M/s. Coronet Hotel Services & Suppliers Pvt. Ltd. v. DCIT    (ITAT, Delhi- ITA No. 4613/ Del/2019)

Assessee initially declared income at (-) 10,17,441 showing revenue receipts generated from operations of “Hotel /  Resort” as “rental income”, which was subsequently revised in revised return of income at (-)54,52,184 where assessee sought to offer said revenue receipts from operation of hotel under the head of “Business Income”

While the decision dealt with multiple issues including AO’s contention as to why management license fee should be taxed under the head “House Property”, disallowance by AO of amount paid by assessee to director holding the same as not having been incurred for purpose of business, AO’s contention as to why there assessee should not be allowed to change its position as it itself had filed return of income reflecting income from House property, assessee’s contentions as regards why the revenue receipt from another entity- M/s. Four Seasons was not the rental income from House property but business income in light of the same being fluctuating in nature, the tribunal aptly clarified that tax assessment cannot be by application of principles of estoppel.

It held:-

“………. the purpose of assessment proceedings before the taxing authority is to assess correctly the tax liability of Assessee in accordance with law. No tax can be levied onthe principle of estoppels. Just because the Assessee has shown the receipt/income in wrong head it does not make him liable to tax thereon. If the Assessee has shown a receipt under the wrong head, it is always open to the Assessee to take the case in appeal or in revision and thereafter within his right in requiring the appellate or revisional authority to examine the validity of assessment of tax on receipt, which cannot be taxed in a particular head but admitted taxable mistakenly or inadvertently under wrong head of income, which is at all not applicable.

Author of this Article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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