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TMI Blog2015 (9) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... held 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly rejected the plea of the appellant on account of waste of food from 25% to 30% on account of food and beverage, which is highly unjustified unreasonable and uncalled for. 7. That the CIT(A) wrongly rejected the grounds of appeal on account of interest to the Directors, which is most unjustified, unreasonable and uncalled for. 8. That the CIT(A) wrongly disallowed the interest u/s 2324A, 234B and 234C of the Income Tax Act, which is highly unjustified unreasonable and uncalled for. 9. That the CIT(A) wrongly disallowed the verdict of the Hon ble Supreme Court, High Courts as well as of the ITAT and also ignored the formula regarding wastage of food and beverage, which is most unjustified, unreasonable and uncalled for. 10. That the appellant reserves right to add or delete any other ground or grounds of appeal at the time of hearing and to also submit written arguments. 2. The brief facts in all the grounds of appeal are that the assessee had shown receipts amounting to ₹ 9,25,265/- on account of food sales. The purchase against the food sales was ₹ 39,12,897/- and the opening and closing stock of food items were shown at ₹ 72,82,615/- and ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading results shown did not present the true and correct picture of the rates of affairs of the assessee. The AO referred to several judicial decisions for the proposition that on account of non-maintenance of stock register and not giving details of opening and closing stock and the day to day records of consumption of raw material, the trading results could not be relied upon and that the book results could be rejected and rejected the books results of the assessee u/s 145(3) of the Act. The AO, thereafter, proceeded to estimate the income of the assessee keeping in view the past history of the case. She noted that past history of the assessee showed that it was in the habit suppressing and under-reporting its food sales. It was noted that in A.Y.2005-06 and earlier assessment years, the food sales of the assessee company had been estimated by the AO by taking the same to be 5 times of the grocery/provision consumed but the Ld. CIT(A) had allowed part relief and estimated the sales by applying the ratio of 1:3. She noted that the 1:3 ratio was subsequently confirmed by the ITAT, Amritsar Bench. Hence, the AO gave a show cause notice to the assessee to explain as to why the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total receipts shown were much higher. The assessee submitted before the AO that the booking register for the relevant previous year was not available at present as it had been recorded by the managerial staff and the staff frequently changed. In respect of the functions, the assessee submitted that there were two types of functions held on behalf of the customers during the year under consideration. It was submitted that if only lawn were provided, then the amount net of taxes stood credited to the lawn charges. It was submitted that if per plate food was provided, the lawn charges were inclusive in the per plate rate, and the food sales, net of taxes, stood credited in the food sales accounts. The details of the calculation, depicting settled rates charged per plate for the functions, number of persons at each function, et. Cetera were submitted to the AO. It was submitted that these rates varied according to the number of items of food, whether they were vegetarian or non-vegetarian, the number of snacks, etc. The AO was not satisfied with the explanation furnished and noted that no explanation had been submitted about the variation in lawn charges from ₹ 11,250/- to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) after making detailed discussions ultimately gave a finding, dismissing the main ground of the assessee by upholding the addition of ₹ 24,06,296/- on account of suppression of food sales, since the consumption to sales ratio determined in the assessee s case based on observation of actual data found during the survey and is based on reality. He further held that the observations on which the assessee has placed reliance is that the large number of hotels and restaurants contribute substantially to the generation of waste in a Municipal Ward and as per the study of the organization of a few wards, hotels and restaurant waste contributed to around 25% to 30% of the total waste generated by the Ward. This study only says that out of the total waste in a Municipal ward, around 25%-30% was on account of hotels restaurants As per the article the hotel waste comprised of items like food and dry waste like plastic bottle, tappers etc. This article does not suggest 25%-30% of grocery consumption of a hotel was wasted. As regards the observations which appear on the website of an organization called Karamayog has been relied upon but the credentials of such organization are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventory of opening and closing stock was not furnished; the consumption of fuel, gases and electricity was on the higher side; the assessee had not accounted for in the regular books of accounts the food sale/lawn charges for several functions held on various dates as per the impounded books; in the month of June no lawn charges had been shown in respect of various functions and only food sales had been recorded; in respect of some functions only lawn charges had been recorded and no food sales had been shown; the assessee had shown lawn charges only for four occasions whereas in the month of June, 2003 itself the number of functions and parties was more than 40 in number as per the impounded books. The pattern of recording of the lawn charges and food charges was found to be followed in the other months also. The AO examined the monthly grocery purchases and the sales in the restaurant, room, banquet etc. and found that in the month of June, 2003 the sales were 5:10 times the grocery purchases. In the month of Sept;2002 as per the impounded documents also the sales were around 6 times the grocery purchases. The AO also found that the per plate rate shown by the assessee was boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was taken at 100 as against 115 taken by the AO. The assessee got relief of ₹ 85.32 lacs on his account. 7.2. The Department went in appeal before the ITAT, Amritsar Bench, against the order of the ld. CIT(A), while the assessee filed C.O. to the appeal. The Hon ble ITAT, in their order dated 60.06.2008 in ITA No.372(Asr)/2007 and CO. No.70(Asr)/2007, have noted that the issue regarding food sales was covered by their order dated 10.04.2008 in ITA Nos.279 and 320(Asr)/2006 for the A.Y. 2002-03. In the said order the findings of the ld. CIT(A) in respect of the addition on account of food sales had been upheld. Following the said order, the ITAT have rejected the Department s appeal as well as the cross objection of the assessee. In respect of the addition on account of lawn charges also, the ITAT upheld the order of the Ld. CIT(A) and rejected the grounds taken by the Department and by the assessee. 7.3. In the assessment order dated 27.12.2007 for the A.Y. 2005-06 the AO rejected the book results in relation to food sales after noting that the assessee was not maintaining any stock register nor any details of stock inventory had been filed. He estimated the preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g period cannot be determined. Valuation of stock is an important ingredient for determining the profit and loss of an accounting period. The irrationality of the value of the opening and closing stock of around ₹ 73 lacs each can be judged from the fact that these are inclusive of mainly perishable items and if the assessee had opening stock of ₹ 72.80 lacs and sales of ₹ 92.25 lacs, there would no need to make purchases of ₹ 39.12 lacs, since the stock could not survive for very long. The decisions relied upon by the Ld. AR in respect of rejection of book results have been correctly rebutted by the AO in his report. He has pointed out that in the decision reported in 97 TTJ 969 (Jodhpur) the ITAT had held that the ratio of cost of material of one hotel could not be applied to another hotel, whereas in the case at hand the ratio in the case of assessee itself in the earlier year had been applied. In respect of the decision reported at 3 SOT 803 the AO has pointed out that in the cited case the yield of furnished product was found satisfactory. It is further seen that the books has been rejected in the cited case only because the GO rate was low and the day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the original appeal memo. Moreover, the admission of the additional ground appeal will require investigation into facts. In the case of CIT vs. Abhishek Industries Ltd. 290 ITR 655 (P H) the Hon ble Jurisdictional High Court have held that the only pre-condition for admission of additional ground of appeal was that it should be reasonable. In this case it was held that the request for raising the additional ground was reasonable because the facts with regard to the legal issue, being raised as an additional ground of appeal, were already on record and secondly the issue had already been decided in favour of the assessee in the earlier years. Thus, admission of an additional ground will be considered to be reasonable if the relevant material is already available on record. In the case of ACIT vs. DHL Operations BV 108 TTJ (Mumbai)(SB) 152 the Hon ble Special Bench of the Tribunal have held that the one limitation of admission of additional ground of appeal was that no new fact was required to be investigated on admission of the additional ground. In the case of ITO vs. Balinder Jason Mann 112 TTJ (ASR) 125 it was held by the Tribunal that an additional ground of appeal which req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual data found during survey and is based on reality. 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/-. 9. As regards the addition on account of lawn charges in AY 2008-09, it is seen that in the AY 2002-03 the number of functions were estimated by CIT(A) at 100 and in the AY 2004-05 also the ld. CIT(A) estimated the number of function at 100. However, in the AT 2005-06, the ld. CIT(A) estimated the number of functions at 62. Though the Ld. AR for the assessee has submitted that there was no evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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