Battula Anjaneyulu, V. THE ACIT, CIRCLE - 1(1), Vijayawada

CO 1/VIZ/2015

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4186 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; TDS

Judgement Text

ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.448/VIZAG/2014 ( / ASSESSMENT YEAR: 2011-12) ACIT, CIRCLE - 1(1), VIJAYAWADA VS. SRI BATTULA ANJANEYULU, TIRUVURU [PAN: AI VPB 5031D ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.1/VIZAG/2015 (ARISING OUT OF I.T.A.NO.448/VIZAG/2014) ( / ASSESSMENT YEAR: 2011-12) SRI BATTULA ANJANEYULU, TIRUVURU VS. ACIT, CIRCLE - 1(1), VIJAYAWADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 21.06.2016 / DATE OF PRONOUNCEMENT : 22.07.2016 ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), VIJAYAWADA DATED 25.4.2014 FOR THE ASSESSME NT YEAR 2011-12. THE CROSS APPEAL FILED BY THE ASSESSEE IS IN SUPPOR T OF THE ORDER OF CIT(A). 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A CIVIL CONTRACTOR FILED A RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS.80 ,37,310/-. THE A.O. HAS OBSERVED THAT THE ASSESSEE IS ALSO SUB CONTRACT OR AND IT HAS REFLECTED RS.23,43,94,382/- AS A CONTRACT RECEIPT A ND RS.2,39,556/- AS OTHER RECEIPTS. THIS ASPECT WAS EXAMINED BY OBTAIN ING THE WORK ORDERS AND DETAILS OF FORM NO.26AS FOR THE YEAR UNDER CONS IDERATION AS PER WHICH THE GROSS TURNOVER STOOD AT RS.23,43,94,382/- AND TDS DEDUCTED AT RS.23,49,691/-. 3. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE A .O. HAS ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS. THE ASS ESSEE WAS NOT ABLE TO PRODUCE THE PROPER BOOKS OF ACCOUNTS. THE A.O. HAS OBSERVED THAT FROM THE EXPLANATION OF THE ASSESSEE, IT IS VERY CL EAR THAT THE ASSESSEE DID NOT MAINTAIN ANY BOOKS THROUGHOUT THE YEAR. TH E AUDITOR OF THE ASSESSEE ATTEMPTED PREPARE THE BOOKS OF ACCOUNTS, B ASED ON THE BANK ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 3 ACCOUNT, SOME BILLS AND VOUCHERS MAINTAINED BY THE ASSESSEE. THE ONLY CONCLUSION THAT CAN BE DRAWN FROM THE ABOVE EXPLANA TION OF THE A.R. IS THAT THE ASSESSEE DID NOT MAINTAIN THE BOOKS OF ACC OUNTS. 4. THE A.O. FURTHER OBSERVED THAT THE MAJOR CHUNK O F THE EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT RELATES TO WAGES IN THE FORM OF SALARIES TO THE FOREMEN, SUPERVISORS, KHALASIS, HEL PERS, WELDERS, CUTTERS, RIGGERS, ETC. THE TOTAL EXPENDITURE ON TH IS COUNT DEBITED TO PROFIT AND LOSS ACCOUNT IS RS.18,89,93,537/-. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE TRADE CREDITORS SHOWN AT RS3,41,00,000/- ALONG WITH CONFIRMATION LETTERS EXPLAINING THE SOURCES FO R THE INVESTMENT MADE. ON VERIFICATION OF THE DETAILS OF THE SUNDRY DEBTORS OF RS.1,72,60,594/- AND THE TRADE CREDITORS OF RS.3,41 ,00,000/- FURNISHED BY THE ASSESSEE IT IS NOTICED THAT THE DEBTORS REPR ESENTS BILLS RECEIVABLE FROM THE RESPECTIVE COMPANIES AND TOTAL AMOUNT OF T RADE CREDITORS REPRESENTS WAGES PAYABLE TO LABOUR. THERE ARE NO SECURED/UNSECURED LOANS AVAILED BY THE ASSESSEE AND THERE ARE NO ASSE TS PURCHASED DURING THE YEAR. IT IS NOTICED THAT DURING THE YEAR THE A SSESSEE HAS ATTAINED A TURNOVER OF RS.23,43 CRORES AS AGAINST RS.10.95 CRO RES OF THE LAST YEAR. HOWEVER, THE PROFIT MARGIN WAS REDUCED FROM 3.72% T O 3.47%. THE ASSESSEE HAS EXPLAINED THAT THE WORK HAS TO BE UNDE RTAKEN UNDER THE ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 4 WATER AND THE LABOURERS WHO WERE ENGAGED HAS TO BE MAINTAINED AT THE SITE THROUGHOUT THE YEAR UNDER DIFFICULT SITUATIONS . THE A.O. HAS FURTHER OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED THE B OOKS OF ACCOUNTS PROPERLY AND IT WAS PREPARED TO SOME EXTENT BASED O N THE BANK STATEMENT, SOME VOUCHERS AND BILLS AND WITH THE REC EIPTS OBTAINED FROM THE EMPLOYERS ACCORDINGLY HE REJECTED THE BOOKS OF ACCOUNTS AND HE ESTIMATED THE PROFIT IN RESPECT OF SUB CONTRACT WOR KS ESTIMATED AT 7%. SO FAR AS MAIN CONTRACT IS CONCERNED, HE HAS ESTIMA TED 12.5%. IN SO FAR AS AN AMOUNT OF RS.2,39,566/- RETURNED BY THE ASSES SEE OTHER INCOME IS ALSO ADDED SEPARATELY. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THA T THE ESTIMATION MADE BY THE A.O. IS ON A HIGHER SIDE AND PRAYED THA T SO FAR AS MAIN CONTRACT IS CONCERNED IN THE SIMILAR LINE OF BUSINE SS PROFIT LEVEL IS 8% AND SUB CONTRACT 5% AND PRAYED THAT THE SAME MAY BE FOLLOWED. 5. THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION S OF THE ASSESSEE HE HAS DIRECTED THE A.O. TO ADOPT 9% IN THE CASE OF MAIN CONTRACTS, 5% IN THE CASE OF SUB CONTRACTS AND DIRECTED THE A.O. TO RECOMPUTED THE INCOME. THE RELEVANT PORTION OF THE ORDER IS EXTRA CTED AS UNDER: ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 5 5.1. THE ISSUE IS WITH REGARD TO THE RATE OF ESTIMA TION ON SUB- CONTRACT WORKS AND CONTRACT WORKS. THE AO RELIED ON THE DECISION OF THE HON'BLE ITAT, HYDERABAD 'A' BENCH, HYDERABAD IN ITA NO.500/HYD/2012 AND ESTIMATED THE INCOME FRO M SUB- CONTRACTS AT 7% AND 12.5% ON CONTRACTS. ON THE OTHE R HAND, THE APPELLANT HAS RELIED ON THE DECISION OF THE HON 'BLE ITAT, HYDERABAD BENCH 'B' IN THE CASE OF SRI KESHAVA BHAT TA VANGALA VS. ITO, WARD-8(2), HYDERABAD IN ITA NO. 1213/HYD/2 013, WHEREIN THE TRIBUNAL HAS HELD THAT ESTIMATION OF PR OFIT @ 8% ON MAIN CONTRACT AND AT 5% ON SUB CONTRACT IS JUSTIFIE D. ON A PERUSAL OF THE ABOVE DECISIONS, IT IS OBSERVED THAT IN THE DECISION RELIED UPON BY THE ASSESSING OFFICER ALSO, THE HONBLE TRIBUNAL HAS FLNALLY HELD THAT ESTIMATION OF PROFIT AT 8% ON MAIN CONTRACT AND 5% ON SUB CONTRACT IS JUSTIFIED HOWEVE R, THE ASSESSING OFFICER HAS ESTIMATED THE INCOME AT 12.5% ON CONTRACT WORKS AND 7% ON SUB-CONTRACT WORKS. WHILE DOING SO, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SUBSTANTIATE HIS STAND. ON THE OTHER HAND, THE APPE LLANT CONTENDED THAT IN THE EARLIER YEARS IN HIS CASE, AS SESSMENTS WERE COMPLETED WITH ESTIMATION OF PROFIT AT 5% ON S UB CONTRACT RECEIPTS. THE APPELLANT ALSO CONTENDED THAT THE WOR KS ARE CONTINUATION OF EARLIER YEARS AND HENCE ADOPTION OF HIGHER PERCENTAGE FOR THIS YEAR NOT JUSTIFIED. 