COMMISSIONER OF INCOME TAX Vs. HOTEL MERIYA

JUDGEMENT

(1.) This is an appeal preferred by the Department under Section 260A of the Income Tax Act (hereinafter referred to as 'IT Act') against the assessee. The assessee M/s. Hotel Meriya, Pala is running a bar attached hotel and was subjected to assessment with PAN.FV.4140. On 28.6.2001 a search was conducted under Section 132 of the IT Act. During the search, though no material was disclosed to show that there was suppression of business, it was revealed that there was suppression of sale outcome. Cash book was seen recorded upto 25.6.2001. Cash book showed a cash balance of Rs. 21,31,523/-. But, the physical balance was only Rs. 34,552/-. On interrogation of the Managing Partner and the employees it was revealed that only 80% of the actual sales turnover in respect of liquors are recorded in the cash book. Consequently, the respondent was served notice to file return under Section 158BC of IT Act. In response to the notice, a return was filed on 4.1.2002 as Sl. No. 866. Subsequently, a modified return was filed on 5.2.2006. In the return a negative income of Rs. 29,770/- was disclosed for the assessment year 2002-'03. In respect of earlier assessment years of the block period, it was declared that there was no undisclosed income for assessment under Section 158BC.

(2.) The assessing officer after perusing the return filed under Section 158BC and hearing the assessee arrived at a conclusion that there was concealing of income amounting to 20% of the disclosed turnover. Accordingly, the total undisclosed income was determined at Rs. 2,37,68,975/-. Consequently, a sum of Rs. 1,47,28,446/- including surcharge at the rate of 2% along with interest at the rate of 1.25% under Section 158BFA(1) of the IT Act was assessed.

(3.) Aggrieved by the said assessment, respondent preferred appeal before the CIT (Appeals). Though CIT (Appeals) concurred with the assessment officer that there was concealment of income, it didn't agree with the assessment officer that there was suppression of 20% income for the entire block period. Taking into account that in the hotel there is sale of food items and no suppression of sale in respect of food items was disclosed, CIT (Appeals) held that there was 5% suppression of turnover of liquor for the assessment years 1996-'97 to 2000-'01. For the assessment year 2001-'02 the concealment of income was determined at 7% of the turnover and for the assessment year 2002-'03 upto 20.6.2001 the concealment was estimated at the rate of 15%. Thus the total undisclosed income was determined at Rs. 57,93,652/-.