AMBUJA NEOTIA HOTEL VENTURES LTD.,NORTH TWENTY FOUR PARGANAS vs. D.C.I.T., CIRCLE - 7(1), KOLKATA

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ITA 224/KOL/2026Status: DisposedITAT Kolkata18 May 2026AY 2018-201915 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the rental income should be treated as business income, aligning with the assessee's consistent practice and the company's objects. The disallowance of expenses was also deleted as it was based on factually incorrect assumptions.

What were the facts?

The assessee treated rental income as business income, but the AO and CIT(A) assessed it under 'Income from House Property'. The AO also disallowed 20% of expenses based on an alleged increase, which the assessee contested.

What were the issues?

Whether rental income is to be assessed as business income or income from house property, and the validity of disallowing expenses based on an unsubstantiated increase.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 250,Section 28,Section 22,Section 142(1),Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH: KOLKATA

Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]

आयकर अपील�य अ�धकरण, कोलकाता पीठ “ए’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA �ी राजेश कुमार, लेखा सट�य एवं �ी �द�प कुमार चौबे, �या�यक सद�य के सम� [Before Shri Rajesh Kumar, Accountant Member &Shri Pradip Kumar Choubey, Judicial Member] I.T.A. No. 224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. Vs. DCIT, Circle-7(1), Kolkata

(PAN: AABCG 6133 G) ( अपीलाथ� ) Respondent / ��यथ� Appellant / Date of Hearing / सुनवाई 16.05.2026 क� �त�थ Date of Pronouncement/ 18.05.2026 आदेश उ�घोषणा क� �त�थ For the Appellant/ Shri Akkal Dudhwewala, FCA �नधा�रती क� ओर से For the Respondent/ Shri V. Vidhyadhar, CITDR राज�व क� ओर से

ORDER / आदेश Per Rajesh Kumar, AM: The present appeal filed by the assessee is against the order dated 21.11.2025 passed by the National Faceless Appeal Centre, Delhi [hereinafter referred to as 'Ld. CIT(A)'] u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') which is in connection with the assessment order passed u/s 143(3) of the Act dated 20.04.2021 for Assessment Year 2018-19.

2 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. 2. The issue raised in Ground No. 1 of the appeal is whether the rental income earned by the assessee deserves to be assessed under the head ‘Profits & Gains from Business’ instead of ‘Income from House Property’ as assessed by the AO.

3.

Brief facts of the case are that, the assessee had filed its return of income on 30.10.2018 for A.Y. 2018-19 declaring income of Rs.NIL. The case of the assessee was selected for scrutiny by issue of notice u/s 143(2) of the Act dated 22.09.2019. During the course of assessment proceedings, the ld. AO noted that, though an amount of Rs.16,93,24,009/- was credited to the P&L Account on account of rental income under the head ‘Revenue from Operation’ but no income was disclosed under the head ‘House Property’. The ld. AO vide notice u/s 142(1) of the Act dated 29.12.2020 required the assessee to furnish complete factual details relating to the rental receipts reflected in Form 26AS. The assessee furnished its reply dated 07.01.2021 wherein it was submitted that, the asseessee company was formed in the year 1988 and since then, it has been engaged in the business of real estate development and sale/ lease of real estate properties. As part of its real estate business, the appellant had acquired commercial properties in a shopping complex named City Centre, Salt Lake for commercial exploitation. It was also submitted that since F.Y. 2004-05, the assessee has been letting out these commercial properties and has derived rental income in the form of license fees and utility charges. The assessee further submitted that, the lease rental income was offered to tax under the head business & profession as leasing of property was one of the main objects of the company and that the nature & character of commercial spaces owned by the assessee was in the nature of business assets/stock in trade. It was also brought to notice of the ld. AO that the assessee has been consistently offering such rental receipts from properties under the head ‘Profits & Gains from Business’ since FY 2004-05. In support of the submission, the assessee placed reliance on the decision of the Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd (373 ITR 673), Karanpura Development Co. Ltd. (44 ITR 362) and Hon’ble Calcutta High Court in the case of Shyam Burlap Company Ltd (61 taxmann.com 121). However the ld. AO was not agreeable to the explanation offered by the assessee. According to him,

3 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. merely because there is an entry in the object clause of the business in Memorandum of Association showing a particular object would not be the determinative factor to arrive at a conclusion that the rental income is to be treated as income from business. He further observed that, the leasing activity was not the principal business activity of the assessee and that the assessee had other business segments as well and therefore in his view, rental receipts were assessable under the head ‘house property’. The ld. AO further was of the view that, the separate agreements entered between the assessee and the lessees in respect of rental receipts and utilities charges was a mechanism and smokescreen to classify the entire receipts as business receipts instead of income chargeable under the head ‘house property’. The ld. AO accordingly rejected all the contentions put forth by the assessee and assessed the rental receipts of Rs.16,93,24,009/- under the head ‘House Property’ instead of ‘Business Income’. The ld. AO in fact had reduced the incidence of tax upon the assessee by doing so. The ld. AO had excluded the rental receipts of Rs.16,93,24,009/- credited in P&L A/c, while assessing the ‘Business Income’ and correspondingly, the ld. AO had computed income chargeable under the head ‘House Property’ at Rs.11,81,43,144/-, resulting in overall reduction of assessable income by Rs.5,11,80,865/-.

4.

In the appellate proceedings, the ld. CIT(A) has confirmed the above action of the AO.

5.

Assailing the action of the lower authorities, the ld. AR submitted that, the assessee had acquired immovable properties being commercial spaces situated within the commercial complex known as CITY CENTRE, Saltlake, Kolkata for which it had initially obtained loans from shareholders and other group/related concerns, which were later on re-financed by Kotak Mahindra Bank in 2016. He showed us that,in terms of the agreements for purchase of the said commercial spaces, the Developer was also required to install and provide specified amenities and utilities such as fire fighting system, electrical installations, DG Set power backup etc. The Developer was also obligated to provide services for maintaining and operating the utilities installed in the

4 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. said commercial centre. He thus submitted that, the installation and provisions of utilities within the commercial spaces was integral part of the property acquired by the assessee in single composite transaction. The utilities installed within the premises were delivered by the Developer to the assessee simultaneously with handing over of the constructed spaces. The ld. AR also showed us that, the commercial constructed spaces along with the utilities & amenities together were let out to several persons by the assessee in an organized manner against a monthly charge. The ld. AR further pointed out that, the assessee also employed a workforce such as night guards, sweepers, watchmen, electricians and other staff member etc. for providing contractual amenities at the Mall, which showed that the assessee was in the overall control, supervision and management of the premises. Accordingly,in consideration for use of the commercial spaces along with ancillary services & amenities, the assessee charged a fixed monthly sum by way of ‘license fee’ & ‘utility fee’, with reference to the per sq. ft. area let out, from all the tenants in the commercial spaces. According to the ld. AR therefore, these contemporaneous facts made it clear that the assessee was in the business of operating, and letting out commercial properties.

6.

The ld. AR further took us through the contents of the main objects of the MOA of the assessee company which included objects to manage & run theland, building or property, collect rents and income and to provide the tenants / occupiers any or all types of services, utilities & amenities needed in a commercial or business organization at such property. Relying on the decisions of Chennai Properties & Investments Ltd (supra) and Shyam Burlap Company Ltd (supra), the ld. AR submitted that, the assessee had rightly classified the rental receipts as business income. Lastly, the ld. AR showed us that, the Revenue had consistently assessed the same rental receipts derived from the same commercial spaces by way of business income in the income-tax assessments framed u/s 143(3) in all the earlier assessment years and therefore in absence of change of facts and position of law, he submitted that the AO/CIT(A) were bound by the rule of consistency and thus urged us to reverse the orders of the lower authorities.

5 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. 7. Per contra, the ld. DR appearing for the Revenue supported the action of the lower authorities. He submitted that, the activity of renting out commercial properties was rightly classified under the specific head of income i.e. ‘House Property’. According to him, the objects of the company was of no consequence and that Section 22 to 26 being specific provisions to tax rental income, the assessee was unjustified in categorizing the same as business income u/s 28 of the Act.

8.

