CIT CHANDIGARH vs. M/S RPS HOTELS PVT. LTD.

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ITA/332/2009HC Punjab & HaryanaPHHC01084429200923 July 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the revenue. The Court noted that the revenue's appeal against the ITAT's order in the present case was based on the same grounds as an appeal in the case of M/s Dua & Associates. The High Court had previously dismissed the revenue's appeal in M/s Dua & Associates (reported as Commissioner of Income Tax-II, Chandigarh Vs. M/s Dua & Associates (P) Ltd., Chandigarh and M/s Dua & Associates (P) Ltd., Chandigarh Vs. The Commissioner of Income Tax-II, Chandigarh) on March 12, 2008. Therefore, following its earlier decision, the present appeal filed by the revenue was dismissed. The specific reasoning of the ITAT regarding the food cost ratio or the perversity of its order was not elaborated upon by the High Court, as it relied on its prior judgment.

What were the facts?

The revenue, Commissioner of Income Tax, Chandigarh-II, filed an appeal under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench-A, dated May 31, 2005. The appeal pertained to assessment year 1999-2000. The assessee, M/s R.P.S. Hotels (P) Ltd., runs a hotel. The Assessing Officer (AO) made an addition to the declared income, finding the claimed cost of raw material for food to be excessive based on prevalent norms in the hotel business. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, holding that books of accounts should be accepted in the absence of specific material. The ITAT upheld the CIT(A)'s view.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the order of the ITAT is perverse because the ITAT failed to appreciate that the CIT(A) restricted the food cost ratio to 55% solely on conjectures and surmises without any evidence, whereas the AO had based its order on the results of 16 hotels/restaurants? (Question of law/mixed law and fact, relating to the AO's assessment and CIT(A)'s deletion). Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue argued that the ITAT's order was perverse. It contended that the CIT(A) had restricted the food cost ratio to 55% based on conjecture and surmises, lacking evidence. In contrast, the AO's assessment was grounded on the results of 16 comparable hotels/restaurants. The revenue relied on the AO's basis for its assessment.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

(1) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH DATE OF DECISION: 23.7.2009 Commissioner of Income Tax, Chandigarh-II ..........Appellant Versus M/s R.P.S. Hotels(P) Ltd., SCO 433-36, ..........Respondent Sector 35-C, Chandigarh CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Ms. Urvashi Dhugga, Advocate for the appellant. **** ADARSH KUMAR GOEL, J. (Oral)

1.

The revenue has preferred this appeal under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh Bench-A dated 31.5.2005 passed in ITA No. 249/Chandi/2003 for the assessment year 1999-200, proposing to raise following substantial question of law:- “Whether on the facts and in the circumstances of the case and in law, the order of the ITAT is perverse as the ITAT has failed to appreciate the fact that the CIT(A) restricted the food cost ratio to 55% only on conjectures and surmises and without any evidence, whereas the Assessing Officer had based its order on the basis of results of 16 hotels/restaurants.”

2.

The assessee is running a hotel. The assessee claimed cost (2) of raw material for the food, which was found by the Assessing Officer to be excessive having regard to the prevalent norms in hotel business. The Assessing Officer accordingly made addition to the declared income. The CIT(A) deleted the addition by holding that in the absence of any specific material, books of accounts should be accepted. This view has been upheld by the Tribunal.

3.

Learned counsel for the revenue fairly states that appeal of the revenue against order of the Tribunal in the case of M/s Dua & Associates, which has been followed in the present case, has been dismissed by this Court being I.T.A. No. 496 of 2005 (The Commissioner of Income Tax-II, Chandigarh Vs. M/s Dua & Associates (P) Ltd., Chandigarh) and ITA No. 557 of 2005 (M/s Dua & Associates (P) Ltd., Chandigarh Vs. The Commissioner of Income Tax-II, Chandigarh) on 12.3.2008. 4. In view of above, this appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 23, 2009

(DAYA CHAUDHARY) pooja JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No

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