K.Venkata Raju, Vemagiri V. Assistant Commissioner of Income Tax, Circle-2(1), , Rajahmundry

CO 29/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7234 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 07-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Rejection of books of accounts; Business income; Depreciation; TDS
• Section: 44AD; 143(3); 142(1); 143(1); 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 549 &550 /VIZ/2018 ( / ASSESSMENT YEAR S : 20 12 - 1 3 AND 2013 - 14 ) ASST .COMMISSIONER OF INCOME TAX CIRCLE - 2(1) RAJAHMUNDRY VS. M/S K.VENKATA RAJU D.NO.2 - 59, VEMAGIRI KADIYAM MANDALAM EAST GODAVARI DIST. [PAN :AABFK4007A] ( / APPELLANT) ( / RESPONDENT) CO NO. 29 & 30 /VIZ/201 9 (ARISING OUT OF I .T.A.NO. 549 & 550 /VIZ/2018 RESPECTIVELY ) ( / ASSESSMENT YEAR: 20 12 - 1 3 AND 2013 - 14 ) M/S K.VENKATA RAJU D.NO.2 - 59, VEMAGIRI KADIYAM MANDALAM EAST GODAVARI DIST. [PAN :AABFK4007A] VS. ASST .COMMISSIONER OF INCOME TAX CIRCLE - 2(1) RAJAHMUNDRY ( / APPELLANT) ( / RESPONDENT) /REVENUE BY : S MT SUMAN MALIK, DR / ASSESSEE BY : SHRI G.V.N.HARI, AR / DATE OF HEARING : 16 . 04. 201 9 / DATE OF PRONOUNCEMENT : 3 0 .04. 201 9 2 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE LD . COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)], RAJAMAHENDRAVARAM, VIDE I.T.A.NO.0096/2015 - 16 DATED 25.07.2018 AND I.T.A. NO.10158/2016 - 17 DATED 25 .07.2018. CROSS OBJECT IONS ARE FILED BY THE ASSESSEE IN SUPPORT OF THE ORDER OF THE ORDERS OF THE LD.CIT(A). SINCE THE GROUNDS RAISED IN THESE APPEALS ARE IDENTICAL, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND A COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AS UNDE R. A.Y.2012 - 13 2. GROUND NOS.1, 8 AND 9 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 3. GROUND NO. 2 TO 5 ARE RELATED TO THE ESTIMATION OF INCOME AND THE ALLOWANCE OF DEPRECIATION FROM THE ESTIMATED INCOME. BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A CIVIL CONTRACTOR FILED I T S RETURN OF INCOME DECLARING TOTAL INCOME OF RS.4,11,23,110/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT), SELECTED FOR SCRUTINY AND THE NOTICES U/S 143(2) AND 142(1) WERE ISSUED TO 3 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM THE ASSESSEE AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.5,02,12,206/ - . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER(AO) FOUND THAT THE ASSESSEE HAS ADMITTED THE GROSS RECEIPTS OF RS.64,74,97,287/ - WHICH INCLUDED THE INSURANCE CLAIM OF RS.5,66,122/ - . THE GROSS CONTRACT RECEIPTS AFTER EXCLUDING THE INSURANCE CLAIM OF RS.5,66,122/ - WORKED OUT TO RS.64,69,31,165/ - OUT OF WHICH SUB CONTRACTS TAKEN WAS RS.33,88,33,723/ - AND THE DIRECT CONTRACT WORKS DONE BY THE ASSESSEE WAS RS.30,80,98,442/ - . DURING THE ASSESSMENT PROCEEDINGS, THE AO HAD CALLED FOR THE DETAILS OF BILLS AND VOUCHERS FOR THE EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT. ON VERIFICATION OF THE BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE, THE AO OBSERVED THAT THE BILLS AND VOUCHERS IN RESPECT OF EXPENDITURE FOR MATERIAL PURCHASES, MESS EXPENSES, SAND PURCHASES, LABOUR PAYMENTS AND FREIGHT CHARGES WERE MOSTLY SELF - MADE VOUCHERS. SOME PAYMENTS WERE ALSO MADE THROUGH CONTRACTORS AND THE TDS HAS B EEN DONE FROM THE PAYMENTS. THE AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF SUCH EXPENSES WHICH WERE INCURRED THROUGH CONTRACTORS. THEREFORE VIEWED THAT NO PROPER VERIFICATION COULD BE MADE WITH REGARD TO THE PAYMENTS MADE THR OUGH THE CONTRACTORS. THE LD.AR ALSO EXPRESSED HIS INABILITY TO SUBMIT THE BREAKUP OF EXPENSES TOWARDS SUCH 4 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM CONTRACT WORK AND RATE OF PROFIT TO BE GIVEN TO THE CONTRACTOR FROM WHOM SUB CONTRACTS HAVE BEEN TAKEN. DUE TO THE DEFECTS FOUND BY THE AO WITH RE GARD TO THE NON - VERIFICATION OF THE EXPENSES, THE AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE NET PROFIT @8% ON DIRECT CONTRACTS AND 5% ON SUB CONTRACTS UNDERTAKEN BY THE ASSESSEE. SINCE THE AO ESTIMATED THE NET PROFITS, HE HAS DIRECTLY TAKEN THE NET PROFIT FOR THE PURPOSE OF COMPUTATION OF INCOME WITHOUT ALLOWING THE STATUTORY ALLOWANCES SUCH AS THE D EPRECIATION, PARTNERS SALARY AND THE INTEREST ON CAPITALS AND ACCORDINGLY ESTIMATED THE NET PROFIT OF RS.4,15,89,561/ - AS UNDER : (A) NET PROFIT ON DIRECT CONTRACT WORKS EXECUTED BY THE ASSESS E E I.E. 8% OF RS.30,80,98,42/ - - RS.2,46,47,875/ - (B) NET PROFIT ON SUB CONTRACT WORKS TAKEN BY THE ASSESSE E I.E. 5% OF 33,88,33,723/ - - RS.1,69,41,686/ - (C) AGGREGATE OF SUCH NET PROFI TS - RS.4,15,89,561/ - THE AO ALSO MADE THE FOLLOWING ADDITIONS SEPARATELY TO THE NET PROFIT: ( A ) INSURANCE CLAIM - RS.5,66,122/ - ( B ) INTEREST RECEIVED - RS.58,62,286/ - ( C ) MACHINERY RENT RECEIVED - RS.21,94,337/ - THUS THE TOTAL INCOME OF THE ASSESSEE WAS COM PUTED AT RS.5,02, 12, 206/ - . 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNTS AND 5 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM ESTIMATION OF INCOME. HOWEVER, THE LD.CIT(A) FOLLOWING THE ORDER OF THE THIS TRIB UNAL IN ASSESSEES OWN CASE FOR THE A.Y.2011 - 12 IN I.T.A. NO.270/VIZ/2016 DATED 22.12.2017 HELD THAT THE ESTIMATION OF INCOME @ 8% ON OWN CONTRACTS AND 6% ON SUB CONTRACTS IS REASONABLE. HOWEVER, THE AO HAS BEEN DIRECTED TO ALLOW THE STATUTORY ALLOWANCE SUCH AS DEPRECIATION, INTEREST ON CAPITALS AND THE REMUNERATION TO PARTNERS FROM THE ESTIMATED INCOME. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT RELEVANT PART OF THE ORDER OF THE LD.CIT(A) IN PARA NO.6.2 TO 6.3 W HICH READS AS UNDER : 6 .2 . A PE RUSAL OF THE ORDER OF THE HON'BL E JURISDICTIONAL TRIBUNAL, VISAKHAPATNAM IN, I.T.A. NO.270/VIZA G /2016 DATED. 22.12.2017 IN THE CASE OF THE APPELLANT IN IT'S OWN CASE FOR THE A.Y.2011 - 12 WHEREIN IT WAS HELD THAT: 'THE A.0 COMPLETED THE ASS ESSMENT ESTIMATING THE INCOME @10 % ON IMPUGNED CONTRACTS, 8% ON SUB - CONTRACTS, 4 % ON SUB CONTRACTS GIVEN, HOWEVER, THE A.0 HAS NOT ALLOWED THE STATUTORY ALLOWANCE OF DEPRECIATION. WHEREAS, THE CIT(A) HAS REDUCED THE ESTIMATION OF INCOME BUT DID NOT ALLOW THE DEPRECIATION. THE DEPRECIATION IS A STATUTORY ALLOWANCE WHICH REQ UIRE TO BE ALLOWED BY THE AO. A S PER THE DECISION OF HON'BLE HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS.CIT AND THE DECISION OF CIT VS. Y.RAMACHANDRA RED DY IN IT TA NO.48/2002 DATED 30.07.2014, HON'BLE HIGH COURT HELD THAT EVEN THOUGH THE A.O REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME, DEPRECIATION IS ALLOWABLE UNLESS THERE IS ON OCCASION TO DISBELIEVE THE PURCHASE OF MACHINERY. THE ONLY ARGUMENT I N TH IS CASE MADE BY THE ASSESSEE WAS TO ALLOW THE DEPRECIATION. ON THE SIMILAR FACTS AND CIRCUMSTANCES, THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASST.YEAR:2009 - 10 ALLOWED THE DEPRECIATION FROM THE ESTIMATION OF INCOME.' 'IN THE INSTANT CASE THERE IS NO DIS PUTE THAT THE FACTS ARE SIMILAR TO THAT OF THE ASSESSEE'S CASE FOR THE ASS T. YEAR:2009 - 10. THE LD.D.R DID NOT 6 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM BRING ANY OTHER CASE LAW OR DISTINGUISHED THE FACTS OF THE CASE. THEREFORE, RESPECTFULLY F OLLOWING THE VIEW TAKEN BY THE I TAT FOR THE EARLIER YEA RS IN THE ASSESSEE'S OWN CASE, WE D IRECT THE A.0 TO ALLOW THE DEPRE CIATION AGAINST THE INCOME ESTIMATED FROM THE CONTRACT RECEIPTS. HOWEVER, THE INCOME SO COMPUTED SHALL NOT B E LESS THAN THE RETURNED INCOME. 6.3. THE A.OS DECISION FOR THE A.Y.2012 - 13 UND ER CONSIDERATION IN ESTIMATING THE INCOME ON PERCENTAGE BASIS IS APPROPRIATE IN VIEW OF THE VARIOUS DISCREPANCIES, FOR WHICH NO VALID REASON WAS ATTRIBUTED BY THE APPELLANT, I CONSIDER IT FAIR AND REASONABLE TO ESTIMATE THE INCOME BY THE A.0 @8%/@ 6% FROM THE CONTRACTS/SUB - CONTRACT WORKS BESIDES IN DISALLOWING SOME OF THE RECEIPTS OFFERED BY THE APPELLANT, IN ABSENCE OF RELATED PROOFS OR EVIDENCES. ON A CAREFUL CO NSIDE RATION OF THE ORDER OF THE HON'BL E JURISDICTIONAL ITAT, VISAKHAPATNAM CITED (SUPRA), I AM OF THE VIEW THAT THE SECOND APPELLATE AUTHORITY HAS TAKEN A CONSCIOUS DECISION ON THIS ISSUE AFTER DULY ANALYSING THE VARIOUS DECISIONS RENDERED BY THE HON'BL E HIGH COURT. THEREFORE, RESPECTFULLY FOL LOWING THE VIEW TAKEN BY THE ITAT IN THE EARLIER YEAR IN THE ASSESSEE'S OWN CASE, IT IS TO DIRECT T HE A.O TO ALLOW THE STATUTORY AL LOWANCES/DEDUCTIONS TOWARDS INTEREST/ REMUNERATION TO PARTNERS AND DEPRECIATION ETC. FRO M THE ESTIMATED INCOME (@8% / @ 6% ) F ROM CONTRACTS. IN ADDITION TO THE ABOVE, THE LD.CIT(A) ALSO DIRECTED THE AO TO INCLUDE THE MACHINERY RENT AND INSURANCE CLAIM AS PART OF BUSINESS TURNOVER I.E . PART OF MAIN CONTRACT RECEIPTS. 6. AGAINST THE ORDER OF THE LD.CIT(A), THE REVENUE HAS FILE D APPEAL BEFORE THIS TRIBUNAL. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE AO HAS ESTIMATED THE INCOME @8% ON OWN CONTRACTS AND 5% ON SUB CONTRACTS, HOWEVER, THE AO HAS NOT ALLOWED THE DEPRECIATI ON, INTEREST ON REMUNERATION TO PARTNERS. THE AO DID NOT GIVE 7 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM REASONS FOR NOT ALLOWING THE DEPRECIATION AND THE INTEREST ON REMUNERATION TO THE PARTNERS. ON IDENTICAL FACTS, THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2011 - 12 UPHELD THE REJECTI ON OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME @8% ON OWN CONTRACTS AND 6% ON SUB CONTRACTS BEFORE STATUTORY ALLOWANCES OF DEPRECIATION. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT PARA NO.8 AND 9 OF THE ORDER OF THIS TRIBUNAL WHICH READS AS UN DER : 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,03,36,200/ - AND THE A.O. COMPLETED THE ASSESSMENT ON TOTAL INCOME OF RS.2,26,89,287/ - . IN THE ASSESSMENT PROCEEDINGS, THE A.O. COMPLETED THE ASSESSMENT ESTIMATING THE INCOME @ 8% ON IMPUGNED CONTRACTS, 6% ON SUB CONTRACTS, 2% ON SUB CONTRACTS GIVEN, HOWEVER, THE A.O. HAS NOT ALLOWED THE STATUT ORY ALLOWANCE OF DEPRECIATION. THE LD. CIT(A) HAS REDUCED THE ESTIMATION OF INCOME BUT DID NOT ALLOW THE DEPRECIATION. THE DEPRECIATION IS A STATUTORY ALLOWANCE WHICH REQUIRE TO BE ALLOWED BY THE A.O., AS PER THE DECISION OF HONBLE HIGH COURT IN THE CAS E OF INDWELL CONSTRUCTIONS VS. CIT AND THE DECISION OF CIT. VS,.Y.RAMACHANDRA REDDY ITTA NO.48/2002 DATED 30/07/2014, HONBLE HIGH COURT HELD THAT EVEN THOUGH THE A.O. REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME DEPRECIATION IS ALLOWABLE UNLESS THERE IS AN OCCASION TO DISBELIEVE THE PURCHASE OF MACHINERY. THE ONLY ARGUMENT IN THIS CASE MADE BY THE ASSESSEE WAS TO ALLOW THE DEPRECIATION. ON THE SIMILAR FACTS AND CIRCUMSTANCES, THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 ALLOWED THE DEPRECIATION FROM THE ESTIMATION OF INCOME. FOR THE SAKE OF CONVENIENCE AND CLARIFY, WE EXTRACT RELEVANT PARAGRAPH OF THE ITATS ORDER IN PARA NOS.16 & 17, WHICH READS AS UNDER: 17. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW EXPRESSED BY TH E HONBLE JURISDICTIONAL HIGH COURT AND ALSO CONSIDERING THE COORDINATE BENCH DECISION OF THIS TRIBUNAL, WE ARE OF THE OPINION THAT DEPRECIATION IS A ALLOWABLE DEDUCTION, EVEN AFTER ESTIMATION OF NET PROFIT FROM THE CONTRACT RECEIPTS. THEREFORE, WE DIRECT THE 8 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM ASSESSING OFFICER TO ALLOW THE DEPRECIATION AGAINST THE INCOME ESTIMATED FROM THE CONTRACT RECEIPTS. AS FAR AS THE DISALLOWANCE OF REMUNERATION TO PARTNERS AND INTEREST ON PARTNERS CAPITAL ACCOUNT IS CONCERNED, THE STATUTE ITSELF IN SECTION 44AD OF T HE ACT, ALLOWED SEPARATE DEDUCTIONS TOWARDS INTEREST ON CAPITAL ACCOUNTS AND REMUNERATION TO PARTNERS, AFTER ESTIMATION OF NET PROFIT FROM THE GROSS RECEIPTS. THE CIT (A) AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS RIGHTLY DIRECTED THE A.O. TO ALLOW REMUNERATION TO PARTNERS AND INTEREST ON PARTNERS CAPITAL ACCOUNT FROM THE NET PROFIT ESTIMATED. THEREFORE, WE FIND NO ERROR OR INFIRMITY IN THE ORDER OF THE CIT (A), HENCE, WE INCLINED TO UPHELD THE ORDER OF THE CIT (A). 18. THE ASS ESSING OFFICER IS DIRECTED TO COMPUTE THE TOTAL INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IN ACCORDANCE WITH THE DECISIONS RENDERED BY US ON VARIOUS ISSUES IN THE PRECEDING PARAGRAPHS. HOWEVER, THE INCOME SO COMPUTED WORKS 4OUT TO LESS THAN THE INCOME RETURNED BY THE ASSESSE E , THEN, THE TOTAL INCOME SO COMPUTED SHALL NOT GO BEYOND THE RETURNED INCOME AND IT SHOULD BE RESTRICTED TO THE INCOME RETURNED BY THE ASSESS E E, SINCE, THE ASSESSED INCOME SHOULD NOT BE LESS THAN THE RETURNED INCOME. 9. IN THE INSTANT CASE THERE IS NO DISPUTE THAT FACTS ARE SIMILAR TO THAT OF THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2009 - 10. THE LD. D.R. DID NOT BRING ANY OTHER CASE LAW OR DISTINGUISHED THE FACTS OF THE CASE. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW T AKEN BY THE ITAT FOR THE EARLIER YEAR IN THE ASSESSEES OWN CASE, WE DIRECT THE A.O. TO ALLOW THE DEPRECIATION AGAINST THE INCOME ESTIMATED FROM THE CONTRACT RECEIPTS. HOWEVER, THE INCOME SO COMPUTED SHALL NOT BE LESS THAN THE RETURNED INCOME. ACCORDINGL Y, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SINCE THE FACTS ARE IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y.2011 - 12, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE REVENUE . HOWEVER, THE INCOME RECOMPUTED SHALL NOT BE LESS THAN THE RETURNED INCOME. 9 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM 8. GROUND NO.6 AND 7 ARE RELATED TO THE MACHINERY RENT AND INSURANCE RECEIVED AS PART OF MAIN CONTRACT RECEIPTS. THE AO WHILE MAKING THE ADDITION HAS NOT GIVEN ANY REASON FOR SEPARATE ADDITION F OR MACHINERY RENT AND INSURANCE CLAIM. THE LD.CIT(A) DELETED THE ADDITION HOLDING THAT THE MACHINERY RENT AND INSURANCE RECEIVED RELATE D TO THE BUSINESS INCOME OF THE ASSESS E E, THEREFORE, THE AO WAS DIRECTED TO INCLUDE IT AS PART O F THE BUSINESS TURNOVER. FURTHER, THE CIT(A) HAS GIVEN A FINDING IN THE APPELLATE ORDER THAT HIS PREDECESSOR CIT(A) AND THE ITAT, VISAKHAPATNAM, FOR THE A.Y.2009 - 10 HAS ALLOWED THE ASSESSEES APPEAL AND TREATED THE INSURANCE RECEIPT AS PART OF THE BUSINES S INCOME. 