We have heard the rival submissions and perused the material placed on record. The limited issue required to be adjudicated is whether the rental receipts of the assessee is assessable under the heads ‘Business Income’ or ‘House Property’. It is seen that, the assessee company was formed with the intent and object to pursue real estate development and also letting out of properties. The relevant objects set out in its MOA is noted to be as under:-

“A. The Main objects of the company to be pursued on its incorporation are :-

1.

To own, purchase, acquire, take on lease, hire, let-out, sub-let, exchange, sell, work, deal, plan, design, construct, erect, build, repair, remodel, demolish, develop, improve, decorate, furnish, maintain, administer, manage, control, grade, curve, pave, cement and maintain, land, buildings, flats, room, show-room, shops, auditorium, hall, market, shed, mines, factories, mills, plants, farms, structures, houses, apartments, hospitals, farms, schools, places of worship, highways, roads, paths, streets, sideways, courts, alleys, payments, and to do other, similar construction levelling or paving work, and to build, construct and repair railways, waterways, ropeways, drainage works, tunnels, canals, wharves, ports, piers, docks, water-works, drainage works, light houses, power houses and floors and to do all kinds of excavating and digging work; to make all kinds of iron wood, glass, machinery, and earth construction, to undertake gardening etc. and agriculture to design, devise, decorate, plan, model and to furnish labour and all kind of material, to supervise construction or other work, to act as valuers, appraisers, referees and assessors; to investigate into the conditions of buildings and other structures of all kinds and to supply efficient and honest arbitrators amongst its personnel.

2.

To do and be in Real Estate business and for the purpose, buy, sell, take on lease or on rent or on tenancy or otherwise, give on lease or on rent, or on tenancy or on licence or otherwise, maintain, develop, demolish, alter, construct, build and turn to account any land or buildings owned or acquired or leased by the company or in which the company may be interested as owners, lessor, lessees, licensor, licensee, architects, builders, interior decorators, and designers, vendors, contractors, property developers, Real Estate owners and agents weather such lands or building or the development thereof be in respect of residential or commercial

6 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. purpose such as multistoreyed buildings, complexes, houses, flats, offices, shops, garages, cinemas, theatres, hotels, restaurant, motels, or other structures, of whatsoever descriptions including pre-fabricated and precase houses, buildings and erections and to enter into contracts subcontracts and arrangements including the raising of finances from whatever sources and giving of loan and advances to give effect and implement the said objects. 3. To manage land, building, and other property whether belonging to the Company or not, and to collect rents and income and to provide or supply to tenants, occupiers and other all or any of the services that may be needed in a commercial, business or other organisation either with or without consideration and in particular providing refreshments, attendant, messenger, couriers services, watch & wards, manager, light, waiting rooms, conference rooms, reading rooms, meeting rooms, board room, dressing rooms, lavatories, lifts, laundry, library, conveniences, electric conveniences, generators, stables garrages, telephone, telex, intercom, and other communication facility, duplicating, Xerox, typing and other copying facility, computers, secretarial services and all other services, privileges, benefits, advantages & amenities which may be required in connection therewith and for the purpose to acquire all or any of the rights, assets, properties, obligations and liabilities of any firm, company, corporation, or of any other person with regard to management, maintenance, control and operation of common portions of any building or market.”

9.

It is observed that, in pursuance of its main objects, the assessee had acquired spaces situated within the commercial complex, CITY CENTRE, Saltlake, Kolkata. The commercial spaces purchased were elaborately designed & constructed and under the terms of purchase, the Developer was specifically required to install utilities & amenities at the commercial spaces. The assessee also employed a taskforce to run, operate & maintain the commercial space. The commercial space owned by the assessee is found to have been systematically let out to various tenants in consideration of rent which was collected under two different nomenclatures, ‘license fee’ & ‘utility fee’. Having regard to these facts, it is observed that the dominant motive of the assessee was to own commercial space, equip it with utilities & amenities so as to exploit it in a purely commercial manner to earn profits.

10.

