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2017 (2) TMI 218 - ITAT COCHIN

2017 (2) TMI 218 - ITAT COCHIN - TMI - Estimation of Gross Profit on sale of Food - Held that:- The average gross profit on food sale is only 6.32% as per the impounded documents. The Assessing Officer on the other hand had estimated the G.P. at 13.68% to 12% for various AYs. The CIT(Appeals) has not gone into the facts and has estimated gross profit rate of 12% on sale of food. The CIT(Appeals) compared with other group concerns on identical business but has not considered the place where thes .....

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s of expenses - assessee could not produce external evidences for the expenses disallowed - Held that:- Admittedly, the Assessing Officer has stated that the expenses are genuine and supported by vouchers. In such a case the Assessing Officer could not have disallowed the expenses. It is also noticed that the CIT(A) has also not correctly appreciated the facts of the present case. Considering the entire facts and circumstances of the present case, it is of the view, that there was no justificati .....

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The relevant assessment years are 2008-09 to 2010-11. 2. Since common issues are raised in these appeals, they were heard together and are disposed off by this consolidated order. Identical grounds are raised for all the assessment years except for variance in figures. Hence grounds relevant to the assessment year 2008-09 are reproduced below: 1.The Assessing Officer has disallowed a sum of ₹ 4,58,012/- on estimate basis stating that internal vouchers are only maintained. The CIT(A) has c .....

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the time of hearing. 3. The brief facts of the case are as follows: The assessee is a partnership firm having two partners. The firm is running a bar attached hotel. There was a search in the premises of one of the partners. Consequently, a survey u/s. 133A was done in the other business entities connected with the assessee. During the course of survey, certain documents relating to the assessee-firm were impounded which pertains to the assessment year 2009-10. The documents impounded suggest an .....

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he assessee is not likely to maintain the complete evidence for all the assessment years. Hence, notices u/s. 148 were issued for the assessment years 2008-09 to 2010-11 and the assessments were completed u/s. 143(3) r.w.s. 147 of the Act. The major additions made for the above assessment years are as follows: i) Estimation of the gross profit of liquor at 79.90% ii) Estimation of sale of food at 13.68% of the liquor sale. iii) Estimating the sale of soda and soft drinks at 4.62%of the liquor sa .....

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2% and disallowance of expenses. The Ld. Counsel for the assessee has filed a brief written submission with regard to estimation of gross profit on food and disallowance of expenses. The relevant potion reads as follows: Estimation of gross profit on food The assessing officer has estimated the sale of food as a percentage of the liquor sales based on the statements impounded. But these documents have no evidence to show the gross profit percentage. The hotel is situated in a Panchayath and the .....

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he entire addition was based on this document the gross profit on food may please be taken at 6.32% against the estimate of 12%. The copy of the impounded statements is enclosed herewith. Disallowance of expenses The assessing officer in para 5 of the order states that the books of accounts are rejected only in respect of profits and the expenditure are found to be genuine and supported by vouchers. The assessing officer has disallowed a portion of the salary and incentive to staff amounting to .....

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to be allowed. 6. The Ld. DR has filed a brief written submission. The relevant portion reads as follows: 5. In fact inpage-2 of Assessment order (sub-para 6) for AY 2008-09, the Assessing Officer has mentioned that the correctness of expenditure as per original Profit& Loss Account is not doubted. The relevant para is reproduced as under. His books though rejected on profit aspects give reasonable picture for expenditure aspects, most of his expenditures are found to be genuine and properly .....

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Commercial Tax Officer, Angamaly dated15.03.2010 in order No: 24162809/07-08 is enclosed herewith to highlight that the firm (Green Park) was not keeping the true and correct accounts relating to their business transaction for 2007-08. The manger of Green Park Hotel has admitted the offence and has prayed for composition of offence before the Commercial Tax Department. 7. In the light of the above, the Assessing Officer has correctly taken the total expenses of the firm at ₹ 81,45,850/- b .....

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10,112/- before the Hon. ITAT, is nothing but an after thought to avoid payment of tax liability, especially as he has originally (vide letter dated 21/09/2012) accepted for total expenses available in original profit & loss account. 7. I have heard the rival submissions and perused the material on record. I shall adjudicate the issue raised as under: Estimation of Gross Profit on sale of Food The Assessing Officer has estimated the sale of food as a percentage of the liquor sales. The learn .....

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roup concerns on identical business but has not considered the place where these concerns are doing business. The place of business have major role in the food sales and cannot be compared with concerns in different places. Moreover as mentioned earlier, the impounded material clearly points out only G.P. of 6.32% on sale of food. (Copy of G.P. on sale of food for the period April 2008 to November 2008 as per impounded documents is enclosed herewith). It is also to be noted that liquor sales are .....

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d by vouchers. The impounded statements showing the expenses have been produced by the assessee s representative, which contain expenses on generator running, staff quarters rent, laundry charges, travelling expenses etc. based on which the assessment was completed by the Assessing Officer. The assessee also stated that the assessment was based on the revised profit and loss account and disallowing a portion of it stating that it was not claimed in the original return is against law and facts. T .....

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rage margin for completing the assessment. But the learned AR stated that since assessment was based on the revised profit and loss account the expenses claimed has to be allowed. 7.2 I have gone through the arguments of both parties and perused the material on record. The Assessing Officer disallowed the expenses for the reason that the assessee could not produce external evidences for the expenses disallowed. The contention of the assessee is that these expenses are recorded in the monthly sta .....

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he view, that there was no justification in making the disallowance of expenses. I therefore, delete the disallowance of expenses made by the Assessing Officer and confirmed by the CIT(A). It is ordered accordingly. 8. The other issue is with regard to wrong disallowance of expenses for AY 2008-09. This issue has been raised by way of additional ground which reads as follows: The assessing officer has wrongly taken the total expenditure of the Profit and Loss account for the year ended on 31.03. .....

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