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2018 (6) TMI 149 - AT - Income TaxAssessment u/s 153A - addition on account of income of ‘Moets Retreat Club' - application of real income theory as the assessee appellant earned no income and so no tax is leviable on him - Held that:- The list, which is a seized document, has to be relied upon totally and not partially, unless there is some other corroborating evidence supporting the view of the assessing officer are also found. The documents has to be read as a whole and not in part and it cannot be said that one part of the document to be correct and another as incorrect. CIT (Appeal) has rightly accepted the list of members and the amount shown from seized annexure as the amount is clearly depicted against each member and rightly rejected the amount calculated/estimated by the AO. As the ld OA has not made any reference to any other evidences which shows the receipt of the membership fees higher than what is computed by the ld CIT (A), we donot find any infirmity in the orders of the ld CIT (A) in computing the membership fees which is showing the numbers of the members as well as the fees received from them. The amount of money has already been deducted by the Agent when the sum is received in cash from member and only net amount is received by the assessee. We therefore hold that commission claimed by the assessee in each year cannot be disallowed especially when the subscription fees is included in the gross receipt chargeable to tax. Further the above sum is payable according to the agreement on receipt of the membership fees by the assessee. When the membership fees has been fully charged to tax, the enhancer has confirmed the receipt of the full commission, there is no dispute about the non-payment of any commission to that party, there is no justification for restricting the allowance of the commission paid by the assessee partially. Therefore the Ld. assessing officer is directed to allow the commission to the assessee is an expenses paid to M/s Enhancer network as the full commission income has been charged to the tax by the AO Disallowance of expenditure - CIT(A) restricted the disallowance of expenditure by giving reasons of absence of certain vouchers of the specific ledger mentioned by him. We do not find any infirmity as far as this disallowance is concerned in this year as he disallowed one-third of expenses of ₹ 1,12,000/- for which no vouchers were produced. As regards disallowance in other years, the ld CIT(A) has not given any specific reasons but confirmed disallowance on adhoc basis to ₹ 1,50,000/- in AY 2003-04 and 2004-05 on the reasoning that in absence of all the vouchers the above disallowance is reasonable , while in AY 2005-06 whole of the expenditure was allowed by him. But in AY 2006-07 the CIT(A) stated that AO has not pointed out any vouchers of expenses which were not produced but still disallowance has been upheld to the extent of 40% on adhoc basis. We restrict the disallowance in all these years to ₹ 50000/-for each of the assessment year i.e. AY 2003-04, 2004-05 and 2006-07. We find that Moets Retreat Club was made as per supplementary agreement with LP Hospitality who were the owners of the land and building. The infrastructure and the assets built thereon by the assessee have already become the property of the owners now. In fact, another company JS Hospitality is presently running the club who has taken over the liabilities assigned on the assessee. The expenditure incurred by the assessee relates to kitchen equipments, swimming pool, scooter, sports and gym equipments and banquet hall. The banquet hall was already built by the owners and only renovations by way of tiles, painting etc. were made which amounted to ₹ 6,00,000/- only in AY 2004-05 because club members were not satisfied about the conditions of the building of the banquet hall. This expenditure is only in the nature of renovation of the building and therefore is required to be allowed totally. The kitchen and sports equipments are also not in the nature of enduring benefits as all the aforesaid equipments are required to be replaced from time to time. However, expenditure incurred on swimming pool and scooter cannot be allowed as revenue expenditure. The depreciation on these two assets is rightly allowed by the ld. CIT(A). Whether assessee cannot retract later once income was surrendered during search that too on the basis of document found during search and subsequent denial has no meaning? - Held that:- During the course of search there were no evidences found except the release of the paper where there are no details of the loans given by the assessee as well as the amount of interest are. It is also interesting to note that the balance sheet of the assessee assessee has borrowed from various parties therefore also it is unusual that assessee for also from other parties and also gives loan to other parties. It is also interesting to note that there is no interest element involved in these loans which is been added by the assessing officer. Therefore the decision relied upon by the revenue does not apply on the facts of the case before us. Estimation of the gross profits with respect to several restaurants business carried on by the assessee - Held that:- CIT(A) has given very detailed order and come to the conclusion by adopting 15% GP Rate in most of these years except AY 2003-04 so far as business of Moets Catering Services is concerned, but it is true that in the year AY 2002-03 the assessee was engaged in the new business of developing a club at the same premises and so GP Rate adopted @15% in that year as against 6.06% declared by the assessee is not justified, and therefore same needs to be scaled down. In the interest of the justice, AO is directed to adopt at 8%. With respect to the other years the Ld. authorized representative could not show was any reason to deviate from the finding of the Ld. CIT (A). Departmental representative also could not show that how the decision of the Ld. CIT (A) is not justify where he has followed the order of the coordinate bench in case of a group concern. In AY 2003-04 assessee himself declared GP Rate of 17.16% which was more than 15% adopted in other years, thus the adoption of 20.53% in this year is also not justified the GP Rate in this year is rightly declared and the same be adopted. However, in other years the GP Rate of 15% adopted by the CIT(A) seems to be justified and is therefore upheld. In other businesses, also, the GP Rate adopted by the CIT (A) seems to be justified and no interference is called for.
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