M/s Hill View Holiday Inn Ltd., Chandigarh V. Income Tax Officer, Chandigarh

ITA 850/CHANDI/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0711 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A GUPTA
• Keywords: Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 850/CHD/2011 ASSESSMENT YEAR : 2007-08 HILL VIEW HOLIDAY INN LTD V I.T.O. WARD 2(4) SCO 50-51 ROPAR CAMP AT SECTOR 17A CHANDIGARH CHANDIGARH AABCH 6745 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI PARIKSHIT AGGARWAL RESPONDENT BY: SHRI A. GUPTA DATE OF HEARING 8.1.2013 DATE OF PRONOUNCEMENT 14.1.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), CHANDIGARH DATED 19.7.2011. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IN APPEAL NO. 407/09-10 DATE D 19.7.2011 HAS ERRED IN PASSING THAT ORDER IN CONTRA VENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME-T AX ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE LD. CIT(A) HAS ERRED IN ESTIMATING THE DISALLOWANCE OF INDIRECT EXPENSES TO TALING TO RS. 3,99,538/- AT THE RATE OF 50% (ORIGINALLY DI SALLOWED BY ASSESSING OFFICER AT THE RATE OF 80%) EVEN WHEN COMPLETE DETAILS OF ALL EXPENSES WERE PRODUCED, BOO KS WERE AUDITED AND NO DISCREPANCIES THEREIN WERE FOUN D AND FINALLY THE SAME WERE NOT EVEN REJECTED. IN THIS W AY LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 1,99 ,769/- OUT OF ADDITION OF RS. 3,19,630/- MADE BY ASSESSING OFFICER. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT DURING THE YEAR THE ASSESSEE HAS SHOWN RENTAL INCOM E OF RS. 2 7,47,138/- AND THE ASSESSEE HAS ALSO SHOWN INCOME F ROM SALE OF TEA AND SNACKS. GROSS RECEIPTS FROM SAME AMOUNT ED TO RS. 4,51,876/-. THE ASSESSEE HAD PREPARED A COMBINED P ROFIT AND LOSS ACCOUNT SHOWING RENTAL INCOME AS WELL AS INCOM E FROM SALE OF TEA AND SNACKS AGAINST THIS BUSINESS. THE ASSESSEE HAD SHOWN DIRECT EXPENSES AMOUNTING TO RS. 2,55,266 /- AND INDIRECT EXPENSES OF RS. 500,325/- IN THIS BUSINESS . THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE CANNOT BE ANY LOSS IN THE BUSINESS OF SALE OF TEA AND SNACKS AND THIS WAS BEING SHOWN TO REDUCE TAXABLE RENTAL INCOME. IN REPLY TO A QUERY IN THIS RESPECT, IT WAS SUBMITTED THAT IDENTICAL FIGUR ES WERE ACCEPTED FOR THE EARLIER YEARS. THE ASSESSING OFFI CER FURTHER NOTED THAT THE SALE OF TEA AND SNACKS HAD GONE DOWN FROM RS. 5,35,480/- TO RS. 4,51,876/- WHEREAS INDIRECT EXPEN SES HAD INCREASED FROM RS. 4,78,202/- TO RS. 5,00,325/-. IN THIS BACKGROUND THE ASSESSING OFFICER ALLOWED DIRECT EXP ENSES AS WELL AS INTEREST ON LOANS BECAUSE INTEREST WAS IN A NY CASE ALLOWABLE AGAINST BUSINESS INCOME AS WELL AS RENTAL INCOME. HOWEVER, OUT OF OTHER INDIRECT EXPENSES AMOUNTING T O RS. 3,99,538/- ONLY 20% OF THE EXPENSES WERE ALLOWED AN D ADDITION FOR RS. 3,19,630/- WAS MADE. 4 IN APPEAL BEFORE THE LD. CIT(A), THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD INCURRED EXPENSES ON SALARY AMOUNTING TO RS. 2,62,360/- WHICH WAS REALLY NOT PO SSIBLE. HOWEVER, HE FOUND THAT ADDITION IS MADE ON HIGHER S IDE AND REDUCED THE SAME TO 50% OF THE INDIRECT EXPENSES. 5 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD PRODUCED BOOKS OF ACCOUNT BEFORE T HE 3 ASSESSING OFFICER AND NO PARTICULAR DEFECT HAS BEEN POINTED OUT. THE ADDITION HAS BEEN MADE ONLY ON ADHOC BASI S WHICH IS NOT PERMISSIBLE. IN ANY CASE THE ADDITION IS ON A V ERY HIGH SIDE AND THE SAME MAY BE RESTRICTED TO REASONABLE DISALL OWANCE. 6 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUP PORTED THE ORDER OF ASSESSING OFFICER AND THE LD. CIT(A). 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND T HAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT AND THE ADDITION HAS BEEN MADE MER ELY ON ADHOC BASIS. HOWEVER, AT THE SAME TIME IT IS NOT PO SSIBLE TO INCUR HUGE LOSS IN A BUSINESS LIKE SALE OF TEA AND SNACKS. THEREFORE, CONSIDERING THE OVERALL CIRCUMSTANCES, W E ARE OF THE OPINION THAT THE ENDS OF JUSTICE WOULD MEET IF THE ADDITION IS RESTRICTED TO 25% OF INDIRECT EXPENSES. THIS PROPO SAL WAS ACCEPTED BY THE LD. COUNSEL OF THE ASSESSEE. ACCORD INGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AS SESSING OFFICER TO DISALLOW INDIRECT EXPENSES @ 25%. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 14.1.2013. SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 14 .1.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR