORDED ON 8 TH DEC. 2006. THE PAPER BOOK CONTAINING 53 PAPER BOOK CONTAIN THE COPY OF STATEMENT OF SHRI GAJENDRA PORWAL FROM PAGES 6 TO 24 AND COPY OF THE AFFIDAVIT OF SHRI GAJENDRA PORWAL FROM PAGES 25 TO 36. IT ALSO CONTAI NED THE COPY OF STATEMENT OF SHRI GAJENDRA PORWAL, DIRECTOR M/S. JALKANTA TECHNICAL & FINANCIAL SERVICES (P) LTD. AND SUCH STATEMENT IS AVAILABLE AT PAGES 125 AND DIREC TIONS U/S 144A OF THE ACT ARE CONTAINED AT PAGES 37 TO 53 OF THE PAPER BOOK. 3.7 THE LD. DR DREW OUR ATTENTION TO THE ASSESSMENT ORDER. SHRI GAJENDRA PORWAL IN THE CAPACITY OF KARTA OF HUF WAS PROP. OF M/S. ANNU CONSTRUCTION. SHRI GAJENDRA PORWAL IN HIS AFFIDAVIT STATED THAT HE IS NOT ENGAG ED IN THE EXECUTION OF ANY CONTRACT AND HE WAS ONLY ISSUING ACCOMMODATION BILLS. NO DOCUMEN TS WERE FOUND DURING THE COURSE OF SEARCH TO INDICATE THAT HE WAS ENGAGED IN ANY CONST RUCTION ACTIVITY. THE STATEMENT OF SHRI GAJENDRA PORWAL WAS RECORDED BY THE DCIT, CENTRAL C IRCLE- 1 UDIAPUR ON 12-12-2006. IN THE STATEMENT SHRI GAJENDRA PORWAL STATED THAT HE R ECEIVED A SUM OF RS. 48.90 LACS AFTER 19 DEDUCTION OF TDS FROM M/S. LAKE PALACE HOTELS AND M OTELS LTD.. THIS CHEQUE WAS DEPOSITED IN BANK OF BARODA, UDAIPUR. A SUM OF RS. 49.00 LACS WAS WITHDRAWN FROM THAT ACCOUNT IN CASH THROUGH CHEQUE NO. 965215. THE CASH SO WITHDRAWN WAS GIVEN BACK TO M/S. LAKE PALACE HOTELS AND MOTELS LTD. THE BALANCE OF RS. 1.00 LAC WAS HIS COMMISSION FOR PROVIDING ACCOMMODATION ENTRY OF RS. 50.00 LACS . BEFORE THE AO, THE ASSESSEE COMPANY SUBMITTED THAT THEY HAVE NOT RECEIVED ANY C ASH FROM SHRI GAJENDRA PORWAL. THE LD. DR THEREFORE, SUBMITTED THAT THE ASSESSEE RECEI VED A SUM OF RS. 49.00 LACS IN CASH FROM SHRI GAJENDRA PORWAL AND THE SAME HAS BEEN REC ORDED IN THE BOOKS OF ACCOUNTS. SUCH UNEXPLAINED CASH IS TO BE ADDED AS UNDISCLOSED INCOME U/S 69 OF THE ACT. 3.8 ON THE OTHER HAND, THE LD. AR HAS ALSO FILED T HE PAPER BOOK CONTAINING 77 PAGES ALONGWITH WRITTEN SUBMISSION OF 12 PAGES. THE LD. A R SUBMITTED THAT THE ASSESSEE HAS NOT DEBITED THE SUM OF RS. 50.00 LACS IN PROFIT AND LOS S ACCOUNT BECAUSE THIS WAS AN ADVANCE FOR EXECUTING THE CONTRACT. THE ASSESSEE COMPANY IS SUED THE LETTERS ON DIFFERENT DATES TO M/S. ANNU CONSTRUCTION FOR STARTING THE WORK. SINCE THE WORK WAS NOT STARTED THEREFORE, THE CONTRACT WAS CANCELLED AND THAT CONCERN WAS ASK ED TO MAKE REPAYMENT OF RS. 50.00 LACS. THIS LETTER STANDS DULY RECEIVED BY SHRI GAJE NDRA PORWAL. THE ASSESSEE COMPANY ALSO ISSUED NOTICE TO THE ADVOCATE OF SHRI GAJENDRA PORWAL FOR MAKING PAYMENT OF RS. 50.00 LACS. THE AMOUNT IS STILL PENDING. SHRI GAJEN DRA PORWAL IN HIS STATEMENT RECORDED ON OATH DURING THE COURSE OF SEARCH U/S 132(4) ADMI TTED THE RECEIPT OF THE AMOUNT AND THUS THE TRANSACTION WAS GENUINE. THE LD. AR DREW OUR AT TENTION THAT CROSS EXAMINATION OF SHRI GAJENDRA PORWAL WAS FIXED FOR 12.30 PM ON 15-12-200 6 AND THE SAME WAS COMMENCED AT 3.30 PM AND SUCH CROSS EXAMINATION WAS CLOSED AT 6 PM. THE CROSS EXAMINATION WAS 20 AGAIN FIXED ON 22-12-2006. THE SAME WAS ASSUMED AT 11 AM BUT STARTED 8.15 PM. THE CROSS EXAMINATION WAS CLOSED ON REFUSAL OF REPLY. T HE LD. AR SUBMITTED THAT SHRI GAJENDRA PORWAL IS WELL EDUCATED WITH KNOWLEDGE OF TAX LAWS BUT IN THE STATEMENT HE HAS GIVEN VAGUE REPLY AND THEREFORE, THE STATEMENT IS N OT TO BE RELIED UPON. SHRI GAJENDRA PORWAL FAILED TO GIVE NAME OF THE PERSONS TO WHOM T HE SUM OF RS. 49.00 LACS IN CASH WAS PAID. THERE IS NO RECEIPT OR EVIDENCE TO PROVE THAT THE SUM OF RS. 49.00 LACS WAS PAID. TO THE ASSESSEE COMPANY. THE RETRACTION BY THE SHRI G AJENDRA PORWAL IS BELATED AND UNDER A SELF SERVING DOCUMENT. THE REVENUE AUTHORITY HAS NO T BEEN ABLE TO SAY THAT UNDER WHICH SECTION THE SUM OF RS. 49.00 LACS CAN BE MADE. SECT ION 68, SECTION, 69, SECTION 69A, SECTION 69B AND 69A ARE NOT ATTRACTED. WHAT IS APPA RENT IS REAL UNLESS PROVED BY THE PARTY WHICH ASSERTS THAT APPARENT IS NOT REAL. RELI ANCE HAS BEEN PLACED ON THE FOLLOWING DECISION. PARIMISETTI SEETHARAMAMMA VS. CIT, 57 ITR 532 (S C) CIT VS. DAULATRAM RAWATMULL (1973), 87 ITR 361 ( SC) RETRACTION AFTER 20 MONTHS IS MOTIVATED AND AFTER T HOUGHT. SUCH RETRACTION DESERVES TO BE EXCLUDED. FOR THIS PURPOSE, THE LD. AR RELIED ON TH E FOLLOWING DECISION . GREENVIEW RESTAURANT VS. ACIT, 263 ITR 169 (GAU) V KUNHAMBU AND SONS VS. CIT 219 ITR 235 (KER.) THE LD. AR ALSO STATED THAT IN SIMILAR CIRCUMSTAN CES, THE ITAT JODHPUR BENCH IN THE CASE OF ACIT VS. SWASTIK ENTERPRISES (ITA NO. 329/ JD/2008 DATED 29-08-2008) UPHELD THE DELETION MADE BY THE LD. CIT(A) AND DISMISSED T HE APPEAL OF THE REVENUE VIDE PARA 13 OF THAT ORDER. 21 3.9 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HA S ISSUED A CHEQUE IN FAVOUR OF M/S. ANNU CONSTRUCTION AND THAT CHEQUE STANDS DEPOS ITED IN THE BANK ACCOUNT OF M/S. ANNU CONSTRUCTION. IT IS THE CONTENTION OF SHRI GAJ ENDRA PORWAL THAT HE HAS PAID RS. 49.00 LACS TO ASSESSEE COMPANY IN CASH BECAUSE HE W AS INDULGING IN PROVIDING BOGUS ACCOMMODATION ENTRIES. THE CASH OF RS. 49.00 LACS I S NOT CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. HENCE THE PROVISI ONS OF SECTION 68 IS NOT APPLICABLE. SECTION 69 REFER TO THE INVESTMENT WHICH ARE NOT RE CORDED IN THE BOOKS OF ACCOUNTS. THE REVENUE HAS NOT IDENTIFIED ANY INVESTMENT MADE BY T HE ASSESSEE DURING THE FINANCIAL YEAR. SECTION 69A IS APPLICABLE IF THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION ETC. THE ASSESSEE IS NOT ADMITTING THAT HE IS OWNER OF THE SUM OF RS. 49.00 LACS WITHDRAWN IN CASH BY SHRI GAJENDRA PORWAL. HENCE, THE PROVISI ONS OF SECTION 68, 69, 69A, 69B, 69C ETC ARE NOT APPLICABLE. THE PAPER BOOK OF THE ASSES SEE CONTAINS THE STATEMENT OF SHRI GAJENDRA PORWAL RECORDED ON 24-03-2005 U/S 131 BY T HE DDIT (INV.)-I, UDAIPUR. IN THE STATEMENT, SHRI GAJENDRA PORWAL STATED THAT HE RECE IVED A SUM OF RS. 50.00 LACS AGAINST ANNUAL RENOVATION CONTRACT. SINCE HE WAS NOT ABLE T O DO THAT WORK, THEREFORE, THE AMOUNT IS STILL TO BE PAID. SHRI GAJENDRA PORWAL WAS CROSS EXAMINED BY THE COUNSEL OF THE ASSESSEE. SHRI GAJENDRA PORWAL STATED THAT CHEUQE W AS ISSUED IN THE NAME OF LAKE PALACE AND HE IS NOT ABLE TO RECOLLECT THE NAME OF THE PER SON TO WHOM CHEQUE WAS GIVEN. IN THE CROSS EXAMINATION, HE WAS ASKED TO EXPLAIN AS TO WH Y THE WORD TRANSFER IS MENTIONED IN THE BANK STATEMENT. IN THE BANK STATEMENT, IT IS ME NTIONED THAT THE AMOUNT HAS GONE TO M/S. JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD . HENCE, SHRI GAJENDRA PORWAL WAS REQUIRED TO EXPLAIN AS TO WHY IT SHOULD NOT BE CONS IDERED THAT SUM OF RS. 49.00 LACS WAS 22 TRANSFERRED TO M/S. JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. IN RESPONSE TO QUESTION NO 71, SHRI GAJENDRA PORWAL REFERRED TO HI S ANS. TO QUESTION NO. 42 IN WHICH HE STATED THAT CHEQUE WAS A SELF CHEQUE AND CASH WAS P AID TO THE PERSON BELONGING TO LAKE PALACE. THE ONUS IS ALWAYS ON THE PARTY WHICH ASSET S THAT WHAT IS APPARENT IS NOT REAL. THERE IS NO CORROBORATIVE EVIDENCE OF RECEIPT OF CA SH FROM ASSESSEE COMPANY AS NO INDIVIDUAL IDENTIFIED FOR HANDING OVER CASH TO SHRI GAJENDRA PORWAL. SIMILAR SITUATION IS THERE WHEN THE CASH IS ALLEGEDLY REPAID. 3.10 ON SIMILAR FACTS ITAT JODHPUR BENCH IN THE CAS E OF ACIT VS. SWASTIK ENTERPRISES, 109 TTJ 557 CONFIRMED THE ORDER LD. CI T(A) IN DELETING THE ADDITION AND DISMISSING THE APPEAL OF THE REVENUE. IT WILL BE US EFUL TO REPRODUCE THE RELEVANT PARA NO. 13 FROM THAT ORDER. 13. KEEPING IN VIEW THE OVERALL CONSPECTUS OF THE CASE, WE FIND THAT THE AMOUNT OF RS. 71 LAKHS, IN FACT ,DID NOT R EACH THE ASSESSEE AS HIS OWN INCOME BUT THE OBLIGATION WHICH HE HAS RECEIVED STOOD FACTUALLY DIVERTED TO JTFSPL. THE LD. CIT(A) HOWEVER LAID NO BASIS OR MATERIAL TO HOLD THAT AN AMOUNT OF RS. 35.75 LAKHS HAS COME BAC K TO THE ASSESSEE FROM JTFSPL NOR ANY COGENT AND RELIABLE MATERIAL HAS BEE N BROUGHT ON RECORD TO CORROBORATE THE ORAL STATEMENT MADE FOR RETURN O F MONEY BY JTFSPL TO THE APPELLANT. ACCORDINGLY, FINDING NO JUSTIFICATIO N IN HIS DECISION TO HOLD THE AMOUNT OF RS. 35.75 LACS AS ACCOMMODATION ENTRI ES, WE SET ASIDE HIS DECISION ON THAT ACCOUNT AND ALLOW THE GROUND OF AP PEAL RAISED BY THE ASSESSEE. AS A CONSEQUENCE OF THAT AND IN VIEW OF T HE FINDINGS REACH HEREINBEFORE, THE GROUND IN APPEAL BY THE REVENUE B EING DEVOID OF ANY MERIT ALSO STANDS REJECTED. 23 3.11 THE ONUS IS HEAVILY ON THE REVENUE BECAUSE SHR I GAJENDRA PORWAL HAS RETRACTED HIS EARLIER STATEMENT AFTER 20 MONTHS. IT MAY BE TR UE THAT AT RELEVANT TIME, THE REVENUE MAY NOT BE AWARE ABOUT THE ACTIVITIES OF PROVIDING ACCO MMODATION ENTRIES AND HENCE HE GAVE FACTUAL INFORMATION. THE REVENUE BECAME AWARE OF HI S ACTIVITIES OF PROVIDING BOGUS ENTRIES BUT THEN ONUS WAS ON THE REVENUE TO ESTABLI SH THAT THE ASSESSEE COMPANY RECEIVED THE SUM OF RS. 49.00 LACS AS CASH. SHRI GAJENDRA PO RWAL HAS NOT BEEN ABLE TO ESTABLISH THAT CASH WAS PAID TO THE PERSON BELONGING TO THE A SSESSEE COMPANY. MOREOVER, THE ASSESSEE COMPANY HAS NOT DEBITED THE EXPENDITURE OF RS. 50.00 LACS AND EVEN THE SUM WAS SHOWN AS RECEIVABLE FROM M/S. ANNU CONSTRUCTION. HE NCE, IT IS NOT A CASE OF GETTING ACCOMMODATION ENTRIES. WE THEREFORE, HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 49.00 LACS. 4.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 2,77,508/- ON ACCO UNT OF EMPLOYERS AND EMPLOYEES CONTRIBUTION TO PF & ESI. 4.2 THIS ISSUE HAS BEEN CONSIDERED BY ITAT JODHPUR BENCH IN THE CASE OF ACIT VS. MALANI IMPEX INC. (ITA NO.66/JODH/2011 DATED 16-12- 2011) FOLLOWING THAT ORDER, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 2,77,508/-. FOR READY REFERENCE, WE ARE REPRODUCING THE FOLLOWING P ARAGRAPH FROM THAT DECISION. 5.3 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE STA NDS COVERED BY THE DECISION OF APEX COURT IN THE CASE O F VINAY CEMENT 307 ITR 202. THE HONBLE KARNATAKA HIGH COU RT IN THE CASE OF CIT V SABRI ENTERPRISE 298 ITR 141 HELD THA T EMPLOYEES CONTRIBUTION IS ALLOWABLE IF THE SAME IS PAID BEFOR E THE DUE DATE OF 24 RETURN. THE HONBLE DELHI HIGH COURT RECENTLY IN T HE CASE OF EMPLOYEES CONTRIBUTION HAS ALSO HELD THAT THE SAME IS ALLOWABLE IN CASE THE SAME IS PAID BEFORE THE DUE DATE OF RETURN CIT V SPL INDUSTRIES. HENCE THE LD.CIT(A) WAS JUSTIFIED IN D IRECTING THE A.O. TO ALLOW RS.1,26,682/-. 5.1 THE THIRD GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 4,53,971/- OUT OF DEFERRED REVENUE EXPENDITURE. 5.2 THE AO HAS OBSERVED AS UNDER:- .. IN THE REPAIR AND MAINTENANCE TO THE BUILDING THE ASSESSEE HAS DEBITED A SUM OF RS. 4,53,971/- PERTAI NING TO LAKE PALACE HOTEL. WHEN ASKED TO JUSTIFY THE ALLOWABILI TY, THE AR OF THE ASSESSEE VIDE HIS LETTER SUBMITTED THAT THIS PERTAI NS TO PAINTING WORK IN FINANCIAL YEAR 1999-2000. TOTAL EXPENSES INCURR ED WERE RS. 22,69,852/- WHICH WAS EFFECTIVE FOR 5 MORE YEARS. IT HAS BEEN TREATED AS DEFERRED EXPENSES FOR 5 YEARS. SO RS. 4 ,53,971/- IS DEBITED IN THIS YEAR. I HAVE CONSIDERED SUBMISSION OF THE ASSESSEE COMPAN Y AND THE FACTS OF THE CASE. AS PER THE AGREEMENT ENTERE D BETWEEN LPHM AND IHCL FROM 1.11.2000 ALL THE EXPENSES WITH REGAR D TO LAKE PALACE HOTEL HAVE TO BE BORNE BY THE IHCL. FURTHER THIS SUM DOESNT RELATE TO THE YEAR UNDER CONSIDERATION AND THERE IS NO SUCH CONCEPT AS DEFERRED REVENUE EXPENDITURE UNDER INCOM E-TAX. SO THIS SUM CANNOT BE HELD AS ALLOWABLE. THEREFORE RS. 4,5 3,971/- DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. 5.3 BEFORE US, THE LD. AR SUBMITTED AS UNDER:- .. THE ID. AO HAS DISCUSSED THE ISSUE IN PARA 7 O F THE IMPUGNED ORDER. PAINTING WORK OF LAKE PALACE HOTEL WAS UNDERTAKEN IN THE FINANCIAL YEAR 1999-2000, INCURRI NG TOTAL EXPENDITURE OF RS. 22,69,852/-. THE ASSESSEE COMPA NY JUDGED THE LIFE OF SUCH PAINT EFFECTIVE FOR FIVE YEARS AND THE REFORE, CLAIMED A SUM OF RS. 4,53,971/- ON AND FROM THE ASSESSMENT YE AR 2000-01 FOR 25 A PERIOD OF FIVE YEARS. ACCORDINGLY, A SUM OF RS. 4,53,971/- WAS CLAIMED DURING THE YEAR IN APPEAL. THE ID. AO HAS DISALLOWED THE SAID CLAIM FOR THE RE ASON THAT AS PER AGREEMENT DATED 1.11.2000 ALL THE EXPEN SES WITH REGARD TO LAKE PALACE HOTEL HAVE TO BE BORNE BY THE INDIAN HOTELS CO. LTD. AS SUBMITTED EARLIER, THE EXPENDITURE WAS INC URRED EARLIER TO THE SAID AGREEMENT. FURTHER, IT IS FOR THE ASSESSE E TO TAKE A DECISION FOR MAINTENANCE OF ITS COMMERCIAL ASSET. AS A COMM ERCIAL EXPEDIENCY AND TO INCREASE REVENUE SUCH EXPENDITURE WAS INCURRED. THE ID. AO HAS MENTIONED THAT THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE UNDER INCOME TAX. WE SUBMIT SU CH AN UNDERSTANDING OF THE ID. AO IS ERRONEOUS AND CONTR ARY TO THE SETTLED PRINCIPLES OF ACCOUNTANCY AND LAW. THE SUPREME COURT IN MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT (1997)225 ITR 802 OBSERVED : ORDINARILY, REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS MUST BE ALLOWED IN ITS ENTIRELY IN THE YEAR IN WHICH IT IS INCURRED. IT C ANNOT BE SPREAD OVER A NUMBER OF YEARS EVEN IF THE ASSESSEE HAS WRITTEN IT OFF IN HIS BOOKS, OVER A PERIOD OF YEARS. HOWEVER, THE FACTS MAY JUSTIFY AN ASSESSEE WHO HAS INCURRED EXPENDITURE IN A PARTICUL AR YEAR TO SPREAD AND CLAIM IT OVER A PERIOD OF ENSUING YEARS. IN FACT, ALLOWING OF THE PROFITS OF A PARTICULAR YEAR. IF THE PAYMENT IS TO SECURE A BENEFIT OVER A NUMBER OF YARS, THERE IS A CONTINUING BENEFIT FOR THE ENTIRE PERIOD. SAME VIEW HAS BEEN EXPRESSE D BY THE JURISDICTIONAL HIGH COURT OF RAJASTHAN IN CIT VS. S HRI RAJASTHAN SYNTEX LTD. (2004) 269 ITR 461. THE HONBLE COURT HELD THAT A REVENUE EXPENDITURE HAS TO BE SPREAD PROPORTIONATEL Y FOR THE ENTIRE PERIOD AND ATTRIBUTABLE TO BE ACCOUNT YEAR WOULD BE DEDUCTIBLE. WE SUBMIT THE CONCEPT OF DEFERRED REVENUE EXPENDITU RE IS NOT FOUND SETTLED, WHOLE OF THE EXPENDITURE DESERVED TO BE ALLOWED IN THE YEAR 2000-01. WE REQUEST TO DIRECT ACCORDINGLY . 5.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE LD. AR DELETED THE ADDITION AFTER OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMI SSION OF THE ID. AR AND FOUND THAT THIS SUM OF RS. 4,53,971 /- IS DEBITED IN THE P&L 26 ACCOUNT ON ACCOUNT OF REPAIR AND MAINTENANCE TO THE BUILDING IN THE BOOKS OF THE LAKE PALACE HOTELS & MOTELS PVT. LTD. THIS EXPENDITURE PERTAINS TO PAINTING WORK IN THE A.Y. 2000-01. THE TOTAL EX PENDITURE INCURRED WAS RS. 22,69,852/- WHICH WAS DEFERRED FOR FOUR MORE Y EARS. THE AO DISALLOWED THE EXPENDITURE ON THE GROUND THAT THE T ELLS & AGREEMENT ENTERED INTO BETWEEN THE LAKE PALACE HOTELS & MOTEL S PVT. LTD. AND INDIAN HOTELS CO. LTD. FROM 1.11.2000. ALL THE EXP ENSES WITH REGARD TO THE LAKE PALACE HOTELS HAVE TO BE BORNE BY INDIAN H OTELS CO. LTD,. FROM 1.11.2000 BUT PRIOR TO THAT PERIOD, ALL THE EXPENDI TURE HAD TO BE BORNE BY THE LAKE PALACE HOTELS & MOTELS PVT. LTD. THE EXPEN DITURE WAS PRIOR TO HANDING OVER LAKE PALACE HOTEL TO INDIAN HOTEL CO. ALTHOUGH THE EXPENDITURE WAS OF REVENUE NATURE BUT AS PER CAS ADVICE, IT WAS TREATED AS CAPITAL NATURE AND DEFERRED FOR FIVE YEARS. ASSE SSMENT YEAR UNDER CONSIDERATION I.E. 2004-05 IS FIFTH AND LAST YEAR. THEREFORE, THE APPELLANT WAS TOTALLY JUSTIFIED TO HAVE CLAIMED THE ABOVE EXP ENDITURE AS REVENUE EXPENDITURE. THEREFORE, THE DISALLOWANCE MADE BY T HE AO IS DELETED AND APPEAL IS ALLOWED. 5.5 WE HAVE HEARD BOTH THE PARTIES. THE EXPENDITURE WAS INCURRED IN FINANCIAL YEAR 1999-2000. FOR THE ASSESSMENT YEAR 2000-01 FOR WHIC H EXPENDITURE WAS INCURRED, THE REVENUE ACCEPTED THE EXPENDITURE AS DEFERRED REVENU E EXPENDITURE. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AO IS ONLY GIVING EF FECT TO THE FINDINGS RECORDED IN EARLIER YEAR. THE AO HAS NO JURISDICTION TO REVIEW THE ORDE R ON THE ISSUE WHICH HAS BEEN DECIDED IN EARLIER YEAR. THE AO WOULD HAVE BEEN RIGHT TO DE CIDE THE ISSUE AS TO WHETHER THE EXPENDITURE IS DEFERRED OR REVENUE IN CASE SUCH EXP ENDITURE HAS BEEN INCURRED DURING THE YEAR. SECTION 37 PROVIDES THE AO TO DECIDE THAT THE EXPENDITURE LAID OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ALLOW THE SAME. IF THE EXPENDITURE IS IN THE NATURE OF CAPITAL EXPENDITURE THEN THAT I S NOT ALLOWABLE U/S 37 OF THE ACT. ONCE THE AO HAS TAKEN THE DECISION FOR THE ASSESSMENT YE AR 2000-01 THAT DECISION CANNOT BE REVIEWED BY THE AO FOR THE ASSESSMENT YEAR UNDER CO NSIDERATION. WE THEREFORE, HOLD THAT 27 THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALL OWANCE OF RS. 4,53,971/- OUT OF DEFERRED REVENUE EXPENDITURE. 6.1 THE 4TH GROUND OF APPEAL OF THE REVENUE IS THA T THE LD. CIT(A) HAS ERRED IN TREATING THE AMOUNT RECEIVED FROM INDIAN HOTEL CO. LTD. BY THE ASSESSEE AS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. 6.2 THE LD. CIT(A) HAS MENTIONED THE FACTS AND ARGU MENTS ON WHICH THE AO HAS RELIED UPON FOR ARRIVING AT THE CONCLUSION AND THER EAFTER HE HAS MENTIONED THE ASSESSEE'S SUBMISSIONS BEFORE HIM. AFTER CONSIDERING THE VIEWS OF THE ASSESSEE AS WELL AS OF THE ASSESSEE , THE LD. CIT(A) DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE. IT WILL BE USEFUL TO REPRODUCE PARA 7.1 TO 7.3 OF LD. CIT(A)S ORDER. 7.1 THE APPELLANT COMPANY DERIVES INCOME FROM RUN NING HOTELS AND OTHER ANCILLARY ACTIVITIES. THE GROSS INCOME I NCLUDES RS. 7,69,976.88 RECEIVED FROM INDIAN HOTELS CO., LTD. ( IHCL). THIS AMOUNT IS RELATED TO MINIMUM GUARANTEED AMOUNT RECE IVED FROM IHCL AGAINST ARRANGEMENTS TO RUN AND OPERATE LAKE P ALACE HOTEL, UDAIPUR. THE INCOME FROM BUSINESS ARRANGEMENTS HAV E BEEN SHOWN AT RS. 7,69,976.99 . IT IS TREATED THAT ON 10.1.2001 THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH IHC L, MUMBAI. THIS AGREEMENT SUPERSEDES EARLIER OPERATING AGREEME NT DATED 23.1.1999. IN THE NEW AGREEMENT EXECUTED HAVE BEE N MODIFIED/ALTERED/DELETED/ CHANGED AND SOME NEW CLAU SES HAVE BEEN INCORPORATED. THE NEW AGREEMENT EXECUTED HAS BEEN CONSIDERED AS EFFECTIVE FROM 1.11.2000. ACCORDING TO THIS AGREEMENT, THE ASSESSEE COMPANY HAS APPOINTED IHCL TO RUN AND OPERATE HOTEL VIA LAKE PALACE HOTEL, UDAIPUR. IN C ONSIDERATION OF THIS ARRANGEMENT IHCL SHALL DURING THE TERM PAY MIN IMUM GUARANTEED AMOUNT AND PERCENTAGE OF NET SALES TO TH E ASSESSEE COMPANY FOR EACH FINANCIAL YEAR. THE MINIMUM GUARA NTEED AMOUNT PER ANNUM FROM 1.11.2000 TO 31.03.2004 IS AG REED AT RS. 7.50 CRORES. AS PER CLAUSE 2.4. OF THE AGREEMENT, THE IHCL SHOUL D GIVE INTEREST FREE REFUNDABLE DEPOSIT OF RS. 20 CRORES T O THE ASSESSEE COMPANY FROM EFFECTIVE DATE I.E. 1.11.2000. ALL EX PENDITURE ON 28 BUYING CAPITAL ASSETS INCLUDING PLANT & MACHINERY, EQUIPMENTS, FURNITURE & FIXTURES, ADDITIONS THEREOF AND REPLACE MENT THERETO AND ALL COSTS AND EXPENDITURE ON RENOVATION/EXPANSION A ND CIVIL WORKS ARE TO BE BORNE BY THE OPERATING COMPANY AND NOT BY THE ASSESSEE COMPANY. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, THE AO HAS HELD THAT THE RECEIPT FROM IHCL IS NOTHI NG BUT INCOME FROM OTHER SOURCES. 7.2 APPELLANTS CASE THE AO HAS DISCUSSED THIS ISSUE IN PARA 2 OF THE IM PUGNED ORDER. THE APPELLANT COMP0ANY IS A RENOWNED AND RE PUTED HOTELIER. IT OWNS OPERATES LAKE PALACE HOTEL, GARDEN HOTEL, FATE H PRAKASH, FATEH BAGH, THE AODHI ETC. IT WAS RUNNING AND OPE4RATING THE SAID HOTELS. HOWEVER, AS A COMMERCIAL EXPEDIENCY, IT ENTERED INT O AN AGREEMENT DATED 16.1.2001 WITH INDIAN HOTELS CO. LTD., MUMBAI (IHCL) FOR GIVING ITS PRESTIGIOUS HOTEL LAKE PALACE WITH BUILD ING, PLANT, EQUIPMENT, MACHINERY, PAINTINGS, FURNITURE, FIXTURE FACILITIES, AMENITIES AND SUPPORT SERVICES AND ALL ANCILLARY ITEMS TO CON TINUE TO RUN AND OPERATE LAKE PALACE HOTEL FOR A PERIOD OF 20 YEARS, WHICH WAS EARLIER OPERATED AND RUN BY THE APPELLANT COMPANY. ADMITTE DLY, THE SAID HOTEL IS A COMMERCIAL ASSET, ITS INCOME IN THE PAST HAS B EEN ASSESSED AS INCOME FROM BUSINESS FROM YEAR TO YEAR AND THE APPE LLANT COMPANY AS PER THE AGREEMENT WAS TO RECEIVE SHARE IN BUSINESS PROFIT. THE CONSIDERATION AS PER CLAUSE 4.1 IS THE MINIMUM GUAR ANTEED AMOUNT AND A PERCENTAGE OF NET SALES. THE MINIMUM GUARANTEED PROFIT AMOUNT IS TO SAFEGUARD THE REVENUE OF THE APPELLANT COMPANY. THE INCOME FROM EXPLOITATION OF COMMERCIAL/BUSINESS ASSET IS TO BE ASSESSED AS INCOME FROM BUSINESS AND NOT AS INCOME FROM OTHER SOURCES. IN THE ALTERNATIVE, IT SHOULD HAVE BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY. THE SUPREME COURT IN COMMISSIONER OF EXCESS PROFITS TAX, BOMBAY CITY VS. SHIR LAKSHMI SILK MILLS LIMITED OB SERVED: THE YIELD OF INCOME BY A COMMERCIAL ASSET IS THE PROFIT OF THE BUSINESS IRRESPECTIVE OF THE MANNER IN WHICH THAT ASSET IS E XPLOITED IT TO HIS BEST ADVANTAGE AND HE MAY DO SO EITHER BY USING IT HIMSE LF PERSONALLY OR LETTING IT OUT TO SOMEBODY ELSE. (EMPHASIS SUPPLIE D). THE JURISDICTIONAL HIGH COURT IN CIT VS. ANAND LAMP 0S (P) LTD (1994) 207 ITR 733 AT 736 OBSERVED IF THERE IS AN Y INTENTION TO EXPLOIT 29 THE COMME4RCIAL ASSET AND THE SAME IS LEASED OUT TH E INCOME THEREFROM WOULD BE BUSINESS INCOME. IT ALSO OBSERVED: A COMMERCIAL ASSET IS AN ASSET WHICH IS USED IN A BUSINESS. THE KERALA HIGH COURT IN CITV. MALABAR AND PIONEE5R HOSIERY (P) LTD. (1996) 221 ITR 117 AT 120 OBSERVED: SO LONG AS THE COMMERCIAL ASSET IS CAPABLE O F BEING EXPLOITED AS SUCH, IT HA S TO BE UNDERSTOOD THAT ITS INCOME IS BUSINESS INCOME AND HAS NO RATIONAL RE LATIONSHIP WITH THE MANNER IN WHICH THE ASSET IS EXPLOITED BY THE OWNER OF THE BUSINESS. A COMMERCIAL ASSET CAN BE RIGHTFULLY EXPLOITED BY THE OWNER THEREOF TO THE BEST ADVANTAGE AND THE ADVANTAGE CAN BE MATERIALIZE D EITHER BY USING IT HIMSELF PERSONALLY OR BY LETTING IT OUT TO SOMEBOD Y ELSE. IT REFERRED TO THE CASE OF LAKSHI SILK MILLS LTD. (SUPRA). IN THE SAI D CASE WHAT WAS LEASED OUT WAS APART OF ITS BUSINESS, IN THE CASE OF THE APPELLANT ALSO ONLY ONE HOTEL HAS BEEN GIVEN BY WAY OF BUSINESS ARRANGEMENT AS STATED ABOVE AND REST OF THE HOTELS ARE BEING RUN AND OPERATED BY NT HE ASSESSEE COMPANY ITSELF. 7.3 DECISION ON GOING THROUGH THE FACTS OF THE CASE AND SUBMISSI ON OF THE ID. AR AND FOUND THAT THE APPELLANT COMPANY IS A RENOWN ED AND REPUTED HOTELIER. IT OWNS AND OPERATES LAKE PALACE HOTEL, G ARDEN HOTEL, FATEH PRAKASH, FATEH BAGH, THE AODHI ETC. HOWEVER, AS A COMMERCIAL EXPEDIENCY IT ENTERED INTO AGREEMENT DATED 1.11.200 0 WITH INDIAN HOTELS CO. LTD., MUMBAI FOR GIVING ITS PRESTIGIOUS HOTEL L AKE PALACE HOTEL WITH BUILDING, PLANT & MACHINERY, EQUIPMENTS, MACHINERY, PAINTINGS, FURNITURE, FIXTURES FACILITIES, AMENITIES AND SUPPORT SERVICES AND ALL ANCILLARY ITEMS TO CONTINUE TO RUN AND OPERATE LAKE PALACE HOTEL FOR A PERIOD OF 20 YEARS, WHICH WAS EARLIER GIVEN TO INDIAN HOTELS CO. LTD. V IDE AGREEMENT DATED 23.1.1999 BEFORE THAT PERIOD THE APPELLANT COMPANY WAS ITSELF RUNNING LAKE PALACE HOTEL. IT IS WELL SETTLED NOW THAT THE INCOME FROM EXPLOIT ATION AND COMMERCIAL ASSET WOULD BE BUSINESS INCOME WHERE THE EXPLOITATION IS DONE DIRECTLY OR THROUGH SOME AGENCY. THE QUESTION WHET HER THE PARTICULAR LETTING IS BUSINESS MUST BE DECIDED ON THE FACTS OF EACH CASE. THERE IS NOTING AS A NATURALLY BOND AS COMMERCIAL ASSET. SI NCE THE ASSET BECOMES COMMERCIAL ONE BY THE USE TO WHICH IT IS PUT IN BUS INESS AND NOT BY IN ITS 30 INHERENT QUALITIES. WHAT IS IMPORTANT IN SUCH CASE AS TO SCAN CLOSELY THE FACTS AND CIRCUMSTANCES OF THE CASE AND TO EXAMINE THE INTENTION AND OBJECT OF THE LESSOR. IN CASE OF EVEREST HOTEL LTD . (1978) 114 ITR 779, THE HONBLE HIGH COURT OF CALCUTTA HELD THAT THE QUESTI ON WHETHER THE PARTICULAR LETTING IS BUSINESS OR NOT DEPENDS UPON THE CIRCUMSTANCES OF EACH CASE. THE HIGH COURT LAID DOWN THE FOLLOWING PRINCIPLES IN THE COMMENTARY IN THE LAW OF INCOME TAX BY SHRI S. RAJ RATHAM IN VOL. 2 AT PAGE 2248 AS UNDER :- 1. IN ORDER TO BE A BUSINESS INCOME WITHIN THE M EANING OF SECTION 10 THERE MUST BE EVIDENCE OF EXPLOITATION O F COMMERCIAL ASSET. 2. EXPLOITATION OF A COMMERCIAL ASSET DOES NOT NECE SSARILY MEAN EXPLOITATION BY THE ASSESSEE HIMSELF AT ALL MA TERIAL TIMES. THE ASSESSEE MAY TEMPORARILY CAUSE IT TO BE EXPLOITED B Y ANOTHER PERSON AGAINST PAYMENT OF CONSIDERATION AND FOR THIS PURPO SE MAY ALSO EXECUTE A LEASE FOR A FIXED PERIOD EVEN WITH CLAUSES OF OPTIO N TO RENEW. 