TMI Blog2013 (1) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... nd true particulars of the foreign travel expenses were submitted at the time of the original assessment nor was it disputed that there was such a clause in the agreement with Taj group. There was thus a failure on the part of the petitioner which would attract the first proviso to Section 147. The contention that the reopening was prompted by a mere allegation of irregularities without any tangible material or finding is not acceptable. The complaint has been filed by Raj Kumar Devraj, one of the directors of assessee company, before the Company Law Board and some credibility has to be accorded to the same as it was filed before a statutory authority competent to deal with the complaint, it must be taken to have been filed with some responsibility. There is also mention in the reasons recorded to an agreement between the petitioner and the Taj Group of Hotels under which the responsibility of incurring foreign travel expenses is with the Taj Group. Thus as the petitioner did not furnish any particulars relating to the foreign tours and their connection with the business it cannot be said that the reopening of the assessment is without jurisdiction. Expenditure debited under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EASWAR, J.: These are five writ petitions of which three have been filed by M/s Rambagh Palace Hotels Pvt. Ltd. and one each by Maharaja Jai Singh and Maharaja Prithviraj Singh. They are all directed against the reassessment notices issued by the respondents under Section 148 of the Income Tax Act, 1961. We may first take up the writ petitions filed by M/s Rambagh Palace Hotels Pvt. Ltd., which is hereinafter referred to as hotel . These are WP(C) Nos.7023 of 2010, 8825 of 2011 and 7206/2012 relating to the assessment years 2003-04, and 2004-05 and 2005-06 respectively. 2. In WP(C) No. 7023/2010 which relates to the assessment year 2003-04 the facts in brief are that the petitioner-hotel is a private limited company incorporated on 15.7.1972 and regularly assessed to income tax from the assessment year 1974-75. It is engaged in the business of running hotels consisting of five independent units i.e. Rambagh plants, the Sawai Madhopur Lodge, the Rambagh Lodge, the Airport Cafeteria and SMS Hotel. It filed a return of income declaring a loss of Rs.4,29,22,365/-. The return was processed under Section 143(1) and an intimation was issued on 18.3.2004. Thereafter, it was selecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n illegally withdrawn and siphoned out by Maharaja Prithviraj and Maharaja Jai Singh out of company fund. These expense are not related to the business of the company as the company is not procuring any business from outside India as per terms of the operational agreement with Indian Hotel company Ltd. (chain of Taj group hotels) company do not have to incur any expenditure for foreign tourist and not to meet any travel agent because all the expenses relating to business operation of the company is being looked after by Indian Hotel Company Ltd. In view of the above facts, I have reasons to believe that an amount of Rs.9,09,15,751/- has escaped assessment in the A.Y. 2003-04. 1. Which comprises of expenses towards repair maintenance Building 4,50,15,315/- Machinery 45,54,181/- Others 28,39,563/- 5,24,09,060/- 2. Traveling Rs.68,57,669/- 3. Addition to fixed assts Rs.3,16,49,022/- Totaling to Rs.9,09,15,751/- Thus the assessee has failed to disclose all material facts truly and fully that were necessary for assessment. Here it is relevant to mention the explanation 1 in section 147 that states that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention of the petitioner before us is that since the assessment is sought to be reopened after the lapse of four years from the end of the assessment year, it was the duty of the assessing officer to show that the petitioner had failed to furnish primary facts fully and truly at the time of the original assessment and that this duty has not been discharged by him. It was contended that the complaint made by Raj Kumar Devraj which formed the basis of the reopening of the assessment was only a bundle of allegations of irregularities and there was no finding that such irregularities have actually been committed by the petitioner. Accordingly, it is contended that the complaint cannot constitute tangible material for reopening the assessment. 7. As regards full and true disclosure, our attention was drawn to page 117 of the writ petition which sets out Schedule L to the profit and loss account for the year ended 31.3.2003 in which repairs and maintenance expenses relating to building, machinery and other assets have been separately shown. At page 120, the petitioner has disclosed the significant accounting policies and notes to accounts . Under the head fixed assets , the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se incurred by the petitioner for the year ended 31.3.2003. It was stated by him that no particulars about the foreign travel expenses were called for by the assessing officer and therefore no particulars were filed except those required to be filed under the head expenditure in foreign currency . Such expenditure was shown as note No.11 under the head significant accounting policies and notes to accounts in schedule O . These details are at page 125. Item b under note 11 shows that expenditure on foreign currency for foreign travel amounted to Rs.12.58 lakhs. No other details were filed by the petitioner in respect of the foreign travel expenses at the time of the original assessment. 10. The above narration of the facts and the submissions would show that at least in respect of the foreign travel expenses, no details were furnished by the assessee at the time of the original assessment, except a bare noting that a part of such expenditure was incurred in foreign currency. No details of the place visited and the purpose of the visit and how the visit was connected to the business of the petitioner were furnished. The assessee was under a duty to disclose these particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a return declaring a loss as assessed under Section 143(3); it also filed detailed objections to the validity of the reassessment proceedings. The objections were disposed of by the respondent on 23.11.2011. The respondent did not agree with the objections and held that the reassessment was validly initiated. The contention of the petitioner is the same as in WP(C) No.7023/2010. 13. In response to the questionnaire issued by the assessing officer, the petitioner submitted a reply dated 16.10.2006 in respect of 10 items which included details of additions/deletions to the fixed assets along with the name of the party, address, description of assets, bill number and date etc., bifurcation of the fixed assets into those acquired before 30th September, 2003 and after that date, etc. There were no details furnished in this letter regarding the foreign tour expenses. By letter dated 31.10.2006 the petitioner submitted, inter alia, details of repairs and maintenance expenses of building, machinery and other assets as well as the details of the foreign travel expenses of the directors and staff and stated that the foreign travel was undertaken for the purpose of business and out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.3CA contain the aforesaid details running into several pages (about 20 pages) in which the particulars of the asset, the date of purchase, cost, depreciation, profit and the closing written down value are all given. The details relating to the foreign travel expenses of the directors and the staff were given under cover of letter dated 31.10.2006. The copies of the board resolution authorizing the foreign travel, the visa details, details for release of foreign exchange etc. were furnished by letter dated 22.11.2006. All these details were filed in the course of the original assessment proceedings. By letter dated 27.11.2006 the petitioner submitted further details to the assessing officer in response to certain queries raised by the latter as to why certain items of expenditure on account of repairs and maintenance of building, plant and furniture should not be disallowed as capital in nature. These queries related to R M Building amounting to Rs.7,74,302/-, details relating to R M Sanitary Fittings amounting to Rs.2,56,572/- and details relating to R M Electricals amounting to a sum of Rs.6.87 lakhs. 15. It is thus seen that in respect of the assessment year 2004-05, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if the repair and maintenance expenses are established by the assessee as bona fide, the same would be treated s(sic) capital expenditure considering the volume of repair and maintenance being carried out by the assessee year after years and only depreciation eligible would be applicable. The gross profit to turnover ratio is 25.16% and NP to turnover ratio is 2.44%. The hotel is run professionally by the TAJ group. However, the NP to turnover ratio is very skewed on the contrary which makes the allegations of the complainants bonafide and reasonable especially when the allegations are made by the close family relative. The market value of the property of assessee co. is worth Rs.100 crs. and more wherein even the rental income itself will fetch higher than what assessee has shown as income in the A.Y. 2005-2006. In view of the above facts, I have reasons to believe that an amount of Rs.12,11,86,357/- has escaped assessment in the AY 2005-06. In view of above facts, I have reason to believe that income chargeable to tax amounting to Rs.12,11,86,357/- has escaped assessment in the case and the same is to be brought to tax under section 147 of the I.T. Act as there has been a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005-06. In these circumstances, we uphold the notice issued under Section 148. 17. WP(C) No.7513/2010 and 7516/2010 have been filed by Maharaja Jai Singh and Maharaja Prithviraj Singh respectively questioning the validity of the reopening notices issued by the respondent under Section 148 for the assessment year 2003-04. There is no material difference between the facts of the two writ petitions. Subsequently, when notices under Section 143(2) were issued to the petitioners and they pointed out that the notices were barred by time, they were informed that the said notices were issued pursuant to reassessment proceedings initiated by notices dated 31.3.2010 under Section 148 of the Act and copies of the notices were served on the petitioners. The objections filed by the petitioners to the reassessment notices were rejected on 12.10.2010 (in both the cases) and it is against those orders and the notices issued under Section 148 that the present petitions have been filed. 18. The reasons recorded for reopening the assessments are common in both the cases and are as under : A complaint against the assessee company has been filed by Shri Raj Kumar Devraj, one of the Directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Addition to fixed assts Rs.3,16,49,022/- Totaling to Rs.9,09,15,751/- Thus the assessee has failed to disclose all material facts truly and fully that were necessary for assessment. Here it is relevant to mention the explanation 1 in section 147 that states that production before the AO of account books or other evidence from which material evidence could with the diligence have been discovered by the AO will not necessarily amount to disclosure with the meaning of the foregoing proviso. In view of above facts, I have reason to believe that income chargeable to tax amounting to Rs.4,54,57,875/- has escaped assessment in the case of Maharaja Jai Singh as the receipts have either to be taken as income on taxable perquisites and the same is to be brought to tax under section 147/ 148 of the I.T. Act. Sanction for issue of notice u/s 148 as prescribed u/s 151, to re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to the notice subsequently during the course of assessment proceedings, may kindly be accorded. 19. We have no hesitation in upholding the jurisdiction of the respondent in issuing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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