Sri Maddipudi Rama Rao, Rajahmundry V. THE ACIT,CIRCLE - 1, Rajahmundry

CO 78/VIZ/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0459 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SARISH KUMAR I
• Section: 142(1)

Judgement Text

ITA NO.168 & CO 78 OF 2013 SRI MADDIPUDI RAMA RAO R AJAHMUNDRY PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.168 /VIZAG/2013 ASSESSMENT YEAR: 2009-10 ACIT CIRCLE-1 RAJAHMUNDRY SRI MADDIPUDI RAMA RAO, 56-10-14/1 LAKSHMI NILAYAM, VIDYANAGAR, RAJAHMUNDRY (APPELLANT) VS. (RESPONDENT) PAN NO: ABWPM 3747 M C.O. NO.78/VIZ/2013 (ARISING OUT OF ITA NO.168/VIZAG/2013) ASSESSMENT YEAR: 2009-10 SRI MADDIPUDI RAMA RAO, 56-10-14/1 LAKSHMI NILAYAM, VIDYANAGAR, RAJAHMUNDRY ACIT CIRCLE-1 RAJAHMUNDRY (CROSS OBJECTOR) PAN NO: ABWPM 3747 M VS. (RESPONDENT) DEPARTMENT BY: SHRI SARISH KUMAR, I. DR ASSESSEE BY: SHRI C. SUBRAHMANYAM, CA DATE OF HEARING: 25/02/2015 DATE OF PRONOUNCEMENT: 03/03/2015 ORDER PER SAKTIJIT DEY: THE APPEAL OF THE DEPARTMENT AND THE CROSS OBJECTI ON OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 11.01 .2013 OF THE LEARNED CIT (A)-11, MUMBAI PERTAINING TO THE ASSESSMENT YEA R 2009-10. ITA NO.168/VIZAG/2013 2. THE FIRST ISSUE IN THE DEPARTMENTAL APPEAL RELAT ES TO THE DECISION OF THE LEARNED CIT (A) IN REDUCING THE ESTIMATION OF P ROFIT FROM 15% TO 7.5%. 3. BRIEF FACTS ARE, ASSESSEE IS AN INDIVIDUAL DERIV ING INCOME FROM EXECUTING WORKS CONTRACT. FOR THE ASSESSMENT YEAR U NDER CONSIDERATION ITA NO.168 & CO 78 OF 2013 SRI MADDIPUDI RAMA RAO R AJAHMUNDRY PAGE 2 OF 6 ASSESSEE FILED HIS RETURN OF INCOME ON 29.09.2009 D ECLARING INCOME OF RS.23,08,510. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THOUGH THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 143( 1) AND 142(1) REQUIRING THE ASSESSEE TO PRODUCE ITS BOOKS OF ACCOUNT, BUT A S OBSERVED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, NO BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE. THEREFORE, IN ABSENCE OF THE BOOKS OF ACCOUNT AND PROPER VOUCHERS WITH REGARD TO THE EXPENDITURE CLAIMED, THE ASSESSING OFFICER TOOK RECOURSE TO SECTION 145(3) AND PROCEED ED TO ESTIMATE INCOME @ 15% ON THE TOTAL RECEIPTS OF RS.3,97,63,886 AS A RESULT OF WHICH PROFIT WAS WORKED OUT TO RS.59,64,583. ASSESSEE BEING AGGR IEVED OF THE ESTIMATION OF PROFIT BY APPLYING THE RATE OF 15% PR EFERRED AN APPEAL BEFORE THE CIT (A). IN COURSE OF HEARING OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SUBMITTED BY THE ASSESSEE THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 THE ITAT VISAKHAPATNAM BENC H HAS DIRECTED TO ESTIMATE PROFIT FROM CONTRACT BUSINESS BY APPLYING THE RATE OF 6.5%.THE LEARNED CIT (A) AFTER CONSIDERING THE AFORESAID SUB MISSIONS OF THE ASSESSEE AND KEEPING IN VIEW THE ORDER OF THE ITAT HELD THAT THE ESTIMATION OF NET PROFIT @ 7.5% ON GROSS CONTRACT RECEIPTS WOULD BE A PPROPRIATE. BEING AGGRIEVED BY THE ADOPTION OF PROFIT RATE OF 7.5% TH E DEPARTMENT IS IN APPEAL BEFORE US. WHILE THE DEPARTMENT IS CHALLENGI NG THE REDUCTION OF PROFIT RATE FROM 15% TO 7.5%, ASSESSEE WANTS THE NE T PROFIT TO BE ADOPTED AT 6.5% BY RAISING A GROUND IN THE CROSS OBJECTION. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS ON RECORD. AS CAN BE SEEN IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007-08, THE COORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT ESTI MATION OF PROFIT AT 6.5% ON GROSS CONTRACT RECEIPTS WILL BE REASONABLE. HOWE VER, IT IS TO BE NOTED THAT IN ASSESSMENT YEAR 2007-08, ASSESSING OFFICER HAD ESTIMATED PROFIT AT 12.5% OF THE GROSS RECEIPTS. IN THE IMPUGNED ASSESS MENT YEAR, ASSESSING OFFICER HAD ESTIMATED THE PROFIT AT 15% OF THE GROS S RECEIPTS. FURTHER THE LEARNED CIT (A) HAS OBSERVED THAT DISCREPANCIES IN THE IMPUGNED ASSESSMENT YEAR ARE MUCH MORE THAN WHAT WAS IDENTIF IED IN ASSESSMENT YEAR 2007-08. IT IS ALSO OBSERVED BY THE LEARNED CI T (A) THAT THE GROSS ITA NO.168 & CO 78 OF 2013 SRI MADDIPUDI RAMA RAO R AJAHMUNDRY PAGE 3 OF 6 RECEIPTS IN THE YEAR UNDER CONSIDERATION ARE LESS W HICH MEANS HIGHER PROFITABILITY. BY KEEPING IN VIEW THESE FACTS THE L EARNED CIT (A) ADOPTED THE RATE OF 7.5% ON THE GROSS CONTRACT RECEIPTS. IN OUR VIEW THE PROFIT RATE ADOPTED IN A PARTICULAR ASSESSMENT YEAR CANNOT BE U NIFORMLY APPLIED TO ALL SUBSEQUENT ASSESSMENT YEARS IRRESPECTIVE OF THE FAC TUAL POSITION. AS CAN BE SEEN THE LEARNED CIT (A) AFTER CONSIDERING THE PECU LIAR FACTS AND CIRCUMSTANCES OF THE IMPUGNED ASSESSMENT YEAR HAS T HOUGHT IT APPROPRIATE TO APPLY NET PROFIT RATE OF 7.5% OF THE GROSS CONTR ACTS. IN OUR VIEW, THE NET PROFIT RATE ADOPTED BY THE LEARNED CIT (A) IS REASO NABLE AND CALLS FOR NO INTERFERENCE. ACCORDINGLY WE UPHELD THE DECISION OF THE LEARNED CIT (A). 4. THE NEXT ISSUE RAISED BY THE DEPARTMENT IS WITH REGARD TO THE DIRECTION OF THE LEARNED CIT (A) TO REDUCE A SUM OF RS.94,36,414 FROM THE GROSS RECEIPTS. AS CAN BE SEEN, THE LEARNED CIT (A) AFTER VERIFICATION OF THE NECESSARY DETAILS HAS FOUND THAT OUT OF THE GROSS R ECEIPTS OF RS.3,97,63,886 AS MENTIONED IN THE TDS CERTIFICATE, A SUM OF RS.94 ,36,414 WAS ALREADY OFFERED BY THE ASSESSEE FOR TAXATION IN THE EARLIER ASSESSMENT YEAR. AS OBSERVED BY THE LEARNED CIT (A), ASSESSING OFFICER ALSO IN HIS REPORT DATED 21/12/2012 ACKNOWLEDGED THAT THE AMOUNT OF RS.94,3 6,414 WAS SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR 2008-09. THE LE ARNED DEPARTMENTAL REPRESENTATIVE ALSO ACCEPTED THE AFORESAID FACTUAL POSITION. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE DECISION OF THE LEARNED CIT (A) IN THIS REGARD. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. C.O. NO.78/VIZAG/2013: 6. THERE IS A DELAY OF FOUR DAYS IN FILING OF C.O. ASSESSEE HAS FILED A PETITION EXPLAINING THE CAUSE OF DELAY. AFTER CONSI DERING THE SAME, WE CONDONE THE DELAY. THE LEARNED A.R HAS NOT ADVANCED ANY SPECIFIC ARGUMENT WITH REGARD TO GROUND NO.1, HENCE THIS GRO UND IS DISMISSED AS NOT PRESSED. ITA NO.168 & CO 78 OF 2013 SRI MADDIPUDI RAMA RAO R AJAHMUNDRY PAGE 4 OF 6 7. IN GROUND NO.1.1, ASSESSEE HAS CHALLENGED THE DE CISION OF THE CIT (A) IN ESTIMATING THE NET PROFIT AT 7.5%. THIS GROU ND HAS ALREADY BEEN DECIDED ALONG WITH GROUND NO.2 IN DEPARTMENTAL APPE AL. IN TERMS WITH THE DECISION THEREIN, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 8. IN GROUND NO.1.2, ASSESSEE HAS CONTESTED THE DEC ISION OF THE LEARNED CIT (A) IN NOT REDUCING THE TURNOVER RELATING TO SU B CONTRACT WORK WHILE ESTIMATING THE PROFIT AT 7.5% ON GROSS CONTRACT REC EIPTS. 9. AS CAN BE SEEN, THE ASSESSING OFFICER ESTIMATED THE PROFIT AT 15% ON THE GROSS CONTRACT RECEIPTS AS A WHOLE. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SUBMITTED BY THE ASSESSEE THAT DURING THE YEAR ASSESSEE ALSO SUB CONTRACTED A PORTION OF THE WORK, HENCE WHILE ESTIM ATING THE PROFIT AT 7.5%, THE TURNOVER RELATING TO SUB CONTRACT WORK NEEDS TO BE REDUCED FROM THE GROSS CONTRACT RECEIPTS AS THE ASSESSEE HAS DECLARE D 2% COMMISSION ON WORK SUB CONTRACTED TO THIRD PARTIES. THE LEARNED C IT (A) HOWEVER, REJECTED THE CLAIM OF THE ASSESSEE WITH THE FOLLOWING OBSERV ATIONS: 7. REGARDING THE SUB-CONTRACT, THE ASSESSEE HAS NO T GIVEN ANY TDS DETAILS WHICH MEAN THE TDS ON SUB-CONTRACT HAS NOT BEEN DONE. MOREOVER THE AMOUNTS OF WORK SUBCONTRACT ED IS THE PART OF GROSS RECEIPTS AND CANNOT BE REDUCED TH EREFROM. 10. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US THAT THE GROSS CONTRACT RECEIPTS CONSIDERED BY THE LEARNED C IT (A) FOR ESTIMATION OF PROFIT @ 7.5% ALSO INCLUDES AMOUNT OF RS.1,80,50,00 0 WHICH WAS SUB CONTRACTED BY THE ASSESSEE TO SHRI BALAJI CONSTRUCT IONS ON WHICH THE ASSESSEE HAS ALREADY DECLARED INCOME @ 2% TOWARDS C OMMISSION RECEIVED ON VALUE OF CONTRACT WORK. IN THIS CONTEXT, THE ASS ESSEE REFERRED TO HIS WRITTEN SUBMISSION FILED BEFORE THE CIT (A) AND ALS O FORM NO.26AS IN THE NAME OF SHRI BALAJI CONSTRUCTIONS. THE LEARNED AUTH ORISED REPRESENTATIVE THEREFORE, SUBMITTED TURNOVER OF RS.1,80,50,000 BEI NG GIVEN ON SUB ITA NO.168 & CO 78 OF 2013 SRI MADDIPUDI RAMA RAO R AJAHMUNDRY PAGE 5 OF 6 CONTRACT CANNOT BE CONSIDERED AS PART OF THE GROSS CONTRACT RECEIPTS FOR ESTIMATING PROFIT AT 7.5%. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED BEFORE US THAT THERE BEING NO EVIDENCE ON RECORD THAT THE ASSESSEE HAS SUB CONTRACTED THE WORK WORTH OF RS.1, 80,50,000, ASSESSEES CLAIM CANNOT BE ACCEPTED. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. IN PRINCIPLE, WE AGREE WITH TH E LEARNED AUTHORISED REPRESENTATIVE THAT WORK SUB CONTRACTED TO THIRD PA RTIES CANNOT BE CONSIDERED AT PAR WITH THE CONTRACTS EXECUTED BY TH E ASSESSEE AS A MAIN CONTRACTOR WHILE ESTIMATING PROFIT. HENCE, THE RATE OF PROFIT APPLIED ON THE MAIN CONTRACT WORK CANNOT BE APPLIED TO THE WORK SU B CONTRACTED TO THIRD PARTIES AS THE PROFIT FROM SUCH SUB CONTRACT WORK W ILL BE MUCH LESS THAN THE PROFIT EARNED ON MAIN CONTRACT WORK. ON A PERUSAL O F FORM NO.26AS IN THE NAME OF SHRI BALAJI CONSTRUCTIONS, IT APPEARS THAT THE ASSESSEE HAS SUB CONTRACTED THE WORK TO THE TUNE OF RS.1,80,50,000. HOWEVER, AS THESE FACTS ALONG WITH THE EVIDENCES HAVE NOT BEEN VERIFIED EIT HER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT (A), WE REMIT THIS IS SUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH AFTER CONSIDE RING THE FACTS AND MATERIALS ON RECORD. WE MAKE IT CLEAR IF ON VERIFIC ATION IT IS FOUND THAT THE ASSESSEE HAS ACTUALLY SUB CONTRACTED A PORTION OF W ORK TO THIRD PARTIES, THEN THE ASSESSING OFFICER SHOULD REDUCE THE TURNOVER RE LATING TO SUCH SUB CONTRACT FROM THE GROSS CONTRACT RECEIPTS AND ESTIM ATE IT AT AN APPROPRIATE RATE BY APPLYING A REASONABLE RATE KEEPING IN VIEW THE DECISION OF THE TRIBUNAL IN THIS REGARD AFTER GIVING CREDIT TO INCO ME, IF ANY, DECLARED BY ASSESSEE ON SUCH SUB CONTRACT WORK. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, CROSS OBJECTION FILED BY THE ASS ESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.168 & CO 78 OF 2013 SRI MADDIPUDI RAMA RAO R AJAHMUNDRY PAGE 6 OF 6 12. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMI SSED AND THE CROSS OBJECTION IS PARTLY ALLOWED FOR STATISTICAL PURPOSE S. PRONOUNCED IN THE OPEN COURT ON 3 RD MARCH, 2015 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 3.3.2015 PVV/SPS CAMP: VISAKHAPATNAM, COPY TO 1 ACIT CIRCLE-1 RAJAHMUNDRY 2 SRI MADDIPUDI RAMA RAO, 56-10-14/1 LAKSHMI NILAYAM, VIDYANAGAR, RAJAHMUNDRY 3 THE CIT (APPEALS)-11 MUMBAI 4 THE CIT, RAJAHMUNDRY 5 THE CIT VISAKHAPATNAM 6 DEPARTMENTAL REPRESENTATIVE, ITAT VISAKHAPATNAM 7 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM