MARS ENTERPRISES & HOSPITALITY PRIVATE LIMITED,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2)(1), MUMBAI

ITA 2061/MUM/2025

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Mars Enterprises & Hospitality Private Limited appealed against the order of the CIT(A)/NFAC, Delhi, which confirmed and enhanced the disallowance made by the Assessing Officer (AO) under section 37 of the Income Tax Act, 1961, and also against the disallowance of set off of unabsorbed depreciation. The AO had initially disallowed expenses amounting to Rs. 4.30 crores due to lack of third-party confirmations and discrepancies in the names and amounts of the parties in the books of the assessee. The CIT(A) upheld most of the disallowances after considering the AO's remand report. The Tribunal found discrepancies in the figures and names used by the AO and directed a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772804 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAMKOSURI
• Assessee Lawyers: RAVIKANT PATHAK
• Keywords: Additional evidence; Depreciation; Unabsorbed depreciation
• Section: 133(6); 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER& SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No. 2061/MUM/2025 (AY: 2017-18) (Physical hearing) Mars Enterprises & Hospitality Private Limited 5th& 6th Floor, Cyrus House, Opp St. Theresa Boys School, Bandra (W), Mumbai – 400050. [PAN: AAKCM4707H] Vs DCIT, Circle 2(2)(1), Mumbai Aayakar Bhawan, M.K. Road, Mumbai-400020 Appellant / Assessee Respondent / Revenue Assessee by Shri Ravikant Pathak, CA Revenue by Shri Annavaram Kosuri, Sr. DR Date of Institution 26.03.2025 Date of hearing 06.08.2025 Date of pronouncement 26.08.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. CIT(A)/NFAC, Delhi dated 07.01.2025 for A.Y. 2017-18. The assessee has raised following grounds of appeal; 1. The Commissioner of Income Tax – Appeals, National Faceless Appeal Centre [CIT(A)] erred in confirming the disallowance u/s 37 of the Income Tax Act, 1961 (Act) made by the AO. The Ld. CIT(A) erred in enhancing the disallowance u/s 37 of the Act at Rs. 6,45,80,183/- as against the disallowance of Rs. 4,30,92,655/- made by the AO on perusal of the ledger accounts of following parties in the books of the appellant: Particulars Disallowance confirmed/made by the CIT(A) Disallowance made by the AO RenuSethi-Vaishali Wines Shop - 10,84,691 Kishore Asthakkar-Western Marketing 27,34,812 17,44,786 MahendraBhadra-Shree Jageshwar 68,60,973 53,10,093 Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 2 Trading Brindeo Sales Ltd. 9,19,048 10,05,494 Unity Traders 24,77,424 24,77,424 S.T. Enterprises - 20,29,365 Mansha Agencies 65,48,946 21,28,730 Aditya Agencies 7,14,261 9,34,645 Nareshchandra Gupta-Om Enterprise - 6,42,397 Mahesh Parekh-Pratik Stationers 13,557 4,75,383 Kaveri Departmental Store - 16,94,580 AstinTradelinks Pvt. Ltd. 11,32,195 7,73,589 PravinSriastave – Srivastava Packaging 5,10,404 3,65,606 Skylite Enterprises - 26,13,715 Mahanagar Gas Ltd. 1,97,63,503 84,88,411 Microsense Pvt. Ltd. - 47,919 Mardi Grass (Candy Spirit) 8,83,804 4,97,186 Milestone Beer Division 61,56,402 89,962 Sharp HRD Services Pvt. Ltd. 1,48,64,854 Total 6,35,80,183 4,30,92,655 The appellant submits that the payments to above parties have been made for the expenses incurred in the normal course of conducting the business, hence, the disallowance made by the AO and enhancement made by the CIT(A) shall be deleted. 2. The CIT(A) erred in confirming the action of the AO in allowing set off of unabsorbed depreciation at Rs. 85,98,013/- as against the set off of brought forward unabsorbed depreciation claimed by the appellant at Rs. 5,16,90,668/-. 2. Brief facts of the case are that assessee company engaged in business of hotel, restaurant, club and allied business activity. The assessee filed its return of income for A.Y. 2017-18 declaring Nil income. The case was selected for scrutiny. During the assessment, the assessing officer noted that in the profit and loss account, the assessee has debited huge expenses under the head purchases and other expenses. The assessee was asked to furnish party-wise details of payments and justification for allowing such major expenses. The assessee furnished party-wise detail. The assessing officer in order to verify the veracity of claim issued notice Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 3 under section 133(6) to various parties on test check basis. The assessing officer in para 4.2 of assessment order recorded that in case of many parties, no reply was received and in some cases