The Commissioner Of Income Tax-1 v. M/S.dara Hotels & Resorts Pvt.ltd

Pvr IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1953 OF 2013 The Commissioner of Income Tax-1.Vs.M/s.Dara Hotels & Resorts Pvt.Ltd. ...Appellant ...Respondent .... Mr.Suresh Kumar, Advocate for Appellant-Revenue. .... CORAM : M.S. SANKLECHA & G.S. KULKARNI, JJ. P.C.: DATED : 26 OCTOBER 2015 1.This appeal under Section 260A of the Income Tax Act, 1961 (the 'Act') challenges the order dated 12 October 2007 passed by the Income Tax Appellate Tribunal (the 'Tribunal'). The appeal relates to the Assessment Year 2001-02. 2.The Revenue has urged the following question of law for our consideration:- “a)Whether on the facts and circumstances of the case and in law the Tribunal was correct in law in confirming the order of CIT(A) deleting the addition made by the AO, by reducing the sale to Rs.1.5 Cr. And estimating the net profit @ 3% of the total sale as against the total income assessed by the AO is Rs.1,80,19,840/- ? 3.The respondent – assessee is carrying on restaurant business. During the Assessment year 2001-02 it filed its return and declared its total income at Rs.1.59 lakhs. In its return of income the assessee had declared its sale of food and liquor at Rs.2.91 lakhs. The Assessing Officer by order dated 26 March 2004 held that there was suppression of sale of liquor / food items and in particular ice-creams, gulab jamun and paneer items to the extent of Rs.1.78 crores. The aforesaid suppression of sale was arrived at on the basis of Assessing Officer's own estimate of the quantum of raw material required to prepare food items. To illustrate, the Assessing officer on his own without assistance of any expert Chef/ Cook concluded that 1 kg paneer is sufficient to prepare six plates of paneer items. 4.In appeal, the Commissioner of Income Tax (Appeals) (CIT(Appeals)) by his order did not disturb the findings Pvr of the Assessing Officer to the extent of the books of accounts of the Assessee being not reliable. Therefore, upheld the rejection under Section 145 of the Act. However, so far as the estimated sale was concerned, the CIT (Appeals) by its order dated 21 July 2004 reduced the suppressed sale from Rs.1.78 crores to Rs.1.50 crores. Further it held that the expenses incurred in respect of preparing food items on suppressed sale was not taken in account. Thus, he applied a net profit ratio of 3% as against 1.64% adopted by the assessee. On the above basis profits of the respondent-assessee was worked out at Rs.4,50,000/-. 5.Both, the Revenue as well as the assessee being aggrieved by the order of the CIT (A) carried the matter in appeal to the Tribunal. The Tribunal by the impugned order did not disturb the finding recorded by the CIT (Appeals). In fact the estimation of suppressed sales and income on that count is referred to in paragraph 9 of the impugned order wherein the order of the CIT(Appeals) is summarised as follows:- “9.Coming to the estimation of sales and income the first appellate authority at Para 3.8 from pages 16 to 22 and para 3.9 at pages 19 to 22 has given detailed reasons as to why the workings of the Assessing Officer cannot be upheld in toto. For the sake of brevity we do not reproduce these detailed calculations. Suffice to say that the learned Departmental Representative was not able to controvert or point out any specific infirmity in the estimates made by the CIT(A). The findings of the first appellate authority can be summarized as follows: i)the estimates of suppression of sales of liquor, suppression of sale of food item and ice-cream, sale of suppression of gulab jamun and suppression of paneer items as worked out by the Assessing Officer, are not based on specific evidence covered during the assessment proceedings.ii)the assessee has not been confronted with any specific evidence before and adverse inference was taken; summarized as follows: i)the estimates of suppression of sales of liquor, suppression of sale of food item and ice-cream, sale of suppression of gulab jamun and suppression of paneer items as worked out by the Assessing Officer, are not based on specific evidence covered during the assessment proceedings.ii)the assessee has not been confronted with any specific evidence before and adverse inference was taken; iii)the entire working of suppression is based on estimated working as to how much could have probably been the sale of liquor, food items and ice-creams. Average rates were taken; iv)the rates of purchase of vegetables etc. adopted by the Assessing Officer i.e. at Rs.10 per k.g. were very low;v)the percentage of wastage allowed by the Assessing Officer was also very low; vi)The quantum of good preparation that can be sold by the restaurant against the utilization of 1 k.g. of material, as estimated by the Assessing Officer is excessive and not practicable; vii)There should be reasonable allowance for spoiled and state food items;viii)The fact that the assessee was employing 30 staff members/appetencies and the fact that they consume food in the assessee's premises is not considered; ix)The fact that the discount has been offered, though on selective basis, has not been considered; x)The amounts collected by the credit card included tips and these tips had been distributed; xi)The entire sale of liquor has been considered by the A.O. only in the form of peg sale format consisting of 60 ml. When evidences clearly suggest that in many cases sale of liquor is done by way of quarter bottles, half bottles etc. Such calculation of peg-wise sales results in over-estimation of sale of liquor items;xii)Cost of paneer, cost of purchase of gulab jamun and cost of purchase of ice-cream were not allowed or discussed in the assessment order.” The Tribunal held that it is incorrect to tax the entire turnover as income and for that purpose reliance was placed on the decision of the Tribunal in the case “Overseas Chinese Cousine Vs. ACIT”. In the above facts, the Tribunal by the impugned order did not entertain the appeal of the Revenue and upheld the order of CIT (Appeals). 6.Mr.Suresh Kumar, learned Counsel for the Revenue states that the impugned order of the Tribunal requires interference. This on the ground that the expenses incurred in respect of suppressed sales of food items and liquor have already been taken into account by the respondent-assessee while disclosing its profit in the regular return of Income filed. We find that the case made out by Mr.Suresh Kumar on behalf of the Revenue is being urged before us for the first time. The Revenue was not able to point out from the record the submission that the expenditure incurred in respect of suppressed sale were already included as a part of the cost in preparing food items which have been declared. The contention now raised that the entire turnover of Rs.1.5 crores has to be considered as income as it is, without attributing any expenses to the suppressed sale was not the contention urged by the Revenue before the Tribunal. We find that the entire issue which arises in the present appeal is a matter of factual finding. The view taken by the CIT (Appeals) and the Tribunal is a possible view. The Revenue has not been able to show that the impugned order of the Tribunal, is in any way perverse. The proposed question of law as formulated does not give rise to any substantial question of law. Accordingly, we decline to entertain the proposed question of law. 8.The appeal is dismissed. No order as to costs. [G.S. KULKARNI, J] [M.S. SANKLECHA, J.]