M/S. MUKUT MAHAL BANQUET (P) LTD.,MEERUT vs. ITO, MEERUT

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Meerut dated 19.12.2014 pertaining to assessment year 2009-10.

1. That the learned Commissioner of Income Tax (Appeals), Meerut ('Id. CIT-(A)') has erred in law as well as on the facts of the case by confirming the additions of Rs4,25,496/-,to the returned income of the assessee and the various observations -and findings made byhim are either factually incorrect or are untenable in law and the facts of the case have not been considered in the right perspective thereof.

2. That the Id. CIT (A) has grossly erred in law and in the facts of the case by holding that the explanation of the assessee regarding cash of Rs.2,00,000/- stated to be belonging to the daughters of the director, appears to be an after-though, ignoring the fact that the said explanation was offered and recorded in the statement on oath of the director of the assessee company as recorded at the time of the survey.

3. That the Id. CIT (A) has grossly erred in law and in the facts of the case by holding that the explanation of the assessee regarding cash of Rs.63,120/- stated to have been left by an acquaintance of the director of the assessee company, namely Sh. Papit Kumar, in the morning of the day survey was conducted upon the assessee , was not acceptable in view that he was an unrelated, non-assessed agriculturist, ignoring the fact that the said explanation was duly recorded in the statement on oath of the director of the assessee company as recorded at the time of the survey and was duly confirmed by Sh. Papit Kumar during the assessment proceedings.

4. That the Id. CIT(A) has grossly erred in law as well as on the fact of the case in upholding the addition of Rs.1,62,376/- as made by the Id. A.O. ignoring the assessee 's submission and statement on oath of all the customers as recorded during

assessment proceedings and in the remand proceedings, and the observations made by him are totally unjust, and are based on incomplete and incorrect appreciation of facts of the case.

5. The assessee craves leave to add, modify andl or delete any grounds of appeal.

3. The brief facts of the case are that the assessee is a private limited company carrying on the business of running of Hotel and Bar/Banquet Hall etc. A survey u/s. 133A of the I.T. Act, 1961 was conducted upont the premises of the assessee on 17.2..2009. The assessee filed its return of income for the relevant year on 25.9.2009, declaring an income of Rs. 4,75,770/-, which was selected for scrutiny assessment. The assessment proceedings were completed by the AO vide his order dated 31.11.2011 passed u/s. 143(3) of the I.T. Act, assessing the total income of the assessee at Rs. 12,88,157/-, after making the various additions.

4. Aggrieved with the assessment order dated 31.12.2011, assessee appealed before the Ld. CIT(A), who vide impugned order dated 19.12.2014 has partly allowed the appeal of the assessee.

8.1 Ground No. 1 is a general in nature in which the assessee challenges the additions of Rs. 2,63,120/- and Rs. 1,62,376/- as are confirmed by the CIT(A) which are specifically being raised in ground no. 2 to 4.

8.2 In so far as addition in dispute raised in Ground No. 2 & 3 i.e. Rs. 2,00,000/- and Rs. 63,120/- out of cash balacne are concerned, a sum of Rs.2,00,000/- was stated to be belonging to the two daughters of the director of the company. The AO while making addition of the said amount has made finding and the main reason given by the AO was that both the girls made withdrawal on 14.02.2009 from their bank accounts, while the cash was found on 17.02.2009, then how could itbe possible for a concern to retain the cash for 3 days. The further finding of the AO was that the assessee could not produce an specific evidence, which could prove that this is the amount of these two girls. On the other hand, the Id. CIT(A) has confirmed the addition under appeal making different observation to the effect that as to how the cash of the daughter was lying in the business premises of the assessee. As per the Id. CIT(A), it does not seem reasonable that the cash withdrawn by the daughter of the director of the assessee company would be kept at the business premises rather than the residence of the director. The Id. CIT(A) further observed that the explanation given by the AR. seem to be an afterthought.