notices were returned unserved and / or no reply was received from some parties. According to the assessing officer, there was mismatch in the expenses claimed by assessee. On the basis of his aforesaid observation, the assessing officer issued fresh show cause notice dated 19.12.2019 and asked the assessee to reconcile the difference and to file third party confirmation in respect of parties who was not responded to the notice under section 133(6) and produce the parties of whom notice was not served. In para 4.3 of assessment order, the assessing officer recorded that assessee furnished confirmation, reconciliation statement and other document to substantiate their claim. The assessing officer prepared the summary of 19 parties, which was doubted by assessing officer. The assessee has shown expenses/purchases aggregating of Rs. 4.30 crores by taking view that either confirmation is not filed or parties has not replied to the notice issued by assessing officer. The assessing officer disallowed such expenses of Rs. 4.30 crores in computation of income. However, in para 4.8, the assessing officer recorded said amount of Rs. 4.09 crores. The assessing officer in the computation of income not allowed set off of unabsorbed depreciation of Rs. 85,98,013/- against the set off of brought forward unabsorbed depreciation claimed by assessee at Rs. 5.16 crores. 3. Aggrieved by the disallowance/addition, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detail written submission. Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 4 The assessee also furnished ledger accounts of the respective parties. All such submissions of assessee are recorded from page no. 11 to 17. The submission of assessee was forwarded to the assessing officer for his remand report as recorded in sub-para 4 of para 9 at page no. 19 of ld. CIT(A) order. The assessing officer furnished his remand report. The remand report of assessing officer is extracted on page no. 20 to 57 of order of ld. CIT(A). In the remand report, the assessing officer summarised his finding as recorded on page no. 56 & 57, wherein the assessing officer objected on the basis of difference in name of parties and the name mentioned in the books of account. 4. The ld. CIT(A) after considering the submission of assessee and the remand report allowed part relief to the extent of Rs. 20.05 lakhs and remaining disallowance under section 37 of Rs. 4.10 crores was upheld by holding that assessing officer has furnished detailed remand report which is acceptable. The action of assessing officer in not allowing set off of unabsorbed depreciation of Rs. 85,98,013/- against the set off of brought forward unabsorbed depreciation claimed by assessee at Rs. 5.16 crores was also confirmed by ld. CIT(A). The ld. CIT(A) confirmed the action of assessing officer by holding that no details in respect of unabsorbed depreciation of Mars Catering Services Pvt. Ltd. which was taken over by assessee was not furnished before assessing officer or before him. Further, aggrieved the assessee has filed present appeal before Tribunal. 5. We have heard the rival submissions of both the parties and have gone through the orders of lower authorities. Ground no. 1 relates to Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 5 disallowance under section 37 of the Act. The ld. Authorised representative (AR) of the assessee submits that assessee-company is in the business of hotel, restaurant and allied hospitality activity. The assessee is operating restaurant namely Waterstone Hotel in Andheri, Pizza by the Bay at Marine Drive, Gordon House Hotel Colaba, Gateway Snack Bar and Restaurant & Waterstone Country Club and Spa, Andheri. The assessee has shown various purchases during the relevant financial year. The assessing officer disallowed the purchases on the ground that vendors have not filed confirmation. Before ld. CIT(A), the assessee again filed all evidences, ledger account and other details to substantiate the purchases. The assessee also filed assessee’s ledger in the seller’s party account. All such evidences were treated as additional evidence; the remand report of assessing officer was obtained. The assessing officer furnished his remand report and objected by raising objection that there is difference in the name of the purchase party and the name in the books of assessee. Since the assessee is running various restaurants in different names so it was not appreciated by assessing officer. The name of certain establishment like Pizza by the Bay is changed which was known as Jazz by the Bay. The assessing officer also mentioned