2015 (10) TMI 389 - AT - Income Tax

Tribunal Adjusts Suppression Rates, Upholds Additional Income, Appeals Partly Allowed

The Tribunal reduced the estimated suppression of liquor sales to 26%, confirmed a 50% suppression of lodge receipts, and upheld the addition of Rs. 1 ... Estimation of sale suppression on sale of liquor - Inflation of discount - Held that:- This Tribunal is of the considered opinion that the assessee might have given some discount. In the absence of any material like reference in tariff card or menu card, it cannot be ruled out that the assessee inflated the discount said to be given to corporate guests, walk in customers and happy hours discount, etc. In fact, Shri Raju, who is in-charge of Rohini International Bar, admitted before the authorities that the sale suppression was done from 5 to 6 years earlier. He has further admitted that bill books are destroyed and separate set of sale bills are prepared underlying the sale price. In view of this categorical statement, this Tribunal is of the considered opinion that the suppression of sale on liquor is confirmed and now what remains is the estimation of quantum of suppression of sale. The Assessing Officer totally rejecting the claim of the assessee regarding discount, estimated the suppression at 56.33%. The CIT(Appeals), however, estimated the same at 30%. This Tribunal is of the considered opinion that by taking into consideration the nature of trade and material found during the course of survey operation and the statement recorded from the person in-charge of Bar, estimation of sale suppression at 26% would meet ends of justice. In other words, the sale suppression of liquor should be estimated at 26% instead of 56.33% estimated by the Assessing Officer. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to estimate the sale suppression on sale of liquor at Rohini International Bar at 26% instead of 56.33%. Suppression of lodge receipt at 208.84% - HUF status - CIT(A) restricting the addition to 50% of the estimation made by the AO - main contention of the assessee now before this Tribunal is that even though the lodge is situated in a prime locality of the city, 100% occupancy cannot be expected at every point of time - Held that:- This Tribunal is of the considered opinion that as rightly submitted by the Ld.counsel, 100% occupancy cannot be expected at every point of time. At the very same time, we can expect a reasonable rate of occupancy since the lodge is located at prime locality in the heart of the city. The fact that the assessee has suppressed the sale is established on the basis of the material found during the course of survey operation. In fact, the actual receipt was ₹ 7,27,979/-. However, the assessee has disclosed in the sheet, which was impounded, at ₹ 2,35,714/-. The CIT(Appeals), after taking into consideration the nature of business, has restricted the suppression of receipt from lodge at 50% of what was estimated by the Assessing Officer. In fact, the suppression was made during the entire period of business. Therefore, this Tribunal do not find any infirmity in the order of the CIT(Appeals) and accordingly the same is confirmed. Estimation of suppression of sale from Rohini Lodge Permit Room - Held that:- AO on the basis of the material found, estimated the suppression of sale at 47%. However, the CIT(Appeals) restricted the same to 30%. While considering an identical issue in the earlier part of this order, this Tribunal, after considering the price discount that would be given to the customers in happy hours, corporate guests and walk in customers, estimated the profit at 26%. For the very same reason, this Tribunal is of the considered opinion that estimation of profit at 26% would meet ends of justice. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to estimate 26% on suppression of liquor sales instead of 47%. Addition of ₹ 1 lakh as income from restaurant - Held that:- The assessee appears to have claimed before the Assessing Officer that the restaurant was closed three years back. But, the revenue authorities found the details of sale for the period April, 2007 to January, 2008 and the same disclose the sales at ₹ 9,40,300/-. Therefore, the claim of the assessee that the restaurant was closed three years back is totally contrary to what was found during the course of survey operation. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the addition of ₹ 1 lakh made by the Assessing Officer. Both the appeals of the Revenue and crossobjections of the assessee are partly allowed. Issues Involved:1. Suppression of sale of liquor at Rohini International Bar.2. Suppression of lodge receipts for HUF status.3. Estimation of suppression of sale from Rohini Lodge Permit Room.4. Addition of income from restaurant.Detailed Analysis:1. Suppression of Sale of Liquor at Rohini International Bar:- Survey and Findings: A survey under Section 133A of the Income-tax Act, 1961, was conducted on 27.02.2008, revealing suppression of liquor sales. Incriminating materials indicated that the price of liquor in the daily stock sheet was less than the menu card price.- Department's Argument: The Department argued that the assessee indirectly accepted the suppression of sales by explaining that discounts ranging from 50% to 10% were given. The Assessing Officer estimated the suppression at 56.33%, which was later reduced to 30% by the CIT(Appeals).- Assessee's Argument: The assessee contended that the discounts were necessary due to the competitive nature of the liquor business and that the sales should not be estimated based on the menu card prices alone.- Tribunal's Decision: The Tribunal acknowledged the possibility of discounts but noted the lack of documentation in the menu card. Given the statement from Shri Raju, the Tribunal estimated the suppression at 26% instead of 56.33% as initially estimated by the Assessing Officer.2. Suppression of Lodge Receipts for HUF Status:- Survey and Findings: During the survey, discrepancies were found in the books of account of the assessee-HUF running a lodging business. The Assessing Officer estimated the suppression of lodge receipts at 208.84%, which was reduced to 50% by the CIT(Appeals).- Assessee's Argument: The assessee argued that 100% occupancy cannot be expected at all times and that the suppression found for January and February 2007 should not be extrapolated for other periods.- Department's Argument: The Department found that the actual receipts were higher than those recorded in the collection sheet and justified the suppression estimation.- Tribunal's Decision: The Tribunal agreed with the CIT(Appeals) that 100% occupancy is unrealistic but acknowledged the suppression of receipts. It confirmed the CIT(Appeals)'s decision to restrict the suppression to 50%.3. Estimation of Suppression of Sale from Rohini Lodge Permit Room:- Survey and Findings: The Assessing Officer estimated the suppression of sales at 47%, which was reduced to 30% by the CIT(Appeals).- Tribunal's Decision: Consistent with its earlier decision, the Tribunal estimated the suppression of sales at 26%, considering the discounts given to customers.4. Addition of Income from Restaurant:- Survey and Findings: The Assessing Officer added Rs. 1 lakh as income from Rangeetha restaurant, based on sales details found during the survey.- Assessee's Argument: The assessee claimed that the restaurant was closed three years ago.- Department's Argument: The Department found sales details for the period April 2007 to January 2008, contradicting the assessee's claim.- Tribunal's Decision: The Tribunal upheld the addition of Rs. 1 lakh, as the evidence contradicted the assessee's claim of the restaurant being closed.Conclusion:The Tribunal's decisions involved reducing the estimated suppression of liquor sales to 26%, confirming the 50% suppression of lodge receipts, and maintaining the addition of Rs. 1 lakh for restaurant income. The appeals and cross-objections were partly allowed, reflecting a balanced consideration of the evidence and arguments presented by both parties.