M/s Vasanth Vihar, Vizianagaram V. The ITO, Wd-2, Vizianagaram

CO 22/VIZ/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4965 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G S S GOPINATH
• Keywords: Depreciation
• Section: 133A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.250 TO 253/VIZAG/2010 ASSESSMENT YEARS : 2003-04 TO 2006-07 RESPECTIVELY M/S. VASANTHA VIHAR VIZIANAGARAM ITO WARD-2 VIZIANAGARAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAAEFV 0896M CO NOS.19 TO 22/VIZAG/2010 ASSESSMENT YEARS : 2003-04 TO 2006-07 RESPECTIVELY ITO WARD-2 VIZIANAGARAM M/S. VASANTHA VIHAR VIZIANAGARAM (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAIN ST THE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEARS 2003-04 T O 2006-07 ON COMMON GROUNDS THAT CIT(A) IS NOT JUSTIFIED IN ESTIMATING THE PROFIT AT 8% AFTER ALLOWING THE DEPRECIATION, REMUNERATION TO PARTNERS AND INTEREST WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF SUR VEY THE UNDISCLOSED INCOME OFFERED BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTM ENT. BESIDES THE CHARGEABILITY OF INTEREST U/S 234B IS ALSO CHALLENG ED. 2. THE REVENUE HAS FILED THE CROSS OBJECTIONS IN TH ESE APPEALS ASSAILING THE ORDER OF THE CIT(A) ON THE GROUND THAT CIT(A) I S NOT JUSTIFIED IN ESTIMATING THE PROFIT AT 8% AFTER ALLOWING DEPRECIA TION, REMUNERATION TO PARTNERS AND INTEREST WITHOUT REALIZING THAT ASSESS ING OFFICER HAS RIGHTLY ESTIMATED THE PROFIT AT 10.5% BEFORE ALLOWING PARTN ERS REMUNERATION AND 2 INTEREST. SINCE THE COMMON ISSUE IS RAISED IN THE APPEAL AND THE C.O. WE PREFER TO ADJUDICATE THEM SIMULTANEOUSLY. 3. THE FACTS BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SELLING OF FLATS. IT FILED ITS RETURN OF INCOME BY ADMITTING NIL INCOME. THERE AFTER SUR VEY U/S 133A WAS CONDUCTED AND DURING THE COURSE OF SURVEY THAT HAVE TAKEN PLACE IN FEBRUARY, 2007 AT THE BUSINESS PREMISES OF THE ASSESSEE, CERT AIN DEFICIENCIES WITH REGARD TO THE VOUCHERS MAINTAINED WERE POINTED OUT AND THE ASSESSEE HAS AGREED TO THE ESTIMATED PROFIT OF RS.48,69,942/- AN D PROPORTIONATE PROFIT BASED ON THE PERCENTAGE OF COMPLETION METHOD WAS WO RKED OUT TO RS.6,47,215/- IN THE A.Y. 2003-04, RS.20,01,546/- I N THE A.Y. 2004-05, RS.16,03,672/- IN THE A.Y. 2005-06, RS.4,81,151/- I N THE A.Y. 2006-07 AND RS.1,36,358/- IN THE A.Y. 2007-08. THE ASSESSEE AD MITTED THE DIFFERENCE BETWEEN THIS AMOUNT AND THE ORIGINALLY RETURNED AS HIS ADDITIONAL INCOME AND ACCORDINGLY REVISED ITS RETURN OF INCOME. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . PROPOSED TO ESTIMATE THE PROFIT OF THE ASSESSEE AT 10% OF THE T URNOVER AND THUS COMPLETED THE ASSESSMENT BY ESTIMATING THE PROFIT A T 10.5% AS AGAINST 10% PROPOSED TO THE TURNOVER CLEAR OF DEPRECIATION, AFT ER REJECTING THE BOOKS OF ACCOUNTS BECAUSE BILLS AND VOUCHERS WERE NOT VERIFI ABLE. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBM ISSION THAT DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A OF THE ACT, A FTER DETAILED APPRAISAL OF PAPERS FOUND DURING THE COURSE OF SURVEY, THE PROFI T WAS ESTIMATED AT RS.48,69,942/- FROM THE PROJECT VASANTHA VIHAR WHIC H WORKS OUT TO APPROXIMATELY 5% OF THE GROSS RECEIPT. ACCORDINGLY , THE ADDITIONAL INCOME WAS ADMITTED BY THE ASSESSEE IN THE STATEMENT RECOR DED ON OATH AND THIS ADDITIONAL INCOME WAS ACCEPTED BY THE A.O. AND THER EAFTER THE A.O. DID NOT BRING ON RECORD ANY NEW MATERIAL OR EVIDENCE ON THE BASIS OF WHICH HE HAS RE-ESTIMATED THE INCOME AT 10.5% OF THE TURNOVER. CIT(A) RE-EXAMINED THE ISSUE BUT WAS NOT FULLY CONVINCED WITH THE EXPLANAT IONS OF THE ASSESSEES. HE HOWEVER, ESTIMATED THE PROFIT AT 8% AFTER ALLOWING DEPRECIATION, REMUNERATION TO PARTNERS AND INTEREST. THIS ORDER OF CIT(A) IS NOT ACCEPTED 3 BY THE ASSESSEE AS WELL AS THE REVENUE AND THEY HAV E PREFERRED THE APPEAL BEFORE THE TRIBUNAL. 5. THE ASSESSEE IS BEFORE US WITH THE SUBMISSION TH AT DURING THE COURSE OF SURVEY, THE ASSESSEE ITSELF HAS ESTIMATED ITS IN COME FROM THE VASANTHA VIHAR PROJECT AND THE SAME WAS ADMITTED BY THE ASSE SSING OFFICER WHO APPORTIONED PROFIT OVER A PERIOD OF 5 YEARS AND THE SAID APPORTIONMENT WAS ACCEPTED BY THE ASSESSEE. THE RETURNS WERE REVISED AND THE TAX WAS PAID ACCORDINGLY. THE LD. COUNSEL FOR THE ASSESSEE FURT HER INVITED OUR ATTENTION TO THE CALCULATIONS OF PROFIT OF THE VASANTHA VIHAR PR OJECT WHICH WERE FURNISHED DURING THE COURSE OF STATEMENT RECORDED IN SURVEY O PERATION. IN COMPUTATION OF PROFIT, SALE CONSIDERATIONS AND COST OF LAND WER E RECORDED AS PER THE BOOKS OF ACCOUNTS ON THE BASIS OF THE DOCUMENTARY EVIDENC E AND THE COST OF CONSTRUCTION WAS CALCULATED @ RS.400/- PER SFT. TO RS.8,05,20,000/-. THIS IS THE ONLY COMPONENT WHERE THE ADDITION CAN BE MADE A FTER DISBELIEVING THIS CLAIM OF EXPENDITURE BUT UNDER THIS HEAD A SUBSTANT IAL ADDITION CANNOT BE MADE AS DONE BY THE A.O. THE LD. COUNSEL FOR THE A SSESSEE FURTHER CONTENDED THAT ONCE THE ADDITIONAL INCOME OFFERED B Y THE ASSESSEE WAS ACCEPTED BY THE A.O. DURING THE COURSE OF SURVEY, I T CANNOT BE RE-ESTIMATED WITHOUT ANY BASIS IN ASSESSMENT PROCEEDINGS. 6. THE LD. D.R. ON THE OTHER HAND HAS PLACED A HEAV Y RELIANCE UPON THE ORDER OF THE A.O. WITH THE SUBMISSIONS THAT ASSESSI NG OFFICER HAS EVERY RIGHT TO EXAMINE THE DOCUMENTS AND CLAIMS OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE ADDITION MA DE BY THE A.O. IS CORRECT AND JUSTIFIED. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE RECORD WE FIND THAT INITIALLY THE ASSESSEE HAS NOT OFFERED ANY INCOME FROM THIS CONSTRUCTION ACTIVITY BUT WHEN THE SURVEY WAS CONDU CTED U/S 133A AND THE ASSESSING OFFICER HAS NOTICED DISCREPANCIES IN THE BILLS AND VOUCHERS AND THE ACCOUNTS OF THE ASSESSEES, THE ASSESSEE ITSELF HAS CALCULATED THE PROFIT FROM HIS VASANTHA VIHAR PROJECT. DURING THE COURSE OF S URVEY, THE INCOME OFFERED BY THE ASSESSEE WAS ACCEPTED BY THE A.O. AND IT WAS APPORTIONED OVER A 4 PERIOD OF 5 YEARS. ASSESSEE HAS NOT MAINTAINED PRO PER BOOKS OF ACCOUNTS AND THE BILLS AND VOUCHERS WERE NOT OPEN TO VERIFIC ATION AS THEY ARE SELF-MADE VOUCHERS. IN THIS TYPE OF SITUATION, THE BOOKS OF A CCOUNTS CAN BE REJECTED AND INCOME CAN BE ESTIMATED. IN THE INSTANT CASE AL SO, THE BOOKS OF ACCOUNTS WERE REJECTED AND THE INCOME WAS ESTIMATED. THE AS SESSEE HIMSELF HAS ESTIMATED THE INCOME AT RS.48,69,942/-. THIS WAS A CCEPTED BY THE A.O. AS HE HAS APPORTIONED THE PROFIT OVER A PERIOD OF 5 YE ARS. THE APPORTIONMENT WAS ACCEPTED BY THE ASSESSEE AND HE DECLARED THIS P ROFIT AND PAID THE TAX ACCRUED THEREON. WE HAVE CAREFULLY EXAMINED THE ST ATEMENT RECORDED BY THE A.O. DURING THE COURSE OF SURVEY, WE FIND THAT WHA TEVER PROFIT WAS WORKED OUT, IT WAS WITH THE AGREEMENT OF THE ASSESSEE AND THE A.O. AND AFTER ITS APPORTIONMENT, THE CORRESPONDING PROFIT WAS DECLARE D BY THE ASSESSEE. ONCE THIS PROFIT DECLARED BY THE ASSESSEE WAS ACCEPTED B Y THE A.O. DURING THE COURSE OF SURVEY PROCEEDINGS, WE FIND NO JUSTIFICAT ION IN RE-ESTIMATING PROFIT IN THE ASSESSMENT PROCEEDINGS WITHOUT BRINGING ANY INC RIMINATING EVIDENCE ON THE BASIS OF WHICH IT CAN BE INFERRED THAT ASSESSEE HAS EARNED MORE PROFIT THAN DECLARED DURING THE COURSE OF SURVEY PROCEEDIN GS. WE THEREFORE FIND NO JUSTIFICATION IN ADDITION MADE BY THE A.O. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. ACCORDINGLY, WE SET ASIDE THE ADDITIO NS MADE BY THE A.O. AND DIRECT HIM TO ASSESS THE INCOME DECLARED BY THE ASS ESSEE DURING THE COURSE OF SURVEY PROCEEDINGS. 8. SO FAR AS CHARGEABILITY OF INTEREST U/S 234B IS CONCERNED, IT IS OF CONSEQUENTIAL IN NATURE AND NEEDS NO INDEPENDENT AD JUDICATION. SINCE THE APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE, THE C. O. OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE AL LOWED AND C.O. OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 30 TH JUNE, 2010 5 COPY TO 1 M/S. VASANTHA VIHAR, RAILWAY STATION ROAD, VIZIAN AGARAM 2 ITO, WARD-2, VIZIANAGARAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM