PALMSHORE HOTELS PRIVATE LIMITED,THIRUVANANTHAPURAM V. ASST COMMISSIONER OF INCOME TAX, CIRCLE 1(), THIRUVANANTHAPURAM

ITA 983/COCH/2024

AI Insights

Palmshore Hotels Pvt. Ltd., engaged in the hotel business, did not file a regular return of income for the Assessment Year 2017-18. The AO, upon receiving information about the company's turnover and other incomes, issued a notice under section 148 of the Income Tax Act, 1961, due to suspected income escaping assessment. The AO completed the assessment ex parte, estimating business income and adding various incomes and liabilities to the taxable income. The CIT(A) upheld the AO's decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal found merit in the appellant's arguments regarding the incorrect assessment of certain incomes and liabilities and remanded the case back to the AO for a detailed examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668784 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Other Referred Cases: (2017) 252 Taxman 191
• Laws Referred To: Income Tax Act, 1961, Companies Act, 2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: RAJEEV R.
• Keywords: Business income; TDS
• Section: 147; 148; 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI GEORGE GEORGE K., VP AND SHRI INTURI RAMA RAO, AM ITA No. 983 /Coch/2024 Assessment Year: 2017-18 Palmshore Hotels Pvt. Ltd. .......... Appellant Light House Road, Vizhinjam Thiruvananthapuram 695521 [PAN: AABCP3814F] vs. ACIT, Circle-10, Thiruvananthapuram .......... Respondent Appellant by: Shri Rajeev R., CA Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 15.05.2025 Date of Pronouncement: 23.06.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 04.10.2024 for Assessment Year (AY) 2017-18. 2. Brief facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 2013. It is engaged in the business of running hotels. No regular return of income under the provisions of section 139(1) of the Income Tax Act, 1961 (the Act) was filed for AY 2017-18. However, the AO, on 2 ITA No. 983/Coch/2024 Palmshore Hotels Pvt. Ltd. receipt of information that the appellant had a turnover from services reported in Service Tax Return of Rs. 34,17,888/-, interest income and rental income on which TDS was deducted, formed an opinion that income escaped assessment to tax. Accordingly, a notice u/s. 148 of the Act was issued. The appellant did not comply with this notice u/s. 148. The appellant even had not responded to the notice u/s. 142(1) (ii) of the Act. In the circumstances, assessment was completed by ACIT, Circle-10, Trivandrum (hereinafter called \"the AO\") vide order dated 27.03.2022 passed u/s. 147 r.w.s. 144B of the Act at a total income of Rs. 1,00,13,580/- . While doing so, the AO estimated the business income at 8% of the turnover reported in Service Tax Return of Rs. 2,73,430/- and made addition on account of interest income or Rs. 29,186/- and rental income received of Rs. 68,75,670/-. He also added back the unpaid liability of loan of Rs. 18,04,290/-. 3. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO. 4. Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal. 5. The learned counsel for the assessee submitted that the assessment of licence fee of Rs. 68,75,670/- received from Somatheeram Ayurvedic Beach as income from other Source' is against decision of the jurisdictional Hon High Court of Kerala in 3 ITA No. 983/Coch/2024 Palmshore Hotels Pvt. Ltd. appellant’s own case relating to A.Y 2005-06 [(2017) 252 Taxman 191]. Income from licence fee is assessable as 'income from business' only. The action of the AO may be struck down with a direction to assesses the income as income from business. It is further submitted that the action of the CIT(A) upholding the action of the AO in assessing an amount of Rs.34,17,888/- taken from the Service Tax return as business income despite the fact that the same income is already included in the amount of Rs.68,75,670/- credited in P&L is not in order and is to be stuck down. He further submitted that the action of the CIT(A) upholding the action of the AO in making addition of Rs. 18.04,290 representing loan repayable to Somatheeram Ayurvedic Beach Resorts Pvt Ltd as income despite that fact that outstanding loan from Somatheeram Ayurvedic Beach Resorts Pvt Ltd has been confirmed by them is to be stuck down. It is submitted that the action of the CIT(A) upholding the action of the AO in making an addition of Rs.10,31,630 u/S.43B as unpaid Service Tax liability despite the fact that there are no unpaid liabilities of any nature as per the audited accounts is to be stuck down. 6. On the other hand, the ld. Sr. DR had no objection to remand the matter to the file of AO for verification of the above facts by the AO. 7. We have heard rival contentions and perused the material available on record. The matter is restored to the file of AO for fresh adjudication in accordance with law after affording reasonable opportunity of hearing to the appellant. 4 ITA No. 983/Coch/2024 Palmshore Hotels Pvt. Ltd. 8. In the result, appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 23rd June, 2025. Sd/- Sd/- GEORGE GEORGE K. VICE PRESIDENT (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 23rd June, 2025 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File Assistant Registrar ITAT, Cochin "