ASCENSION HOTELS P LTD. (FORMERLY RATTHA HOTELS PVT LTD.),CHENNAI vs. ACIT, CHENNAI

The assessee has filed this appeal challenging the order dated 26-05-2014 passed by Ld CIT (Appeals)-V and it relates to the assessment year 2009-10. The assessee is aggrieved by the decision rendered by Ld CIT(Appeals) on the following issues:-

We heard the parties and perused the record. With regard to the issue relating to the disallowance of Salary expenses, the Ld A.R submitted that the assessing officer has made the same by conducting independent enquiries about the present employment of the employees. The Ld A.R submitted that the assessing officer has conducted the enquiries after the expiry of three years from the end of the financial year relevant to the assessment year under consideration. He submitted that there is no guarantee that the employees who worked with the assessee in the year under consideration shall continue to work, even after the expiry of three years. He submitted that all the employees have worked with the assessee during the year under consideration and the assessee has paid salaries to those employees and has deducted the TDS also. The Ld A.R submitted that the salary expenses claimed by the assessee consisted of two categories of employees, viz., (a) its own employees and (b) employees sent to the assessee on deputation from its sister concerns. He submitted that the assessee has reimbursed the salary expenses in respect of seconded employees The Ld A.R further submitted that the assessee has earned gross receipts of about `2.54 crores, whereas the Assessing Officer has allowed salary expenditure only to the tune of about `15.00 lakhs.

The Ld D.R submitted that the assessee has filed to prove the salary expenses and hence the Ld CIT(Appeals) has confirmed the disallowance. view that this issue requires fresh examination at the end of the assessing officer. As submitted by Ld A.R, the total disallowance included the salary paid to own employees. Further it is the claim of the Ld A.R that the Assessing Officer has ascertained the position of present employment of the employees as on the date of assessment, whereas what is required to be seen is whether the said employees were working with the assessee in the relevant year under consideration. Further it is submitted that the Assessing Officer has failed to confront the result of his investigation with the assessee, thus violating the principles of natural justice. Hence, we find merit in the submissions of Ld A.R. Accordingly, we set aside the order of Ld CIT(Appeals) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh after affording necessary opportunity of being heard to the assessee and take appropriate decision in accordance with the law.

The next issue that was argued by the Ld A.R relates to the addition made on account of difference in gross receipts. The Assessing Officer, on examination of the TDS certificates, noticed that there was some difference between the gross receipts as per TDS certificates and that disclosed in the books of account. For amount by adopting the TDS rate at 10.3%. Accordingly he added the difference in Gross receipts as computed by him. The Ld CIT(Appeals) also confirmed the same.

The Ld A.R submitted that the applicable rate of TDS was 11.3% and hence the Assessing Officer was wrong in adopting the rate at 10.3%. He further furnished a reconciliation statement before the bench and submitted that the assessee could reconcile the difference in this Statement. Accordingly he prayed that this matter may also be set aside to the file of the Assessing Officer.

The next two issues relate to the disallowances made u/s 14A and sec. 40(a)(ia) of the Act. The Ld A.R submitted that the law relating to both the issues has been elaborated in the latest

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.