5.2. AFTER CONSIDERING THE FACTS OF THE CASE, I AM O F THE OPINION THAT THE POINT TO BE NOTED HERE IS THAT AS TO WHAT IS THE APPROPRIATE YIELD DEPENDS ON FACTS AND CIRCUMSTANCE S OF EACH CASE AND THERE ARE NO HARD AND FAST RULES TO BE APP LIED ON UNIVERSAL BASIS. BUT IN ANY CASE VARIOUS APPELLATE BODIES HAVE HELD THE ESTIMATION OF INCOME TO BE BETWEEN 8 TO 12 .5 PERCENT ON CONTRACT WORKS AND 5 TO 7% ON SUB-CONTRACT WORKS . BUT, HOWEVER HAVING REGARD TO THE FACTS, CIRCUMSTANCES O F THE CASE AND ALSO THE DECISION OF THE HON'BLE ITAT, HYDERABA D BENCH 'B BENCH IN THE CASE OF SRI KESHAVA BHATTA VANGALA VS. ITO, WARD- 8(2), HYDERABAD IN ITA NO.1213/HYD/2013 RELIED UPON BY THE APPELLANT, I AM OF THE CONSIDERED OPINION THAT ENDS OF JUSTICE ARE MET IF FOR MAIN CONTRACTS, A PERCENTAGE OF 9 IS ADOPTED IN THE PLACE OF 12.5 AND FOR SUB-CONTRACTS, A PERCENTA GE OF 5 IS ADOPTED IN THE PLACE OF 7 ADOPTED BY THE AO IN THE IMPUGNED ASSESSMENT ORDER. ACCORDINGLY, THE ASSESSING OFFICE R IS DIRECTED TO DO SO. ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, ASSESSEE IS A CIVIL CONTRACTOR AND ALSO CARRI ED SUB CONTRACTS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. HAS ASKE D THE ASSESSEE TO FILE THE BOOKS OF ACCOUNTS. THE ASSESSEE IS NOT AB LE TO FILE ALL THE RELEVANT DETAILS, THEREFORE, THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME ON GROSS RECEIPTS OF SUB C ONTRACT WORKS AT 7%, INCOME ESTIMATED ON GROSS RECEIPT OF MAIN CONTR ACT WORKS AT 12.5%. ON APPEAL, THE LD. CIT(A) HAS RESTRICTED TH E DISALLOWANCE IN RESPECT OF SUB CONTRACT WORKS AT 7% TO 5% AND IN RE SPECT OF MAIN CONTRACTS 12.5% TO 9%. BOTH THE A.O. AS WELL AS CI T(A) STATED THAT THE ASSESSEE IS NOT ABLE TO FILE FULL DETAILS AND PROPE R BOOKS OF ACCOUNTS. WE FIND THAT ESTIMATION HAS TO BE BASED ON FACTS AND C IRCUMSTANCES OF THE EACH CASE. IN THE PRESENT CASE, THE ESTIMATION RES TRICTED BY THE LD. CIT(A) AS AGAINST THE ORDER OF THE A.O., WE FIND IT JUST AND REASONABLE, THERE IS NO REASON TO INTERFERE WITH THE ORDER PASS ED BY THE CIT(A). THUS THIS APPEAL FILED BY THE REVENUE IS DISMISSED. THE CROSS APPEAL WHICH IS SUPPORTIVE IN NATURE, IN VIEW OF OUR ORDER ABOVE, THE SAME IS ALSO DISMISSED. ITA NO.448/VIZAG/2014 & CO 1/VIZAG/2015 SRI BATTULA ANJANEYULU, TIRUVURU 7 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CROSS APPEAL FILED BY THE ASSESSEE IS ALSO DISMISSE D. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JUL16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 22.07.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1(1), VIJAYAWAD A 2. / THE RESPONDENT SRI BATTULA ANJANEYULU, D.NO.21 0261, SANTHI NAGAR, TIRUVURU, KRISHNA DISTRICT. 3. ) / THE CIT, VIJAYAWADA 4. ) ( ) / THE CIT(A), VIJAYAWADA 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM