M/S BATRA PALACE P. LTD. vs. COMMISSIONER OF INCOME TAX

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ITA/76/2010HC Punjab & HaryanaPHHC01093727201016 February 2010Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE JITENDRA CHAUHAN3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the additions made by the Assessing Officer, which were upheld by the CIT(A) and the Tribunal, were based on findings of fact. The court reasoned that whether building repair and maintenance expenditure was actually incurred, and whether expenditure on items like linen and curtains was genuine, are inherently questions of fact. The court found no substantial question of law that would warrant the admission of the appeal under Section 260-A of the Income Tax Act, 1961. Consequently, the appeal was dismissed. No issue was expressly left undecided.

What were the facts?

The assessee, M/s. Batra Palace P. Ltd., filed a return for assessment year 2005-06 declaring nil income. The Assessing Officer (AO) selected the return for scrutiny and finalized the assessment under Section 143(2) of the Income Tax Act, 1961. The AO made additions of Rs. 21,09,875/- claimed as hotel building repair expenditure and Rs. 4,02,350/- for expenditure on linen, curtains, and room supplies, deeming them bogus. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's order, rejecting the assessee's books of account under Section 145 and completing the assessment to the best of his judgment. The CIT(A) noted that suppliers like M/s. Tools Traders and M/s. Amit Enterprises, Delhi, denied any business dealings or provided addresses that returned as 'no such address'. Another supplier, M/s. Amar Nath & Co., Delhi, denied selling materials to the assessee. The Tribunal upheld the CIT(A)'s order, which is now challenged before the High Court.

What were the issues?

1. Whether the High Court should admit the appeal under Section 260-A of the Income Tax Act, 1961, as a substantial question of law arises from the Tribunal's order. Assessee's Contention: The assessee, by filing the appeal under Section 260-A, implicitly argues that a substantial question of law does arise. (No specific arguments are recorded in the judgment). Revenue's Contention: The revenue, through the AO and CIT(A)'s findings upheld by the Tribunal, contends that the additions made are based on findings of fact, specifically concerning the genuineness of expenditure on hotel building repair and supplies like linen and curtains. The revenue argues that these are not substantial questions of law warranting admission of the appeal.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 143(2),Section 145

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: February 16, 2010

M/s. Batra Palace P. Ltd. ----Appellant Versus Commissioner of Income Tax, Aayakar Bhawan Rishi Nagar, Ludhiana, Punjab. ---Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present: Mr. S.K. Mukhi, Advocate for the appellant.

1.

To be referred to the Reporters or not?

2.

Whether the judgment should be reported in the Digest? **** M.M. KUMAR, J. The assessee has approached this Court by invoking Section 260-A of the Income Tax Act, 1961 (for brevity 'the Act') and has challenged order dated 15.05.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (A) (for brevity 'the Tribunal') rendered in ITA No. 144/Chandi/2009 in respect of the assessment year 2005-06. The assessee has filed his return for the assessment year 2005-06 declaring nil income. However, Assessing Officer selected the return for scrutiny. The assessment was finalized after complying with the procedure laid down under Section 143(2) of the -2- Act. The assessing Officer made additions of Rs. 21,09,875/-, which was claimed by the assessee to be expenditure of hotel building repair. Another sum of Rs. 4,02,350/- was also added because the Assessing Officer found the expenditure on linen curtains, room supply debited to P & L account as bogus. The assessment framed by the Assessing Officer vide order dated 28.12.2007 was challenged before the CIT(A) who upheld the order of Assessing Officer in rejecting the books of account under Section 145 of the Act and by completing the assessment to the best of his judgment. The CIT(A) found the various cases of expenditure made by the appellant in his books of accounts but subjected to verification, by asking the seller of those items to the appellant. The seller of the appellant, M/s. Tools Traders and M/s. Amit Enterprises, Delhi were sent letters through speed post, which was received back with the postal remarks that 'no such address'. In respect of one M/s. Amar Nath & Co., Delhi from where Bed Cover, Bed Sheet were said to have been purchased, was contacted by the Assessing Officer on telephone. They had denied selling any materials to the appellant nor they have any ledger account in the name of appellant in their books of accounts, this was also confirmed vide letter dated 21.12.2007. Accordingly, likewise communications were received from M/s. Amit Enterprises, Delhi which has been rejected by the Assessing Officer because the letter obviously sent at the instance of the appellant, so information was sent on fresh letter page, which did not even carried telephone numbers nor any account numbers.

-3- The other invoices and bills are also found to be bogus. Accordingly, they claimed expenditure in respect of sum of Rs. 4,02,350/- was found to be bogus. Likewise, amount of Rs. 21,09,875/- as expenses incurred on the repair and maintenance of hotel building was found to be unexplainable, the genuineness of the expenditure could not be verified from the voucher and purchase invoices. The order of CIT(A) has been upheld by the Tribunal which is subject matter of challenge in the instant appeal. Having heard learned counsel for the appellant at a considerable length, we find that the additions have been made after rejecting the books of accounts. These are necessarily findings of fact which would not give rise to any question of law warranting admission of appeal. Whether the building repair and maintenance was actually done by incurring expenditure, whether expenditure was incurred on linen curtains, bed cover etc. would necessarily be questions of fact. We do not find any substantive question of law warranting admission of appeal, accordingly the same is dismissed. (M.M. KUMAR)

Judge

(JITENDRA CHAUHAN) 16th February, 2010

Judge Atul

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