The Commissioner Of Income Tax – 5, Mumbai v. M/S.red Buttons Parks & Resorts Pvt. Ltd., Pune

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2718 OF 2009 The Commissioner of Income Tax – 5, Mumbai Versus M/s.Red Buttons Parks & Resorts Pvt. Ltd., Pune ..Appellant. ..Respondent. Ms.Padma Divakar for the appellant.Mr.Sanjiv Madhusudan Shah for the respondent. CORAM : Dr.D.Y. Chandrachud & J.P. Devadhar, JJ. DATE : 8 June, 2010. P.C. : 1.In this appeal by the Revenue, the following three questions of law have been formulated. a)Whether on the facts and in the circumstances of the case, the ITAT is correct in confirming the decision of CIT (A) in deleting the additions made by the A.O. of Rs.13,82,737/- on account of personal use of premises by the Director.ITAT is correct in confirming the decision of CIT (A) in deleting the additions made by the A.O. of Rs.13,82,737/- on account of personal use of premises by the Director. b)Whether on the facts and in the circumstances of the case, the ITAT is correct in confirming the decision of CIT (A) in deleting the depreciation of Rs.9.30,228/- u/s.38(2) of the I.T. Act, 1961 on account of depreciation attributable to four rooms and other relatable assets used by the Directors.ITAT is correct in confirming the decision of CIT (A) in deleting the depreciation of Rs.9.30,228/- u/s.38(2) of the I.T. Act, 1961 on account of depreciation attributable to four rooms and other relatable assets used by the Directors. c)Whether on the facts and in the circumstances of the case, the ITAT is correct in deleting the disallowance of unaccounted expenditure of Rs.7,28,500/- u/s.69C of the I.T. Act, 1961.ITAT is correct in deleting the disallowance of unaccounted expenditure of Rs.7,28,500/- u/s.69C of the I.T. Act, 1961. The appeal arises out of the assessment proceedings for assessment year 2001-2002. 2.The first and the second questions are inter-related. The assessee conducts a hotel at Mahabaleshwar. The Assessing Officer found that four rooms out of 24 rooms of the hotel were occupied by the Directors of the assessee company and those were treated as utilized for the personal use of the Directors. Consequently, 16.66% of the expenses and depreciation in the same ratio was disallowed. The explanation of the assessee was accepted in appeal by the Commissioner (Appeals). The assessee explained that the four rooms in question had in fact been let out to guests of the hotel and that rental charges have been received. Though the rooms were also utilized by the Directors when they visited the hotel, this was regarded as being for the purposes of business and not for personal use. The Tribunal has affirmed the finding of the Commissioner (Appeals). We do not find any substantial question of arising on the basis of the finding of the Commissioner (Appeals), as confirmed by the Tribunal. 3.In so far as the third question is concerned, the Tribunal has noted that during the assessment proceedings, the Assessing Officer found that the assessee has purchased furniture and fixtures for the hotel in the amount of Rs.7,28,500/-. The Assessing Officer noted that the assessee had We do not find any substantial question of arising on the basis of the finding of the Commissioner (Appeals), as confirmed by the Tribunal. 3.In so far as the third question is concerned, the Tribunal has noted that during the assessment proceedings, the Assessing Officer found that the assessee has purchased furniture and fixtures for the hotel in the amount of Rs.7,28,500/-. The Assessing Officer noted that the assessee had not produced bills of purchase and did not explain the source of investment. However, before the Commissioner (Appeals) the assessee furnished bills which on remand were verified in the amount of Rs.6,45,501/- by the Assessing Officer. The assessee submitted that the bills had been submitted to the auditors for audit and that the assets consisting of furniture and fixtures have been capitalized in the books of account. The Commissioner (Appeals) held that the investments have been recorded in the business accounts and the source of investments has been properly explained. The bills were verified by the auditors. On this factual material, the Tribunal held, in our view correctly, that the purchase of assets which constituted a part of the capital work in progress could not be considered as unaccounted expenditure under Section 69C merely because the assessee was not in a position to furnish the original bills. In the remand proceedings, the assessee explained the source of funds and the expenditure which was reflected in the books of account. 4.For the aforesaid reasons, we are of the view that no substantial question of law would arise. The appeal is accordingly dismissed. There shall be no order as to costs. (J.P. Devadhar, J.) (Dr.D.Y. Chandrachud, J.)