TMI Blog2009 (11) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... account of reimbursement of expenses to M/s. Cox King (India) (P.) Ltd. and to M/s. Tulip Star Hotels (P.) Ltd. for assessment years 2004-05 and 2005-06 are liable to be deleted or confirmed?" 2. Regarding first point of difference - At the time of hearing before me, it is stated by the learned counsel for the assessee that the assessee-company is engaged in the business of operation and management of hotels owned by third parties. The assessee has taken over the management of the hotel property, viz., Tulip Star Mumbai, situated at Juhu Tara Road, Juhu, Mumbai. The assessee was redeveloping the said property into a multi-product hospitability destination and was also developing international standard Service Apartments. The assessee offered the space in the same property to Shri Somendra Khosla of UAE on a 99 year lease basis. After negotiation, Shri Khosla agreed to acquire the space admeasuring 12,700 sq. ft. at the rate of Rs. 7,500 per sq. ft. In pursuance to such booking of the property, Shri Khosla advanced the sum of Rs. 4,78,12,403 during the accounting year relevant to assessment year 2004-05 and the sum of Rs. 1,02,91,176 in the accounting year relevant to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable before the ITAT, all the above three ingredients to discharge the onus has duly been proved. From the copy of Passport, Chartered Accountant s certificate, telephone bill, electricity bill, Health Card, etc., the identity of the creditor, viz., Shri Somendra Khosla, is proved beyond doubt. That, as per certificate of the Chartered Accountant, properties owned by Shri Somendra Khosla, his wife and son is worth 46.78 million USD, which would be equivalent to Rs. 200 crores (approx.). That, his telephone bill for one month is of 3731 Dhs. which would be approximately Rs. 50,000 per month; his electricity bill per month is 5287 Dhs. and water bill is 1816 Dhs. That the news published in Gulf News of UAE on 22-1-2007, shows that the New World Real Estate, a regional real estate company, has notched up the sale of 1.1 billion Dhs. in the last year, i.e., the calendar year 2006. These evidences prove beyond doubt that Shri Somendra Khosla had the creditworthiness. He also stated that the Assessing Officer has asked the assessee to supply Permanent Account Number of Shri Khosla. He explained that Shri Khosla is a Non-Resident Indian and, therefore, he is not being assessed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness, asking for security is not a common phenomenon. The person who books the real estate gives advance against the booking without asking for any security therefor. He also submitted that the evidence in regard to creditworthiness of the creditor is of the subsequent period and not of the relevant year. Even the trade licence of Dome Services is also of subsequent period. In view of above, it is stated by the learned DR that neither the identity, creditworthiness nor the genuineness of the transaction is established by the assessee and, there- fore, the Assessing Officer rightly treated the cash credit to be unexplained. In support of this contention, he relied upon the decision of the Hon ble Apex Court in the case of P. Mohanakala ( supra ). He also stated that the assessee produced the additional evidence before the ITAT, which was considered by the learned Judicial Member without allowing any opportunity to cross-examine such evidence to the Assessing Officer. Therefore, the additional evidence should not have been considered. In view of above, it is submitted by the learned DR that the order of the learned CIT(A) on this point should be sustained and question No. 1 shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive but to consider all the evidences, including additional evidence considered by the learned Members of the ITAT and then arrive at the conclusion whether the assessee is able to discharge the onus lay upon him. 6. Regarding identity : At page 28 of the assessee s paper book, there is a certificate by Shri Alliott Hadi Shahid, Chartered Accountant in which he has certified that he personally knew ( sic ) Mr. Somendra Khosla since 2000. He has also certified that Shri Somendra Khosla is living in Dubai since the year 2000. His main business in Dubai is development of real estate. At page 30 of the paper book, there is a Xerox copy of the passport issued by Government of United Arab Emirates. At page 32 of the paper book, there is a copy of trade licence issued by Government of Sharjah to "Dome Services" in which owners are Shri Somendra Khosla and Sahil Khosla. At page 35 there is a copy of telephone bill in the name of Shri Somendra Khosla. At page 36 of the paper book, there is a copy of electricity and water charges bill issued by Dubai Electricity and Water Authorities. At page 46 there is a health card issued by Ministry of Health, United Arab Emirates in the name of Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The value of above properties is based on average value of two (2) real estate valuers in Dubai." 