Income Tax Appellate Tribunal - Mumbai
Sunil Hotels Pvt.Ltd., Mumbai vs Assessee on 6 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH 'E' BENCH
BEFORE SHRI B.RAMA KOTAIAH(ACCOUNTANT MEMBER) AND
SHRI VIVEK VARMA (JUDICIAL MEMBER)
ITA No.6021 /Mum/2008
Assessment Year: 2005-06
Sunil Hotels Pvt Ltd., Dy. CIT, Range 8(3),
Kakad Corner, Kondivita Lane, Mumbai.
Andheri Kurla Road, Andheri(E),
Mumbai-59 Vs.
PA No.AAFCS 5261 D
(Appellant) (Respondent)
Appellant by : Mr H.N.Motiwala
Respondent by : Mr Manoj Mishra
Date of hearing : 06.03.2012
Date of pronouncement : 21.03.2012
ORDER
Per Vivek Varma, JM:
This appeal filed by the assessee is directed against the order dated 27.4.2008 of the CIT(A)-29, Mumbai, for the assessment year 2005-06 on the following grounds"
"1. The ld CIT(A) erred in upholding the addition of Rs. 1,14,44,964 in respect of additional pack up income.
2. The ld CIT(A) erred in upholding the addition of Rs. 4,72,084 on account of suppression of liquor sale."
2. The facts of the case are that the assessee is a private limited company having business of running of dance bars, liquor and food sale, hotels and construction and development of property. There was a search and seizure operation u/s.132 of the I.T.Act, 1961 on 23.1.2004 on the business premises of the assessee. In the assessment proceedings u/s. 153A consequent to search, the AO held that the assessee had been suppressing income from the business activities by declaring suppressed pack 2 ITA No.6021 /Mum/2008 Assessment Year: 2005-06 up income and liquor sales and by not showing entertainment income from assessment years 1998-99 to 2004-05. The AO, on the basis of working for assessment year 2004-05, worked out pack up income for the current year at Rs. 42,754 per day and thus, for 346 days, when the bar was open, estimated the same at Rs. 1,47,92,884 as against Rs. 33,47,920, making an addition of Rs. 1,14,44,964. The AO further made addition on account of suppression of liquor sale at Rs. 4,72,084, wherein, the AO observed that the assessee was using two sets of menu cards in different halls and on different occasion. According to the AO, rates of liquor like scotch, rum, vodka, gin, liquors and wines were 15% to 30% higher as compared to lower rates in the menu card. He, therefore, held that there was an overall suppresson of rates charged and made an addition of Rs. 4,72,084.
3. The assessee aggrieved by the findings of the AO filed appeal before the CIT(A) who, after hearing the assessee sustained the additions made by the AO.
4. The assessee company, not satisfied is now before the Tribunal.
5. Before us, the learned A.R. of the assessee, at the outset submitted that the impugned assessment year is post search, the search having been conducted on 23.1.2004. The A.R. of the assessee drew our attention to the contents of written submissions filed before the AO on 19.12.2007, which has been reproduced in the assessment order itself. The AR pointed out that the assessee company had one bar in the name of Night Lover Bar & Restaurant, in which there were 5 dancing halls/stages. In the current year, out of the 5 halls / stage, 2 were fully operational, one was used occasionally and 2 halls were closed for renovation. The sales of food liquor were billed from the company and taken to the books of account and the money received as tips to the dance artists were shared by the performing artists on the stage and the company in the ratio of 70:30.
6. The AR thrust his arguments on the fact that the dance activity during the current year was not on full swing as two of its halls were under renovation. He invited our attention to the chart showing the repair activity carried over by the assessee and pointed out that in the current assessment year, there was a major repair activity which 3 ITA No.6021 /Mum/2008 Assessment Year: 2005-06 amounted to Rs. 17.79 lakhs as compared to certain minor repairs in the preceding years. The AR pointed out that the assessee had been maintaining its books on regular basis and which were duly audited by the CA, he further argued that when in a case the books are readily available, the AO cannot exercise an option for framing the assessment on estimates. The AR pointed out that the AO had simply adopted the working done by the department for assessment year 2004-05, wherein the then AO had estimated total collections of pack up money per day at Rs. 46,740 for the fully functional dance bar.