It is seen that case of the assessee is squarely covered by the decision of the Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd Vs CIT (supra). In the instant case, the assessee was a company incorporated with the main object, as stated in the Memorandum of Association, to acquire the properties and to let

7 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. out those properties. The assessee had therefore acquired certain properties and rented it out and the rental income received therefrom was shown as income from business. The AO had assessed the rental income under the head “House Property” instead of “Business”. When this question came up for consideration before the Supreme Court, the Court gave decisive importance to the main objects laid down in the Memorandum of Association to determine the nature of rental income. The Court found that the main object of the assessee was to acquire and rent out properties and accordingly it held that the rental income was earned in the regular course of assessee’s business as set out in the object clause of its MOA. The Supreme Court by following the decision law laid down by the earlier coordinate bench in Karanpura Development Co. Ltd. v. CIT (supra) observed that, the company was formed with the purpose of acquiring and disposing coal mining rights and in pursuance of its objective, the assessee had acquired long term leases of coalfields which was subsequently let-out to various customers. The rental income derived from letting out coal fields was held assessable as business income by the Supreme Court.

11.

We find that the above judgment of the Hon’ble Apex Court (supra) was followed by the jurisdictional Calcutta High Court in the case of Shyam Burlap Company Ltd Vs CIT (supra) whose facts are similar to that of the assessee. In the decided case, the assessee was a company formed with the purpose of acquiring, developing properties and to deal with the same by way of sale, lease or letting out etc. The assessee had acquired certain premises which were demolished and two new buildings were developed at substantial cost. The first building and portions of the second one was sold to different buyers. Portions of the second building were let out to various tenants. The assessee had offered the rental income derived from the properties by way of business income. The AO instead assessed it under the head “House Property”. On appeal, the High Court following the ratio laid down by the Hon’ble Supreme Court(supra) held that the objects of the company must also be kept in view to interpret the activities. The High Court noted that the fact that the Memorandum of the assessee permitted it to let out properties and therefore it was held that the rental

8 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. income derived from properties was assessable as business income and not income under the head house property. The relevant findings applicable to the present case are noted to be as follows:-

“14……..Since the object in the Memorandum permitted the appellant to carry on business in letting out properties and as 85% of the income of the appellant was by way of deriving rent and lease rentals, in our view the income from rent constituted the business income of the appellant. Since compensation of Rs.53,50,000/- was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather the compensation was paid to the existing tenants to have their portions vacated to have new tenants with higher rent and thus to have a higher rental income which was a business activity permitted by the Memorandum. The judgment in Auto Distributors Ltd's case (supra) wherein the assessee company was engaged in the business of taking properties of lease and letting out for the purpose of earning income by way of rent, supports the case of the appellant as therein the payment made by the assessee was on the ground of commercial expediency and held to be revenue in nature as the assessee did not acquire any new asset or advantage of enduing nature. The judgment of the Supreme Court in Empire Jute Co. Ltd (supra) supports the stand of the assessee as therein too the payments made by the assessee for purchase of loom hours was expenditure laid out as a part of the process of profit earning and was revenue in nature. That the object for the purpose for which the company was established is vital in considering the issue is evident from the judgment in S. G. Mercantile Corporation (P.) Ltd. (supra) wherein on facts the Supreme Court held taking property on lease and subletting portion thereof was part of the business and trading activity and the income would fall under business income. Though in the judgment in Radhasoami Satsang (supra) Supreme Court had observed that the said judgment was confined to the facts of the case which were special and may not be treated as an authority on aspects which have been decided for general application, however it was held that a question cannot be reopened if it is "decided" in earlier proceedings unlike the case in hand in the earlier assessment years no such issue was raised and decided. In Bhaskar Mitter (supra) it was held that it is always open to an assessee to take the plea that the figure in his return is not taxable under the Act and law empowers the Assessing Officer to asssess the income of an assessee in accordance with law and to determine tax accordingly. Therefore, an Assessing Officer has to assess the income of an assessee after considering whether the figure in the return is taxable or not and then to determine the tax in accordance with law. In determining the same, a decision has to be reached on the issue raised. Unless a decision is reached, it cannot be said that the issue was adjudicated or decided. Keeping these principles of law as formulated by the Courts in mind, the finding by the Assessing Officer and Tribunal that declaring the rental income under the head "income from house property" precludes the appellant from claiming deduction cannot be accepted as Memorandum permitted it to carry on business of letting out properties and indisputably it was carrying on business in letting out properties and in carrying on such trading activity had paid compensation. The observation of the Tribunal that the appellant had all along, including in this assessment year, had shown the income under "Income from house property" cannot be a ground for denial of the deduction as

9 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. in the earlier assessment years never an occasion arose for adjudication or decision on the said issue. Thus the conduct of the appellant cannot be called approbate and reprobate since in V.MR. P. Firm (supra) it was held that "As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income." Had there been an adjudication on the said issue, the submission of the Revenue would have been acceptable. Thus, the application of the principles of consistency or res judicata does not arise. Moreover though the principles of res judicata are not applicable in tax proceedings, issue would have been different had there been an adjudication in the earlier assessment years including on the issue of payment of compensation. Absence of adjudication on the question of payment of compensation takes the matter out of the ambit of the principle of consistency.

15.

There is another aspect of the matter. Though the appellant had relied on the Memorandum in support of its contention that it was carrying out business by letting out the property, however, neither the Assessing Officer nor the Tribunal, which had recorded the submission of the appellant in paragraph 2 of its order, had considered the issue at all from that angle. Since the CIT(A) while allowing the appeal of the appellant had referred to the Memorandum, it was incumbent on the part of the Tribunal to deal with the said Memorandum instead of denying deduction on the ground that the assessee in the preceding years throughout had declared the rental income under the head "Income from house property". Though in Bharat Sanchar Nigam Ltd (supra) it was held that "The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position" (paragraph 20) and though, as evident from the "order" in Shambhu Investment (P.) Ltd. v. CIT [2003] 263 ITR 143/129 Taxman 70, the Supreme Court had dismissed the Civil Appeals from the judgment in Shambhu Investments (P.) Ltd (supra) wherein it was held that "what has to be seen is what was the primary object of the assessee while exploiting the property", however neither the Assessing Officer nor the Tribunal had considered the facts in the light of the Memorandum. The judgment in Excel Industries Ltd. (supra) and in AR.J Security Printers (supra) do not support the stand of the Revenue as in the case in hand there was no earlier decision. The judgments in Gobind Sugar Mills Ltd. (supra) and in Mather & Platt (India) Ltd. (supra) are not relevant as these are cases of acquisition of property where the respective assessees had acquired a right to a property. The judgment in Hemraj Mahabir Prosad (P.) Ltd. (supra) is inapplicable to the facts of the case in hand as therein assessee was not the owner and the building was taken on sublease. In Azimganj Estate (P.) Ltd. (supra) the subject matter was whether the income derived from letting out the unsold flats was income from house property and not business income which is not the case in hand.

16.

Since Memorandum of the appellant company was not considered, the judgment in CIT v. Estate of Omprakash Jhunjhunwala (supra) or the judgment in Sultan Brothers (P.) Ltd. (supra) does not further the case of the revenue as Supreme Court therein held that "Whether a particular letting is business has to be decided in the circumstances of each case" and "each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner" which the Assessing Officer and the Tribunal failed to do. The judgment in Chloride India Ltd. (supra) is not

10 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. applicable as it is evident from the facts that the assessee had taken vacant possession of the property on lease, whereas in the case in hand the assessee is the owner of the property. The judgment in E.I.D. Parry (India) Ltd (supra) is inapplicable as therein the expenditure incurred for setting up of a project was capital in nature. In Rajasthan Rajya Sahakari Spg. & Ginning Mills Federation Ltd. (supra) though it has been held that in tax matters one has to interpret taxation statute strictly, in the instance case, as discussed, the Tribunal did not at all decide the claim. The judgment in Arawali Constructions Co. (P.) Ltd.(supra) is also inapplicable as it was a case of expenditure regarding acquisition of software. Whether the activities of the assessee constituted business has to be gathered from the facts of each case and as we have held that income from rent constituted the business income of the assessee, the judgment in Director General of IT (Exemptions) (supra) is not of much assistance. 17. Hence, as the appellant, being the owner of the property, was carrying on business and had paid compensation for deriving higher rent which was in tune with the Memorandum – a fact which was not at all considered by the Assessing Officer and the Tribunal, the question no.1 is answered in the negative, against the Revenue and in favour of the Appellant.”

