SUKH HOTELS MOTELS PVT. LTD.,MUMBAI vs. ITO,RG. -8(3)(2), MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-18, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).

There has been a delay of 61 days on the part of the assessee to file the appeal. The assesseee has filed an affidavit for condonation of the above delay. Having gone through the contents of the said affidavit, we find that there was genuine difficulty faced by the assessee in filing the appeal in time. Therefore, we condone the above delay in filing the appeal. 2. The ground of appeal filed by the assessee read as under: -

1. The Ld. CIT(A) has erred in ignoring the facts that the appellant has been denied natural justice, stating by way of affidavit filed, in response to remand and original text of order.

2. The Ld. CIT(A) has erred in holding that the AO disallowing commission paid to Mr. Dilip Panchal a sum of Rs.9,45,123/-.

3. The Ld. CIT(A) has erred in holding that the AO disallowing commission paid to Ms. Sharmila Sarmalkar a sum of Rs.4,15,129/-.

4. The Ld. CIT(A) has erred in holding that the AO disallowing commission paid to Ms. Neha Nitin Singhadia a sum of Rs.3,64,535/-.

5. The Ld. CIT(A) has erred in holding that the AO disallowing commission paid to various Taxi and Rickshaw Drivers amounting to Rs.25,93,769/- being 75% of Rs.34,58,359/-.

3. Briefly stated, the facts of the case are that the Assessing Officer (AO) noticed during the assessment proceedings that the assessee had debited in the profit and loss account Rs.1,03,72,387/- as commission paid. He also found that the assessee had paid commission in cash amounting to Rs.34,58,359/- and claimed the same as paid to others (taxi/rickshaw drivers) in amounts less than Rs.1,000/- to each person. The AO issued notice u/s 133(6) to verify commission of Rs.9,45,123/- paid to Shri Dilip Panchal and Rs.4,15,129/- paid to Ms. Sharmila P. Sarmalkar. Both the notices were returned by the postal authorities as ‘unserved’. In spite of being asked by the AO to file the address of Ms. Neha Nitin Singhadia, the assessee did not furnish the same before the AO. The commission paid to Ms. Singhadia was Rs.3,64,535/-. The AO gave several opportunities to the assessee to file details of commission claimed to have been paid in cash amounting to Rs.34,58,359/-. The assessee failed to file the said details before the AO. As the assessee failed to file the details, the AO made a disallowance of 75% of the commission paid in cash to taxi/rickshaw drivers. Also the AO made a full disallowance of the commission paid to Shri Dilip Panchal, Ms. Sharmila P. Sarmalkar and Neha Nitin Singhadia. The total disallowance made by the AO thus comes to Rs.43,18,566/-.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The assessee filed complete details along with TDS certificates before the Ld. CIT(A). The address of the parties to whom commission paid was also filed before him. Since these were new evidence, the Ld. CIT(A) sent a copy of it to the AO to make inquiry and send a remand report. The AO vide office letter dated 05.09.2014 submitted a remand report to the Ld. CIT(A). The Ld. CIT(A) has observed that no documentary evidence was filed by the assessee during the assessment proceedings, remand proceedings and appellate proceedings to prove the claim of above expenses. Therefore, he dismissed the appeal filed by the assessee.

5. Before us, the Ld. counsel of the assessee submits copy of ledger accounts for commission paid to Shri Dilip Panchal, Ms. Sharmila P. Sarmalkar & Ms. Neha Nitin Singhadia along with Bank Statement and stated that these were filed before the Ld. CIT(A) as well as AO. Also it is stated by him that copy of ledger account for the commission paid to taxi/rickshaw drivers along with evidence was filed before the above Income-tax authorities.

6. On the other hand, the Ld. DR submits that the assessee failed to file documentary evidence in support of its claim before the AO and Ld. CIT(A). Therefore, he supports the order passed by the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. In the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC), it is held that the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment. We are of the considered view that the contentious issues in the instant case could be resolved by examination of the relevant accounts and primary documents. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a fresh assessment after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the complete documents/details before the AO.