Hotel Deepak Vs DCIT (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai allowed an appeal filed by Hotel Deepak against an order of the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2018-19. The dispute arose from a survey conducted under Section 133A of the Income Tax Act, 1961, at the hotel’s premises. During the survey, one of the partners, Shri Chandrakanth Ramanna Shetty, made a voluntary declaration of income. However, the income declared in the subsequent return of income was lower.
The Assessing Officer (AO) added the difference to the hotel’s income, citing the survey statement and a diary recovered during the survey. The CIT(A) upheld the AO’s decision. Hotel Deepak argued that the survey declaration was made before the financial year concluded and didn’t account for certain expenses. They submitted supporting documents for these expenses, explaining the discrepancy between the survey declaration and the returned income.
The ITAT observed that while the AO considered the hotel’s explanation, it wasn’t accepted, primarily because the AO felt the expenses pertained to a period before the survey. However, the ITAT noted a similar case involving Hotel Deepak for the assessment year 2017-18, where the tribunal had considered the same partner’s declaration and the same issues regarding expenses. In that case, the tribunal had ruled in favor of the assessee, accepting the explanation for the difference in income.
The ITAT emphasized that a statement recorded during a survey under Section 133A, by itself, does not have conclusive evidentiary value and cannot be the sole basis for additions to income. While the AO had referred to the diary, the ITAT found that the core issue revolved around the discrepancy between the survey statement and the returned income, a matter already adjudicated in the prior year’s case. The ITAT, citing the earlier decision, concluded that Hotel Deepak had sufficiently demonstrated the reasons for the difference in income, primarily the unaccounted expenses. Therefore, the ITAT deleted the addition made by the AO, effectively allowing the hotel’s appeal. This decision reinforces the principle that survey statements must be corroborated with other evidence and cannot form the exclusive basis for income additions, especially when credible explanations for discrepancies are provided.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