8.1. MACHINERY RENT WAS SEPARATELY TREATED AS INCOME FROM OTHER SOURCES BY THE AO WITHOUT GIVING ANY REASON. THE SAID INCOME WAS STATED TO BE RECEIVED FROM LEASING OUT OF MACHINES. ONCE THE AO TREATS THE MACHINERY RENT AS SEPARATE SOURCE OF INCOME, IT IS OBLIGATION OF THE AO TO ALLOW THE EXPENDITURE RELATABLE TO MACHINERY RENT INCLUDING THE INTERE ST, REPAIR AND MAINTENANCE ETC. AND THE DEPRECIATION SEPARATELY TO ARRIVE AT THE INCOME. HOWEVER, NO SUCH EXERCISE WAS DONE BY THE AO. 10 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM 8.2. SIMIL ARLY, INSURANCE RECEIVED WAS A BUSINESS CLAIM STATED TO BE PART OF ASSESSEES CLAIM FOR LOSS OF MACHINERY. NO DETAILS WERE FURNISHED BY THE AO IN THE ASSESSMENT ORDER. DURING THE APPEAL HEARING THE LD. DR COULD NOT PLACE ANY MATERIAL ON THE ADDITIONS MADE RELATING TO MACHINERY RENT AND THE INSURANCE CLAIMS. THE LD.CIT(A) DIRECTED THE AO TO TREAT THE MACHINERY RENT AS WELL AS INSURANCE CLAIM AS BUSINESS RECEIPT FOLLOWING THE ORDER OF CIT(A) FOR EARLIER YEAR. SINCE THE DEPARTMENT COULD NOT PLACE ANY MATERIA L TO ASSESS THE MACHINERY RENT AND INSURANCE CLAIM AS A SEPARATE SOURCE OF INCOME, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ) AND THE SAME IS UPHELD. THE APPEAL OF THE REVENUE ON THIS GROUND IS DISMISSED. 9. THE ASSESS E E FILE D CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD.CIT(A). SINCE THE ORDER OF THE LD.CIT (A) IS UPHELD, CROSS OBJECTIONS FILED BY THE ASSESSE E BECOMES INFRUCTUOS, HENCE DISMISSED. A.Y. 2013 - 14 1 0 . FOR THE A.Y. 201 3 - 1 4 THE ONLY ISSUE IS ESTIMATION OF INCOME AND THE ALLOWANCE OF D EPRECIATION THEREON. FOR THE A.Y.2012 - 13, THE AO ESTIMATED THE INCOME @10% ON MAIN CONTRACTS, 8% ON SUB CONTRACTS AND 4% ON SUB CONTRACTS GIVEN BY THE ASSESSEE. THUS, NET PROFIT FROM THE GROSS CONTRACTUAL 11 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM RECEIPTS WERE ESTIMATE D @ RS.4,89,41,116/ - . THE CIT(A) FOLLOWED THE ORDER OF THIS TRIBUNAL AND ESTIMATED THE INCOME @8%, 6% AND 2% AND DIRECTED THE AO TO ALLOW THE DEPRECIATION, INTEREST A N D THE REMUNERATION TO PARTNERS FROM THE ESTIMATED INCOME. SINCE THE FACTS ARE IDENTICAL, FOL LOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 1 1 . THE ASSESSEES CROSS OBJECTIONS ARE IN SUPPORT OF THE CIT(A) ORDER. SINCE THE ORDER OF THE CIT(A) IS UPHELD CROSS OBJECTIONS BECOMES INFRUCTUOUS AND HENCE DISMISSED. 1 2 . IN THE RESULT, APPEAL OF THE REVENUE FOR THE A.Y. 201 2 - 1 3 AND A.Y.2013 - 14 AS WELL AS THE CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2019. S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 30 .04.2019 L.RAMA, SPS 12 I.T.A. NO . 549 & 550 /VIZ/2018 AND CO NO. 29 & 30 /VIZ/201 9 M/S K.VENKATA RAJU, KADIYAM MANDALAM / COPY OF THE ORDER FORWARDED TO: - 1 . / THE REVENUE ASST .COMMISSIONER OF INCOME TAX , CIRCLE - 2(1) RAJAHMUNDRY 2 . / THE ASSESSEE - M/S K.VENKATA RAJU, D.NO.2 - 59, VEMAGIRI , KADIYAM MANDALAM, EAST GODAVARI DIST. 3. THE PR. COMMISSIONER OF INCOME TAX , RAJAMAHENDRAVARAM 4. THE COMMISSIONER OF INCOME - TAX (APPEALS) , RAJAMAHENDRAVARAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM