COMMISSIONER OF INCOME TAX Vs. PARADISE HOLIDAYS

JUDGEMENT

(1.) THIS appeal is directed against the order of the Income Tax Appellate Tribunal dated 23.12.2008, whereby it dismissed the appeal, being ITA No. 5028/Del/2007, filed by the appellant against the order passed by Commissioner of Income Tax(Appeals), in respect of assessment of the respondent, for the assessment year 2004 -2005.

(2.) THE assessee firm, which is engaged in the business of travel and tourism, as a tour operator arranging inland tour of foreign tourists visiting India, filed its return declaring taxable income of Rs. 42,53,536/ - for the assessment year 2004 -2005. The net profit shown in the return was at 7.93% of the receipts. Since the Assessing Officer felt that the net profit reported by the assessee was on lower side, he picked up the expenses relating to seven tours organized by the respondent. On a consideration of the accounts furnished by the assessee, the Assessing Officer felt that the assessee could not demonstrate any pattern as to uniformity of rates etc. and the expenses debited in the tour Ledger did not reconcile with the tour itinerary. He, therefore, rejected the book results in terms of Section 145(3) of the Income Tax Act, 1961 and assessed the income @ 12% of gross foreign receipts. Net rate of 10% was applied by the Assessing Officer, to determine the income from Indian business receipts.

(3.) THE Income Tax Appellate Tribunal noted that though one reason assigned by the Assessing Officer for rejecting the Books of Account was that the net profit disclosed by the assessee was on the lower side considering the line of business in which it was engaged, no specific reasons of higher profit having been declared by any similarly situated assessee had not been found by the Assessing Officer. The Tribunal accepted the contention of the assessee that considering the nature of business of the assessee, a formal agreement with the foreign principal was not imperative. As regards reconciliation of the tour expenses with the tour itinerary, it was held that the itinerary was tentative for the purpose of fixing the charges but the same could be changed depending upon various factors, including the number of days of the entire tour, period of stay in a particular place, the quality of hotel services provided to the tourists and frequent travel of tourists from one place to another. The Tribunal felt that the exact bill could be raised only after execution of the tour programme and, therefore, could not have been compared with the agreement or contract note with the foreign principal in order to ascertain the correct income of the assessee.