3. BUT IN ORDER THAT THE INCOME DERIVED FROM THE LE ASE WOULD BE TAXABLE U/S. 10 IT MUST BE SHOWN THAT THE LESSOR S INTENTION WAS THAT DURING THE PERIOD OF LEASE THE ASSET LEASED OUT MUS T REMAIN AND BE TREATED AS A COMMERCIAL ASSET AND EXPLOITED AS SUCH. 4. THIS INTENTION OF LESSOR REFERRED TO ABOVE HAS T BE ASCERTAINED FROM THE CUMULATIVE EFFECT OF ALL THE T ERMS OF THE LEASE AND OTHER MATERIAL CIRCUMSTANCES. IN CASE OF CIT VS. ANAND LAMS PVT. LTD. (1994) 207 ITR 733 TO 736, THE HONBLE RAJASTHAN HIGH COURT HAS OBSERVED THAT IF THERE IS ANY INTENTION TO EXPLOIT THE COMMERCIAL ASSET AND THE S AME IS LEASED OUT, THE INCOME THEREFROM WOULD BE BUSINESS INCOME. IT FURT HER OBSERVED THAT A COMMERCIAL ASSET IS AN ASSET WHICH IS USED IN THE B USINESS IN ANOTHER CASE CIT VS. MALABAR AND PIONEER HOSIERY (P) LTD. (1996) 221 ITR 117 AT 120, THE HONBLE HIGH COURT OF LERALA OBSERVED THAT SO L ONG THE COMMERCIAL ASSET IS BEING EXPLOITED AS SUCH IT HAS TO BE UNDER STOOD THAT ITS INCOME IS BUSINESS INCOME AND HAS NO RATIONAL RELATIONSHIP0 W ITH THE MANNER IN WHICH THE ASSET IS EXPLOITED BY THE OWNER OF THE BU SINESS. THE COMMERCIAL ASSET CAN BE RIGHTLY EXPLOITED BY THE OWNER THEREOF TO THE BEST ADVANTAGE AND THE ADVANTAGE CAN BE MATERIALIZED EITHER BY USI NG HIMSELF, PERSONALLY 31 OR BY LETTING OUT TO SOMEBODY ELSE. IN THE INSTANT CASE, LOOKING TO THE ABOVE FACTS, IT IS UNDOUBTEDLY PROVED THAT THE HOTE L IN QUESTION WAS EARLIER USED AS A HOTEL BEFORE THE ORIGINAL AGREEMENT DATED 23.1.1999 AND SUBSEQUENT AGREEMENT DATED 1.11.2000. IT IS ALSO A FACT THAT THE SAME COMMERCIAL ASSET HAS BEEN USED BY THE APPELLANT TO THE BEST ADVANTAGE AND NOT BY ITSELF BUT BY THE INDIAN HOTELS CO. LTD. T HEREFORE, THE INCOME EARNED FROM OPERATION OF THE LAKE PALACE HOTEL IS T REATED AS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. THE APPE AL IS ALLOWED ON THIS GROUND. 6.3 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE IS NOT OWNING ONLY ONE HOTEL BUT IS RUNNING OTHER HOTELS LIKE GARDEN HOTEL, FATEH PRAKA SH, FATEH BAGH, THE AODHI ETC. AS A COMMERCIAL EXPEDIENCY, THE ASSESSEE ENTERED INTO AN AGREEMENT FOR RUNNING HOTEL OF INTERNATIONAL STANDARDS. WE HAVE GONE THROUGH THE C OPY OF THE AGREEMENT AVAILABLE AT PAGES 1 TO 42 OF THE OF IIND PAPER BOOK FILED BY TH E ASSESSEE. THE AGREEMENT HAS BEEN REFERRED AS AN OPERATING AGREEMENT. THE INDIAN HOTE L CO. WAS TO RUN, DEVELOP, CONDUCT, OPERATE AND MANAGE THE HOTEL FOR CONSIDERATION. THE CONSIDERATION AS MENTIONED IN THE AGREEMENT IS MINIMUM GUARANTEED AMOUNT AND A PERCEN TAGE OF NET SALES. AS PER AGREEMENT, ALL THE EXISTING STAFF AT THE HOTEL TO C ONTINUE THE EMPLOYEES OF THE ASSESSEE. NEW STAFF CAN BE RECRUITED BY THE INDIAN HOTEL COMP ANY BUT SUCH STAFF SHALL BE ON THE ROLL OF ASSESSEE. THE SHOPPING ARCADE IN THE HOTEL IS TO BE USED AND DEALT WITH BY THE ASSESSEE. AS PER THE AGREEMENT, IT WAS TO BE PROMIN ENTLY DISPLAYED THAT THE HOTEL IS OWNED BY LAKE PALACE HOTELS & MOTELS LTD. AND OPERATED BY THE INDIA HOTEL CO. IF ONE GOES THROUGH THE AGREEMENT, IT IS CLEARLY MENTIONED THAT IT IS NOT A LEASE AGREEMENT BUT IS AN OPERATING AGREEMENT THROUGH WHICH INDIAN HOTEL COMP ANY WAS PROVIDED TO MANAGE AND OPERATE THE HOTEL. THE ASSESSEE COMPANY IS IN THE B USINESS OF RUNNING HOTEL AND THE RECEIPTS AFTER PROVIDING THE PERCENTAGE OF RECEIPTS TO M/S. INDIAN HOTEL COMPANY BELONG 32 TO THE ASSESSEE. UNDER THE SIMILAR CIRCUMSTANCES, T HE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. FRANCIS WACZLARG, 2011-TIOL-757-HC- DEL THAT THE AMOUNT RECEIVED IS BUSINESS INCOME WHEN THE HOTEL IS BEING MANAGED BY NHPL. IN THIS ALSO, THERE WAS REVENUE SHARE AND EACH YEAR LICENSE FEE VARIES AND THE THERE WAS MANAGEMENT BY NHPL. WE THEREFORE, FEEL THAT THE LD. CIT(A) WAS JUSTIFIE D IN HOLDING THAT THE AMOUNT FROM INDIAN HOTEL COMPANY BY THE ASSESSEE IS BUSINESS IN COME AND NOT INCOME FROM OTHER SOURCES. 7.0 NOW WE TAKE UP THE GROUNDS OF THE C.O. OF THE A SSESSEE BEARING C.O. NO. 24/JU/2009 FOR THE ASSESSMENT YEAR 2004-05 8.1 THE FIRST GROUND OF THE C.O. OF THE ASSESSEE I S THAT THE LOWER AUTHORITIES GROSSLY ERRED IN HOLDING LEASE RENT OF RS. 52,55,625/- AS I NCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS OR INCOME FROM PROPERTY. 8.2 THIS ISSUE HAS BEEN CONSIDERED BY THE LD. CIT(A ) IN PARA 8 OF THIS ORDER. IT WILL BE USEFUL TO REPRODUCE PARA 8.1 TO 8.3 FROM THE ORDER OF THE LD. CIT(A). 8.1 DURING THE YEAR, THERE IS A RETURNED LOSS OF RS. 2,28,30,552/-, THEREFORE, THE ASSESSEE HAS NOT CLAI MED DEDUCTION U/S. 80HHD OF THE ACT. THIS YEAR, THE ASSESSEE REC EIVED ARS. 52,55,625/- AS LEASE RENT AND RS. 1,52,56,068/- AS AIRCRAFT HIRE CHARGES. THE AO HAS TREATED THESE INCOMES AS INCOM E FROM OTHER SOURCES ON THE BASIS OF THE DECISION OF A.Y. 2001-0 2 TAKEN BY NTHE AO AND CONFIRMED BY THE HONBLE ITAT IN ASSESSEES OWN CASE FOR A.Y. 2001-02. THE FACT OF THE ISSUE IS THAT THE LA ND AT HARIDASJI-KI- MAGRI, UDAIPUR WAS LEASED TO EAST INDIA HOTELS LTD. FOR CONSTRUCTING LUXURIOUS AND PRESTIGIOUS HOTELS. THE INCOME DERIVED FROM THE SAID LAND HAS GOT DIRECT NEXUS WITH ASSESS EES BUSINESS; THEREFORE THE SAME SHOULD BE TREATED AS BUSINESS IN COME. 33 8.2 APPELLANTS CASE THE AR HAS SUBMITTED DETAILS OF LEASE RENT FROM VAR IOUS PARTIES AS UNDER :- SLY. NO. NAME OF LASSESSEE/LICENSEE AMOUNT (RS) USE OF ASSETS ASSETS/LOCATION AGREEMENT 1 M/S. EIH LTD. 2325000 IN USE FOR CONSTRUCTION AND OPERATION OF HOTEL TRIDENT & HOTEL UDAI VILAS LAND AT HARIDAS JI KI MAGRI LEASE DEED DATED 02.05.1989 2 M/S. C.I.E. LTD. 2472465 SHOW ROOM/ HANDICRAFT AND ANTIQS EMPORIUM GHAS GHAR BUILDING LICENCE DEED DATED 15.07.1992 3 M/S. GARDEN REAL ESTATE & HOTELS PVT. LTD. 180000 EDUCATIONAL INSTITUTION VACANT LAND ADMEASURING 1174 SQ. MTRS. WITH UNFINISHED CONSTRUCTION LEASE DEED DATED 11.07.1992 4 M/S. RAJASTHAN ART SCHOOL 150000 DISPLAY AND SALE OF HANDICRAFTS GOODS LOWER PORTION OF SHIVNIWAS PALACE LICENCE AGREEMENT DATED 1.4.2003 5 JAL DARSHAN ESTATE PVT. LTD. 108000 SHOPS VACANT LAND ADMEASURING 2717 SQ. MTRS. LEASE DEED DATED 23.4.1992 6 HOTEL MARIDA PVT. LTD. 18000 HOTEL/SHOPS VACANT LAND ADMEASURING 618 SQ. MTRS. LEASE DEED DATED 23.4.1992 7 HISSAMUDDIN PAINTER 360 PAINTER SHOP OUTSIDE GARDEN HOTEL SHOP RENT 8 RAJASTHAN TOURS PVT. LTD. 1800 TOUR OPERATOR SHOP OUTSIDE GARDEN HOTEL SHOP RENT 525625 34 THE AR FURTHER SUBMITTED THAT THE LAND WAS LEASED T O EAST INDIA HOTELS LTD. FOR CONSTRUCTION OF HOTEL TRIDENT AND U DAI VILAS. THE INCOME OF RS. 23,25,000/- FROM SUCH LAND AS WELL AS LEASE RENT FROM OTHER IS INCOME FROM BUSINESS. WITH REGARD TO AIRCRAFT HIRE CHARGES, THE APPELLANT HAS SUBMITTED THE FOLLOWING:- THE ASSESSEE COMPANY OWNS AND OPERATES AN AIRCRAFT VT- RAM. IT