Seasons Catering Services Pvt. Ltd., New Delhi v. DCIT, New Delhi

ITA 3463/DEL/2008 | 2005-2006
Pronouncement Date: 30-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 346320114 RSA 2008
Assessee PAN AAFCS6016G
Bench Delhi
Appeal Number ITA 3463/DEL/2008
Duration Of Justice 1 year(s) 5 month(s) 10 day(s)
Appellant Seasons Catering Services Pvt. Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 30-04-2010
Date Of Final Hearing 16-03-2010
Next Hearing Date 16-03-2010
Assessment Year 2005-2006
Appeal Filed On 20-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO. 3463/DEL/2008 ASSESSMENT YEAR : 2005-06 SEASONS CATERING SERVICES PVT. LTD. B-6 ANUPAM PLAZA AZAD APARTMENTS HAUZ KHAS NEW DELHI VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 8(1) NEW DELHI PAN: AAFCS 6016 G APPELLANT RESPONDENT APPELLANT BY : SHRI KAPIL GOEL CA RESPONDENT BY : MRS. SHUMANA SEN SR. DR O R D E R PER: C.L. SETHI J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 01.09.2008 PASSED BY THE LD. CIT(A) IN THE MATTER OF ASSESSMENT MADE BY THE AO U/S. 143(3) OF THE INCOME TAX ACT 1961 (THE ACT) FOR THE A.Y. 2005- 06. 2. GROUND NO. 1 AND 2 ARE DIRECTED AGAINST THE CIT( A)S ORDER IN SUSTAINING THE ADDITION OF RS. 25 00 000/- MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INCOME ALLEGEDLY DICTATED AT THE TIME O F SURVEY CONDUCTED AGAINST THE ASSESSEE U/S. 133 OF THE ACT. ITA NO. 3463/DEL/2005 2 2.1 RELEVANT FACTS GIVING RISE TO THIS ISSUE AS BOR NE OUT FROM THE ORDERS OF THE AUTHORITIES BELOW AND MATERIALS ON RECORD MAY IN BRIEF BE STATED IN ENSUING PARAS. 2.2 THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CATERING F&B CONTRACT OF DLF GOLF CLUB GURGAON AND HAS BEEN RUN NING AN INDEPENDENT RESTAURANT IN THE DDA PICNIC HUT COMPLEX MEHRAULI. THERE WAS A SURVEY OPERATION U/S. 133A CONDUCTED AGAINST THE ASSESSEE ON 14.12.2004 BY THE DEPARTMENT AT ASSESSEES VARIOUS BUSINESS PREMISES. DURING THE COURSE OF SURVEY VARIOUS INCRIMINATING DOCUMENTS WERE FOUND A ND SOME OF THE DOCUMENTS WERE ALSO IMPOUNDED. 2.3 IN THIS CONNECTION THE AO STATED THAT IN THE L IGHT OF THE VARIOUS DISCREPANCIES REVEALED FROM THE VARIOUS DOCUMENTS A ND PAPERS FOUND DURING THE SURVEY THE ASSESSEE COMPANY VOLUNTARILY SURREN DERED AMOUNT OF RS. 25 00 000/- AS ADDITIONAL INCOME VIDE LETTER DATED 11.02.2005 AND THE ASSESSEE ALSO PAID THE ADVANCE TAX THEREUPON BUT O N PERUSAL OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET FILED ALONWITH THE RETURN OF INCOME IT WAS FOUND THAT THE ASSESSEE HAS NOT INCLUDED IN THE RETURN OF INCOME THE AFORESAID SUM OF RS. 25 00 000/- SURRENDERED BY THE ASSESSEE VIDE LETTER DATED 10.02.2005. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS THUS ASKED BY THE AO TO EXPLAIN THE REASON FOR NOT DISCLOSING THE AMOUNT OF RS. 25 00 000/- ITA NO. 3463/DEL/2005 3 SURRENDERED BY THE ASSESSEE VIDE AFORESAID LETTER. IN REPLY THE ASSESSEE SUBMITTED AS UNDER:- WE HAVE SURRENDERED RS. 25 00 000/- AT THAT POINT OF TIME THE SURRENDER WAS MADE IN SPITE OF THERE BEIN G NO CLARITY ABOUT THE EXISTENCE/NATURE/EXTENT OF UNDISC LOSED INCOME. AS CAN BE EXPECTED DURING SURVEY PROCEEDI NGS A LOT OF MATERIAL MOSTLY IRRELEVANT WAS IMPOUNDED BY THE DEPARTMENT AND AT THAT POINT OF TIME WE HAD DEPOSI TED AN ADHOC PAYMENT OF TAX OF RS. 9 15 000/-. SUBSEQUENT LY AFTER CLOSING OF THE YEAR ON MARCH 31 2005 WHEN W E FINALIZED OUR ACCOUNTS WE ARRIVED AT OUR TOTAL TAX LIABILITY FOR THE YEAR ON WHICH WE DULY PAID THE ENTIRE TAX A FTER ADJUSTING THE ADHOC PAYMENT OF RS. 9 15 000/-. 2.4 THE AFORESAID EXPLANATION OF THE ASSESSEE WAS N OT FOUND FAVOUR WITH THE AO PARTICULARLY IN VIEW OF THE DISCREPANCIES IN THE BOOKS OF ACCOUNTS FOUND AND IMPOUNDED AT THE TIME OF THE SURVEY. 2.5 IT WAS NOTICED BY THE AO FROM ANNEXURE A 1(5) IMPOUNDED FROM PREMISES AT D 1-7 DR. AMBEDKAR COLONY NEW DELHI T HAT IT WAS A PART REGISTER CONTAINING THE RECORD OF CLIENTS OR PARTIE S OR CUSTOMERS CATERED BY THE ASSESSEE. THE OTHER RECORDS WERE ALSO IMPOUNDE D FROM THE PREMISES D- 6 ANUPAM PLAZA AZAD APARTMENTS HAUZ KHAAS NEW D ELHI. FROM THE IMPOUNDED DOCUMENTS IT WAS NOTED THAT THE ASSESSEE HAS NOT RECORDED ALL THE RECEIPTS IN ITS BOOKS OF ACCOUNT. 2.6 THE AO THEN POINTED OUT THE VARIOUS OTHER DISC REPANCIES FOUND IN THE ACCOUNTS VIS--VIS THE MATERIAL OR PAPERS IMPOUNDED DURING THE COURSE OF THE SURVEY. ITA NO. 3463/DEL/2005 4 2.7 IN THE LIGHT OF THE DISCREPANCIES NOTICED BY TH E AO THE AO VIDE ORDER- SHEET ENTRY DATED 20.08.2007 SPECIFICALLY ASKED THE ASSESSEE TO FILE A NOTE ON THE BUSINESS OF CATERING AND GIVE EXPLANATION AS TO HOW THE RATES ARE FIXED AND MENU IS DECIDED. THE ASSESSEE VIDE LETTER DATE D 05.09.2007 STATED THAT RATE ARE FIXED IN THE INDUSTRY ON VARIOUS FACTORS L IKE:- I. COMPOSITION OF MENU II. TIME OF THE ORDER WHEN THE PARTY IS HELD (SEASO N NON-SEASON PEAK SEASON LEAN SEASON) III. AVAILABILITY TO DO AND PROFILE OF THE CUSTOMER S. IV. THE LEAD-TIME BETWEEN THE ORDER AND THE DATE OF FUNCTION. V. WHERE IT IS TO BE HELD. VI. RELATIONSHIP WITH THE CUSTOMERS AND DURATION OF ASSOCIATION WITH THE CUSTOMER. 2.8 THE REPLY OF THE ASSESSEE WAS NOT FOUND ACCEPTA BLE TO THE AO IN AS MUCH AS THE ASSESSEE FAILED TO PROVIDE DETAILS ABOU T THE MENU RATE AND NATURE OF SERVICES ETC. THE AO FURTHER OBSERVED TH AT THE ASSESSEE HAS CONDUCTED A FUNCTION AND PARTY RAISING AS HIGH OF R S. 13 00 000/- AND RS. 10 58 168/- TO 12.25 LACS. ON THESE FACTS THE AO STATED THAT IT CANNOT BE ACCEPTED THAT THE ASSESSEE WAS RUNNING A TOTALLY UN ORGANIZED SECTOR. ITA NO. 3463/DEL/2005 5 2.9 SINCE THE VARIOUS TRANSACTIONS FOUND RECORDED I N THE PAPERS FOUND DURING THE COURSE OF SURVEY WERE NOT RECORDED IN TH E BOOKS OF ACCOUNTS THE AO VIDE ORDER-SHEET ENTRY DATED 10.12.2007 ASKED TH E ASSESSEE TO EXPLAIN AS TO WHY THE BOOKS OF THE ASSESSEE SHOULD NOT BE REJE CTED U/S. 145 OF THE ACT. IN REPLY THERE TO THE ASSESSEE VIDE LETTER DATED 1 2.12.2007 SUBMITTED THAT THE ASSESSEES ACCOUNTS WERE AUDITED U/S. 44AB OF THE A CT AND ALSO UNDER THE COMPANIES ACT AND DULY AUDITED ACCOUNTS ALONGWITH AUDIT REPORTS WERE FILED ALONGWITH RETURN OF INCOME FILED BY THE ASSES SEE. THE ASSESSEE FURTHER SUBMITTED THAT THE LIST OF BOOKS OF ACCOUNTS MAINTA INED BY THE ASSESSEE ARE MENTIONED IN THE TAX AUDIT REPORT AND ALL ENTRIES OF BUSINESS WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE VI DE LETTER DATED 18.12.2007 FURTHER SUBMITTED THAT SINCE SURVEY WAS CONDUCTED O N 14.12.2004 AND THE SAME WAS LASTED TILL WEE HOURS ON 15.12.2004 CREATI NG A LOT OF STRESS ON ALL THE EMPLOYEES AND WORK AND THE BUSINESS WAS HAMPERE D TO A GREAT EXTENT THE ASSESSEE IMMEDIATELY CANCELLED THE FUNCTION OF MR. KUSHAAL AS THEY WERE NOT IN A POSITION TO CARRY OUT THE ORDER. THIS EXP LANATION OF THE ASSESSEE ABOUT THE CANCELLATION OF THE PARTY WAS NOT FOUND A CCEPTABLE TO THE AO IN THE ABSENCE OF EVIDENCES AND HAVING REGARD TO THE GROUN D REALITIES. WITH REGARD TO THE ASSESSEES SUBMISSION THAT BOOKS OF ACCOUNTS WERE DULY AUDITED UNDER THE INCOME TAX ACT AS WELL AS UNDER THE COMPANIES A CT THE AO COMMENTED THAT GETTING THE ACCOUNTS AUDITED U/S. 44 AB OR UNDER THE ITA NO. 3463/DEL/2005 6 COMPANIES ACT WOULD NOT MEAN THAT THE ASSESSEE HAS RECORDED ALL THE RECEIPTS AND THE PAYMENTS IN HIS BOOKS OF ACCOUNTS AS THE AUDITOR CAN ONLY AUDIT THE ENTRIES WHICH WERE ENTERED INTO THE BOOK S OF ACCOUNTS AND AUDITORS ARE NOT SUPPOSED TO KNOW ABOUT THE ENTRIES WHICH ARE NOT RECODED IN THE BOOKS OF ACCOUNTS. 2.10 IN THE LIGHT OF THE VARIOUS DEFECTS FOUND IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND MADE THE ADDITION OF RS. 25 00 000/- TO THE TRADING RESU LT DECLARED BY THE ASSESSEE IN THE BOOKS. 2.11 BEING AGGRIEVED THE ASSESSEE PREFERRED AN APP EAL BEFORE THE LD. CIT(A). 2.12 BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE AO HAD MISREAD AND MISINTERPRET THE ENTRY ON IMPOUNDED PAGES OF 52 AND 53 OF ANNEXURE A 1 (5) IN AS MUCH AS THE OBSERVATION OF THE AO T HAT ONLY RS. 400/- PER HEAD WAS RECORDED IN THE BOOKS AS AGAINST RS. 650/- CHAR GED PER HEAD WAS INCORRECT. IT WAS EXPLAINED THAT THESE PAGES RELAT ED TO THE CATERING SERVICES PROVIDED TO GANNON DUNKERLEY & CO. ON 15.12.2004 AN D A CERTIFICATE FOR THAT COMPANY WAS FURNISHED SHOWING THAT THE CATERIN G WAS FOR 200 PERSONS @ RS. 410/- PER HEAD WHEREAS RS. 650/- PER KG. WAS CHARGED SEPARATELY FOR 20 KG. PRAWN TO BE SUPPLIED EXTRA. IT WAS THEREFO RE STATED THAT THERE WAS NO DISCREPANCY BETWEEN THE DOCUMENT AND THE AMOUNT REC ORDED IN THE BOOKS. ITA NO. 3463/DEL/2005 7 HE FURTHER CONTENDED THAT THE CATERING SERVICES INT ENDED TO BE PROVIDED TO MR. KUSHAAL AS RECORDED IN IMPOUNDED DOCUMENTS WAS ULTIMATELY CANCELLED AND CONSEQUENTLY THE ASSESSEE RECEIVED NO MONEY ON THAT ACCOUNT AND THAT IS WHY NO RECEIPT WAS SHOWN IN THE BOOKS OF ACCOUNT . WITH REGARD TO THE OTHER DISCREPANCIES NOTED IN VARIOUS OTHER DOCUMENT S THE ASSESSEE SUBMITTED THAT THE ENTRIES ON THOSE PAPERS WERE ROUGH WORKING AND THEY HAD NO RELEVANCY WITH THE ACTUAL RECEIPT RECORDED IN THE B OOKS OF ACCOUNT. IT WAS SUBMITTED THAT THE CONTENTS OF THE DOCUMENTS DID NO T INDICATE ANYTHING OR THE CONTEXT IN WHICH THEY WERE WRITTEN. THEY WERE NOT SIGNED NOR DATED. THE NATURE OF CALCULATION MADE ON THOSE DOCUMENTS WAS A LSO NOT KNOWN. THE ASSESSEE THEREFORE CONTENDED THAT ADDITION OF RS. 25 00 000/- MADE BY THE AO ON THE BASIS OF ASSESSEES DECLARATION WAS NOT J USTIFIED. THE ASSESSEE ALSO RELIED UPON THE VARIOUS DECISIONS AS MENTIONED IN THE CIT(A)S ORDER. THE ASSESSEE FURTHER CONTENDED THAT SINCE THE ALLEG ED DISCREPANCIES POINTED OUT BY THE AO WERE DULY EXPLAINED THE A WAS NOT JU STIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THEN MAKING T HE ADDITION OF RS. 25 00 000/-. 