Commissioner of Income Tax vs Vandana Hotel, Sagar

This is revenue''s appeal under Section 260A of the Income Tax Act, 1961 calling in question tenability of an order dated 13th of June, 2011 passed by the Income Tax Appellate Tribunal, Indore in the matter of imposition of tax for the assessment year 2004-05.

In the business premises of the respondent/assessee''s Santosh Sahu Group of Sagar, certain search and seizure was conducted on 10th of December, 2003. During these proceedings, a hard disc was seized, print out of which yielded, certain particulars of cash books, ledgers and final accounts for the period 1.4.2003 to 31.3.2002 & 1.4.2003 to 5.12.2003, certain sales with regard to restaurant and bar were reflected in these documents.

The sale proceeds included sale of liquor and cigarette from the bar of sister concern M/s. Sagar Wines. The assessing officer while passing assessment order added the said sale proceeds of M/s. Sagar Wines to the account of the assessee and on an appeal being filed, the Commissioner Income Tax recalculated the matter and assessed the income at a lower rate. Finally, when the matter went to the tribunal, the tribunal assessed the profit at 10% of the liquor and cigarette sale as reflected in the computer print out. Challenging this order of the tribunal on the ground that the assessing the profit only at 10% is an illegality, this appeal has been filed.

On consideration of the facts and circumstances of the case and on going through the orders passed by the appellate tribunal, we find that the appellate tribunal has found that based on the sales made by a sister concern with regard to the bar owned by the sister concerned, adding the entire sale, as reflected in the documents on the account of the assessee/company was not proper. It was found that the assessment was based on certain documents, which could not be done and taking a pragmatic view of the matter, a reasonable approach has been adopted by the tribunal in making the assessment. The reasons that weighed with the tribunal in doing so reads as under :

"There were two print outs in the computer, one was related to the business of restaurant and another was the consolidated profit and loss account without cash book indicating total sale of restaurant, liquor and cigarettes. The AO disbelieved the books of account and made addition on the basis of sale of liquor and cigarettes shown in the print out taken from computers so found in assessee''s premises. Contention of the assessee was that it has merely allowed sale of liquor and cigarettes at its restaurant, so as to increase sale of restaurant items, actually the sale of liquor was by M/s. S.S. Enterprises and Sagar Wines, who were liquor contractors. Further contention was that the assessee was not having bar license, therefore, there was no reason for adding the sale and income from Bar and Cigarettes in assessee''s total income. He further drew our attention to the fact that M/s. Sagar Wines obtained the separate license on 29.2.2003 to make the Bar sales in assessee restaurant and also paid license fee of Rs.3 Lakhs and claimed the same in their profit and loss account. It was also contention of the ld. Authorized Representative that legal presumption u/s 292-C that only papers showing higher sales have to be accepted is not correct, in so far as both the profit and loss account was found in the computer, one relating to sale of restaurant and another consolidated indicating sale of liquor and cigarettes. However, neither the assessee nor the revenue could substantiate the figures reflected in the computer print out nor any cogent reasoning was given for the additions so made."

It was after recording such a finding, the tribunal found that the additions have been made by the assessing officer mainly on the basis of the sale of liquor and cigarette but as there is no supporting document to show that the figures reflected are correct and when the assessing officer has rejected books of accounts and when no other cogent evidence or material is available, it was held that the entire sale of liquor and cigarette of the Company M/s. Sagar Wines cannot be added and accordingly, the order of taking 10% profit was directed.

In doing so, we are of the considered view that a reasonable approach has been adopted by the tribunal and the discretion exercised by the tribunal in the matter cannot be termed as perverse or erroneous to such an extent that a substantial question of law arises for consideration in the matter. The total amount of such profit and loss is Rs.5,76,609/-.

Accordingly, we find no reason to interfere into the matter.

The appeal is, therefore, dismissed.