M/S. UNISON HOTELS PVT. LTD.,NEW DELHI V. DCIT, NEW DELHI

CO 25/DEL/2017

AI Insights

The case involves M/s Unison Hotels P. Ltd. appealing against the order of the Commissioner of Income Tax (Appeals)-9, which confirmed certain additions and disallowances made by the Assessing Officer during the assessment year 2012-13. The primary issues revolved around the additions made for outstanding credit balances and disallowances related to expenses on 'soiled operating equipments and linen inventory written off'. The Tribunal examined the validity of these additions and disallowances, considering the submissions and evidence presented by the assessee, including previous rulings in similar cases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471781 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Other Referred Cases: Badru (since Deceased) through LRs vs NTPC, Unison Hotels vs. ACIT, New Delhi, T.V. Sundram Aiyangar & Sons, Sugauli Sugar Works (P) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR
• Assessee Lawyers: V.K. BINDAL
• Keywords: Set aside; Tax effect; Period of limitation; Bogus
• Section: 143(2); 143(1); 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘G’: NEW DELHI) BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER C.O. No:- 25/Del/2017 (Arising out of ITA No.-6126/Del/2016) (Assessment Year- 2012-13) M/s Unison Hotels P. Ltd, 2, Nelson Mandela Road, Vasant Kunj, Phase-II, New Delhi-110 070. Vs. DCIT, Circle 27(1), New Delhi. PAN No: AAACU0455C APPELLANT RESPONDENT Assessee by : Shri. V.K. Bindal, CA and Ms. Rinky Sharma, Adv. Revenue by : Ms. Harpreet Kaur, Sr. DR Date of Hearing : 29.11.2024 Date of Pronouncement : 27.02.2025 ORDER PER SUDHIR PAREEK, JM: This cross objection filed by the assessee against the order dated 09.08.2016 of Ld. Commissioner of Income Tax (Appeals)-9, C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 2 New Delhi [hereinafter referred to as “the Ld. CIT(A)] pertaining to Assessment Year 2012-13. 2. Facts of the case may be summarised as that return of income as electronically filed on 30.09.2012 declaring total income of Rs. 88,03,315/- which was processed u/s 143(1) of the Act and the case was, thereafter, selected for scrutiny and in pursuance thereof notice u/s 143(2) of the Act dated 07.08.2013 was issued and duely served upon assessee. In completion of said assessment proceedings, the Ld. AO, computed the total income of the assessee Rs. 2,07,79,260/- inclusive of additions made in different paras vide order dated 14.03.2015. 3. Aggrieved by the aforesaid order, the assessee preferred appeal and the Ld. CIT(A) partly allowed the appeal vide order dated 09.08.2016. 4. It is relevant to mention here that in this case Revenue also been preferred appeal assailing the order passed by the Ld. CIT(A) before Tribunal which has been dismissed in low tax effect vide order dated 28.08.2019. As per section 253(4) of the Act, the assessee may notwithstanding that he may not have appealed C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 3 against such order or any part thereof, file a memorandum of cross –objection, against any part of such order and such memorandum shall be disposed of by the tribunal as if it were as appeal presented within the time specified in section 253 (3) of the Act. The Hon’ble Supreme Court in the case of Badru (since Deceased) through LRs vs NTPC AIR 2019 SC 3385 held that the Cross – objections (C.O.) should be decided in accordance with law. Hence, we do so. 5. The Ground of Cross Objection are as under: 1. The CIT(A) erred in law and on facts in confirming the addition of Ra, 19.75.248/-for the outstanding credit balances of some parties without appreciating the facts that the said creditors have not remitted their liability and the outstanding amounts were paid/adjusted in the subsequent years as submitted. Thus the addition so made should be deleted. 2. The CIT(A) erred in law and on facts in confirming the ado addition of Rs. 7,86,762/out of the disallowance made on estimated basis by the assessing officer out of \"Soiled operating equipments and linen inventory written off\" without properly appreciating the nature of the said expenses. Thus the addition so made should be deleted. 3. The CIT(A) erred in law and on facts in confirming the disallowance of Rs. 7,86,762/- by changing the basis of disallowance and enhancing the same to 100% -of the amount of Rs. 2,39,503/- on account of silverware and Rs. 5,47,259/- on account of miscellaneous others debited under the head \"Soiled operating equipments and linen inventory written off as against 10% of the total amount of Rs. 86,78,698/- disallowed by the assessing officer without issuing any show cause notice for enhancement. Thus the addition so made without following proper course of law should be deleted. 4. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.” C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 4 6. Heard rival submissions and carefully perused the material available on record. 