2.13 AFTER CONSIDERING THE ASSESSEES SUBMISSION AN D THE AOS ORDER INCLUDING THE ASSESSMENT RECORDS AND THE VARIOUS MA TERIALS AND PAPERS COLLECTED IN THE PRESENT CASE THE CIT(A) CONFIRMED THE ADDITION BY OBSERVING AND HOLDING AS UNDER:- ITA NO. 3463/DEL/2005 8 I. VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE AR E OF NO ASSISTANCE TO THE ASSESSEE IN AS MUCH AS IN THE PR ESENT CASE THE ASSESSEE HAS SURRENDERED THE INCOME NOT DURING THE COURSE OF THE SURVEY PROCEEDINGS BUT SURRENDERED THE INCOME V OLUNTARILY VIDE LETTER DATED 11.02.2005 FILED AFTER ABOUT TWO MONTHS FROM THE DATE OF THE SURVEY CONDUCTED ON 14.12.2004. TH E CIT(A) OBSERVED THAT IN THE DECISIONS RELIED UPON BY THE A SSESSEE THE ISSUE IS WITH REGARD TO THE SURRENDER OF THE ADDITI ONAL INCOME MADE AT THE TIME OF SURVEY BUT LATER ON RETRACTED. THOUGH IN THE PRESENT CASE THE ADDITIONAL INCOME HAS BEEN OF FERED BY THE ASSESSEE SUBSEQUENTLY AFTER THE ASSESSEE WAS ASKED TO GIVE EXPLANATION AS TO THE VARIOUS DOCUMENTS IMPOUNDED A T THE TIME OF THE SURVEY. THE CIT(A) FURTHER OBSERVED THAT IT WAS THE CASE WHERE NOT ONLY DID THE ASSESSEE DISCLOSED THE ADDIT IONAL INCOME OF RS. 25 00 000/- BUT ALSO PAID THE TAXES OF RS. 9 150 000/- DUE THEREUPON BY WAY OF ADVANCE TAX PAID BY 31.03.2005 II. THE CIT(A) FURTHER HELD THAT IT IS NOT THE CAS E WHERE STATEMENT DECLARING ADDITIONAL INCOME WAS MADE UNDER PRESSURE OR COERCION OR UNDER MISTAKEN BELIEF AT THE TIME OF TH E SURVEY. III. THE IMPOUNDED DOCUMENTS WERE HANDED OVER BY TH E INVESTIGATION WING TO THE AO VIDE LETTER DATED 21.0 1.2005 AND ITA NO. 3463/DEL/2005 9 AFTER EXAMINING THE VARIOUS PAPERS AND DOCUMENTS FO UND AT THE TIME OF SURVEY THE ASSESSEE VIDE LETTER DATED 11.0 2.2005 VOLUNTARILY OFFERED THE ADDITIONAL INCOME AND THUS RETRACTION MADE IN THE RETURN OF INCOME DOES NOT HAVE ANY VALI D REASON OR BASIS. IV. THE CERTIFICATE FROM THE GANNON DUNKERLEY & CO. FILED DURING THE COURSE OF APPELLATE PROCEEDINGS WOULD ALSO OF N O HELP TO THE ASSESSEE IN AS MUCH AS IT IS A SELF SERVING DOCUME NT AND ONCE EVENT OF CATERING SERVICES IS COMPLETED THE ADDITI ONAL MONEY RECEIVED BY THE CATERER PAID IN CASH WOULD NEVER BE CERTIFIED BY THE CUSTOMERS. THE ADDITION HAS BEEN MADE BY THE A O ON THE BASIS OF NOTING IN THE IMPOUNDED PAPER IN RESPECT O F WHICH THE ASSESSEE HAS NOT GIVEN ANY SATISFACTORY EXPLANATION . 2.14 STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEF ORE US. 2.15 THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATE D THE CONTENTIONS AND SUBMISSIONS THAT WERE MADE BEFORE THE LD. CIT(A) TO CONTEND THAT ACTUAL CHARGES RECEIVED FROM GANNON DUNKERLEY & CO. WAS ON LY RS. 400/- PER HEAD AND NOT RS. 650/- PER HEAD AND THAT MONEY OF RS. 650/- MENTIONED IN THE IMPOUNDED DOCUMENTS WAS WITH REFERENCE TO THE R ATE OF PRAWNS PER KG. TO BE CHARGED FOR 20 KG. PRAWNS TO BE SUPPLIED EXTR A AND THUS THERE WAS NO DISCREPANCY BETWEEN THE ENTRY MADE IN THE IMPOUNDED DOCUMENT AND THE ITA NO. 3463/DEL/2005 10 ENTRY MADE IN BOOKS. HE FURTHER SUBMITTED THAT THE OTHER DOCUMENTS FOUND DURING THE COURSE OF THE SURVEY WAS WITH REFERENCE TO THE CATERING SERVICES INTENDED TO BE GIVEN TO ONE MR. KUSHAAL TO WHOM SE RVICES WERE ULTIMATELY NOT GIVEN BECAUSE OF SURVEY TAKEN PLACE AT THE ASSE SSEES PREMISES ON 14.12.204 CONTINUED UPTO WEE HOURS OF 15.12.2004. HE FURTHER CONTENDED THAT VARIOUS OTHER DISCREPANCIES POINTED OUT BY THE AO ARE PURELY BASED ON ROUGH NOTING AND WORKING HAVING NO RELATION OR CONN ECTION TO THE ACTUAL BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE. HE F URTHER SUBMITTED THAT MERELY ON THE BASIS OF DECLARATION WITHOUT THE SAME BEING SUPPORTED BY ANY MATERIAL OR EVIDENCES FOUND DURING THE COURSE OF TH E SURVEY NO ADDITION CAN BE MADE. HE FURTHER SUBMITTED THAT THE STATEMENT M ADE AT THE TIME OF THE SURVEY IS NOT CONCLUSIVE SO THAT ANY INCOME OFFERED BY THE ASSESSEE IN THE STATEMENT CAN BE BROUGHT TO TAX MERELY ON THE BASIS OF ASSESSEES STATEMENT WITHOUT THE SAME BEING SUPPORTED BY ANY SUPPORTING EVIDENCES. HE THEREFORE SUBMITTED THAT THE ADDITION OF RS. 25 00 000/- MADE BY THE AO AND FURTHER CONFIRMED BY THE CIT(A) IS UNJUSTIFIED. 2.16 THE LD. DR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO GIVE ANY SATISFACTORY OR ACCEPTABLE EX PLANATION WITH REGARD TO THE VARIOUS DOCUMENTS OR PAPERS FOUND DURING THE CO URSE OF THE SURVEY. IT WAS THE BURDEN OF THE ASSESSEE TO EXPLAIN THE NATUR E OF EACH AND EVERY ENTRY RECORDED IN THE IMPOUNDED DOCUMENTS BY GIVING THE S ATISFACTORY EXPLANATION ITA NO. 3463/DEL/2005 11 AND EVIDENCES IN SUPPORT THEREOF. IT WAS FURTHER C ONTENDED BY THE LD. DR THAT SINCE VARIOUS DEFECTS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS HAVE NOT BEEN RECONCILED OR HAVE BEEN PROPERLY EXPL AINED THERE COULD NOT BE ANY DISPUTE TO THE FACT THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT CORRECT AND COMPLETE SO AS TO DEDUCE THE T RUE PROFIT THEREFROM. HE THEREFORE CONTENDED THAT THE AO WAS JUSTIFIED IN R EJECTING THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND THEN IN MAK ING ADDITION OF RS. 25 00 000/- WHICH HAS BEEN REASONABLY DETERMINED I N THE LIGHT OF THE ASSESSEES OWN ADMISSION. HE ALSO REITERATED THE VARIOUS OBSERVATION AND REASONS GIVEN BY THE LD. CIT(A) IN SUSTAINING THE A DDITION. 2.17 RIVAL CONTENTIONS OF BOTH THE PARTIES HAVE BEE N CONSIDERED. THE ORDERS OF THE AUTHORITIES BELOW HAVE BEEN CAREFULLY PERUSED. WE HAVE ALSO PERUSED THE VARIOUS DOCUMENTS AND PAPERS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. 