9. The telephone bill of Shri Somendra Khosla for one month given at page 35 of the assessee s paper book is amounting to 3731 Dirhams. His electricity bill and water bill for one month as per the bill issued by Dubai Electricity and Water Authority is 5287 dirhams and 1816 dirhams respectively. At page 40 of the paper book, assessee has given Xerox copy of the news published in Gulf News dated 22-1-2007, which reads as under : "Dubai : New World Real Estate (NWRE), a regional real estate company, last year notched up sales of Dhi. 1 billion for the Living Legends project currently being developed by Saudi Arabia based Investor Tanmiyat. NWRE sold 75 villas on the golf course and 500 apartment units in the Living Legends. Tanmiyat Group is developing the Dh. 14 billion ($3.8 billion) Legends Dubailand project in association with Bahrainbased Gulf Finance House (GFH). Besides the Living Legends development at Dubailand, Tanmiyat is also developing the Commercial Heights in Dubai s Business Bay. NWRE President Somendra Khosla said : "With our exclusive network of sele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets in the year 2004 or 2005 is not furnished before me by either side. It would have been ideal condition to obtain such details. However, as a Third Member, I have to give my opinion on the questions referred to me on the basis of the material already placed by the parties before the Division Bench. In the above circumstances, I have to draw inference on the basis of material already produced before the Tribunal. As per the material already on record, the sale of the real estate company of Shri Somendra Khosla in the year 2006 was Rs. 1,300 crores approximately. As per the news published in Gulf News dated 22-1-2007, Shri Somendra Khosla, President of NWRE said with our exclusive network of select brokers, unparalleled service and committed team members, we have achieved this sales figure for the year 2006. This interview was being given by Shri Somendra Khosla with reference to sale of his company NWRE of 1.1 billion Dirhams in the year 2006. From the above statement of Shri Somendra Khosla, it is evident that NWRE is an old company, which has established the network of select brokers, in preceding years it has provided satisfactory services to the customers which has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and telephone bill, the post box number of his residential address is given. He had also pointed out that in the licence issued by Government of Sharjah to Dome Services for carrying on general trading business, the address is given along with post box number which is the same as given in the correspondence furnished before the Assessing Officer. 13. I have carefully gone through all the relevant materials and find that in the correspondence furnished before the Assessing Officer, the address of Shri Somendra Khosla is given as post box No. 7805. In the licence issued by the Government of Sharjah in the name of Dome Services (FZC), the address of the company is given as post box number 7805. The name of the owners of the company as given in the licence are Shri Somendra Khosla and Sahil Khosla. Thus, it cannot be said that the address given as per the post box number 7805 before the Assessing Officer was incorrect or unverifiable address. 14. The Assessing Officer as well as the learned Accountant Member also doubted the genuineness of the transaction on the ground that in the certificate of foreign inward remittance issued by Citibank in the column of name and address o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Settlement Commission held that the explanation of the assessee was not genuine for the following reasons : "( i )The appellant s knowledge of racing is very meagre ( ii ) A jackpot is a stake of five events in a single day and one can believe a regular and experienced punter clearing a Jackpot occasionally but the claim of the appellant to have won a number of jackpots in three or four seasons not merely at one place but at three different centres, namely, Madras, Bangalore and Hyderabad appears, prima facie, to be wild and contrary to the statistical theories and experience of the frequencies and probabilities. ( iii ) The appellant s books do not show any drawings on race days or on the immediately preceding days for the purchase of jackpot combination tickets, which entitled sizable amounts varying generally between Rs. 2,000 and Rs. 3,000. The drawings recorded in the books cannot be co-related to the various racing events at which the appellant made the alleged winnings. ( iv ) While the appellant s capital account was credited with the gross amounts of race winnings, there were no debits either for expenses and purchase of tickets or for losses. ( v ) In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation was not satisfactory the amounts were not of the nature of income. The CIT(A) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the Assessing Officer and the CIT(A). On appeal, the High Court re-appreciated the evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmise, conjecture and suspicion. 