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2015 (9) TMI 110 - AT - Income TaxRejection of books of accounts - Held that - There is no dispute to the fact that the assessee is not maintaining day to day consumption register, stock register and any details for opening stock and closing stock. Therefore, the ld. CIT(A) has rightly upheld the rejection of books of account. Moreover, against the rejection of books of account, there is no ground raised by the assessee before us, though the ld. CIT(A) has rightly rejected the books of account Estimation of food sales - Held that - We have seen earlier that in the assessment order for the A.Y. 2008-09 the AO has applied the ratio of 1 3 to estimate the food sales of the assessee after rejecting the book results. I do not find any irregularity in the decision arrived at by the AO on this account. The reason for the rejection of the book results are the non-maintenance of day to day consumption register and stock register and the nonproduction of the details of the opening and closing stock. For these very reason the rejection of book results for the A.Y. 2004-05 and 2005-06 have been upheld by the CIT(A) and the ITAT. Even if it is not possible to maintain a day to day stock register, in the absence of the particulars of the valuation of the stock at the beginning and at the end of the relevant accounting period, the income of the accounting period cannot be determined. Hence, the addition of ₹ 24,06,296/- on account of suppression of food sales is upheld. The Ld. counsel for the assessee relied upon the assessment made by the AO for the A.Y. 2010-2011 where wastage of 15% has been allowed. In this regard, first of all, it is not a past practice of the assessee. Normally past trend is followed in the case of present assessment. Moreover, every year is an independent year and the decision of the AO in the following year cannot be a guide while deciding the appeal in the present case. Therefore, the said submissions made by the assessee is rejected and the ld. CIT(A) as mentioned hereinabove has rightly upheld the findings of the A.O. in confirmation of addition of ₹ 24,06,296/-. Lawn charges or proceeds of banquets - addition to income - estimation of number of functions - CIT(A) applied the ratio of 1 3 as against the ratio of 1 5 applied by the AO - Held that - The number of functions claimed by the assessee is only 24 during relevant previous year which appears to be very low considering the past history of the case and excellent location of the appellant s hotel. Taking into account the general fall in number of function over the years, the number of function during the relevant previous year is estimated at 40 instead of 50 estimated by the AO. The estimate of receipts of ₹ 55,000/- per function taken by the AO is held to be reasonable since this is only a 10% increase over the rate estimated in AY 2002-03. The assessee will consequently get relief of ₹ 5,50,000/- out of the addition of ₹ 15,72,472/- made by the AO on this account - no infirmity in the above order of the ld. CIT(A) which is a well reasoned order. As regards the findings of AO in the subsequent year where the AO has allowed 15% wastage, as argued by Ld. AR, the same cannot be applied in the present facts and circumstances for the reasons, each year is independent year in Income Tax proceedings and the following year having its own facts and circumstances and decision of AO for following year cannot be a guide on the Tribunal as in the present case, which has its own circumstances. - Decided against assessee.
Issues Involved:
1. Conversion of loss to income by the AO. 2. Rejection of additional ground of appeal by the CIT(A). 3. Confirmation of addition on account of food and beverage by the CIT(A). 4. Confirmation of addition on account of function charges by the CIT(A). 5. Rejection of plea regarding wastage of food. 6. Rejection of grounds of appeal on account of interest to the Directors. 7. Disallowance of interest under sections 2324A, 234B, and 234C of the Income Tax Act. 8. Disregard of Supreme Court, High Courts, and ITAT verdicts by the CIT(A). Detailed Analysis: 1. Conversion of Loss to Income by the AO: The AO converted a declared loss of Rs. 134,853 into an income of Rs. 4,071,805. This was contested by the assessee as unjustified. The AO's decision was based on the non-maintenance of stock registers and other records by the assessee. The AO applied a ratio of 1:3 (grocery consumption to sales) to estimate the income, considering the past history of under-reporting by the assessee. 2. Rejection of Additional Ground of Appeal by the CIT(A): The assessee's additional ground of appeal regarding wastage of 25% to 30% of consumption was rejected by the CIT(A). The CIT(A) found no basis for admitting this additional ground as it required investigation into new facts not already on record. The CIT(A) emphasized that the evidence presented by the assessee, including an article from an organization called Karmayog, did not substantiate the claim of wastage. 3. Confirmation of Addition on Account of Food and Beverage by the CIT(A): The CIT(A) upheld the AO's addition of Rs. 24,06,296 on account of suppression of food sales. The CIT(A) found the consumption to sales ratio of 1:3 reasonable based on past assessments and actual data found during a survey. The CIT(A) rejected the assessee's argument for considering wastage, stating that the pricing of sales already accounted for such factors. 4. Confirmation of Addition on Account of Function Charges by the CIT(A): The CIT(A) partially upheld the AO's addition on account of function charges, estimating the number of functions at 40 instead of 50 as estimated by the AO. The CIT(A) found the average receipt of Rs. 50,000 per function reasonable and allowed relief of Rs. 5,50,000 out of the total addition of Rs. 15,72,472 made by the AO. 5. Rejection of Plea Regarding Wastage of Food: The CIT(A) and the ITAT rejected the assessee's plea for considering 25% to 30% wastage of food. The CIT(A) found no credible evidence to support this claim and noted that the consumption to sales ratio already accounted for such factors. The ITAT concurred, emphasizing that each assessment year is independent and must be judged on its own merits. 6. Rejection of Grounds of Appeal on Account of Interest to the Directors: The CIT(A) rejected the grounds of appeal related to interest to the Directors. The details and reasoning for this rejection were not elaborated in the provided text. 7. Disallowance of Interest Under Sections 2324A, 234B, and 234C of the Income Tax Act: The CIT(A) upheld the disallowance of interest under sections 2324A, 234B, and 234C of the Income Tax Act. This decision was contested by the assessee but ultimately upheld by the ITAT. 8. Disregard of Supreme Court, High Courts, and ITAT Verdicts by the CIT(A): The assessee claimed that the CIT(A) disregarded verdicts from higher judicial authorities. However, the CIT(A) and ITAT found that the decisions were based on the specific facts and circumstances of the case, and past judicial decisions were appropriately considered. Conclusion: The ITAT upheld the CIT(A)'s well-reasoned order, dismissing all grounds of appeal raised by the assessee. The ITAT emphasized the importance of maintaining proper records and found the AO's and CIT(A)'s estimations and rejections justified based on the facts and circumstances of the case. The appeal filed by the assessee was dismissed.
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