A sum of Rs.63,120/- out of the cash found was explained to have been left by an acquaintee of the director of the company namely Shri Papit Kumar in the morning of the day of survey. The AO has made addition holding that Shri Papit Kumar is an agriculturist having no relationship with any of the director of the ~ company and was not an assessee and merely on the basis of confirmation of Shri Papit Kumar filed the explanation is not accepted. The Id. CIT(A) has confirmed the addition by observing that the AR. has not been able to counter argument of the AO. I find considerable cogency in the assessee’s submissions that the assessee has explained the availability of cash of Rs.2,63,120/- spontaneously at the time of survey itself when question was first raised to him and therefore the same cannot be regarded as an afterthought. In my view there is no legal bar in keeping cash of daughters of the director at business premises of director and also there is nothing abnormal in keeping the cash balance for 3 days as stated by the A.O. It has also been brought on record at page nos. 27 to 40 of the Paper Book, before the authorities below that the cash by the daughters of director was withdrawn for being deposited in their bank account with Punjab National Bank account and the same was actually deposited on 21.02.2009 in their Punjab National Bank account. As far as the amount of Rs.63,120/- which was left as a trust money by Mr. Papit Kumar on his way while going from Meerut to Delhi for safe custody. The authorities below have treated the said amount as a cash credit and therefore have made and confirmed addition on the ground that he was not assessed to tax. They have not doubted his identity at all. For keeping money in trust, it was not necessary to prove the creditworthiness of the person leaving the money. Otherwise also assessee has submitted Kishan bahi and Khasra of his land showing his land holding. To be a relative of any director is aIso not necessary for keeping the money in trust for a day or two for safe custody. The statement of the director of the assessee at the time of survey operation specifying the exact money to the extent of Rs.63, 120/- also supports assessee's case. In view of the above, I hereby delete the additions in dispute raised in ground no. 2 & 3 and allow the ground no. 2 & 3 in favour of the Assessee.

8.3 In so far as addition in dispute raised in Ground No. 4 i.e. Rs. 1,62,376/- towards alleged difference is concerned, this addition is relating to booking amounts stated to have been paid by six (6) parties as against the amount recorded to have been received by the assessee. The AO during post survey proceedings recorded statement on oath of six (6) parties behind the back of the assessee. Out of the six (6) parties, one party confirmed to have been paid the amount of Rs.20,OOO/-, which was also recorded in the books of account at the same figure. The remaining five (5) parties in their respective statements stated that they have paid amounts more than the amount declared and receipted by the assessee . However, all the five (5) parties had stated in their statement that the amount paid by them was towards hire charges of banquet, charges for waiters, crockery, flower decoration, diesel for generator and other facilities. The AO has referred to the impounded seized aterial stating that this fact is also evident from the perusal thereof, but the AO has not mentioned or pin-pointed any transaction or page number of the seized material, where any transaction showing, different amount more than that of the amount recorded in the regular books of account, was noted/ recorded. The AO has made the reference to the impounded material only for the sake of strengthening his finding without pin-pointing any specific transaction therein. In fact, there is no transaction in the seized material, which was at different amount than the amount recorded in the regular books of account. During assessment proceedings, the AO. was requested to confront the five (5) parties to the assessee for cross examination. The request was not acceded to and the addition was made. The AO has made additions by making findings at pages 5 to 10 of the assessment order. The findings made by the Id. AO. are perverse as all receipts for advances received and details of amount credited in the books of accounts were duly filed before the AO in assessment proceedings and no deficiency therein are pin-pointed by him. The Id. CIT(A) remanded the matter to the file of the AO to confront the said parties to the assessee and their statements on cross examination in remand proceedings were recorded. In my considered view all the five (5) parties have confirmed during cross examination that they have paid the various amounts separately to the different service providers for catering, flower decoration, waiters, diesel and other services and only the amounts which were receipted by the assessee were paid to it. Copies of the statements of all the five (5) parties as recorded behind the back of the assessee as well as recorded' in remand proceedings are placed at pages 44-62 in the paper book. In find that the Id. CIT(A) has confirmed the addition vide para 7.3 of the appeal order simply relying on the finding of the AO regarding impounded books of account and the statement of the five (5) parties concerned, stating that there were difference in the amounts paid by them and amounts receipted by the assessee and making an unwarranted observation that the said parties, even in remand 'proceedings could not clarify satisfactorily that they have paid some amounts separately to some service providers, probably for the reason that the said parties could not tell the names of other service providers to the AO. In view of the statements of the five parties recorded during remand proceedings as are placed at page 46-48, 50- 52, 54-56, 58 and 61-62, I am of the considered view that that the excess amount declared to have been paid by the said five (5) parties during their earlier statements, were in fact paid by them to the different service providers and not to the assessee . The assessee did not provide other services to the parties solemnizing their functions at the banquet of the assessee, which fact also find support from the books of account, where no expenses on waiters, flower decoration, generator diesel, D.J. or other service are booked. The submissions also find support from the statement on oath as recorded at the time of survey from internal pages 3 & 5 as placed at pages 21 & 23 of the paper book. I find consdierable cogency in the contention of the Assessee’s counsel that it is not possible for the parties solemnizing their function to remember the names of the different service providers, being one time dealing only. In view of the above, I hereby delete the addition in dispute raised in ground no. 4 and allow the ground no. 4 in favour of the Assessee.

Order pronounced in the open court on 30/10/2015.