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2016 (8) TMI 871 - AT - Income TaxAddition of expenditure with regard to unaccounted sales from Avalon Pub though no evidence of these expenses were produced by the assessee - CIT(A) allowed claim - Held that:- CIT(A) considering the submissions of the assessee and the seized documents directed the Assessing Officer to allow deduction of 15% from the Avalon Pub sales towards cost of liquor observing that the seized materials contains the recording of sales and payments were made for purchase of liquor outside the books of account and further on verification of the Foreign Liquor Register (FLR) each and every bottle of liquor sold is accounted for in the FLR. He further observed that if there were any unaccounted sales of liquor, it has to come out of unaccounted purchases of liquor only. The Ld. CIT(A) also held that as per the regular books of accounts, the cost of Bar sales is around 19% to 26% and therefore the deduction claimed by the assessee @ 15% is reasonable and in fact it is less than what has been allowed by the Assessing Officer in computing the income from Avalon Pub as per the regular books of account. Therefore, he concluded that 15% of the sales claimed by the assessee towards cost of liquor is very much reasonable. The findings of the Ld. CIT(A) are very much logical and it is commonsense that unless there are unaccounted purchases, there cannot be unaccounted sales. The Revenue is not disputed that in the regular books of account assessee has claimed the cost of Bar sales in the range of 19 to 26% and such cost of sales were allowed as deduction in computing the income. It is also evident from the seized materials that the assessee paid amounts to liquor shops i.e. Vishal wines. This shows that there are unaccounted purchases of liquor. In the circumstances, we find that the claim of the assessee 15% towards cost of liquor is very much reasonable. Thus, we sustain the order of the Ld. CIT(A) in directing the Assessing Officer to allow deduction of 15% from the gross sales made from Avalon Pub towards cost of purchases of liquor. This ground of the Revenue is rejected. Disallowance u/s. 36(i)(iii) out of bank interest paid - CIT(A) allowed claim - Held that:- In this case it is the finding of the Ld. CIT(A) that the utilization of funds for non-business purposes stood at ₹ 8,47,88,382/- and the available funds with the assessee stood at ₹ 8,29,13,964/- and therefore it is reasonable to conclude that a sum of ₹ 18,74,418/- only has come out of interest bearing funds. He further concluded that since assessee himself has disallowed ₹ 10,68,637/-, there is no reason for making further disallowance and directed to delete the disallowance of interest of ₹ 36,99,211/-. We do not find any infirmity in the order of the Ld. CIT(A) and valid reason to interfere with the findings of the Ld. CIT(A) in deleting the disallowance. Therefore, in view of our above discussion, we uphold the order of the Ld. CIT(A). This ground of the Revenue is dismissed. Addition made u/s. 2(22)(e) as deemed dividend - Held that:- Admittedly, the assessee is not a shareholder in M/s. Gunjyot Properties Pvt. Ltd., and therefore the provisions of Sec. 2(22)(e) are attracted only to register shareholders and since assessee is not the shareholder of lending company i.e. M/s. Gunjyot Properties Pvt. Ltd., no addition can be made u/s. 2(22)(e) of the Act in the hands of the assessee. See Kewal Kumar Jain (2013 (6) TMI 751 - ITAT PUNE) Rental income received - business income OR income from house property - Held that:- The income received by the assessee from letting out of terrace space for erection of antenna tower for Reliance Infocom is to be assessed under the head income from house property only and not under the head income from business or under the head income from other sources as was assessed by the Ld. CIT(A)/Assessing Officer . This ground of the assessee is therefore allowed. Determining amount taxable u/s. 2(22)(e) - Held that:- Admittedly, there is no business relation between the assessee company and M/s. Jagjit Singh & Co.. The advances received by the assessee company are not in the course of any business connection between these two companies. In the circumstances, we do not find any substance in the submissions of the Ld. Counsel for the assessee that the transaction is outside the purview of the provisions of Sec. 2(22)(e) of the Act. We direct the Assessing Officer to exclude loan/advances given to the assessee in earlier years which are assessable as deemed dividend in the hands of the assessee in the past years while computing the deemed dividend taxable u/s. 2(22)(e) of the Act during this assessment year. This ground is partly allowed. Disallowance of benefit of telescoping in respect of unexplained income against the substantial disclosure of income in the hands of group of concerns of the assessee - Held that:- We failed to understand why the Assessing Officer has not made additions based on seized materials rather than going by the additional income offered by the assessee. We also see that the income from suppressed sales of Avalon Pub have been fully taxed as suppressed income and the very same income is disallowed in the hands of the Director i.e. assessee treating the same as unexplained income which would result in double addition. Therefore, we are of the considered view that it is unjust in denying telescoping of these amounts among the group of the assessee. However, we make it clear that if Vijaydeep Hotels Pvt. Ltd utilized these amounts for any other sources other than for advancing such amounts to the Director Mr. Karanveer Singh Bawa, to that extent it cannot be used for telescoping. Therefore, the Assessing Officer shall examine these aspects. In the circumstances, we direct the Assessing Officer to allow telescoping of these amounts subject to verification after calling for necessary details and providing adequate opportunity of being heard to the assessee. This ground is therefore partly allowed.
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