Hotel New Niyaz Vs ACIT (ITAT Panaji)
Panaji ITAT Restores ₹6.82 Crore Additions for Fresh Adjudication: Crucial Evidence Cannot Be Ignored Merely Because It Was Not Filed Before Lower Authorities
The Panaji ITAT in M/s Hotel New Niyaz v. ACIT dealt with additions arising from a survey under section 133A. The assessee, a partnership firm engaged in the restaurant business under the brand “Niyaz”, had returned income of ₹40.06 lakh for AY 2016-17. Following survey proceedings, the AO made additions of ₹5.48 crore towards alleged suppression of sales and ₹1.33 crore towards unexplained unsecured loans under section 68, assessing total income at ₹7.21 crore. The CIT(A) sustained the additions.
Before the ITAT, the assessee contended that the alleged suppression of sales was not supported by adequate evidence and that its explanations regarding unsecured loans had not been properly considered. More importantly, it sought admission under Rule 29 of the ITAT Rules of substantial additional evidence comprising consumption details, purchase ledgers, sample purchase invoices, wages ledger and wages register, running from pages 3 to 494 of its paper book.
The Tribunal emphasised that such evidence “play[s] a very important role in decision making” and held that the assessee should not suffer merely because material information had not been filed before the lower authorities. Considering the nature and relevance of the additional evidence, the ITAT set aside the CIT(A)’s order and restored the disputed issues to the CIT(A) for fresh adjudication on merits.
The CIT(A) was directed to verify the additional evidence, call for a remand report and provide adequate opportunity of hearing to the assessee before deciding the matter afresh. Thus, the ₹5.48 crore suppression-of-sales addition and ₹1.33 crore section 68 addition were not deleted on merits but remanded for reconsideration. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT PANAJI
The assessee has filed the appeal against the order of the CIT(A)-2, Panaji passed u/sec 143(3) and u/sec250 of the Income Tax Act. The assessee has raised the fallowing grounds of appeal as under:
1. The learned AO and the learned CIT(A) have erred, in law and in facts, by incorrectly holding that there has been a suppression of sales to the tune of Rs. 5,48,28,180/- and thereby making an addition in this regard.
2. The learned CIT(A) has erred, in law and in facts, by completely ignoring most of the explanations given by the appellant with respect to unsecured loans and holding them as unexplained to the tune of Rs. 1,33,45,285/and thereby making an addition in this regard which is completely bad in law
3. The orders of the learned AO and learned CIT(A) are based on incorrect application/interpretation of law and therefore are bad in law
4. The learned AO and the learned CIT(A) have erred, in law and in facts, by solely relying on the report of the survey team and not carrying out any independent analysis whatsoever in deciding the case
5. The learned AO and the learned CIT(A) have erred, in law and in facts, by upholding suppression of sales for the year under question based on an analysis of data for a past financial year, which is devoid of any logic and is completely bad in law.
6. The learned CIT(A) has erred in law and in facts, by hastily concluding the appeal proceedings thereby denying the appellant an opportunity making additional submissions or providing information, resulting disregard of the principles of natural justice in the process.
The assessee has raised additional ground of appeal as under:-
1. On the facts and in the circumstances of the case as well as in law the Ld.AO has erred in converting the limited scrutiny to completed scrutiny in violation of the CBDT circular No. 225/402/2018/ITA 11, therefore, assessment order passed u/sec 143(3) r.w.s 144A of the Income Tax Act, 1961 in invalid and void ab initio.
2. At the time of hearing, the Ld.AR has not pressed the additional ground of appeal. And this ground of appeal is withdrawn and is dismissed.
3. The brief facts of the case are that, the assessee is a partnership firm and is engaged in business of restaurant with the brand “Niyaz”. The assessee has filed the return of income for A.Y. 2016-17 on 08.10.2016 disclosing a total income of Rs. 40,06,520/- and return of income was processed u/sec 143(1) of the Act. Subsequently, the case was selected for limited scrutiny under the CASS and notice u/sec 143(2) of the Act was issued. There was survey operation u/sec133A of the Act carried out on the business premises of the assessee on 18.07.2017 and the assessee has declared additional income over and above the regular income. The Assessing Officer (A.O) found that the assessee’s firm is engaged in the business of restaurant and catering business and the assessee’s firm has shown a decline in the turnover from A.Y. 2014-15 and further the assessee has provided branch franchisee to many of the associates and percentage income was disclosed. The assessee has filed the explanations on the purchases, sales and expenditure and reasons for decline in profit. The AO has dealt on the material impounded in survey, details, and the statement recorded and made addition of suppression of sales to the extent of Rs.5,48,28,180/- and similarly made addition of unsecured loans u/sec68 of the Ac and assessed the total income of Rs. 7,21,79,985/- and passed the order under Section 143 r.w.s. 144 of the Act dated 17.12.2018.
4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered grounds of appeal, statement of facts, submissions of the assessee, finding of A.O. but, sustained the action of the Officer and dismissed the assessee’s appeal. Aggrieved by the order of the CIT(A), the assesse has filed the appeal with the Hon’ble Tribunal.
5. At the time of hearing, the Ld. AR submitted that CIT(A) has erred in confirming the action of the Assessing Officer, overlooking the provisions of the Act and submissions in the proceedings and made a addition of suppression of sales which is not supported with evidence except the information submitted by the assessee and also ignoring the explanations on unsecured loans. The CIT(A) has erred in not considering the submissions and evidences. Further the assessee has filed an application for the admission of Additional evidence under Rule 29 of the ITAT Rules and the Ld.AR substantiated the submissions with the factual paper book and judicial decisions and prayed for allowing the appeal. Per contra, the Ld.DR submitted that the additional evidences were not examined by the lower authorities and the Ld. DR supported the order of the CIT(A).
6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issues envisaged by the Ld AR that the CIT(A) has erred in confirming the action of the assessing officer. The CIT(A) has erred in not considering the factual aspects of percentage of profit in the restaurant business and expenditure/overheads. Further the assessee has filed an application for admission of addition evidences under Rule 29 of the ITAT Rules i.e consumption details, purchase ledgers, sample purchase invoices, wages ledger, and wages register placed at page 3 to 494 of the paperbook which could not be submitted before the lower authorities. Further, the evidences play a very important role in decision making in the adjudicating proceedings, Therefore considering the facts, circumstances and additional evidences, the assessee should not suffer for non-filing of material information, as the evidences play a vital role in decision making. Accordingly, we set-aside the order of the CIT(A) and to meet the ends of justice, we restore the disputed issues along with the evidences to the file of the CIT(A) to verify and adjudicate afresh on merits and call for the remand report on evidences and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal. And, we allow the grounds of appeal of the assessee for statistical purposes.
7. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced on the open Court on 31st July 2026.