20. On appeal, to the Hon ble Supreme Court, held, "reversing the decision of the High Court, that the findings of the Assessing Officer, the CIT(A) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction was not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact." 21. From the above, it is evident that in the abovementioned case, the assessee has claimed to have received foreign gift from one common donor. The evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As per the agreement, the assessee has to receive hotel operating fees at the rate of 3 per cent of gross hotel receipt plus the incidental expenses incurred on operating the hotel were also to be reimbursed by THSL to the assessee. The assessee also entered into an understanding with M/s. Cox King (India) (P.) Ltd. (CKIL) for using its network of office and infrastructure for marketing of hotel Tulip Star. The assessee also entered into a Memorandum of Understanding with M/s. Tulip Star Hotels Ltd. (TSHL) for operating the hotel Tulip Star, which was owned by THSL. During the accounting year relevant to the assessment year 2004-05, the assessee received a sum of Rs. 61,93,015 as per the agreement with THSL being 3 per cent of the gross receipt of the hotel. The same amount was paid by the assessee to TSHL, who actually operated the hotel Tulip Star. As per the agreement with TSHL, the assessee has raised debit note for reimbursement of expenses amounting to Rs. 7,56,16,910. The assessee raised debit note on the basis of monthly debit note received from CKIL for the services rendered by them to THSL. Thus, the expenditure was actually incurred by CKIL for and on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal is still pending in that case. He stated that question of allowability of such expenditure is to be considered in the case of THSL and not in the case of the assessee. He, therefore, submitted that the addition of Rs. 7,56,16,910 and also Rs. 61,93,015 by way of disallowance of expenditure is not at all justified and the same should be deleted. 25. The learned D.R., on the other hand, relied upon the order of the authorities below as well as the learned Accountant Member. He stated that the assessee has not proved any services rendered by CKIL or TSHL. Therefore, the payment of a sum of Rs. 7,56,16,910 by the assessee to CKIL and a sum of Rs. 61,93,015 to TSHL by the assessee cannot be allowed as a deduction. At page 121 of the assessee s paper book, there is a list of the employees deputed by CKIL for carrying out the duty of THSL. However, there is no evidence of actual services being rendered by them to the assessee or to THSL. He also submitted that when the assessee made the payment to CKIL or to TSHL, whether the deduction for the same is allowable or not is to be considered in the case of the assessee even if similar amount is received by the assessee from THSL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reimbursed by THSL. The assessee has furnished the profit and loss account in its paper book and from the perusal of which it is evident that the total expenditure debited in the profit and loss account was only Rs. 86,97,337. When the total expenditure incurred by the assessee during the year under consideration was Rs. 86,97,337, by no stretch of imagination, it can include the expenditure incurred by CKIL for which debit note amounting to Rs. 7,56,16,910 was raised by the assessee. When the assessee has not claimed the deduction in respect of the expenditure of Rs. 7,56,16,910, the question of disallowing the same in the case of the assessee cannot arise. 28. With regard to the operating fee of Rs. 61,93,015 is concerned, I find that the assessee received the identical amount from THSL and paid the same to TSHL. Here again, in real terms, the assessee has neither received any income nor incurred any expenditure. It entered into an agreement with THSL for operating their hotel, namely, Tulip Star. Simultaneously, the assessee entered into another agreement with THSL for operating the said hotel. The entire operating fee receivable by the assessee for operating the hotel was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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