7. On going through the facts as mentioned in the orders of the revenue authorities and the facts placed before us during the course of hearing, we find that the AO, while dealing with the issue of pack up collection / tips, went on to make an estimation on the basis of the preceding year, without going into the facts, i.e. the dance floors were curtailed during the year two of its dance floors were under renovation and being regular assessment proceedings, the AO had to go into the factual details as per the audited accounts. The AO, on both these points committed an error.
8. Coming to the factual matrix, nowhere have we found that the AO has disregarded the book results, which were before him and which were duly audited. On the directions of the Bench, the AR submitted the month wise details of pack up collection / tips received by the assessee co. during the year. It is observed that the facts in 2004-05 on which basis, the AO had made his estimation is different from the facts of the current year. From the orders, we find that the assessee, in 2004-05 and in earlier period could not provide the actual collection details nor was it able to provide any estimate of the collections. In those circumstances, the revenue authorities and even the coordinate Bench were forced to go into estimating pack up collections. But in the current year, which is the period of regular assessment and where the assessee has provided not only regular books but have provided audited account, in these circumstances, we have to take into account the actual results of the assessee, unless they are otherwise proved to be incorrect.
9. During the course of hearing, the AR, after bringing all the facts to the knowledge of the Bench, referred to the decisions of Evergreen Bar & Restaurants Restaurant vs. ACIT in ITA No. 6614 & 6615/M/2006, reported in 6 DTR(Mum)(TRI) 56 4 ITA No.6021 /Mum/2008 Assessment Year: 2005-06 and the case of CIT vs. C.J. Shah (Bombay), reported in 246 ITR 671, wherein it has been held, estimation of the turnover by the AO on notional basis was arbitrary. The AR also relied on the decision of Mumbai Tribunal in the case of DCIT vs. K.K. Shah, ITA No. 1899 to 1901/Mum/2008, wherein the coordinate Bench held that there was no need for extrapolation. The AR also relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Anand Kumar Deepak Kumar, reported in 294 ITR 497, wherein it was held that there would be no presumption that unaccounted sale would continue for the post search period, the AO was not justified in assuming unaccounted sales for entire year, where no discrepancies are noted in the books of account maintained by the assessee.
10. Taking the entire facts and on going through the cited case laws, we are of the considered opinion that when book result had not been disturbed, estimation cannot be gone into. We, therefore, hold that the case of the assessee co. is squarely covered by the decisions cited by the AR. We find no justification to sustain the impugned addition. We, therefore delete the addition made by the revenue authorities at Rs. 1,14,44,964.
11. On the issue of addition on account of liquor sales at Rs. 4,72,084, the AR drew our attention to the order dated 11.5.2009 of the ITAT in assessee's own case, wherein, in para 13, it has been observed as under:
"Coming to the addition on account of liquor sales, we find that the assessing officer took the rates mentioned in a menu card which was higher than the rates specified in the bill and made an addition of the difference. In or considered opinion, this addition is not well founded. The undisputed fact is that the bills that were available were made out at the rates which were mentioned in a menu card which was having lesser rates. The assessee explained that a particular section of the hotel was closed and that this menu card with higher rates was used in that particular section is a plausible explanation. As the only evidence found by the revenue is a menu card which has rates higher than the other menu cards and as no other evidence was found, it cannot be said that the assessee had received amounts which are in excess of that which is mentioned in the bills. Finding a menu card with higher rate does not mean that the billing was done at that higher rate and that sales were suppressed. No evidence of receipt of money in excess of that which is mentioned in the bill book was found during the course of search. Addition is made on a mere presumption. Thus, in view of the above discussion we allow the ground pertaining to addition on account of liquor sales for all the years."5 ITA No.6021 /Mum/2008
Assessment Year: 2005-06 Since the coordinate Bench of this Tribunal in assessee's own case in the preceding assessment years (supra), have deleted the similar addition, we respectfully follow the same, we, therefore delete the addition for this assessment year.
12. In the result, appeal filed by assessee is allowed.
Pronounced in the open court on 21st March, 2012
Sd/- Sd/-
(B.RAMAKOTAIAH) (VIVEK VARMA)
Accountant Member Judicial Member
Mumbai, Dated : 21st March, 2012
Parida
Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals),XXIX, Mumbai
4. Commissioner of Income Tax, 8, Mumbai
5. Departmental Representative, Bench 'E' Mumbai
//TRUE COPY// BY ORDER
ASSTT. REGISTRAR, ITAT, MUMBAI