12.

Apart from the above, it is also noted by us that, the rental income declared by the assessee has been accepted and assessed by way of business income in the scrutiny assessments framed u/s 143(3) from the first year of commencement of letting out business activity i.e. A.Y. 2004-05 until the immediately preceding AY 2017-18. According the principle of consistency is fully applicable in the present case. For this we gainfully rely on the decisions of the Hon'ble Supreme Court in the case of Radhasoami Satsang Saomi Bagh Vs CIT (193 ITR 321) and CIT Vs PFH Mall &Retail Management Pvt. Limited in Appeal No.6756/2009 from the judgment of Hon’ble Calcutta High Court in ITA No.763/2007 dated 29.01.2008.

13.

In the light of above discussions, we are of the view that rental income was rightly offered by the assessee by way of ‘Profits & Gains from Business’. The finding of the ld. AO that such income is to be assessed as income from house property is not correct and is vacated. The ld. AO is directed to treat such income as business income and determine the taxable income of the assessee accordingly. This ground no. 1 is accordingly allowed.

14.

The issue raised in Ground No. 2 is against the estimated disallowance of expenses to the extent of Rs.8,39,29,488/-.

11 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd.

15.

The facts in brief are that, during the course of assessment, the ld. AO vide notice u/s 142(1) of the Act dated 29.12.2020 had required the assessee to furnish the details of expenses along with documentary evidences which had increased more than 25% in comparison to last year. Later on, the ld. AO vide notice dated 30.03.2021 had called for evidences in respect of all those expenses exceeding Rs.5 lakhs incurred for all the four segments of business and for Corporate Segment. In response, the assessee furnished the details of expenses exceeding Rs.5 lacs vide letter dated 07.04.2021. It is observed that, the assessee had filed head-wise break-up of these expenses along with the names, addresses, PANs and amount of expenditure, details of which are placed at Pages 70 to 80 of the paper book. The assessee is also noted to have filed sample invoices in support of these expenses before the ld. AO. The ld. AO issued show cause notice dated 10.04.2021 wherein he observed that, the assessee had not given any justification for increase in expenses of more than 25% in comparison to earlier years. Though the ld. AO took note of the fact that the assessee had furnished charts and lists of expenses containing the details along with sample invoices, but in his view, these were not sufficient compliance. The ld. AO thus proposed to disallow 25% of the expenses. The assessee in its submissions dated 14.04.2021 has furnished a detailed comparative chart of expenses to show that there was no such increase of 25% or more in comparison to earlier year vis-à-vis any of the heads of expenses. The assessee therefore submitted that, when there was no such increase of 25% in any of the item of expenses, it could not be expected to explain the non-existent increase. In so far as the details of expenses were concerned, the assessee submitted that it had furnished detail of expenses in value of more than 80% along with the relevant details of TDS deducted, copies of TDS returns etc. The assessee explained that due to enormity of the physical data, it was not possible to scan and upload online each and every invoice. The assessee claimed that, having regard to the details already filed and given the fact that, there was no significant variance in any of the expenses in comparison to earlier years, no disallowance on this account was warranted. The AO however rejected the submissions of the assessee and held that the expenses incurred during the year was excessive and

12 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. therefore disallowed 20% of the total expenses of Rs.41,96,47,442/- i.e. Rs.8,39,29,488/- and added the same to the total income. In the appellate proceedings, the ld. CIT(A) confirmed the action of the AO.

16.

The ld. AR for the assessee submitted that, the foundational premise on which the ld. AO made the disallowance was non-existent. He showed us that, there was no such increase of 25% or more in any of the item of expenses in comparison to previous year and therefore, the ld. AO was factually incorrect in observing so in the assessment order. He further brought to our notice that, the assessee had furnished names & PANs- wise break-up of all the items of expenses along with sample invoices and that no specific infirmity or defect in even a single instance was pointed out by the ld. AO. He also pointed out that, the assessee had also furnished the details of TDS deducted on the expenses, as applicable, along with the TDS returns, which were also not doubted by the ld. AO. According to him therefore, the impugned estimation of disallowance was based on pure conjectures and lacked any rationale basis. He further claimed that the ld. AO had not rejected the books of accounts or invoked Section 145(3) of the Act and therefore, it was contended that the estimated disallowance of expenses was legally untenable as well.