WAS GIVEN ON LEASE FOR OPERATING TO M/S. AIR WORKS INDIA ENGINEERING PVT. LTD., MUMBAI. ALL THE BOOKINGS WE RE MADE BY THEM. IT PAYS THE ASSESSEE COMPANY AS SPECIFIED IN THE FOURT H SCHEDULE OF THE AGREEMENT. THE ASSESSEE COMPANY HAS TO BEAR FUEL C HARGES AND OTHER EXPENSES. BALANCE OF 78% IS SHARED BY THE ASSESSE E AND 22% BY THE LESSEE. RUNNING OF AIRCRAFT IS ONE OF THE OBJECTS OF THE ASSESSEE COMPANY. HENCE, THE RECEIPTS FROM AIRCRAFT ARE IN THE NATURE OF BUSINESS RECEIPTS AND NOT AS INCOME FROM OTHER SOURCES. THE SUPREME COURT IN CIT V. SHAAN FINANCE (P) LTD. (1998) 231 ITR 308 HELD THAT WHERE THE BUSINESS OF THE ASSESSE E CONSISTS OF HIRING OUT MACHINERY AND/OR WHERE THE INCOME DERIVED BY THE AS SESSEE FROM THE HIRING OF SUCH MACHINERY IS BUSINESS INCOME, THE AS SESSEE MUST BE CONSIDERED AS HAVING USED THE MACHINERY FOR THE PUR POSE OF ITS BUSINESS. IT HAS BEEN FOLLOWED BY THE BOMBAY HIGH COURT IN CIT V S. INTERNATIONAL COMPUTERS INDIAN MANUFACTURE LTD. (1999) 239 ITR 49 9.. 8.3 DECISION I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS ION OF THE ID. AR AND FOUND THAT THE MATTER IS ALREADY SETTLED BY THE HONBLE ITAT IN ASSESSEES OWN CASE FOR THE A.Y. 1994-95 AND 1995-9 6 IN ITA NO. 1807(JP)/96 AND 972(JP)/97DATED 12.12.2001 HOLDING THAT THE LEASE RENT FROM BUSINESS BUT IT IS INCOME FROM OTHER SOURCES. THE SIMILAR VIEW HAS BEEN SUSTAINED IN THE SUBSEQUENT ASSESSMENT YEARS. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT IN ASSESSEE S OWN CASE, I HOLD THE INCOME OF THIS LAND AS INCOME FROM OTHER SOURCES. THE AO HAS NOT DEALT WITH LEASE RENT RECEIVED FORM CIE LTD., M/S. GARDEN REAL ESTATE & HOTELS PVT. LTD., M/S. RAJAST HAN ART SCHOOL, JAL DARSHAN ESTATE PVT. LTD., HOTEL MARIDA PVT. LTD., H ISSAMUDDIN PAINTER AND RAJASTHAN TOURS PVT. LTD. THE AO HAS ONLY COMMENTE D UPON THE LEASE RENT RECEIVED FROM EAST INDIA HOTELS LIMITED FOR GI VING THE LAND FOR 35 CONSTRUCTION AND OPERATION OF HOTEL TRIDENT AND UDA I VILAS. THE AO HAS TREATED THE LEASE RENT AS INCOME FROM OTHER SOURCES FOLLOWING DECISION IN THE A.Y. 2001-02. IN THIS RESPECT THE AR HAS NOW SUBMITTED THE FOL LOWING: THE ASSESSEE COMPANY HAS TAKEN A PROPERTY KNOWN AS GHAS GHAR ON LEASE FROM THE ESTATE OF HIS LATE HIGHNESS MAHARANA BHAGWAT SINGHJI VIDE REGISTERED LEASE DEED DATED 2 9.8.07. OUT OF IT, 9000 SQ. FT. OF THE GHAS GHAR BUILDING WAS GIVE N ON LICENCE FOR THE PURPOSE OF USING THE SAID AREA FOR SETTING UP S HOPPING ARCADE/SHOWROOMS TO COTTAGE INDUSTRIES EXPOSITION L IMITED IN TERMS OF LICENCE DEED DATED 15.7.98. A SUM OF RS. 24,72,465/- WAS RECEIVED. HANDICRAFTS ANTICS EMPORIUM IS RUN BY TH E LICENSEE. TAKING AND GIVING ON LEASE/LICENCE IS OBJECT OF THE ASSESSEE. THE ANTICS EMPORIUM, ARTS AND CRAFT ETC. ARE OF INTERES T AS A PART OF THE SERVICE OF HOSPITALITY TO TRAVELERS, PAYING GUESTS AND OTHER TRAVELLING PUBLIC ON COMMERCIAL BASIS. WE SUBMIT S UCH SERVICES ARE INTENDED TO ATTRACT CUSTOMERS WHO ARE A PART AN D PARTIAL OF THE HOSPITALITY OF THE HOTEL BUSINESS RUN BY THE APPELL ANT COMPANY. WE PLACE RELIANCE ON MADRAS HIGH COURT IN CIT VS. SAN GU CHAKRA HOTELS PVT. LTD. 292 ITR 591. THE APPELLANT COMPANY OWNS AND OPERATES GARDEN HOTE L & MOTEL. VACANT LAND ADMEASURING 1174 SQ. M. WITH UNFINISH C ONSTRUCTION WAS GIVEN ON LEASE TO M/S. GARDEN REALESTATE & HOTELS PVT. LTD. BY LEASE DATED 11.7.1992. A SUM OF RS. 1,80,000/- WAS RECEI VED AS LEASE. THE ASSESSEE COMPANY OWNS THE LOWER PORTION OF SHIV A NIWAS PALACE HOTEL. IT GRANTED LICENCE TO M/S. RAJASTHA N ART SCHOOL FOR DISPLAY AND SALE OF GOODS ON THE GROUND FLOOR OF THE BUILDI NG BY LICENCE DEED DATED 1.4.2003. A SUM OF RS. 1,50,000/- WAS RECEIVED AS LICENCE FEE. THE AR HAS ALSO FURNISHED A COPY OF MEMORANDUM OF A SSOCIATION OF THE COMPANY WHEREIN AT POINT NO. 2 AND 37 OF THE OBJECT CLAUSE THE APPELLANT COMPANY HAS AN OBJECT TO DEVELOP AND TURN TO ACCOUNT AND LAND, BUILDING, ACQUIRED OR TAKEN ON LEASE BY THE COMPANY LETTING BUILDING ON LEASE AND TO SELL, IMPROVE, MANAGE, DEVELOP, EXCHAN GE, LEASE, MORTGAGE, 36 ENFRANCHISE, DISPOSE OF, TURN TO ACCOUNT OR OTHERWI SE DEAL WITH, ALL OR ANY PART OF THE PROPERTY AND THE RIGHTS OF THE COMPANY. NO. DOUBT, THE TAKING BUILDING ON LEASE OR GIVING BUILDING ON LEASE IS ON E OF THE OBJECTS OF THE APPELLANT BUT IT IS NOT A REGULAR BUSINESS ACTIVITY . THE LAND/BUILDINGS HAVE BEEN GIVEN ON LEASE FOR A FIXED PERIOD. AS PER DEFINITION OF BUSINESS IN SECTION 2(13) OF T HE ACT BUSINESS INCLUDES AND TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. I N THE APPELLANTS CASE, THE TAKING OR GIVING LAND AND BUILDING ON LEASE IS NOT BUSINESS ACTIVITY BUT ONE TIME AFFAIR. THEREFORE, THE INCOME RECEIVED FR OM LEASE RENT COULD NOT COME UNDER THE HEAD BUSINESS BUT INCOME FROM OTHE R SOURCES AS ALREADY TAKEN IN THE EARLIER YEARS. MY PREDECESSOR AND HON BLE ITAT, JODHPUR HAS ALSO CONFIRMED THE VIEW IN THIS REGARD TAKEN BY THE DEPARTMENT. THEREFORE, THE LEASE RENT IS TREATED AS INCOME FROM OTHER SOUR CES AND NOT INCOME FROM BUSINESS. 8.3 DURING THE COURSE OF PROCEEDING BEFORE US, THE LD. AR HAS REFERRED TO CLAUSE NO. 2,3,5,12 AND 37 OF THE MEMORANDUM OF ASSOCIATION. AS PER OBJECT CLAUSE OF THE ASSESSEE COMPANY, THE ASSESSEE COMPANY WAS TO PROVIDE LODGIN G, BOARDING AND OTHER FACILITIES TO THE PUBLIC, INCLUDING TOURISTS VISITORS ETC. AS PER CLAUSE 5, THE ASSESSEE COMPANY WAS TO ESTABLISH AND PROVIDE FOR ALL KINDS OF CONVENIENCES AND ATTRACTIONS FOR CUSTOMERS AND OTHERS INCLUDING STORES, SHOPS, PLACES OF AMUSEMENT ETC. FROM THE OBJECT CLAUSE, IT WAS SUBMITTED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING FACILITIES TO THE TOURISTS INCLUDING THE FACILITIES OF SHOPPIN G. THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH M/S. COTTAGE INDUSTRIES EXPOSITION L TD. FOR SETTING UP SHOPPING ARCADE WITHIN THE CITY PALACE COMPLEX. OUR ATTENTION WAS D RAWN TOWARDS THE FACT THAT LICENSEE WAS PERMITTED TO ENTER AND REMAIN IN THE PREMISES F ROM 9AM TO 5 PM. IN CASE THE LICENSEE WANTED TO REMAIN IN THE PREMISES BEYOND TH E STIPULATED PERIOD THEN HE WILL HAVE 37 TO OBTAIN PERMISSION. THE LICENSEE WAS ASKED TO SEL L THE HOUSEHOLD GOODS AND MERCHANDISE LIKE FURNISHING ETC. THE ASSESSEE COMPA NY HAS A RIGHT TO INSPECT THE LICENSEE AND THE LICENSEE WILL HAVE NO INTEREST IN THE PREMI SES INCLUDING THE POSSESSION. THE LICENSEE WAS GIVEN ONLY A RIGHT TO USE AND OCCUPY F OR SHOPPING ARCADE. 8.4 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE AUTHORITIES BELOW. 8.5 WE HAVE HEARD BOTH THE PARTIES. WE HAVE PERUSED THE LICENSE AGREEMENT AND HAVE TAKEN INTO CONSIDERATION THE LICENSE CLAUSES MENTIO NED IN THE AGREEMENT. THE LICENSEE HAS NO RIGHT TO USE THE PREMISES IN ITS OWN SWEET WILL AND DISCRETION. THE LICENSEE CANNOT BE EQUATED WITH THE TENANT. IF LETTING IS SELF SERVING TO THE MAIN BUSINESS THEN IT IS TO BE CONSIDERED AS BUSINESS AND NOT RENTAL INCOME. REFER ENCE IS MADE TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NUTWAN WAR EHOUSING COMPANY (P) LTD. VS. DCIT,326 ITR 94. THE HON'BLE HIGH COURT OBSERVED TH AT IF THE DOMINANT INTENTION OF THE ASSESSEE IS TO EXPLOIT A COMMERCIAL ASSET BY CARRYI NG ON A COMMERCIAL ACTIVITY, THE INCOME WOULD HAVE TO BE TREATED AS INCOME FROM BUSI NESS. LOOKING TO THE CLAUSES MENTIONED IN THE AGREEMENT, IT IS CLEAR THAT THE AS SESSEE WANTED TO EXPLOIT THE ASSET COMMERCIALLY AND THEREFORE, THE AMOUNT RECEIVED IS TO BE TREATED AS INCOME FROM BUSINESS. WE THEREFORE, HOLD THAT THE LD. CIT(A) WA S NOT JUSTIFIED IN TREATING THE RECEIPTS OF RS. 52,55,625/- AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME 9.1 THE SECOND GROUND OF THE C.O. OF THE ASSESSEE IS THAT THE LOWER AUTHORITIES GROSSLY ERRED IN HOLDING AIRCRAFT CHARGES OF RS. 1, 52,56,068/- AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS. 38 9.2 THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING HIS FINDINGS THAT RECEIPT OF LESE RENT IS INCOME FROM O THER SOURCES AND NOT INCOME FROM BUSINESS. 9.3 WE HAVE HEARD BOTH THE PARTIES. THIS IS A REGUL AR BUSINESS ACTIVITY AS PER OBJECT CLAUSE, FOLLOWING OUR FINDINGS THAT RECEIPT OF LEAS E IS BUSINESS INCOME, WE HOLD THAT THE RECEIPTS OF AIRCRAFT CHARGES ARE ALSO TO BE CONSIDE RED AS BUSINESS INCOME. 10.1 DURING THE COURSE OF HEARING, THE LD. AR OF TH E ASSESSEE HAS NOT PRESSED THE GROUND NO. 3 OF THE C.O. OF THE ASSESSEE. HENCE, TH E SAME IS DISMISSED BEING NOT PRESSED. 11.0 THUS THE APPEAL OF THE REVENUE IS DISMISSED AN D C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 612/ JU/2008 REVENUE A.Y. 2003-04 12.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN TREATING THE AMOUNT RECEIVED FROM INDIAN HOTEL CO. LTD. BY THE ASSESSEE AS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. 12.2 WE HAVE HEARD BOTH THE PARTIES. THIS ISSUE STA NDS COVERED BY OUR FINDINGS IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-0 5. 12.3 THE RELEVANT GROUND OF APPEAL IN ASSESSMENT YE AR 2004-05 WAS GROUND OF APPEAL NO. 4. FOLLOWING THAT FINDINGS, WE HOLD THAT THE LD . CIT(A) WAS JUSTIFIED IN HOLDING THAT THE AMOUNT RECEIVED FROM INDIAN HOTEL COMPANY IS BU SINESS INCOME. 39 13.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 13,61,191/- ON ACC OUNT OF EMPLOYERS AND EMPLOYEES CONTRIBUTION TO ESI AND PF. 13.2 THIS ISSUE HAS BEEN CONSIDERED IN GROUND NO. 2 FOR THE ASSESSMENT YEAR 2004-05 AND FOLLOWING OUR FINDINGS FOR THAT ASSESSMENT YEAR , WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 13,61 ,191/-. 14.1 THE THIRD GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 4,53,971/- OUT OF DEFERRED REVENUE EXPENDITURE. 14.2 THIS ISSUE HAS BEEN DECIDED IN FAOVUR OF THE A SSESSEE WHILE DISPOSING OFF THE GROUND OF APPEAL NO. 3 OF THE REVENUE FOR THE ASSES SMENT YEAR 2004-05. FOLLOWING THAT ORDER, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 4,53,971/- . C.O. NO 23/JU/2009 ASSESSEE A.Y. 2003-04 15.1 THE FIRST GROUND OF APPEAL OF THE C.O. OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING LEASE RENT OF RS. 48,61,880/- AS I NCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS OR INCOME FROM PROPERTY. 15.2 THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE WHILE DISPOSING OFF THE GROUND OF APPEAL NO. 1 OF C.O. OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. FOLLOWING OUR FINDINGS FOR THE ASSESSMENT YEAR 2004 -05, WE HOLD THAT THE LEASE RENT IS TO BE TAXED UNDER THE HEAD BUSINESS INCOME. 40 16.1 THE SECOND GROUND OF APPEAL OF THE C.O. OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING AIRCRAFTS CHARGES OF RS. 41,31,670 /- AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS OR INCOME FROM BUSINESS . 16.2 THIS ISSUE HAS ALSO BEEN DECIDED WHILE DISPOSI NG OF THE GROUND OF APPEAL NO. 2 OF THE C.O. OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2 004-05 IN WHICH THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING OUR FI NDINGS FOR THE ASSESSMENT YEAR 2004- 05, WE HOLD THAT THE INCOME IS TO BE TAXED UNDER TH E HEAD BUSINESS INCOME. 17.1 DURING THE COURSE OF HEARING, THE LD. AR OF TH E ASSESSEE HAS NOT PRESSED THE GROUND NO. 3 OF THE C.O. OF THE ASSESSEE. HENCE, TH E SAME IS DISMISSED BEING NOT PRESSED. ITA NO. 500/JODH/2010 A.Y. 2005-06 REVENUE 18.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE TO TREAT A RECEIPTS OF RS. 9,79,54,42 1/- FROM BUSINESS AND PROFESSION AGAINST INCOME FROM OTHER SOURCES ASSESSED BY THE AO. 18.2 THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASS ESSEE WHILE DISPOSING OFF THE APPEAL NO. 4 OF THE REVENUE FOR THE ASSESSMENT YEAR 2004-0 5. FOLLOWING OUR FINDINGS, WE HOLD THAT THE LD. CIT(A) AS JUSTIFIED IN DIRECTING TO TR EAT THE RECEIPTS FROM INDIAN HOTEL CO. LTD. AS INCOME FROM BUSINESS. 19.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 1,19,014/- MADE U/ S 36(1)(VA) R.W.S. 2(24)(X) OF THE I.T. ACT ON ACCOUNT OF PAYMENT OF EMPLOYEES CONTRIBUTIO N TOWARDS PF AND ESI AFTER DUE DATE 41 19.2 THIS ISSUE ALSO STANDS COVERED BY OUR ORDER FO R THE ASSESSMENT YEAR 2004-05 AND FOLLOWING THAT FINDING, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. 20.1 THE THIRD GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS. 61 ,76,703/- ON NEW AIRCRAFT. 20.2 THE AO IN HIS ORDER HAS MENTIONED THAT THE ASS ESSEE HAS NOT DISCLOSED ANY RECEIPTS FROM AIRCRAFT. IT WAS FURTHER OBSERVED BY THE AO THAT THE WORD PRIVATE IS MENTIONED IN THE COPY OF THE LOG BOOK FURNISHED. TH EREFORE, THE AO DISALLOWED THE DEPRECIATION. 20.3 BEFORE THE LD. CIT(A), ASSESSEE HAS SUBMITTED AS UNDER:- BEFORE ME, IT HAS BEEN SUBMITTED THAT THE DISALLO WANCE OF DEPRECIATION CLAIMED ON NEWLY AIR CRAFT DESERVES TO BE DELETED BECAUSE, THE SAID AIRCRAFT WAS USED FOR VISITING VARIOUS OFFICES OF THE COMPANY FOR OFFICIAL PURPOSES. FROM THE FINDINGS OF THE A.O., I T APPEARS THAT THE A.O. HAS MAINLY DISALLOWED THE DEPRECIATION ON THE GROUN D THAT THE SAID AIRCRAFT HAS BEEN USED FOR PRIVATE PURPOSE AND NOT FOR BUSIN ESS PURPOSE BY RELYING ON THE MENTIONING OF WORD PVT IN THE LOG BOOK. EV EN THOUGH THE WORLD PVT HAS BEEN MENTIONED IN THE LOG BOOK, THAT VISIT WAS FOR BUSINESS PURPOSE FOR VARIOUS PLACES WHERE THE OFFICES OF THE ASSESSEE HAS BEEN LOCATED. IN SUPPORT OF THIS, THE LEARNED A/R FOR TH E APPELLANT HAS MENTIONED IN THE REPLY AS UNDER: FOR CLARIFICATION REGARDING COLUMN X OF LOG BOOK NAMING NATURE OF FLIGHT (PRIVATE, AERIAL WORK, SCHE DULED OR NON SCHEDULED, WE RESPECTFULLY SUBMIT THAT PRIVATE CATE GORY MEANS 42 AIRCRAFT FOR ANY PURPOSE OTHER THAT PUBLIC TRANSPOR T OR AERIAL WORK AND THAT AIRCRAFT MAY NOT BE USED FOR THE PURPOSE O F HIRE. LOG BOOK OF THE AIRCRAFT VT LPH SHOWS THE WORK PRIVATE & I T ONLY MEANS THE AIRCRAFT HAS BEEN OPERATED IN THE PRIVATE CATEG ORY. IN VIEW OF ABOVE FACTS, IT HAS BEEN PLEADED THAT TH E DISALLOWANCE OF DEPRECIATION MADE BY THE A.O. MAY BE DELETED AND NE CESSARY RELIEF MAY BE ALLOWED TO THE APPELLANT. 20.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS DELETED THE DISALLOWANCE OF DEPRECIATION AFTER OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED A/R FOR THE APPELLANT VIS--VIS THE FINDINGS OF THE A.O. GI VEN IN THE ASSESSMENT ORDER UNDER APPEAL ALONGWITH THE RELEVAN T FACTS OF THE CASE OF THE APPELLANT. THERE IS NO DISPUTE THAT DEP RECIATION ON ASSETS IS ONLY ALLOWABLE WHEN THE ASSETS WERE PUT I N USE FOR BUSINESS PURPOSE. IN THE CASE OF THE APPELLANT, AC CORDING TO THE A.O. THE AIR CRAFT WAS NOT USED FOR BUSINESS PURPOS E WHICH ACCORDING TO HIM IS VERIFIABLE FROM THE COPY OF LOG BOOK FURNISHED BY THE APPELLANT WHERE THE WORD PVT HAS BEEN MENT IONED. IN MY VIEW, THE CLARIFICATION GIVEN FOR MENTIONING THE WO RD PVT IN THE LOG BOOK AGAINST EACH TRIP IS ACCEPTABLE BECAUSE, I N ALL THE PLACES WHERE THE AIRCRAFT WAS USED FOR TRAVEL BY THE DIREC TOR OF THE APPELLANT COMPANY, OFFICE OF THE APPELLANT COMPANY WAS LOCATED AND THEREFORE, IT CANNOT BE SAID THAT SUCH TRIPS W ERE FORE THE PURPOSE OTHER THAN BUSINESS. ADMITTEDLY, THE A.O. H AS NOT BROUGHT ANY EVIDENCE ON RECORD TO SUGGEST THAT THE TRIPS UNDER TAKEN BY THE DIRECTOR OF THE APPELLANT WAS PURELY F OR THE PURPOSE OTHER THAN BUSINESS. AFTER HAVING CONSIDERED ALL TH E ABOVE FACTS 43 AND CIRCUMSTANCES OF THE CASE, I HOLD THAT THE AIRC RAFT UNDER REFERENCE WAS USED FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT COMPANY AND THEREFORE DEPRECIATION ON THE AIRCRAFT IS ALLOWABLE. THEREFORE, THE DISALLOWANCE MADE BY THE A.O. DESERV ES TO BE DELETED AND I ORDER ACCORDINGLY, 20.5 WE HAVE HEARD BOTH THE PARTIES. IT IS NOT DISP UTED BY THE AO THAT AIRCRAFT WAS RUN ON TRIAL AS ON 30 TH SEPT. 2004. IT IS ALSO AN UNDISPUTED FACT THAT IT FLEW BETWEEN VARIOUS LOCATIONS INCLUDING SHIKARBADI, BIKANER, DELHI, JOD HPUR. THERE IS NO LOCATIONS AT WHICH THE ASSESSEE IS NOT HAVING ANY BUSINESS REQUIREMENT . BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE AIRCRAFT WAS USED FOR THE PURPOS E OF BUSINESS AS IT HAS MADE TRIPS TO DIFFERENT LOCATIONS. THE LD. CIT(A) HAS MENTIONED T HAT THE AO HAS NOT BROUGHT ANY EVIDENCE TO SUGGEST THAT TRIPS UNDERTAKEN BY THE DI RECTORS WERE PURELY FOR THE PURPOSE OTHER THAN BUSINESS. WE FEEL THAT THE LD. CIT(A) WA S JUSTIFIED IN HOLDING THE DEPRECIATION IS ALLOWABLE. 21.1 THE FOURTH GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF EXPENSES OF RS. 12,82,535/ - OUT OF AIRCRAFT EXPENSES BEING PERSONAL IN NATURE. 21.2 THESE EXPENSES INCLUDED FUEL EXPENSES, REPAIRS AND MAINTENANCE EXPENSES, OPERATING EXPENSES AND INSURANCE EXPENSES IN RESPEC T OF THE AIRCRAFT. THE AO HAS ADMITTED THAT THERE HAS BEEN TRIAL RUN BY THE PILOT FOR THE PURPOSE OF BUSINESS AND THE EXPENSES INCURRED ARE OF REVENUE IN NATURE. 21.3 THE LD. CIT(A) HAS ALREADY HELD THAT THE AIRCR AFT WAS USED FOR THE PURPOSE BUSINESS. 44 21.4 AFTER CONSIDERING BOTH THE PARTIES AND ON PERU SAL OF THE MATERIALS AVAILABLE ON RECORD, WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED I N DELETING THE DISALLOWANCE OF RS. 12,82,535/- OUT OF AIRCRAFT EXPENSES. C.O. 1/JODH/2011 ASSESSEE A.Y. 2005-06 22.1 THE FIRST GROUND OF C.O. OF THE ASSESSEE IS THAT THE LOWER AUTHORITIES ERRED IN HOLDING LICENSE FEES/ LEASE RENT OF RS. 54,25,964/- AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS OR INCOME FROM PROPERTY. 22.2 THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASS ESSEE AS PER OUR FINDINGS FOR THE ASSESSMENT YEAR 2004-05. FOLLOWING THAT FINDINGS, W E HOLD THAT THE RECEIPTS ARE TO BE TAXED UNDER THE HEAD BUSINESS INCOME. 22.3 THE SECOND GROUND OF APPEAL OF THE C.O. OF THE ASSESSEE IS THAT THE LOWER AUTHORITIES ERRED IN HOLDING AIRCRAFTS CHARGES OF RS. 1,40,85,108/- AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS. 22.4 THIS ISSUE STANDS COVERED BY OUR FINDINGS FOR THE ASSESSMENT YEAR 2004-05 IN FAVOUR OF THE ASSESSEE . FOLLOWING OUR FINDINGS, WE HOLD THAT RECEIPTS ARE TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS 22.5 DURING THE COURSE OF HEARING, THE LD. AR OF TH E ASSESSEE HAS NOT PRESSED THE GROUND NO. 3 OF THE C.O. OF THE ASSESSEE. HENCE, TH E SAME IS DISMISSED BEING NOT PRESSED 23 IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED WHILE THE C.O. OF THE ASSESSEE ARE PARTLY ALLOWED. THE ORDER IS PRONOUNCED ON 20-01-2012. SD/- SD/- 45 (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 20 /01/2012 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 2, UDAIPUR 2. THE LAKE PALACE HOTELS & MOTELS (P) LTD. , UDAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO. 612/JU /08) A.R, ITAT, JODHPUR 46 47