2009 (12) TMI 567 - HC - Income Tax

Estimation of hotel receipt - Assessing Officer worked out the occupancy days at 105 and the daily higher charges @ Rs.10,425/- and thus the total income was assessed at Rs.10,94,625/-, in respect of one of the hotels about which return was filed for the year 1994-95 - Tribunal came to the conclusion that the Assessing Officer had rightly worked out number of occupancy days at 105 and that the tariff worked out by him was based upon the rates approved by the Tourism Department and that at times the hoteliers do not get customers at such rate and, therefore, allowed 20% discount in the approved tariff adopted by the Assessing Officer and directed reassessment of income accordingly. - Held that - here is absolutely nothing on record, indicating that the Tribunal has misread or misconstrued any material document or other evidence, relied upon by the parties. - Revenue appeal dismissed.

Summary

Issues:
- Interpretation of material on record in estimating hotel receipts
- Sustainability of findings based on material in law

Analysis:
1. The judgment involved six appeals directed against the same order of the Income Tax Appellate Tribunal, Chandigarh Bench. The substantial question of law in all appeals was whether the Tribunal misread and misconstrued the material on record in estimating hotel receipts and if the findings based on such material were sustainable in law.

2. The appellants, members of a single family, operated three hotels in Shimla. A search and seizure operation under the Income Tax Act was conducted due to dissatisfaction with the income shown in their returns. The Assessing Officer completed the assessment for the year 1994-95, including a trading addition on account of suppression of hotel receipts.

3. The matter reached the Income Tax Appellate Tribunal, which set aside the assessments and remitted the case to the Assessing Officer for reevaluation based on the disclosure made before the Settlement Commission. Subsequently, assessment orders were passed for the years 1994-95 and 1995-96 for all three hotels.

4. The appellants challenged the fresh orders of the Assessing Officer, leading to an appeal before the Income Tax Commissioner (Appeals) who reduced the daily income and number of occupancy days. Dissatisfied with this decision, the appellants further appealed before the Tribunal.

5. The Tribunal upheld the Assessing Officer's calculation of occupancy days and approved tariff rates, considering the peak and lean seasons in Shimla. It allowed a 20% discount in the approved tariff and directed reassessment of income based on these considerations.

6. Upon review, the High Court found no evidence indicating that the Tribunal misread or misconstrued any material. The Assessing Officer's methodology in determining occupancy days and tariff rates was deemed reasonable, especially considering the comparison with other hotels in Shimla.

7. The High Court noted that the Assessing Officer had considered the rates approved by the Tourism Department and had made adjustments based on the circumstances. It was observed that the appellants' actions, such as incorrect returns and fudged accounts, aimed to manipulate occupancy days and hire charges.

8. Ultimately, the High Court concluded that the substantial question of law raised in the appeals did not actually arise. Therefore, all the appeals were dismissed based on the findings and analysis presented in the judgment.