MARS ENTERPRISES & HOSPITALITY PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL
“D” BENCH, MUMBAI
BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER&
SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER
(Physical hearing)

Mars Enterprises & Hospitality Private
Limited
5th& 6th Floor, Cyrus House,
Opp St. Theresa Boys School,
Bandra (W), Mumbai – 400050. [PAN: AAKCM4707H]
Vs
DCIT, Circle 2(2)(1), Mumbai
Aayakar Bhawan,
M.K. Road,
Mumbai-400020
Appellant / Assessee

Respondent / Revenue

Assessee by Shri Ravikant Pathak, CA
Revenue by Shri Annavaram Kosuri, Sr. DR
Date of Institution
26.03.2025
Date of hearing
06.08.2025
Date of pronouncement
26.08.2025

Order under section 254(1) of Income Tax Act

PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. CIT(A)/NFAC, Delhi dated 07.01.2025 for A.Y. 2017-18. The assessee has raised following grounds of appeal; 1. The Commissioner of Income Tax – Appeals, National Faceless Appeal Centre [CIT(A)] erred in confirming the disallowance u/s 37 of the Income Tax Act, 1961 (Act) made by the AO.

The Ld. CIT(A) erred in enhancing the disallowance u/s 37 of the Act at Rs. 6,45,80,183/- as against the disallowance of Rs. 4,30,92,655/- made by the AO on perusal of the ledger accounts of following parties in the books of the appellant:

Particulars
Disallowance confirmed/made by the CIT(A)
Disallowance made by the AO
RenuSethi-Vaishali Wines Shop
-
10,84,691
Kishore Asthakkar-Western
Marketing
27,34,812
17,44,786
MahendraBhadra-Shree Jageshwar
68,60,973
53,10,093
Mars Enterprises & Hospitality Private Limited
2

Trading
Brindeo Sales Ltd.
9,19,048
10,05,494
Unity Traders
24,77,424
24,77,424
S.T. Enterprises
-
20,29,365
Mansha Agencies
65,48,946
21,28,730
Aditya Agencies
7,14,261
9,34,645
Nareshchandra Gupta-Om
Enterprise
-
6,42,397
Mahesh Parekh-Pratik Stationers
13,557
4,75,383
Kaveri Departmental Store
-
16,94,580
AstinTradelinks Pvt. Ltd.
11,32,195
7,73,589
PravinSriastave – Srivastava
Packaging
5,10,404
3,65,606
Skylite Enterprises
-
26,13,715
Mahanagar Gas Ltd.
1,97,63,503
84,88,411
Microsense Pvt. Ltd.
-
47,919
Mardi Grass (Candy Spirit)
8,83,804
4,97,186
Milestone Beer Division
61,56,402
89,962
Sharp HRD Services Pvt. Ltd.
1,48,64,854
Total
6,35,80,183
4,30,92,655

The appellant submits that the payments to above parties have been made for the expenses incurred in the normal course of conducting the business, hence, the disallowance made by the AO and enhancement made by the CIT(A) shall be deleted.

under section 133(6) to various parties on test check basis. The assessing officer in para 4.2 of assessment order recorded that in case of many parties, no reply was received and in some cases notices were returned unserved and / or no reply was received from some parties. According to the assessing officer, there was mismatch in the expenses claimed by assessee. On the basis of his aforesaid observation, the assessing officer issued fresh show cause notice dated 19.12.2019 and asked the assessee to reconcile the difference and to file third party confirmation in respect of parties who was not responded to the notice under section 133(6) and produce the parties of whom notice was not served. In para 4.3 of assessment order, the assessing officer recorded that assessee furnished confirmation, reconciliation statement and other document to substantiate their claim. The assessing officer prepared the summary of 19 parties, which was doubted by assessing officer. The assessee has shown expenses/purchases aggregating of Rs. 4.30 crores by taking view that either confirmation is not filed or parties has not replied to the notice issued by assessing officer. The assessing officer disallowed such expenses of Rs. 4.30 crores in computation of income. However, in para 4.8, the assessing officer recorded said amount of Rs. 4.09 crores. The assessing officer in the computation of income not allowed set off of unabsorbed depreciation of Rs. 85,98,013/- against the set off of brought forward unabsorbed depreciation claimed by assessee at Rs. 5.16 crores.
3. Aggrieved by the disallowance/addition, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detail written submission.
Mars Enterprises & Hospitality Private Limited
4

The assessee also furnished ledger accounts of the respective parties. All such submissions of assessee are recorded from page no. 11 to 17. The submission of assessee was forwarded to the assessing officer for his remand report as recorded in sub-para 4 of para 9 at page no. 19 of ld.
CIT(A) order. The assessing officer furnished his remand report. The remand report of assessing officer is extracted on page no. 20 to 57 of order of ld. CIT(A). In the remand report, the assessing officer summarised his finding as recorded on page no. 56 & 57, wherein the assessing officer objected on the basis of difference in name of parties and the name mentioned in the books of account.
4. The ld. CIT(A) after considering the submission of assessee and the remand report allowed part relief to the extent of Rs. 20.05 lakhs and remaining disallowance under section 37 of Rs. 4.10 crores was upheld by holding that assessing officer has furnished detailed remand report which is acceptable. The action of assessing officer in not allowing set off of unabsorbed depreciation of Rs. 85,98,013/- against the set off of brought forward unabsorbed depreciation claimed by assessee at Rs. 5.16 crores was also confirmed by ld. CIT(A). The ld. CIT(A) confirmed the action of assessing officer by holding that no details in respect of unabsorbed depreciation of Mars Catering Services Pvt. Ltd. which was taken over by assessee was not furnished before assessing officer or before him. Further, aggrieved the assessee has filed present appeal before Tribunal.
5. We have heard the rival submissions of both the parties and have gone through the orders of lower authorities. Ground no. 1 relates to Mars Enterprises & Hospitality Private Limited
5