different amount which was confirmed by ld. CIT(A) of such difference of disallowance is mentioned in the grounds of appeal itself. The ld AR of the assessee also pointed out certain discrepancies in the figures of disallowances by assessing officer and figure mentioned in his remand report. The ld. AR of the assessee submits that they are still ready to explain the difference in the name and figure before Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 6 the assessing officer and in the interest of justice, the matter may be restored back to the assessing officer with the direction to allow the assessee to explain the fact. On disallowance of set off of unabsorbed depreciation, no show cause notice was issued during assessment, thus, the assessee has no opportunity. The ld. CIT(A) also confirmed the action without appreciation of facts. Therefore, ground no. 2 may also be restored to the file of assessing officer for passing the order afresh. 6. On the other hand, the learned senior departmental representative (ld. Sr. DR) for the revenue supported the order of lower authorities. 7. We have considered the rival submissions of both the parties and have gone through the lower authorities carefully. Ground no. 1 relates to disallowance under section 37 of the Act. We find that during assessment, the assessing officer mainly disallowed purchases to the extent of Rs. 4.30 crores on the ground that no third party confirmation was filed or no reply was received from seller parties in response to notice under section 133(6). We find that there is no finding of the assessing officer, if any payment was made through banking channel or not. The assessing officer in the assessment order vaguely recorded that in some cases, the notice returned unserved or no reply was received. The assessing officer in para 4.3 of his order has narrated the aggregate value of purchases against the name of each seller party. However, in remand report, the assessing officer has mentioned different details. Like against the purchases from Mahanagar Gas Ltd., which is Government owned company, the assessing officer in his remand report at serial no. 21 has mentioned the amount of Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 7 Rs. 1,97,63,503/- which is more than double to the figure mentioned in the assessment order. Similarly, for Sharp HRD Services Pvt. Ltd., the assessing officer disallowed Rs. 1,06,88,679/- which is mentioned at serial no. 19, however, in remand report such name is mentioned in serial no. 1 and the assessing officer has mentioned the purchase amount of Rs. 1,31,00,0129/- and Rs. 17,64,725/- at serial no. 2, thus, aggregating of Rs. 1.48 crores. There are other similar discrepancies as has been mentioned in grounds of appeal itself. Thus, we do not find any justification in the order passed by ld. CIT(A) in confirming such addition. Thus, considering the prayer of ld. AR of the assessee, this ground of appeal is restored back to the file of assessing officer to pass the assessment order afresh. Needless to direct that before passing the assessment order, the assessing officer shall allow fair and reasonable opportunity to the assessee. The assessee is also directed to file complete details of purchases, evidences to substantiate purchases and the evidence of payment and other evidence to substantiate the purchases. The assessing officer is directed to consider all such evidences and pass the order afresh in accordance with law. In the result, ground No. 1 of the appeal is allowed for statistical purpose. 8. So far as disallowance of unabsorbed depreciation is concerned, which is subject matter of ground No.2, we find that assessing officer has not given any show cause notice before making such disallowance. Similarly, there is no remand report of assessing officer on such issue, therefore, we also deem it appropriate to restore this issue to the assessing officer to pass the order afresh. Needless to direct that before passing the order, the Printed from counselvise.com ITA No. 2061/Mum/2025 Mars Enterprises & Hospitality Private Limited 8 assessing officer shall allow opportunity to the assessee. The assessee is directed to furnish complete details about the unabsorbed depreciation before the assessing officer. In the result, this ground of assessee is also allowed for statistical purposes. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order was pronounced in the open Court on 26/08/2025. Sd/- OMKARESHWAR CHIDARA ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 26/08/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "