Income Tax Appellate Tribunal - Delhi
Dcit, Cc-06, New Delhi vs Kad Housing Pvt. Ltd., Delhi on 11 January, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Sh. Yogesh Kumar US, Judicial Member
ITA No. 2034/Del/2021 : Asstt. Year: 2017-18
DCIT, Vs KAD Housing Pvt. Ltd.,
Central Circle-06, 151, Savita Vihar,
New Delhi-110055 New Delhi-110092
(APPELLANT) (RESPONDENT)
PAN No. AACCK4705B
Assessee by : Sh. C. S. Anand, Adv.
Revenue by : Ms. Smita Singh, Sr. DR
Date of Hearing: 08.11.2023 Date of Pronouncement: 11.01.2024
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Re venue against the order of ld. CIT(A)-24, New Delhi dated 07.10.2021.
2. The Reve nue has raised the following grounds of appe al:
"1. The ld. CIT(A) erred in law and o n fac ts in deleting the additio n of Rs.4,03,95,261/- made on account of unexplaine d cash deposited during the demonetizatio n period."
3. The assessee company is managing a Ho tel under the name of Radis son Blu Hotel at G haziabad and also maintaining a Commercial office complex. The assessee compa ny filed return of income on 14.11.2017 declaring income of Rs. Nil. The assessee company is maintaining regular books of accounts which are duly audited as per Companies Act, 2013 as well as u/s 44AB of the Income Tax Act 1961. The asse ssee Company 2 ITA No. 2034/Del/20221 KAD Housing Pvt. Ltd.
submitted its Audited Balance Sheet and Profit and Loss Ac count along with No tes to accounts and Tax Audit Report in For m No 3CA with annexure in form No 3CD under sectio n 44AB of the Income Tax Act 1961.
4. The assessee company deposited cash of Rs. 7,07,72,500/- during the demonetization Period. The cash deposit out of the opening cash balance of Rs. 3 ,03,77,239/- was accepted and balance sum of Rs. 4,03,95,261/- w as added to dis closed income u/s 115BBE of the Income Tax Act, 1961 without set off of lo sses and created a demand of R s. 2,50,14,937/- after adjusting of tax credit of Rs. 1,25,37,454 /-.
5. Aggrieve d, the assessee filed appeal before the ld. CIT(A) who deleted the additio n made by the AO .
6. Aggrieve d, the Revenue filed appeal before the Tribunal.
7. Before us, the ld. DR argued relying on the Assessment Order whereas the ld. AR supported the order of the ld. CIT(A).
8. Heard the arguments of both the parties and peruse d the material available on record.
9. The comparative figures for increase in business year wise considering the year 2014 as base line as follows:
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 Tota l Sale 356685450 419949862 521992168 726283954 827709207 Cash Sale 134998942 112214854 143043401 269989615 146969567 Other Sale 221686508 307735008 378948767 456294339 680739640 % of Cash Sale 38% 27% 27% 37% 18% Sale Growth 18% 24% 39% 14% 3 ITA No. 2034/Del/20221 KAD Housing Pvt. Ltd.
10. The Assessing Officer allowed benefit of opening cash balance of Rs. 3,03,77,239/- and added back balance amo unt of Rs. 4,03,95,261/- in view of following reasons:
There was substantial amount of increase in cas h deposit during F.Y. 2016-17 when compared with cash de posited in F.Y. 2015-16.
The assessee had not filed any corroborative evidence to justify the source of cash deposit.
It was observed that most of the bills were less than Rs.
50,000/- which indicate that assessee was using c olourable device to camouflage the source of cash.
11. The asse ssee is in the business of Hotel Industry, in their mode l of business most of the revenue is generated from Food and Beverages (F&B) a nd almost 70.53% of the total revenue of year in consideration i.e. A.Y. 2017-18 and Room reve nue & other minor operated departments constituted 29.45% of total revenue of A.Y. 2017-18. Further, most of the revenue in F&B segment is in the for m of cash sales of smaller amounts as given below:
Hotel Revenue AY 2017-18 AY 2016-17 AY 2015-16 AY 2014-15 Food, beverages sales 512,270,351 354,769,521 274,160,420 220,738,414 Room revenue & Other 214,013,603 167,222,647 145,789,441 135,947,037 minor operating revenues 726.283.954 521.992.168 419.949.862 356.685,450 Tota l Revenue 726,283,954 521,992,168 419,949,862 356,685,450 Food, beverages & 512,270,351 354,769,521 274,160,420 220738413.6 others F&B sale % of Tota l 70.53% 67.96% 65.28% 61.89% Revenue 4 ITA No. 2034/Del/20221 KAD Housing Pvt. Ltd.
12. It is a fact on record that the asse ssee company capitalized a sum of Rs. 46,40,43,078/- on 01.01 .2016 corresponding to Assessment Year 2016-17 which is duly recorded in the audite d books of accounts wherein the existing Hote l facilities were increased by 02 additional banquets, 02 additional res taurant and 03 additional meeting rooms (New Venues) in the hotel premises. This can be said to have increased in the revenues on account of food & be verages which are retailed and sold in cash on day to day basis . The increase in the capacity of the assessee during the year is as under:
S . N o P a r t i c ul a r s B e fo r e C a p i t a l i z at i o n A ft e r C a p i t al i z a t i o n ( P a x ) (Pax) 1 B a nq u e t s 1 0 0 0 ( M a x i m um C a p a c i t y ) 2 5 0 0 ( M a x i m um c a p ac i t y ) 2 R e s t a ur a nt s 186 364 3 03 Meeting Rooms 0 9 0 ( M a x C a p a c i t y)
13. During the A.Y. 2014-15, percentage of cash sale s was 37.82% of total sale while during the A.Y. 2017-18 percentage of cash sales was 37.16% of to tal sales. The same AO accepted figure of 38% for A.Y. 2014-15. There has been increase o f 15% in growth rate of total sales of the assessee company. Growth rate of total s ale incre ased from 24% in A.Y. 201 6-17 to 39% in AY 2017-18 a nd incre ase in growth rate of tota l sale is more than the grow th rate in cash component of sale which showed an increase of just 10% from A.Y. 2016-17 to A.Y. 2017-18.
14. There was increase in turnover during the period 01.04.2016 to 08.11 .2016 (Pre-demonetization perio d) in comparison to the corresponding perio d of previous year i.e. 01.04.2015 to 08.11.2015. Due to increased tur nover, majorly 5 ITA No. 2034/Del/20221 KAD Housing Pvt. Ltd.
due to New F&B venue s, there was increase in cash sale s and corresponding cash de posits during the period 01.04.2016 to 08.11.2016 as compared to the correspo nding period in last F.Y. i.e. 01.04.2015 to 08.11.2015. The total cash deposits for the relevant period is as under:
S. No. Particulars Amount
(In Cr.)
1. a. To ta l cash deposit in AY 2016-17 14.93
b. Total cash deposit in Bank between 01/04/15-08/11/15 8.41
c. Total cash deposit in Bank between 09/11/2015-31/12/2015 5.12
2. a. To ta l cash deposit in AY 2017-18 18.19
b. Total cash deposit in Bank between 01/04/16-08/11/16 9.40
c. Total SBN deposit in Bank betwee n 09/11/2016-31/12/2016 7.00
3. Percentage of cash deposit 1 (b) in comparison of total deposit 1 (a) 56.32%
Percentage of cash deposit 2(b) in compariso n of total deposit 2 (a) 51.67%
4. Percentage of cash deposit 1(c ) in comparison of tota l deposit I (a) 34.29%
Percentage of cash deposit 2(c ) in comparison of tota l deposit 2 (a) 38.48%
15. From the above, it can be found that the cash deposit during pre-demonetization period between 1st Apr il to 8th November to total cash deposits was 51.67% in A.Y. 2017-18 which was 56.32% in A.Y. 2016-17. These figures are comparable. Also percentage cash deposits during demo netizatio n period (between 09.11.2016-31.12.2016) to total cash deposit was 38.48% which was 34.29% for corresponding period of AY 2016-17. Similarly, cash sale as perce ntage of total sale during both the years has been e venly spread out even dur ing pre-demonetization months and is consistent and comparable on year on year basis as follows :
S. NO P a r t i c ul a r s A m o u nt ( I n C r o r e s )
1. a. Total cash sales in AY 2016-17 1 4 .3 0
b. Total cash sales between 01 /04/15-08/11/15 , 8.41
2. a. Total cash sales in AY 2017-18 2 6 .9 9
b. Total cash sales between 01 /04/16-08/11/16 1 6 .1 5
3. P e r c e nt a g e o f c a s h s a l e s 1 ( b ) i n c o m p a r i s o n o f 1 ( a ) 5 8 .8 1 %
P e r c e nt a g e o f c a s h s a l e s 2 ( b ) i n c o m p a r i s o n o f 2 ( a ) 5 9 .8 3 %
6
ITA No. 2034/Del/20221
KAD Housing Pvt. Ltd.
16. Sales below Rs 50000/-were examined and accepted in to witho ut any adverse re marks, the closing balance of cash of Rs. 3,03,77,239/- as on 31.03.2016 has been accepte d by the AO.
17. Month w ise cash sale and cash deposit from 01.04.2016 to 08.11.2016 are given below:
Month Op. Cash in Cash Sales Other Cash Cash Petty Cash Closing Cash hand recpt. deposit in withdrawal Exp in Hand Bank Apr-16 30,377,239 16,699,245 3,600 13,293,237 1,100,000 1,726,431 33,160,416 May-16 33,160,416 11,054,772 100 15,058,020 900,000 878,203 29,179,065 Jun-16 29,179,065 38,129,158 - 12,734,211 2,025,000 829,448 55,769,564 Jul-16 55,769,564 26,079,188 6,120 20,537,335 1,600,000 1,123,761 61,793,777 Aug-16 62,793,777 32,983,728 2,087,627 10,920,270 1,300,000 1,056,394 87,188,468 Sep-16 87,388,468 27,174,115 21,854 8,875,240 1,250,000 979,243 105,979,953 Oct-16 104,979,953 6,984,802 8,425 6,992,955 1,510,000 1,513,680 104,976,545 Nov till 104,776,545 3,445,575 - 5,641,420 100,000 317,968 102,362,732 8/11/16
18. The assessee had sufficie nt cash in hand much before demo netizatio n was announced and there was decrease in cash sales during demonetization period as given below :
P a r t i c ul a r s AY 2016-17 A Y 2 0 1 7 - 1 8 ( I n R s . ) C l o s i ng c a s h b al a n c e (In Rs.) AY 2017-18 (In Rs.) April 9 5 ,5 5 , 4 6 8 / - 1,62,61,650/- 3,31,60,416/- May 1,23,27,783/- 1,10,39,717/- 2,91,79,064/- J u ne 7 9 ,8 6 , 5 6 6 / - 3,80,94,695/- 5,57,69,564/- July 1,71,01,037/- 2,58,06,384/- 6,17,93,776/- A ug 7 6 ,3 1 , 5 4 1 / - 3,29,34,994/- 8,71,88,467/- Set 1,59,62,032/- 2,69,50,104/- 1 0 ,5 9 , 7 9 ,9 5 3 / - Oct 1,04,09,706/- 6 9 ,6 5 , 0 2 6 / - 1 0 ,4 9 , 7 6 ,5 4 5 / - Nov 1,24,88,589/- 4 8 ,5 9 , 9 2 2 / - 1 0 ,2 3 , 6 2 ,7 3 2 / - Dec 1,10,50,954/- 4 2 ,2 3 , 9 2 3 / - 7 4 ,6 0 7 , 2 2 5 / - Jan 1,20,67,345/- 3,69,41,896/- 4,699,394/- Feb 1,54,39,152/- 3,27,05,452/- 3,64,63,029/- March 1,10,23,228/- 3,32,05,845/- 6,39,22,703/- Total Cash 1 4 ,3 0 , 4 3 ,4 0 1 / - 2 6 ,9 9 , 8 9 ,6 1 4 / - 8 8 ,2 1 9 , 5 1 8 / - Sales 7 ITA No. 2034/Del/20221 KAD Housing Pvt. Ltd.
19. In the backdrop of these facts, we have go ne through the order of the ld. CIT(A) which examined the follow ing:
Assessee filed VAT Re turns fro m April to Sept. 2 016 upto 22.10.2016 i.e. before the date of demonetization on 08.11.2016 disclosing substantial cash sales and paying effec tive VAT amounting to Rs.2.59 Crores. Ass essee has not revised its VAT Returns. In the assessment order under VAT dt.31.05.2019 of UP VAT for FY 2016-17, no adverse comments were made.
Assessee has not revised its Service Tax Returns. In the assessment order under Service Tax dt.19.11.2019, no adverse comments were made.
Assessee paid total VAT of Rs.6 .05 Crores and Service Tax of Rs.6.58 Crores during FY 2016-17 on total turnover of Rs.72 .62 Crores which amounts to effective tax rate of 17.40% on its total turnover.
Cash Sales for Oct.2016 were lower than the Cash Sale for Oct. 2015. Similarly Cash Sale s for Nov.2016 were lower than the Cash Sale for Nov.2015.
Cash sales after demo netization in Jan. to Mar. 2 017 were above Rs.3.27 Crores for each month on which assessee has paid VAT and Service Tax. It shows that the assessee was having substantial cash sales eve n after demo netizatio n.
It is matter o f record that Assessee expanded its existing hotel facilities by 2 additional banquets, to additiona l resta urant and 3 additional mee ting rooms in its hotel from 8 ITA No. 2034/Del/20221 KAD Housing Pvt. Ltd.
01.01.2016 w hich increased its cash sales as we ll as tota l sales .
Perce ntage o f cash sales @ 27.39% in FY 20 16-17 is comparable to other years of 37.82% in FY 2014-15, 26.72% in FY 2015-16 and 37.16% in FY 2017-18. Assessee ma intained books of accounts and got them audited. No discrepancy was po inted out by the AO and the books of acco unt were not rejected.
20. Thus, after going through the entire facts on record and keeping in view, the examination and adjudication of the ld. CIT(A) which consists the follow ing points validly, we decline to inter fere with the order of the ld. CIT(A).
21. In the re sult, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 11/01/202 4.
Sd/- Sd/-
(Yogesh Kumar US) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 11/01/2024
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR