ITO, New Delhi V. M/s K.S. Hotel Pvt. Ltd., New Delhi

ITA 883/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3100 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 15-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RADHA KATYALNNARANG
• Section: 40A(3); 143(3); 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER & SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO-883/DEL/2017 (ASSESSMENT YEAR: 2013-14) M/S K.S HOTELS PVT. LTD., B - 25, CONNAUGHT PLACE, NEW DELHI- 110001. AAACK4557EI VS ITO WARD-14 (1) NEW DELHI REVENUE BY SH. RADHA KATYALNNARANG , SR DR ASSESSEE BY SH. MADHUR AGGARWAL, ADV ORDER PER K. NARSIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 15/12/2016 PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, DELHI (LD. CIT(A)) IN APPEAL NUMBER DEL/CIT (A)-5/0358/2015-16 IN THE CAS E OF M/S KS HOTELS PRIVATE LIMITED (THE ASSESSEE) FOR THE ASS ESSMENT YEAR 2013-14, REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING TWO GROUNDS, WITHOUT 1 BEING GENERAL IN NATURE. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. CIT(A) HAS ERRED IN LAW IN TREATING THE CONTRACTUAL RECEIPTS OF GOODS UNDER SECTION 194 C BY TREATING THEM AS REGUL AR SALE BY SUPPLIERS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) HAS ADDED IN LAW IN DELETING UNVERIFIABLE MISCELLANEOUS EXPENSES. DATE OF HEARING 04.11.2020 DATE OF PRONOUNCEMENT 05 .11.2020 ITA NO. 883/DEL/2017 2 2. BRIEF FACTS OF THE CASE, AS COULD BE CULLED OUT FROM THE RECORD, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUN NING A RESTAURANTS BY THE NAME OF ZEN AND TAO IN CONNAUGHT PLACE WHICH SE LL PRIMARILY CHINESE FOOD, BEVERAGES AND LIQUOR AND THAT THE COM PANY OUTSOURCED THE CHINESE KITCHEN TO ANOTHER ENTITY CALLED DEWA ENTER PRISES. FOR THE ASSESSMENT YEAR 2013-14, THEY FILED THE RETURN OF I NCOME ON 28/9/2013, DECLARING AN INCOME OF RS. 40, 87, 223/-, BUT THE ASSESSMENT WAS COMPLETE UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961 (THE ACT) AT RS. 3, 12, 43, 980/-BY MAKING ADDITION OF RS. 7 0, 51, 973/- ON ACCOUNT OF SECTION 40(A)(IA) OF THE ACT AND RS. 1, 04, 788 /-ON ACCOUNT OF AD HOC DISALLOWANCE OF CERTAIN MISCELLANEOUS EXPENSES. 3. WHEN THE ASSESSEE PREFERRED APPEAL, LD. CIT(A) D ELETED BOTH THE ADDITIONS AND, THEREFORE, THE REVENUE IS AN APPEAL BEFORE US CHALLENGING THE DELETION STATING THAT THERE IS ERROR IN THE FIN DING OF THE LD. CIT(A) INASMUCH AS LD. CIT(A) TREATED THE PAYMENTS NOT AS CONTRACTUAL PAYMENTS BUT AS CONSIDERATION FOR PURCHASE OF FOOD AND ALSO IN NOT SUSTAINING THE UNVERIFIABLE MISCELLANEOUS EXPENSES. 4. INSOFAR AS THE ADDITION OF RS. 3, 12, 43, 980/- IS CONCERNED, LEARNED ASSESSING OFFICER HELD THAT THERE WAS A CONTRACT BE TWEEN DEWA ENTERPRISES AND THE ASSESSEE FOR SUPPLY OF CHINESE FOOD DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, SUCH PAYMENT WAS CONTRACTUAL PAYMENT FALLING WITHIN THE DEFINITION OF CONTRACTOR UNDER SECTION 194C OF THE ACT. SINCE THE ASSESSEE DID NOT EFFECT THE TAX DEDUCTION AT SOURCE, SUCH AN EXPENSE IS LIABLE TO BE DISALLOWED UNDER SE CTION 40(A)(IA) OF THE ACT. ASSESSEE PLEADED BEFORE THE LD. CIT(A) THAT T HE ASSESSEE IS THE OWNER OF THE PREMISES AND HAS AGREEMENT WITH M/S DE WA ENTERPRISES FOR SUPPLY OF CHINESE FOOD AND IN ACCORDANCE WITH THE A GREEMENT, FOOD WAS ITA NO. 883/DEL/2017 3 SUPPLIED BY CHARGING VAT ON THE SALE OF FOOD SUPPLI ED, WHICH IN TURN WAS SOLD TO THE CUSTOMERS OF THE ASSESSEE BY CHARGI NG VAT THEREON BY CLAIMING THE VAT INPUT. ON THIS GROUND, THE ASSESS EE CONTENDED THAT THE TRANSACTION BETWEEN THE TWO CONCERNS IS IN THE NATU RE OF PURCHASE AND SALE INASMUCH AS THE CONTRACT FOR SUPPLY OF MATERIA L/FOOD IS NOT A LABOUR WORK CONTRACT AS A ENVISAGED UNDER SECTION 194C OF THE ACT. 5. LD. CIT(A) CONSIDERED THE CONTENTIONS OF THE ASS ESSEE IN THE LIGHT OF THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. FURTHER, LD. CIT(A) FOUND THAT A SIMILAR QUESTION HAD ARISEN IN THE CAS E OF THE ASSESSEE IN THE PREVIOUS ASSESSMENT YEARS AND AFTER EXAMINING THE C ONTRACT WITH THE DEWA ENTERPRISES, THE BILLS ISSUE AND THE VAT RETUR NS OF THE ASSESSEE AND A SELLER OF THE GOODS IN THE LIGHT OF THE AMENDED S ECTION OF 194C OF THE ACT, HIS PREDECESSOR REACHED A CONCLUSION THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE SUPPLIER WAS THAT OF SALE AND PURCHASE AND THE SAME DOES NOT FALL WITHIN THE AMBIT OF SECTION 194C OF T HE ACT. LD. CIT(A), THEREFORE, OBSERVED THAT SINCE THERE IS NO CHANGE I N THE FACTS AND CIRCUMSTANCES OF THE CASE NOR HAS THE LEARNED ASSES SING OFFICER BROUGHT ANYTHING ON RECORD TO PROVE THAT THE AGREEMENT FELL WITHIN THE EXPANDED SCOPE OF WORK CONTRACT ENVISAGED UNDER SECTION 194C OF THE ACT, EXPLANATION (IV) THERETO WITH EFFECT FROM 1/10/2009 , THERE IS NO SCOPE TO DEVIATE FROM THE VIEW TAKEN BY HIS PREDECESSORS FOR THE ASSESSMENT YEARS 2006-07 TO 2012-13. FINDINGS OF THE LD. CIT(A) WERE CONFIRMED BY TRIBUNAL IN ITA NOS 4466/DEL/2015, ITA NOS 278/DEL/2013, ITA NOS 2809/DEL/2015 AND ITA NOS 6858/DEL/2015 FOR AY 2006 -07, 2007-08, 2011-12 AND 2012-13 RESPECTIVELY. 6. IT IS NOT THE CASE OF THE REVENUE THAT ANY CHANG E OCCURRED EITHER IN ITA NO. 883/DEL/2017 4 THE FACTS OR IN LAW SUBSEQUENT TO THE LD. CIT(A), T AKING THE CONSISTENT VIEW FOR THE ASSESSMENT YEARS 2006-07 TO 2001-13. IN THE ABSENCE OF ANY SUCH CHANGE, LD. CIT(A) IS JUSTIFIED IN FINDING IT DIFFICULT TO TAKE A DIFFERENT VIEW FROM THE CONSISTENT ONE TAKEN FOR TH E EARLIER ASSESSMENT YEARS. WE DO NOT FIND ANY ILLEGALITY OR IRREGULARI TY IN SUCH COURSE ADOPTED BY THE LD. CIT(A). WE ACCORDINGLY DECLINE TO INTERFERE WITH THE SAME AND DISMISS THIS GROUND OF APPEAL. 7. SECOND GROUND RELATES TO THE ADDITION OF RS. 1, 04, 788/-TOWARDS AND HAD DISALLOWANCE OF 10% OF THE MISCELLANEOUS EX PENSES. ACCORDING TO THE LEARNED ASSESSING OFFICER THE ASSESSEE HAD D EBITED MISCELLANEOUS EXPENSES OF RS. 10, 47, 885/-IN P&L ACCOUNT, BUT T HE LARGER PART OF IT IS NOT SUBJECT TO VERIFICATION DUE TO LACK OF PROPER V OUCHERS AND, THEREFORE, THE DISALLOWANCE OF 1/10 OF THE EXPENSES HAD TO BE MADE. ASSESSEE ARGUED BEFORE THE LD. CIT(A) THAT SUCH DISALLOWANCE WAS MADE WITHOUT ANY BASIS OF REASON AND THAT TOO WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THEIR CASE ON THIS ASPECT. 8. LD. CIT(A) CONSIDERED THE CONTENTIONS OF THE ASS ESSEE AND FOUND THAT THE LEARNED ASSESSING OFFICER WAS NOT CLEAR IN HIS REASONS FOR DISALLOWANCE, BUT DISALLOWED THE EXPENSES ON AD HOC BASIS SIMPLY BY PERUSING THE LEDGER ACCOUNT WHEREIN SUFFICIENT DETA ILS WERE NOT AVAILABLE. ACCORDING TO THE LD. CIT(A) IN CASE OF LEARNED ASSE SSING OFFICER ENTERTAINING ANY DOUBT ABOUT THE NATURE OF SOME OF THE EXPENSES, HE COULD HAVE CALLED FOR THE CORRESPONDING BILLS AND M ADE ENQUIRIES ABOUT THE GENUINENESS OF THE BUSINESS EXPEDIENCY OF INCUR RING THOSE EXPENSES, BUT WITHOUT PIN-POINTING THAT ANY OF THE CASH PAYME NTS WHERE ABOVE THE ITA NO. 883/DEL/2017 5 LIMIT SPECIFIED IN SECTION 40A(3) OF THE ACT OR THA T ANY OF THE BILLS WERE INGENUINEOR FOR OTHER THAN BUSINESS PURPOSE, THE DI SALLOWANCE WILL BE SUBJECTIVE IN MANNER BASING ON SURMISES AND CONJECT URES. LD. CIT(A) PLACE RELIANCE ON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF ACIT VS. GANPATI ENTERPRISES LTD (2013) 35 CCH 485 AND TRIPA T KAUR VS. ACIT AND HELD THAT THEY DISALLOWANCE OF EXPENDITURE ON E STIMATE BASIS WITHOUT POINTING OUT SPECIFIC DEFECTS IN THE BOOKS AND WITH OUT PROVIDING AN OPPORTUNITY OF EXPLANATION TO THE ASSESSEE CANNOT B E SUSTAINED. 9. ON A CONSIDERATION OF THE CONTENTIONS RAISED BEF ORE US, WE OF THE CONSIDERED OPINION THAT THERE IS NO PERVERSITY IN T HE FINDING OF THE LD. CIT(A) AND HE IS RIGHT IN OBSERVING THAT WITHOUT PO INTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND WITHOU T GIVING AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THEIR STAND ON THIS ISSUE, THE AD HOC DISALLOWANCE CANNOT BE SUSTAINED. FINDINGS OF THE LD. CIT(A) DO NOT WARRANT ANY INTERFERENCE AND HAVE TO BE CONFIRMED. WE ACCORDINGLY DISMISSED GROUND NUMBER TWO. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THE 5TH DAY O F NOVEMBER, 2020. SD/- SD/- (N. K. BILLAIYA) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:.05.11.2020