17.

Per contra, the ld. DR supported the order of the lower authorities. He urged that the impugned issue in the alternate be sent back to the ld. AO to verify the details of expenses furnished by the assessee.

18.

We have heard the rival parties and perused the material placed before us. The undisputed facts on record are that, the assessee had furnished the details of the following expenses before the AO along with sample invoices.

Particulars Amount (in Rs.) Construction expenses 2,23,11,158/-

13 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. Power & fuel 3,29,88,642/- Rent 5,86,46,317/- Repairs & maintenance - Building 28,07,132/- Repairs & maintenance - Others 2,30,84,309/- Professional & consultancy charges 27,08,376/- Advertisement & publicity 58,19,123/- Security charges 1,45,82,251/- Brokerage and commission 29,40,993/-

19.

It is also observed that, the assessee had also furnished the details of TDS deducted on various expenses by letter dated 26.02.2021. Once the assessee had discharged its onus and the burden shifted on the ld. AO, and in the present case, we find that the ld. AO was unable to come out with any cogent evidence to justify the disallowance of expenses. Rather, we find that, the ld. AO chose to sit back with folded hands till the assessee exhausted all the evidences in their possession and then merely rejected the same without conducting any inquiry or verification. Such an action cannot be countenanced. The ld. AO was not even able to point out any specific defect in even one single instance or item of expense, whose details were not provided by the assessee. We thus are in agreement with the ld. AR that, when the relevant details furnished by the assessee remained unconverted and the books of accounts were also not rejected by the ld. AO, the impugned action of making estimated disallowance of total expenses was unjustified.

20.

Secondly, we note that the impugned disallowance was made on the premise that the expenses incurred during the year was excessive as there was an alleged increase of 25% or more in the expenses in comparison to earlier years. The ld. AR has rightly pointed out to us that, there was no such increase in any of the items of expenses in comparison to earlier years, which we note as follows:-

14 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. Particulars FY 2017-18 (in Rs.) FY 2016-17 (in Rs.) % change Construction Expenses 2,23,11,158 6,58,94,483 -66.14% Consumption of Provisions, Beverages 3,93,11,932 3,24,29,467 21.22% & others Upkeep and Service 1,29,55,863 1,39,49,949 -7.13% Cost Changes in Inventories (5,43,66,216) (8,63,50,205) -37.04% of Work-in-progress Employee benefit 9,89,20,372 8,83,82,403 11.92% Expenses Finance Cost 13,75,94,693 16,54,49,642 -16.84% Depreciation and Amortization Expenses 3,11,25,878 3,38,05,047 -7.93% Other Expenses 17,93,81,758 16,07,24,277 11.61%

21.

It was further shown to us that the increase in certain heads of expenses was also commensurate with the increased activities and revenues of the assessee. According to us therefore, the observations made by the ld. AO that the expenses incurred were excessive was factually unsustainable. For the reasons discussed in the foregoing, we hold the impugned disallowance to be unsustainable and thus direct the ld. AO to delete the same. This ground is accordingly allowed.

22.

In the result, the appeal of the assessee is allowed.

Order is pronounced in the open court on 18th May, 2026

Sd/- Sd/-

(Pradip Kumar Choubey /�द�प कुमार चौबे) (Rajesh Kumar/राजेश कुमार) Judicial Member/�या�यक सद�य Accountant Member/लेखा सद�य Dated: 18th May, 2026 SM, Sr. PS

15 I.T.A. No.224/Kol/2026 Assessment Year: 2018-19 Ambuja Neotia Hotel Ventures Ltd. Copy of the order forwarded to: 1. Appellant- Ambuja Neotia Hotel Ventures Ltd., Ecospace Business Park, Block 4B, 6th Floor, Premises No. IIF/11, Action Area III, New Town-700160 2. Respondent – DCIT, Circle-7(1), Kolkata 3. Ld. CIT(A)- NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)

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