2.18 IN THE PRESENT CASE IN THE LIGHT OF THE VARIO US DEFECTS AND DISCREPANCIES FOUND IN THE BOOKS OF ACCOUNT MAINTAI NED BY THE ASSESSEE THE AO HAS REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND HAS MADE THE ADDITION OF RS. 25 00 000/- TO THE TRADING RESULTS DECLARED IN THE BOOKS BY THE ASSESSEE. THE LD. CIT(A) HAS UPHELD T HE AOS ORDER. IN THIS RESPECT THE FIRST QUESTION THAT ARISES FOR OUR CON SIDERATION IS WHETHER THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT IS AN ITA NO. 3463/DEL/2005 12 ADMITTED POSITION THAT A SURVEY U/S. 133A WAS CONDU CTED AT THE ASSESSEES BUSINESS PREMISES ON 14.12.2004 DURING THE COURSE OF WHICH CERTAIN DOCUMENTS AND PAPERS WERE FOUND AND WERE ALSO IMPOU NDED. ONE OF THE DOCUMENT FOUND AND IMPOUNDED DURING THE COURSE OF T HE SURVEY IS ANNEXURE A-1(5) PAGE NO. 52 INDICATING THAT THE ASSESSEE HA D RENDERED CATERING SERVICES IN RESPECT OF 600 PERSONS @ RS. 450/- PER PERSON. IT IS THE ALLEGATION OF THE AO THAT THIS RECEIPT WAS NOT ACCO UNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HOWEVER ON THE OTHER HA ND IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE PARTY BOOKED IN RESPECT OF ONE FUNCTION AT THE PREMISES OF ONE MR. KUSHAAL TO BE ORGANIZED WAS UL TIMATELY CANCELLED AND NO RECEIPT TOWARDS CATERING SERVICES WERE RECEIVED BY THE ASSESSEE AND THEREFORE THE QUESTION OF ENTERING THOSE RECEIPTS IN THE BOOKS OF ACCOUNTS DID OR COULD NOT ARISE. THE ASSESSEE SUBMITTED THAT FO R THE REASON THAT A SURVEY WAS CONDUCTED ON 14.12.2005 AT THE ASSESSEES PREMI SES AND THE ASSESSEE WAS VERY MUCH UPSET BY THE SURVEY THE FUNCTION ARR ANGED FOR 15.12.2004 FOR MR.KUSHAAL WAS CANCELLED AS IF THE ASSESSEE WOULD H AVE GONE AHEAD WITH THE ARRANGEMENTS THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO CARRY OUT THE SAME EFFICIENTLY AND THERE WOULD HAVE BEEN A TOTAL LOSS OF REPUTATION. THE EXPLANATION OF THE ASSESSEE AS WELL AS THE AOS STA ND IN THIS RESPECT OF THE MATTER HAS BEEN EXAMINED AND CONSIDERED BY US. WE HAVE GONE THROUGH THE RELEVANT SEIZED PAPERS PLACED AT PAGE 110 OF THE PA PER BOOK FILED BY THE ITA NO. 3463/DEL/2005 13 ASSESSEE. IN THIS PAGE IT IS MENTIONED THAT ON OC CASION OF SHAADI AN ARRANGEMENT WAS TO BE MADE ON 15.12.2004. NUMBER O F GUESTS GUARANTEED BY THE HOST WAS GIVEN AT 600 AND NUMBERS OF GUESTS EXPECTED WERE MENTIONED AS 700. THE RATE PER HEAD WAS FIXED AT R S. 400/- + TAXES. THE DETAILS OF THE MENU HAS ALSO BEEN MENTIONED THEREIN . THIS ORDER WAS BOOKED ON 12.09.2004. THIS IS ON ASSESSEES OWN LETTER-HE AD. IT IS ALSO MENTIONED THEREIN THAT AN ADVANCE OF RS. 20 000/- WAS RECEIVE D BY THE ASSESSEE. IN THE COURSE OF HEARING OF THIS APPEAL A QUERY WAS RAISE D BY THE BENCH TO THE LD. COUNSEL FOR THE ASSESSEE AS TO WHETHER THE ASSESSEE HAS FILED ANY CONFIRMATION LETTER FROM MR. KUSHAAL THAT THE DINNE R FIXED ON ACCOUNT OF SHAADI TO BE ARRANGED BY THE PRESENT ASSESSEE ON 15 .12.2004 WAS NOT ARRANGED BY THE ASSESSEE AND THE CUSTOMER MADE ALT ERNATIVE ARRANGEMENTS OF HIS OWN. IN REPLY THERETO THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO SUCH LETTER OR CONFIRMATION FROM MR. KUSHAAL HAS BE EN PRODUCED BY THE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE LD. CIT (A) THAT THE DINNER TO BE ARRANGED BY THE ASSESSEE WAS CANCELLED. IT WAS ALS O POINTED OUT TO THE LD. COUNSEL FOR THE ASSESSEE AS TO WHETHER THE ADVANCE AMOUNT OF RS. 20 000/- RECEIVED BY THE ASSESSEE AT THE TIME OF BOOKING THE ORDER HAS BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND IF IT SO ACCOUNTE D FOR WHETHER THE AMOUNT RECEIVED BY WAY OF ADVANCE HAS BEEN REFUNDED BY THE ASSESSEE TO MR. KUSHAAL AND NECESSARY ENTRIES TO THAT EFFECT ARE MA DE IN THE BOOKS OF ITA NO. 3463/DEL/2005 14 ACCOUNTS. IN THIS RESPECT THE LD. COUNSEL FOR THE ASSESSEE FAILED TO GIVE ANY REPLY. THE ASSESSEE FAILED TO POINT OUT THAT AMOUN T OF RS. 20 000/- RECEIVED ON 12.09.2004 WAS ACCOUNTED FOR IN THE BOOKS OF ACC OUNTS. IN THE LIGHT OF THESE FACTS POINTED OUT ABOVE WE FIND THAT THE ASS ESSEE HAS MERELY GIVEN A FANCIFUL AND BLUNT EXPLANATION WITHOUT THE SAME BEI NG SUPPORTED BY ANY IOTA OF EVIDENCE THAT DINNER TO BE ARRANGED BY THE ASSES SEE ON 15.12.2004 WAS ULTIMATELY CANCELLED. WE THEREFORE HAVE NO HESIT ATION IN HOLDING THAT THE RECEIPT AGAINST THE SAID CATERING SERVICES RENDERED BY THE ASSESSEE TO MR. KUSHAAL HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOU NTS AND HAS BEEN KEPT OUTSIDE THE BOOKS AND THUS THE RECEIPTS HAVE BEEN SUPPRESSED BY THE ASSESSEE. IT IS WELL SETTLED THAT WHEN THERE IS SU PPRESSION OF SALES OR RECEIPTS THE BOOKS OF THE ASSESSEE CAN BE REJECTED AND INCOM E CAN BE ESTIMATED. IT IS OF GREAT IMPORTANCE THAT THE DETAILS OF ALL THE SAL ES AND RECEIPTS SHOULD BE VERIFIABLE AND CORRECTLY RECORDED. THE BOOKS CAN B E REJECTED EVEN IF THE SOME OF THE SALES ARE FOUND TO BE VERIFIABLE AND TH E REST ARE NOT VERIFIABLE. THEREFORE WE HOLD THAT THE AO WAS JUSTIFIED IN REJ ECTING THE BOOKS OF THE ASSESSEE AND IN ESTIMATING THE INCOME MY MAKING ADD ITION TO THE TRADING RESULTS DECLARED BY THE ASSESSEE. 2.19 WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO GIVE ANY SATISFACTORY EXPLANATION AS TO THE FOLLOWING DISCREPANCIES FOUND IN THE BOOKS OF ACCOUNT ITA NO. 3463/DEL/2005 15 MAINTAINED BY THE ASSESSEE VIS--VIS VARIOUS DOCUME NTS AND PAPERS FOUND AND IMPOUNDED DURING THE COURSE OF THE SURVEY:- DISCREPANCIES NOTICED: ANNEXURE A-9/PAGE 16 B 6 HAUZ KHAS IT IS A HAND WRITTEN ROUGH WORKING IT IS A PLAIN PAPER IN THE NAME OF KUNAL LALANI REGARDING DETAILS OF FUNCTIONS DATED 06.11.2004 FOR DINNER PARTY ON 6.11 .2004 FOR 325 PERSONS. THE AMOUNT QUOTED IS RS. 2 34 737 /-. THE SAME HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACC OUNT. THE ASSESSEES EXPLANATION IS THAT IT IS HAND WRIT TEN ROUGH WORKING AND NOT RELEVANT WITH THE BOOKS OF ACCOUNT IS NOT ACCEPTABLE. PAGE 39/A-1 DATED 28.11.2004 RS. 22 375 IT IS A NOTE IN RESPECT OF SOME CASUAL BOYS. CORRESPONDING ENTRY OF RECEIPTS ARE NOT APPEARING I N THE BOOKS OF ACCOUNT. A 1/PAGE 42 EXPENDITURE OF RS. 10 500/- SIGNED BY ASHISH GUPTA NOT ACCOUNTED FOR. THE CORRESPONDING RECEIPT OF TH E FUNCTION WHERE THE CASUAL LABOUR WERE DEPLOYED WERE NOT ACCOUNTED FOR IN THE BOOKS. A 1/PAGE 43 AMOUNT OF EXPENDITURE 5 300 NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT A 1(1) PAGE 123 D-127 AMBEDKAR COLONY PAGE 123 526 9 10 11 12 13 14 215 AND 26 CONTAINED THE NOTING ABOUT THE EXPENDITURE RANGIN G BETWEEN 900 TO 3000 AND NOT ACCOUNTED FOR IN THE BO OKS OF ACCOUNT. ALL THE ABOVE DISCREPANCIES NORMALLY SHOW THAT THE ASSESSEES BOOKS OF ACCOUNT DO NOT CONTAIN ALL THE RECEIPTS AND EXPENSES AND THEREFORE CANNOT BE RELIE D UPON. ITA NO. 3463/DEL/2005 16 2.20 IN RESPECT OF THE AFORESAID DISCREPANCIES POIN TED OUT BY THE AO THE ASSESSEE HAS GIVEN A WILD EXPLANATION THAT THEY ARE EITHER HAND WRITTEN ROUGH WORKING OR THEY ARE NOT RELATED TO ANY RECEIPTS AND EXPENSES INCURRED BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT ALL THE PAPERS AND DOCUMENTS WERE FOUND IN THE CONTROL AND CUSTODY OF THE ASSESSEE AND THERE FORE IT WAS THE BURDEN OF THE ASSESSEE TO EXPLAIN THE NATURE AND CONTENTS OF THOSE DOCUMENTS. IT WAS WITHIN THE SPECIFIC KNOWLEDGE OF THE ASSESSEE THAT WHY CERTAIN NOTINGS ON THESE PAPERS WERE MADE AND WHY THOSE WERE NOT RECOR DED IN THE REGULAR BOOKS OF ACCOUNTS BUT THE ASSESSEE HAS FAILED TO GI VE ANY SATISFACTORY AND ACCEPTABLE EXPLANATION EXCEPT GIVING A BLUNT AND WI LD REPLY. IN THE LIGHT OF THESE AFORESAID DISCREPANCIES NOTED BY THE AO THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE UNDOUBTEDLY LIABLE T O BE REJECTED IN AS MUCH AS ALL THE RECEIPTS AND EXPENSES RECORDED IN THE VA RIOUS DOCUMENTS AND PAPERS FOUND AT THE TIME OF THE SURVEY WERE NOT REC ORDED OR ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. 2.21 FOR THE REASON GIVEN ABOVE WE THEREFORE HOL D THAT THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSES SEE AND HAS PROCEEDED TO ESTIMATE THE ASSESSEES INCOME BY MAKING ADDITION T O THE TRADING RESULT DECLARED BY THE ASSESSEE. NOW THE QUESTION ARISES AS TO THE QUANTUM OF REASONABLE ADDITION WHICH IS CALLED FOR IN THE PR ESENT CASE. ITA NO. 3463/DEL/2005 17 2.22 IT IS AN UNDISPUTED FACT THAT SURVEY U/S. 133A WAS CARRIED OUT AGAINST THE ASSESSEE ON 14.12.2004 DURING THE COURSE OF WHI CH VARIOUS DOCUMENTS AND PAPERS WERE FOUND AND IMPOUNDED INDICATING THAT CERTAIN RECEIPTS AND EXPENSES OF BUSINESS WERE NOT RECORDED IN THE ASSES SEES BOOKS OF ACCOUNTS. NUMBER OF DOCUMENTS AND PAPERS WERE FOUND DURING TH E COURSE OF THE SURVEY WHICH WERE MARKED AS ANNEXURE 1 TO ANNEXURE 10 AND THEN ANNEXURE A-1 AND A-2. ANNEXURE A-1(1) CONTAINED 12 7 PAGES ANNEXURE A-1(2) CONTAINED 242 PAGES ANNEXURE A-1(3) CONTAIN ED 218 PAGES ANNEXURE A-1(4) CONTAINED 273 PAGES ANNEXURE A-1(5 ) CONTAINED 86 PAGES ANNEXURE A-1(6) CONTAINED 98 PAGES ANNEXURE A-1(7) TO ANNEXURE A-1(14) CONTAINED VARIOUS PAPERS REGARDING MATERIAL TRANSFERRED FROM ONE UNIT TO ANOTHER DAILY DAY BOOK VEHICLE LOG BOOK STOCK REGISTER STAFF ATTENDANCE REPORT PAYMENT RECEIVED BOOKS ETC. IN OTHER WORDS VOLUMINOUS PAPERS AND DOCUMENTS ABOUT THE ASSESSEES BUSINESS ACTIVITIES AND THE RECEIPTS AND EXPENSES WERE FOUND DURING THE COURSE OF THE SURVEY. THESE DOCUMENTS WERE THOROUGHLY EXAMINED AND VERIFIED BY INVESTIGATION WING AND THE ASSESSEE WAS GIVEN A FULL AND SUFFICIENT OP PORTUNITY TO GIVE NECESSARY EXPLANATION AS TO THE NATURE AND CONTENTS THEREOF. THE ASSESSEE WAS ALSO GIVEN SUFFICIENT OPPORTUNITIES TO EXAMINE AND VERIFY ALL THE VARIOUS DOCUMENTS AND PAPERS FOUND DURING THE COURSE OF THE SURVEY. THEREAFTER THE ASSESSEE VIDE ITS LETTER DATED 11.02.2005 HAD CHOSE N OR DECIDED TO MAKE A ITA NO. 3463/DEL/2005 18 DISCLOSURE OF INCOME OF RS. 25 00 000/-. IN THE AS SESSEES LETTER DATED 11.02.2005 THE ASSESSEE HAS STATED THAT IN THE COU RSE OF THE SURVEY CARRIED AT THREE BUSINESS PREMISES OF THE ASSESSEE ON 14 TH DECEMBER 2004 THE DEPARTMENT HAD SEIZED/IMPOUNDED VARIOUS DOCUMENTS RECORDS REGISTERS BOOKS OF ACCOUNTS ETC. PERTAINING TO SEVERAL YEARS OVER WHICH THE ASSESSEE HAD BEEN IN BUSINESS. THE ASSESSEE HAS STATED IN T HIS LETTER THAT THE DEPARTMENT HAD RAISED VARIOUS QUERIES ON THE SEIZED DOCUMENTS RECORDS ETC. FOUND AT THE TIME OF THE SURVEY AND HAS GIVEN VARI OUS HEARINGS THEREAFTER AND IN VIEW OF ALL THE