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2016 (11) TMI 1154 - ITAT MUMBAI

2016 (11) TMI 1154 - ITAT MUMBAI - TMI - Addition on account of the income of the Goa unit assessed on the basis of the figure of the Murud unit:- Held that:- The Assessing Officer has admitted Gross Profit of 39% in Goa Resorts and 72% in Murud for the A.Y.2006-07 made u/s.143(3) of the Act. No plausible reasons have been placed on record by the Assessing Officer to which it can be assumed that in which circumstances the Gross Profit of Goa unit is not acceptable. All figures which have been me .....

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ingly, we allow the same and the Assessing Officer is hereby directed to reduced the addition to the extent of 50% of the amount of ₹ 15,45,186/-. Accordingly, this issue has been partly allowed in favour of the assessee. - Disallowance u/s.14A - Held that:- Assessing Officer did not go through the correctness of the claim. No satisfaction of any kind was recorded by the Assessing Officer. The assessee has shown the common expenses to all head of income. The provision of section 14A re .....

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/Mum/2012 - Dated:- 23-9-2016 - SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Shri R. C. Jain For The Department : Shri R. P. Rastogi ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 11.06.2012 passed by the Commissioner of Income Tax (Appeals) 17, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2008-09. 2. The assessee has raised the following grounds:- 1. ADDITION ON ACCOUNT OF LOW GROSS PROFIT AND ESTIMATION .....

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ntenance of quantitative details of consumable food items running into hundreds is not practicable, as also appreciated by the Govt. of India, which grants exemption for such quantitative details, and such an exemption cannot be a ground to justify invoking of section 145(3) of the Act. (c) The ld. CIT(A) erred in failing to bring on record an comparative cases of any third party assessee, to justify the addition, and taking a different view runs contrary to the view taken by him in deciding Gr. .....

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of the Act were issued on 16.08.2010 and 15.10.2010 alongwith questionnaire calling for various details and was duly served upon the assessee. The assessee was in the business of running two resorts one at Goa and the other at Murud. While assessing the income of Goa unit the Assessing Officer adopted the figure of Murud Unit and disallowed the expenses to the tune of ₹ 15,45,186/- and also disallowed the expenditure in view of the provision u/s.14A read with Rule 8D of the Act and assess .....

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business of hoteliering. The assessee was running two units vide which one unit was being run at Goa whereas the other unit was being run at Murud. The sale rate at Murud unit was much lower than the sale rate of Goa of food and beverage items. The assessee company did not keep any record of day to day consumption of food and beveragers purchased and consumed and sales made. The Assessing Officer noted the following points:- a. During the month of March 2008, the purchases at Murud were ₹ .....

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u at Murud for the same items. 5. The Assessing Officer was of the view that the sale or closing stocks have been suppressed at Goa. The Assessing Officer applied the ratio of 3.57 times, as per Murud unit. Therefore, came to the conclusion of sale amounting to ₹ 15,45,186/- has been suppressed at Goa after invoking the provision u/s.145(3) of the Act. The contention of the assessee is that the accounts of both the units are not comparable. The assessee has raised the following points befo .....

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by the AO and therefore the AO ought to have accepted the Gross Profit as shown in the Goa Hotel in the year under assessment (Refer pg. 67 of P.B.) (ii) The accounts of the appellant company are audited under provision of Companies Act 1956 and also u/s.44AB of the I.T.Act and are subject to scrutiny by other government departments, viz., Luxury Tax and Sales Tax Officer at Goa and Murud. (iii) The AO erred in failing to make out a case as to why the G.P. shown by the appellant was not acceptab .....

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ess. In Murud on an average 3.5 times is the sales ration to cost of raw materials, whereas in Goa it is 2 times, and thus the result of the Murud Hotel and Goa Hotel cannot be compared and made the basis for any addition as suppressed sales. It is submitted that more material was required to justify the addition. 6. The Assessing Officer has admitted Gross Profit of 39% in Goa Resorts and 72% in Murud for the A.Y.2006-07 made u/s.143(3) of the Act. No plausible reasons have been placed on recor .....

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.Y.2007-08 accepted u/s.143(1) (4) Goa unit closed from A.Y.2009-10 (5) A.O. estimated sales of Goa unit @ 3.57 times of purchases similar to Murud unit and estimated the sales at ₹ 33,68,206/- and added the difference of ₹ 15,45,186/- as alleged suppressed sales. 7. All figures which have been mentioned in the said assessment order speaks about the less profit of the Goa unit. In view of the said figures mentioned above, we are of the view that the Assessing Officer has wrongly asse .....

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partly allowed in favour of the assessee. ISSUE NO.2:- 8. Under this issue the assessee has challenged the disallowance u/s.14A of the Act. The contention of the assessee is that the disallowance u/s.14A of the Act is required to be restricted to the tune of ₹ 62,069/-. Before going further it is necessary to advert the finding of the CIT(A) on record: 5.2 I have perused the facts in the appellant case. There is no doubt that appellant is having tax free dividend income. on the debit side .....

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ccount of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. 5.3 Further, the provisions of Rule 8D, read as follows: (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with - (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no .....

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(ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula namely:- A x B/C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year; B= the average of value of investment, income from which does not or shall not form part of the total inc .....

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