ACIT, CORPORATE CIRCLE-1(1), BHUBANESWAR vs. M/S. HOTEL PAL REGENCY PVT. LTD., BHUBANESWAR

आयकर अपीलीय अधधकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM आयकर अपील सं./ITA No.123/CTK/2016 (धनधाारण वषा / Assessment Year :2009-2010) ACIT, Corporate Circle-1(1), Vs. M/s Hotel Pal Regency Bhubaneswar Pvt. Ltd., Plot No.96, Cuttack Road, Bhubaneswar स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No. : AABCH 9527 M (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) राजस्व की ओर से /Revenue by : Shri D.K.Pradhan, DR निर्ााररती की ओर से /Assessee by : Shri B.N.Mahapatra, AR सुनवाई की तारीख / Date of Hearing : 19/09/2017 घोषणा की तारीख/Date of Pronouncement 21/09/2017 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: The revenue has filed an appeal against the order of CIT(A), Cuttack, in Appeal No.0306/15-16, dated 25.1.2016, passed u/s.147/143(3) of the Income Tax Act, 1961 for the assessment year 2009-2010, wherein the revenue has raised the following grounds :- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in deleting the addition of Rs.54,54,243/- made by the AO on account of undisclosed income as security deposit. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in not accepting the examination of findings made by the AO on the issue. 2. Brief facts of the case are that the assessee is engaged in the business of hotel and filed the return of income electronically for the assessment year 2009-2010 on 16.11.2009 with total income of Rs.Nil and the assessment was completed u/s.143(3) of the Act on 08.12.2011 determining total loss of Rs.21,09,360/-. Subsequently, the AO has

2 ITA No.123/CTK/2016 reason to believe there is income escaping assessment and the case was reopened on 19.2.2014 and the notice u/s.148 of the Act was issued. The AO recoded the reasons for reopening and subsequently notice u/s.143(2) and 142(1) was issued along with questionnaire. In compliance, ld. AR of the assessee appeared from time to time and submitted the information. In respect of security deposit, the AO found that the assessee in the balance sheet has disclosed the liability Rs.1,96,99,575/- as security deposit from shopping arcade tenants under the head unsecured loan. As per the details of rent and security deposit, the assessee could furnish only details to the extent of Rs.1,42,45,332/-, therefore, the AO is of the opinion that the assessee has shown excess liability of Rs.54,54,243/- and explanation was called for. The assessee has explained along with statement of security deposit that some of the shopkeepers took the shop in 2008 and paid the security deposit, whereas shops were opened later on and the rent started from the opening day of the shop and two months time was provided to the shopkeepers for preparing of interior of shop. But the AO was not satisfied with the explanation and made addition along with other additions and assessed the total income of Rs.34,67,520/- and passed the order u/s.143(3)/147 of the Act, dated 4.8.2014. 3. Aggrieved by the order of AO, the assessee filed an appeal with the CIT(A). In the appellate proceedings, ld. AR of the assessee appeared and argued the grounds and reiterated the submissions made before the AO. In respect of addition of undisclosed income as security deposit made

3 ITA No.123/CTK/2016 by the AO Rs.54,54,243/-, the CIT(A) considered the findings of AO and submissions made by assessee and observed at para 3.2 in respect of security deposits and deleted the addition which reads as under :- 3.2 I have considered the matter carefully with reference to the facts on The total security deposit reflected in the balance sheet stands at Rs. 1,96,99,575/-. The details of such deposits have been filed. In the course of regular assessment, the assessee had also submitted details of such security deposits tenant-wise which amounted to Rs. 1,42,45,332/-. Security deposits to the extent of Rs.54,54,243/- were received from prospective tenants which did not find place in the details furnished because these prospective tenants had not occupied the shop premises by end of the previous year 2008-09. It is totally uncalled for on the part of the AO to reject the explanation of the assessee in this regard in a highhanded and arbitrary manner with a sweeping remark that the explanation is not satisfactory. In any case, the total security deposits as reflected in the balance sheet stood at Rs. 1,96,99,575/- and the AO had not brought any materials on record that deposits to the extent of Rs,54,54,243/- was not genuine. The explanation of the assessee was more than satisfactory and there was no reason to make any addition on account of security deposits especially when the assessee is a company and the final accounts were duly audited as per the Companies Act as well as u/s.44AB of the Act. The addition of Rs.54,54,243/- is, therefore, deleted. 4. Aggrieved by the order of CIT(A), the revenue has filed an appeal before the Tribunal. 5. Before us, ld. DR submitted that the CIT(A) has erred in deleting the addition of Rs.54,54,243/- made by the AO in respect of undisclosed security deposits. Ld. DR further submitted that the assessee at the time of filing details could not give the explanation for the difference, therefore, the AO was correct in making the addition. Contra, ld. AR relied on the orders of CIT(A) and submitted that the assessee filed the tax audit report in Form 3CD and ledger copy of the security deposits to the extent of Rs.1,96,99,575/- and prayed for dismissal of revenue’s appeal.

4 ITA No.123/CTK/2016 6. We have heard the rival contentions and perused the material on record. The sole crux of the disputed issue is with respect to the addition made by the AO of security deposit of Rs.54,54,243/-. Ld. DR’s contention was that assessee could not reconcile the facts during the assessment and the CIT(A) has unilaterally dealt on this issue and granted relief to the assessee. Whereas ld. AR submitted that the assessee has filed statement of liabilities and also produced the copy of audited tax audit report along with statement of security deposit to substantiate that there is no difference in the amount of security deposit, the fact that in some cases, rent starts subsequently after two months of the interior work, therefore, there is some difference of time gap between security deposit and rental income and the assessee has rightly disclosed the entire rental income received in the year and regularly filing the return of income. We find that the CIT(A) has considered this submissions and also dealt on the disputed issue. Further ld. DR could not point out any reason with cogent material to doubt the genuineness of the security deposits. Considering the apparent facts material on record, we are not inclined to interfere in the order of CIT(A), who has discussed the issue elaborately and granted relief. Accordingly, we upheld the action of CIT(A) and dismiss the grounds of appeal of the revenue. 7. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on this 21/09/2017. Sd/- Sd/- (N. S. SAINI) (PAVAN KUMAR GADALE) लेखा सदस्य / ACCOUNTANT MEMBER न्याधयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनांक Dated 21/09/2017 प्र.कु.धि/PKM, Senior Private Secretary

5 ITA No.123/CTK/2016 आदेश की प्रधतधलधप अग्रेधषत/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant- ACIT, Corporate Circle-1(1), Bhubaneswar 2. प्रत्यथी / The Respondent- M/s Hotel Pal Regency Pvt. Ltd., Plot No.96, Cuttack Road, Bhubaneswar 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT निभागीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, कटक / DR, ITAT, Cuttack 5. 6. गाडा फाईल / Guard file. सत्याधपत प्रधत //True Copy// आदेशानुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीलीय अधधकरण, कटक / ITAT, Cuttack