7. Regarding ground no. 1, the Ld. AR submitted that the Ld. CIT(A) erroneously confirmed the addition of Rs. 19,75,248/- for the outstanding credit balance of some parties but said creditors have not remitted their liability and the outstanding amounts were paid / adjusted in the subsequent years. 8. the Ld. AO stated in order dated 14.03.2015 that with the balance payable to M/s Agrim Sales, M/s Javed Enterprises, M/s RK International and M/s KTC India Pvt. Ltd. as on dated 30.03.2012, these parties do not infact exist, more so when these amount remained unverifiable and to that extent the balance payable to them on 31.03.2012, added Rs. 19,75,248/- to the total income of the assessee company. 9. The assessee assailed the order before the Ld. CIT(A) by stating that summons sent to them were served and none returned and all the said parties did exist and on the given addresses as per the books of account of the assessee. Thus, the identity and bonafide of the creditors is beyond doubt as they were having bank C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 5 accounts with KYC norms. It was pleaded before the Ld. CIT(A) that merely because due to sustained relationship with those in the year 2015, the assessee was not in the position to obtain confirmations with them and above all because of the said parties did not responded to the summons, no addition can be made and the Ld. AO could have verified the facts by sending inspector for spot verification but the Ld. CIT(A) dismissed the plea by observing addition in question justified. 10. The Ld. DR relied upon orders passed by lower authorities. 11. In the course of hearing, the Ld. AR relied upon the orders passed by Co-ordinate Bench of ITAT, in assessee’s own case ITA No. 2259/Del/2012, AY, 2008-09, Unison Hotels vs. ACIT, New Delhi, in which assessee had not written back these amounts in the profit & loss account and the impugned amounts represented only unclaimed balanced and by observing as there is no remission or cessation of liability, set aside the order of the Ld. CIT(A). Relevant para 27 and 28 reproduced as under: “27. The facts are not disputed. The assessee had not written back these amounts in the Profit & Loss Account and the impugned amounts represented only unclaimed balances. C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 6 28. In the case of T.V. Sundram Aiyangar & Sons (supra), the Income Tax Officer found that for the assessment years 1982-83 and 1983-84, the assessee had transferred an amount of Rs. 17,381/- to Profit & Loss Account of the Company during the accounting period ended on 31 March, 1982 (A.Y. 1982-83), and an amount of Rs. 38,975/- during the accounting period ended on 31 March, 1983 (A.Y.1983-84). But these amounts were not included in the total income of the assessee. Thus, assessee had taken a conscious decision regarding cessation of liability. However, in the present case, the assessee had not written back these amounts in the Profit & Loss Account. Thus, there was no positive act on the part of the assessee from which it could be concluded that there was remission or cessation of trading liability. Therefore, the decision in the case of T.V. Sundram Aiyangar & Sons (supra) was not applicable. In the case of Sugauli Sugar Works (P) Ltd., (supra), it was, inter-alia, held that expiry of the period of limitation prescribed under the Limitation Act could not extinguish the debt but it would only prevent the creditor from enforcingthe debt. It was further held that mere entry in the books of account of the debtor, made unilaterally, without any act on the part of the creditor, will no enable the debtor to say that the liability has come to an end. In the present case, since assessee had not written back these amounts therefore, there was acknowledgment of debt by assessee as on the date of balance sheet. Under such circumstances, it could not be said that there was remission or cessation of liability. We, therefore, set aside the order of Ld. CIT(A) on this issue.” 12. During the hearing, the Ld. AR submitted photocopies of the books of account of the assessee regarding Agrim Sales, Javed C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 7 Enterprises, RK International and KTC India Pvt. Ltd. for perusal which is furnished as below: C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 8 C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 9 C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 10 C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 11 13. In this regards, the Ld. AR also submitted that it is established principle of law that whereas assessee having given the names and addresses of the creditors who were income tax assessee, the mere fact that such creditors did not respond pursuant to notice could not be used against the assessee. From the perusal of record, it reveals that neither the Ld. AO nor the Ld. CIT(A) properly verified the fact and passed order merely on this ground that concerned parties did not respond pursuant to notice u/s 133(6) of the act served upon them. So, on the basis of foregoing fact situation, addition made deserves to be deleted and accordingly, ground no. 1 is allowed. 14. further, reiterating the ground of cross – objection filed by assessee, the Ld. AR submitted that the Ld. CIT(A) erroneously confirmed the addition of Rs. 7,86,762/- made on estimated basis by the Ld. AO out of soiled operating equipments and linen inventory written off without properly appreciating the nature of the said expenses and changed the basis of disallowance enhancing the source to 100% of the amount of Rs. 2,39,503/- on account of miscellaneous debited under the head “soiled operating equipments C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 12 and linen inventory written off” as against 10% of the total amount of Rs. 86,78,698/- disallowed by the Ld. AO without issuing any show cause notice for enhancement. 15. The Ld. AO, in this regard, observed as under: “The above submission of the assessee had been examined and is not found acceptable for the following reasons, either singularly or collectively: - a. The assessee had claimed to have incurred above cost on account of operation of hotel. While the operation and running of hotel is beyond any lota of doubt, the incurrence of such expense, that too on account of scarping of such items is not proved by the assessee, The assessee had neither furnished details of such scrapings as per its industry conventions or even as per its earlier years results. b. The assessee had claimed to discard the above items also on account of uniform system of accounting. However, which accounting systems and practices are being followed have neither been substantiated nor established nor referred during the course of assessment. c. The assessee had not furnished even a single document so as to prove the approvals, its internal policies on scrapping/discarding, procedure followed in its industry, etc so as to establish its claim of above expenses. d. The assessee had claimed scrapping cost of silver ware and crockery without showing any realisation from sale/scrapping of these items. It is highly imaginary that silver costing for Rs. 2.5 lakhs approx had been scrapped and such item had been scrapped at cost without any realization. The details of the party to whom this silver had been scrapped, mode and manner of scrapping, etc, even at the cost of repetition have remained unsubstantiated from the assessee's end. In view of the above reasons, the entire claim of the assessee qua above items cannot be permitted. At the same time, since assessee is running a 5 star hotel, it is required to maintain high standards of items, crockery, linen, etc. which require time and again replacements, etc. However, revenue leakages are bound to occur and some of such have been discussed in earlier para. The end of justice would be met incase 10% of the total expense claimed under the above expense head is being disallowed. C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 13 (Disallowance of Rs. 8,67,870/-)” 16. While deciding the appeal, the Ld. CIT(A) stated that assessee has not furnished the details of Rs. 547259/- of scraping cast of silver are of Rs. 239503/- and OE expenses but the items for which no details furnished was only Rs. 7,86,762/- and to such a amount addition confirmed and for the rest assessee was given relief . 17. The Ld. AR submitted that the Ld. AO nowhere alleged these expenses to be bogus / false but accepted that they are genuinely required for the business of the assessee and allowed 90% of the expenses. It is also submitted that once the nature of expenses is accepted to be of business than no estimated disallowance out of the said expanses can be made on surmises or presumption and the Ld. AO failed to bring any evidence on record or a singly instance which even presume regarding leakage and in the absence of any logical finding, no any estimated disallowance can be made. 18. We find material substance as mentioned hereinabove and in such a fact situation and following established principles of law, addition in question is not sustainable in the eyes of law and deserved to be deleted. C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 14 19. Consequently, the grounds of cross objection are allowed as indicated above. Order pronounced in the Open Court on 27.02.2025 Sd/- Sd/- (S RIFAUR RAHMAN) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27/02/2025. Pooja/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT C.O. no.- 25/Del/2017 Unison Hotels Pvt. Ltd. 15 1. Date of dictation of Tribunal order 24.02.25, 25.02.25 2. Date on which the typed draft Tribunal Order is placed before the Dictating Member 24.02.25, 25.02.25 3. Date on which the typed draft Tribunal order is placed before the other Member 4. Date on which the approved draft Tribunal order comes to the Sr. PS/PS 5. Date on which the fair Tribunal order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr.PS/PS 7. Date on which the final Tribunal order is uploaded by the Sr.PS/PS on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal order 9 Date of killing off the disposed of files on the judisis Portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes to the Assistant Registrar for endorsement of the order 12. Date of Despatch of the order "