DOCUMENTS SEIZED BY THE DEPA RTMENT THE ASSESSEE HAD CHOSEN OR DECIDED TO MAKE A DISCLOSURE OF INCOME OF RS. 25 00 000/-. FROM THIS AVERMENT MADE BY THE ASSESSEE IN ITS LETTER DA TED 11.02.2005 IT IS CLEAR THAT THE DEPARTMENT HAD RAISED VARIOUS QUERIES ON T HE SEIZED DOCUMENTS/RECORDS ETC. AT THE TIME OF THE SURVEY AN D AS WELL AT THE VARIOUS HEARINGS MADE THEREAFTER AND LATER ON IN VIEW OF ALL THE DOCUMENTS IMPOUNDED BY THE DEPARTMENT THE ASSESSEE DECIDED T O MAKE A DISCLOSURE OF INCOME OF RS. 25 00 000/- VIDE ASSESSEES LETTER DA TED 11.02.2005. IT IS THUS MORE THAN CLEAR THAT THE ASSESSEE HAD DISCLOS ED THE SUM OF RS. 25 00 000/- IN THE LIGHT OF THE VARIOUS DOCUMENTS S EIZED BY THE DEPARTMENT AND IT IS NOT MERELY AN IMAGINATIVE FIGURE WITHOUT THE SAME BEING BASED ON ANY MATERIAL OR DOCUMENTS FOUND AT THE TIME OF THE SURVEY. IN THE LETTER THE ASSESSEE HAS FURTHER STATED THAT THE DISCLOSURE WAS BEING MADE IN THE LIGHT OF ITA NO. 3463/DEL/2005 19 THE VARIOUS DISCUSSIONS AND HEARING WITH THE CONCER NED OFFICIALS OF THE DEPARTMENT WHICH WOULD MEAN THAT THE ASSESSEE WAS GIVEN FULL OPPORTUNITY OF BEING HEARD IN RESPECT OF THE VARIOUS DOCUMENTS AND RECORDS SEIZED OR IMPOUNDED DURING THE COURSE OF THE SURVEY AND AFTE R PROPER DELIBERATION AND EXAMINATION OF THE DOCUMENTS THE ASSESSEE DECIDED TO MAKE A DISCLOSURE OF INCOME OF RS. 25 00 000/-. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT ONLY DECIDED TO MAKE A DISCLOSURE OF INCOME OF RS. 25 00 000/- BUT ALSO PAID THE TAX IN ADVANCE DUE THEREUPON. THE ASSESSE E HAD PAID THE SUM OF RS. 9 15 000/- BEING THE TAX AND SURCHARGE DUE ON THE S UM OF RS. 25 00 000/- AND THE SAID AMOUNT HAS BEEN PAID BEFORE THE CLOSE OF THE RELEVANT FINANCIAL YEAR. IT IS THUS CLEAR THAT THE ASSESSEE HAS QUA NTIFIED THE DISCLOSED AMOUNT AT RS. 25 00 000/- AFTER GOING THROUGH THE VARIOUS DOCUMENTS SEIZED AND IMPOUNDED BY THE DEPARTMENT AND THAT TOO AFTER ABOU T TWO MONTHS FROM THE DATE OF SURVEY. IT IS NOT A CASE WHERE DISCLOSURE WAS MADE AT THE SPOT AT THE TIME OF THE SURVEY WITHOUT EXAMINING AND VERIFYING THE VARIOUS DOCUMENTS AND PAPERS FOUND AT THE TIME OF THE SURVEY BUT IT IS A CASE WHERE VOLUMINOUS DOCUMENTS AND RECORDS OR PAPERS FOUND AT THE TIME OF THE SURVEY WERE DULY EXAMINED AND VERIFIED BY THE ASSESSEE AN D THE DISCLOSURE WAS MADE AFTER VARIOUS QUERIES ON THE SEIZED DOCUMENTS AND RECORDS WERE RAISED BY THE DEPARTMENT AND AFTER VARIOUS HEARINGS WERE TAKEN PLACE AND AFTER THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITIES TO GIVE EXPLANATION TO THE VARIOUS ITA NO. 3463/DEL/2005 20 QUERIES RAISED BY THE DEPARTMENT. IT IS ONLY AT TH E TIME WHEN THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 30.10.2005 THAT THE ASSESSEE RETRACTED FROM ITS OWN STATEMENT MADE IN ITS LETTER DATED 11. 02.2005 DECLARING ADDITIONAL INCOME OF RS. 25 00 000/- AND CHANGED T HE STAND WITHOUT ANY VALID REASON. WHEN NO EXPLANATION AS TO THE DISCREP ANCIES IN ACCOUNTS WAS GIVEN AT THE TIME OF THE SURVEY AND THEREAFTER AT T HE STAGE OF VARIOUS HEARINGS GIVEN TO THE ASSESSEE AND WHEN THE ASSESSEE HAD GIV EN AN UNDERSTANDING TO THE DEPARTMENT ABOUT DETERMINATION OF UNDISCLOSED I NCOME AT RS. 25 00 000/- VIDE HIS LETTER DATED 11.02.2005 AND H AS ALSO PAID TAX THEREUPON WITHIN THE FINANCIAL YEAR ITSELF AFTER EXAMINING AN D VERIFYING ALL THE DOCUMENTS AND PAPERS FOUND AT THE TIME OF THE SURVE Y AND AFTER AVAILING FULL OPPORTUNITY OF BEING HEARD ON ALL THE QUERIES RAISE D BY THE DEPARTMENTS ON SAID DOCUMENTS/PAPERS HE CANNOT BE NOW ALLOWED TO TURN ROUND AND URGE THAT SUCH DETERMINATION OF UNDISCLOSED INCOME OF RS . 25 00 000/- IS INCORRECT UNJUSTIFIED AND UNWARRANTED BY RETRACTIN G HIS ADMISSION LATER ON IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO N OT THE CASE WHERE THE DECLARATION WAS MADE UNDER PRESSURE OR COERCION IF ANY EXERCISED BY THE DEPARTMENT AT THE TIME OF THE SURVEY OR THEREAFTER. THE DECLARATION WAS MADE BY THE ASSESSEE AFTER DUE VERIFICATION AND EXAMINAT ION OF THE VARIOUS DOCUMENTS AFTER A PERIOD OF ABOUT TWO MONTHS FROM THE DATE OF THE SURVEY. EVEN THE ASSESSEE HIMSELF ADMITTED IN ITS LETTER DA TED 11.02.2005 THAT ITA NO. 3463/DEL/2005 21 ASSESSEE WAS GRATEFUL TO ALL THE OFFICERS OF THE DE PARTMENT FOR EXTENDING THEIR FULL SUPPORT AND CORPORATION TO THE ASSESSEE DURING AND AFTER THE SURVEY PROCEEDINGS. THE ASSESSEE HAS ALSO STATED IN THE AF ORESAID LETTER THAT THE ASSESSEE SHALL BE ABLE TO ACHIEVE THE OBJECT OF BUY ING PEACE WITH THE DEPARTMENT AND ENSURE SMOOTH SAILING FOR IT NOT ONL Y AT THE INVESTIGATION STAGE BUT ALSO AT THE ASSESSMENT STAGE. FROM THE A FORESAID AVERMENT MADE BY THE ASSESSEE IN ITS LETTER 11.02.2005 IT IS FULLY ESTABLISHED AND PROVED THAT IT IS NOT THE CASE WHERE DISCLOSURE HAS BEEN MADE EITH ER UNDER COERCION OR PRESSURE OR BECAUSE OF ANY MISUNDERSTANDING AND/OR MISTAKEN READING OF THE DOCUMENT. IT WAS NEVER THE CASE OF THE ASSESSEE TH AT THE ASSESSEE HAS MISUNDERSTOOD THE CONTENTS OF THE VARIOUS DOCUMENTS AND PAPERS FOUND AT THE TIME OF THE SURVEY AND HAS WRONGLY DECLARED THE AMO UNT OF RS. 25 00 000/- VIDE ITS LETTER DATED 11.02.2005 WHICH WAS SUBMITT ED AFTER ABOUT TWO MONTHS FROM THE DATE OF THE SURVEY IN THE LIGHT OF VARIOUS DOCUMENTS AND PAPERS FOUND AT THE TIME OF THE SURVEY. 2.23 IN THESE CIRCUMSTANCES WE THEREFORE HOLD TH AT THE ASSESSEES CONDUCT IN NOT INCLUDING THE AFORESAID SUM OF RS. 25 00 000 /- DECLARED VIDE LETTER DATED 11.02.2005 IN THE LIGHT OF THE VARIOUS DOCUM ENTS AND PAPERS FOUND AT THE TIME OF THE SURVEY ON WHICH TAX WAS ALSO PAID I N ADVANCE IS NOT JUSTIFIED BUT IS AN UNWARRANTED ATTEMPT TO REDUCE ITS DUE AND JUST TAX LIABILITY. ITA NO. 3463/DEL/2005 22 2.24 THE ASSESSEES DISCLOSURE OF AN AMOUNT OF RS. 25 00 000/- ON THE BASIS OF VARIOUS DOCUMENTS AND PAPERS FOUND AT THE TIME O F THE SURVEY IN RESPECT OF WHICH VARIOUS ENQUIRES WERE RAISED BY THE DEPART MENT FROM TIME TO TIME AND VARIOUS HEARING HAD TAKEN PLACE AND THE ASSESSE E WAS PROVIDED SUFFICIENT OPPORTUNITY TO EXPLAIN THE DOCUMENTS ETC. BEFORE TH E DISCLOSURE WAS MADE BY THE ASSESSEE AND PAYMENT OF ADVANCE TAX DUE THEREU PON ARE ITSELF SUFFICIENT PIECE OF EVIDENCE AND BASIS ON WHICH THE ADDITION O F RS. 25 00 000/- CAN BE MADE TO THE TRADING RESULT DECLARED BY THE ASSESSEE IN ITS BOOKS. THIS IS THE CASE WHERE ADDITION HAVE NOT BEEN MERELY ON THE BAS IS OF ASSESSEES DECLARATION BUT THE ADDITION MADE IN THE LIGHT OF T HE VARIOUS DISCREPANCIES OR DEFECTS FOUND IN THE BOOKS OF ACCOUNTS MAINTAINED B Y THE ASSESSEE AND IN THE LIGHT OF THE SUPPRESSED SALES OR EXPENSES FOUND REC ORDED IN THE SEIZED DOCUMENTS OR PAPERS FOUND AT THE TIME OF THE SURVEY ON THE BASIS OF WHICH THE ASSESSEE HAS MADE A DECLARATION OF RS. 25 00 00 0/-. 2.25 IT IS ALSO WELL SETTLED THAT ONCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE RIGHTLY REJECTED U/S. 145(3) OF THE ACT THE AO HAVE TO PROCEED TO DETERMINE THE ASSESSEES INCOME ON THE BASIS OF MAT ERIAL AVAILABLE ON RECORD AND TO THE BEST OF HIS JUDGMENT. IT IS WELL SETTLE D THAT THAT IN A BEST JUDGMENT THE ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESSWORK. NO DOUBT THAT THE AUTHORITIES HAS TRIED TO MAKE AN HONEST AND FAI R ESTIMATE OF THE INCOME. THERE IS NECESSARILY SOME AMOUNT OF GUESSWORK INVOL VED IN A BEST JUDGMENT ITA NO. 3463/DEL/2005 23 ASSESSMENT. IN THIS CASE THE AO RESORTED TO MAKE AN ADDITION OF RS. 25 00 000/- TO THE BOOK RESULT DECLARED BY THE ASSE SSEE IN THE LIGHT OF VARIOUS DEFECTS AND DISCREPANCIES FOUND IN THE BOOKS OF ACC OUNTS MAINTAINED BY THE ASSESSEE AND ON THE BASIS OF ASSESSEES OWN ADMISSI ON WHERE THE ASSESSEE HAS DISCLOSED AN AMOUNT OF RS. 25 00 000/- AS ADDIT IONAL INCOME AND HAS ALSO PAID TAXES IN ADVANCE ACCORDINGLY. THEREFORE IN THE PRESENT CASE IT COULD NOT BE SAID THAT THERE IS ANY ARBITRARINESS I N THE ACTION OF THE AO IN MAKING ADDITION OF RS. 25 00 000/- TO THE BOOK RESU LT DECLARED BY THE ASSESSEE. IT IS THE ASSESSEE ITSELF WHO IS TO BLAM E AS THE ASSESSEE DID NOT MAINTAIN TRUE AND CORRECT AND PROPER ACCOUNTS AND DID NOT SUBMIT PROPER ACCOUNT TO THE DEPARTMENT. THE FACT THAT ASSESSEE HAS BEEN INDULGING IN SUPPRESSING SALES OF ITS BUSINESS HAS BEEN DETECTED AS A RESULT OF A SURVEY CONDUCTED BY THE DEPARTMENT DURING THE COURSE OF WH ICH VARIOUS DOCUMENTS AND PAPERS WERE FOUND AND IMPOUNDED INDICATING THAT ALL THE TRANSACTION OF RECEIPTS AND PAYMENTS WERE NOT RECORDED IN THE BOOK S OF ACCOUNTS SUBMITTED BY THE ASSESSEE TO THE DEPARTMENT. IN THE LIGHT OF THE TOTALITY OF THE DISCUSSIONS MADE ABOVE WE THEREFORE UPHELD THE O RDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 25 00 000/- MADE TO THE TRADING RESULTS DECLARED BY THE ASSESSEE. THIS GROUND RAISED BY TH E ASSESSEE IS THUS REJECTED. ITA NO. 3463/DEL/2005 24 3. THE GROUND NO. 3 IS DIRECTED AGAINST THE CIT(A) S ORDER IN SUSTAINING THE DISALLOWANCE OF RS. 1 00 000/- OUT OF BUSINESS PROMOTION EXPENSES MADE BY THE AO. 3.1 RELEVANT FACTS RELATING TO THE ISSUE ARE THAT I N THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THAT THE ASSE SSEE HAS DEBITED THE AMOUNT OF RS. 07 08 293/- UNDER THE HEAD BUSINESS PROMOTION EXPENSES. ON BEING ASKED TO JUSTIFY THE CLAIM THE ASSESSEE V IDE LETTER DATED 26.12.2007 SUBMITTED AS UNDER:- IN BUSINESS PROMOTION EXPENSES THE MAIN EXPENDITURE IS RELATED TO RESTAURANT BILLS AND SOME HOTEL BILLS IN INDIA WHERE THE DIRECTORS GO FOR MEETING T HE CLIENTS FOR THE PURPOSE OF BUSINESS OF THE HOSPITAL ITY INDUSTRY AND HENCE THERE IS A LOT OF EXPENDITURE IN CURRED IN THE RESTAURANTS FOR MEETING THE CLIENTS AND FOR OBTAINING THE BUSINESS FROM THE CLIENT. SINCE OUR CLIENTS ARE VERY HIGH PROFIT AND FOR THAT WE HAVE TO TAKE T HEM TO VARIOUS RESTAURANTS TO UPDATE THEM ABOUT THE VARIOU S KINDS OF CUISINES AND EQUIPMENT AVAILABLE WITH US. BESIDES THIS SINCE OUR INDUSTRY IS FOOD ORIENTED I NDUSTRY WE HAVE TO UPDATE OUR INFORMATION AND WE HAVE TO KN OW ABOUT OUR COMPETITORS RECIPES AND NEW RECIPES/ITEM S AVAILABLE IN THE MARKET BESIDES THIS SOME EXPENDITURE IS MADE ON THE FLOWER ARRANGEMENTS/BOUQUETS SENT TO THE PRESTIGIOUS CLIE NTS ON VARIOUS OCCASIONS TO GET THEM UPDATED AND FOR PR AN D FOR GETTING MORE BUSINESS FROM AS OUR CLIENTS ARE REPEATED CLIENTS OVER THE YEARS. 3.2 AFTER CONSIDERING THE ASSESSEES SUBMISSIONS T HE AO DISALLOWED THE EXPENSES TO THE EXTENT OF RS. 1 00 000/- BY OBSERVI NG AS UNDER: ITA NO. 3463/DEL/2005 25 FROM THE DETAILS OF THE EXPENDITURE INCURRED IT IS SEEN THAT MOST OF THE EXPENSES HAVE BEEN INCURRED E ITHER IN CASH OR THROUGH CREDIT CARD AND THE NATURE OF TH E EXPENDITURE IS FOR LUNCH GIFTS ETC. THE PERSONAL ELEMENT OF EXPENDITURE INCLUDING THEREIN THEREFORE CANNOT B E AVOIDED AND DISALLOWANCE OF RS. 1 00 000/- IS MADE ON THIS ACCOUNT. (DISALLOWANCE RS. 1 00 000) 3.3. ON AN APPEAL THE CIT(A) CONFIRMED THE DISALLO WANCE BY OBSERVING THAT THE ASSESSEE HAS FILED ONLY COPY OF ACCOUNT OF BUSINESS PROMOTION EXPENSES AND FROM THE COPY OF ACCOUNTS IT IS NOTE D THAT THE SOME OF THE EXPENSES ARE IN THE FORM OF HOTEL AND RESTAURANT BI LLS AND HAVE BEEN INCURRED FROM CREDIT CARD AND WHILE SOME EXPENSES INCURRED I N CASH ALSO AND THEREFORE THE ASSESSEE HAS NOT BEEN ABLE TO JUSTIF Y THAT ENTIRE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PU RPOSE. 3.4. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 3.5. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD CLA IMED BUSINESS PROMOTION EXPENSES OF RS. 7 08 293/- OUT OF WHICH THE SOME OF RS. 1 00 000/- HAS BEEN DISALLOWED BY GIVING THE REASON THE THAT SAME HAS N OT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE E XPENSES OF RS. 7 08 293/- HAS BEEN INCURRED IN THE COURSE OF MEETING WITH THE CLIENTS AND OTHER BUSINESS ASSOCIATES BY ARRANGING THE MEETING AT VAR IOUS HOTELS AND RESTAURANTS. THE DETAILS OF THE PAYMENTS HAS BEEN FILED BY THE ASSESSEE. THE PAYMENTS HAVE BEEN MADE THROUGH CREDIT CARDS. HOWE VER THE CIT(A) IN HIS ITA NO. 3463/DEL/2005 26 ORDER STATED THAT SOME EXPENSES ARE INCURRED IN CAS H ALSO BUT HE HAS FAILED TO QUANTIFY THE AMOUNT OF THOSE ITEMS IN RESPECT OF WH ICH THE PAYMENTS WERE MADE IN CASH. THE CIT(A) HAS MADE A GENERAL OBSERV ATION IN THAT REGARD. IT IS ALSO PERTINENT TO NOTE THAT BOTH THE AUTHORITIES BELOW HAVE ACCEPTED IN PRINCIPLE THAT THE EXPENSES WERE INCURRED FOR THE P URPOSE OF BUSINESS. HOWEVER THEY HAVE DISPUTED THE QUANTUM OF THE EXPE NSES INCURRED BY THE ASSESSEE BY DISALLOWING RS. 1 00 000/- OUT OF RS. 6 08 293/-. IN OTHER WORDS THE AUTHORITIES BELOW HIMSELF ADMITTED THAT SUM OF RS. 7 08 293/- ARE ALLOWABLE EXPENSES. THEY HAVE NOT POINTED OUT ANY SPECIFIC ITEM WHICH COULD BE SAID BEING NOT RELATED TO THE ASSESSEES B USINESS. WITHOUT POINTING OUT ANY SPECIFIC ITEM WE ARE OF THE CONSIDERED VIE W THAT THE AUTHORITIES BELOW ARE UNJUSTIFIED IN DISALLOWING PART OF THE TO TAL EXPENSES INCURRED ON ACCOUNT OF BUSINESS PROMOTION EXPENSES. THE AO SHO ULD HAVE POINTED OUT SOME OF THE INSTANCES IN RESPECT OF WHICH HE WAS OF THE VIEW THAT EXPENSES WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS BUT THE AO HAS NOT DONE SO AND HAS DISALLOWED THE AMOUNT PURELY ON ESTIMATE. IN THIS VIEW OF THE MATTER WE THEREFORE DO NOT FIND ANY JUSTIFICATIO N IN SUSTAINING THE DISALLOWANCE OF RS. 1 00 000/- OUT OF THE BUSINESS PROMOTION EXPENSES OF RS. 7 08 293/-. WE THEREFORE DELETE THE DISALLOW ANCE OF RS. 1 00 000/-. 4. GROUND NO. 4 IS DIRECTED AGAINST THE CIT(A)S OR DER IN SUSTAINING THE DISALLOWANCE OF RS. 75 000/- OUT OF THE TOTAL DISAL LOWANCE OF RS. 1 00 000/- ITA NO. 3463/DEL/2005 27 MADE BY THE AO OUT OF VEHICLE RUNNING VEHICLE MAIN TENANCE AND DEPRECIATION. 4.1. THE SUM OF RS. 1 00 000/- HAS BEEN DISALLOWED BY THE AO OUT OF VEHICLE RUNNING AND MAINTENANCE AND DEPRECIATION TR EATING THE SAME TO HAVE BEEN INCURRED FOR PERSONAL USE. THE DISALLOWANCE S O MADE BY THE AO HAS BEEN SUSTAINED TO THE EXTENT OF RS. 75 000/- BY GRA NTING A RELIEF OF RS. 25 000/- BY THE LD. CIT(A). 4.2 WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 4.3. THE PRESENT CASE IS A CASE OF PRIVATE LIMITED COMPANY WHERE THE VEHICLES BELONGING TO THE COMPANY WERE ALSO USED BY THE DIRECTORS. EVEN IF THE DIRECTORS WERE USING THE VEHICLE FOR THEIR PERS ONAL USE IN SO FAR AS COMPANY IS CONCERNED THE EXPENSES ARE TO BE TREATE D AS BEING INCURRED FOR THE PURPOSE OF BUSINESS. IF ANY PERSONAL BENEFIT I S ACCRUING TO THE DIRECTORS BY USE OF VEHICLE FOR THEIR PERSONAL PURPOSES THE PERQUISITE VALUE COULD HAVE BEEN ADDED AS INCOME IN THE HANDS OF THE DIRECTORS. IT IS ALSO TO BE NOTE THAT PROVIDING A CAR TO THE DIRECTOR BY THE COMPANY CANN OT SAID TO BE ON NON- BUSINESS ACCOUNT. MOREOVER THE BOOKS OF ACCOUNT O F THE ASSESSEE HAVE BEEN REJECTED AND THE ADDITION OF RS. 25 00 000/- HAS BE EN MADE BY THE AO IN THE TRADING RESULT AND THEREFORE THERE WOULD BE NO J USTIFICATION TO MAKE FURTHER DISALLOWANCE OUT OF THE EXPENSES CLAIMED IN THE PRO FIT AND LOSS ACCOUNT WHEN ITA NO. 3463/DEL/2005 28 THE ADDITION OF RS. 25 00 000/- HAS ALREADY BEEN MA DE BY THE AO. WE THEREFORE DELETE THIS ADDITION OF RS. 75 000/- SUS TAINED BY THE LD. CIT(A). 5. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 6. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL 2010. SD/- (R.C. SHARMA) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 30 TH APRIL 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. BY ORDER DEPUTY REGISTRAR