disallowance under section 37 of the Act. The ld. Authorised representative
(AR) of the assessee submits that assessee-company is in the business of hotel, restaurant and allied hospitality activity. The assessee is operating restaurant namely Waterstone Hotel in Andheri, Pizza by the Bay at Marine
Drive, Gordon House Hotel Colaba, Gateway Snack Bar and Restaurant &
Waterstone Country Club and Spa, Andheri. The assessee has shown various purchases during the relevant financial year. The assessing officer disallowed the purchases on the ground that vendors have not filed confirmation. Before ld. CIT(A), the assessee again filed all evidences, ledger account and other details to substantiate the purchases. The assessee also filed assessee’s ledger in the seller’s party account. All such evidences were treated as additional evidence; the remand report of assessing officer was obtained. The assessing officer furnished his remand report and objected by raising objection that there is difference in the name of the purchase party and the name in the books of assessee. Since the assessee is running various restaurants in different names so it was not appreciated by assessing officer. The name of certain establishment like Pizza by the Bay is changed which was known as Jazz by the Bay. The assessing officer also mentioned different amount which was confirmed by ld. CIT(A) of such difference of disallowance is mentioned in the grounds of appeal itself. The ld AR of the assessee also pointed out certain discrepancies in the figures of disallowances by assessing officer and figure mentioned in his remand report. The ld. AR of the assessee submits that they are still ready to explain the difference in the name and figure before
Mars Enterprises & Hospitality Private Limited
6

the assessing officer and in the interest of justice, the matter may be restored back to the assessing officer with the direction to allow the assessee to explain the fact. On disallowance of set off of unabsorbed depreciation, no show cause notice was issued during assessment, thus, the assessee has no opportunity. The ld. CIT(A) also confirmed the action without appreciation of facts. Therefore, ground no. 2 may also be restored to the file of assessing officer for passing the order afresh.
6. On the other hand, the learned senior departmental representative (ld. Sr.
DR) for the revenue supported the order of lower authorities.
7. We have considered the rival submissions of both the parties and have gone through the lower authorities carefully. Ground no. 1 relates to disallowance under section 37 of the Act. We find that during assessment, the assessing officer mainly disallowed purchases to the extent of Rs. 4.30
crores on the ground that no third party confirmation was filed or no reply was received from seller parties in response to notice under section 133(6). We find that there is no finding of the assessing officer, if any payment was made through banking channel or not. The assessing officer in the assessment order vaguely recorded that in some cases, the notice returned unserved or no reply was received. The assessing officer in para
4.3 of his order has narrated the aggregate value of purchases against the name of each seller party. However, in remand report, the assessing officer has mentioned different details. Like against the purchases from Mahanagar Gas Ltd., which is Government owned company, the assessing officer in his remand report at serial no. 21 has mentioned the amount of Mars Enterprises & Hospitality Private Limited
7

Rs. 1,97,63,503/- which is more than double to the figure mentioned in the assessment order. Similarly, for Sharp HRD Services Pvt. Ltd., the assessing officer disallowed Rs. 1,06,88,679/- which is mentioned at serial no. 19, however, in remand report such name is mentioned in serial no. 1 and the assessing officer has mentioned the purchase amount of Rs.
1,31,00,0129/- and Rs. 17,64,725/- at serial no. 2, thus, aggregating of Rs.
1.48 crores. There are other similar discrepancies as has been mentioned in grounds of appeal itself. Thus, we do not find any justification in the order passed by ld. CIT(A) in confirming such addition. Thus, considering the prayer of ld. AR of the assessee, this ground of appeal is restored back to the file of assessing officer to pass the assessment order afresh.
Needless to direct that before passing the assessment order, the assessing officer shall allow fair and reasonable opportunity to the assessee. The assessee is also directed to file complete details of purchases, evidences to substantiate purchases and the evidence of payment and other evidence to substantiate the purchases. The assessing officer is directed to consider all such evidences and pass the order afresh in accordance with law. In the result, ground No. 1 of the appeal is allowed for statistical purpose.
8. So far as disallowance of unabsorbed depreciation is concerned, which is subject matter of ground No.2, we find that assessing officer has not given any show cause notice before making such disallowance. Similarly, there is no remand report of assessing officer on such issue, therefore, we also deem it appropriate to restore this issue to the assessing officer to pass the order afresh. Needless to direct that before passing the order, the Mars Enterprises & Hospitality Private Limited
8

assessing officer shall allow opportunity to the assessee. The assessee is directed to furnish complete details about the unabsorbed depreciation before the assessing officer. In the result, this ground of assessee is also allowed for statistical purposes.
9. In the result, the appeal of the assessee is allowed for statistical purposes.
Order was pronounced in the open Court on 26/08/2025. OMKARESHWAR CHIDARA
ACCOUNTANT MEMBER PAWAN SINGH
JUDICIAL MEMBER

MUMBAI, Dated: 26/08/2025
Biswajit

Copy of the order forwarded to:
(1)
The Assessee;
(2)
The Revenue;
(3)
The PCIT / CIT (Judicial);
(4)
The DR, ITAT, Mumbai; and (5)
Guard file.
By Order