THE ACIT, CIRCLE - 1, ELURU., Eluru V. M/s Dwaraka Tirumala Contructions, Eluru

ITA 10/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1213 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M GANGA RAJU SARMA
• Keywords: Rejection of books of accounts; Business income
• Section: 143(3); 145; 148

Judgement Text

ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 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.NOS.10&11/VIZAG/2013 ( / ASSESSMENT YEARS: 2008-09 & 2009-10 RESPECTIVEL Y) ACIT, CIRCLE - 1, ELURU VS. DWARAKA TIRUMALA CONSTRUCTIONS ELURU [PAN: AACFD9718J ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NOS.35&36/VIZAG/2013 (ARISING OUT OF I.T.A.NOS.10&11/VIZAG/2013 RESPECTI VELY) ( / ASSESSMENT YEARS: 2008-09 & 2009-10 RESPECTIVEL Y) DWARAKA TIRUMALA CONSTRUCTIONS ELURU VS. ACIT, CIRCLE - 1, ELURU ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR / RESPONDENT BY : SHRI M. GANGA RAJU SARMA, AR / DATE OF HEARING : 24.03.2016 / DATE OF PRONOUNCEMENT : 19.04.2016 ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS FILED BY THE REVENUE AND CROSS OBJEC TIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMM ON ORDER OF CIT (APPEALS), GUNTUR DATED 10.10.2012 FOR THE ASST. YE ARS 2008-09 & 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACTS, FILED A RETU RN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 BY ADMITTING TOTAL INCOME O F ` 57,83,290/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T'). THEREAFTER, A NOTICE U/S 148 OF THE ACT WAS ISSUED AND AFTER FOLL OWING THE DUE PROCEDURE, THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. HAS NOTED THAT THE ASSESSEE WAS ASKED TO FILE INFORMATION IN RESPE CT OF DETAILS OF EXPENDITURE SUCH AS BOOKS OF ACCOUNTS, BILLS, VOUCH ERS AND PURCHASE OF DIFFERENT MATERIAL AND OTHER INFORMATION. IN RESPO NSE TO THAT, ASSESSEE HAS FILED DETAILS. ON VERIFICATION OF THE SAME, TH E A.O. HAS FOUND THAT ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 3 VOUCHERS ARE SELF-MADE AND LACKING FULL DETAILS FOR WHICH PURPOSE THE PAYMENT MADE AND THE A.O. CAME TO A CONCLUSION THAT VOUCHERS ARE NOT FULLY VERIFIABLE. THE A.O. HAS FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED THE PURCHASE OF MATERIALS OF ` 4,28,90,613/- AND EXPENDITURE INCURRED FOR CONSUMABLES (OILS AND LUBRICANTS) OF ` 1,30,52,998/-. THE ASSESSEE HAS FURNISHED CERTAIN VOUCHERS AND BILLS U NDER THE ABOVE HEADS. ON VERIFICATION OF THE SAME BY THE A.O., HE HAS FOUND THAT THE VOUCHERS FILED BY THE ASSESSEE ARE SELF-MADE LACKIN G FULL DETAILS AND CAME TO A CONCLUSION THAT VOUCHERS ARE NOT FULLY VE RIFIABLE. THE A.O. FURTHER NOTED THAT ACCORDING TO THE ASSESSEE, HE HA S INCURRED FOR WAGES TO THE WORKERS AMOUNTING TO ` 2,87,81,707/- AND SALARIES TO STAFF AMOUNTING TO ` 32,91,750/-. WHEN THE A.O. ASKED FOR WAGE REGISTE RS AND OTHER DETAILS, ASSESSEE WAS NOT ABLE TO PRODUCE THE SAME BEFORE THE A.O. EVEN OTHER EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD TRANSPORT CHARGES AND TRAVELLING EXPENSES, PRINTI NG AND STATIONERY, THE ASSESSEE IS NOT ABLE TO FILE DETAILS BEFORE THE A.O . IN VIEW OF THE ABOVE, THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT U/S 145 OF THE ACT AND KEEPING IN VIEW OF THE BUSINESS OF THE ASSESSEE, HE HAS ESTIMATED INCOME OF THE ASSESSEE AT 10% OF THE GROSS RECEIPTS . ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS SUB MITTED BEFORE THE ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 4 CIT(A) THAT THE ESTIMATION MADE BY THE A.O. IS EXCE SSIVE AND THE A.R. OF THE ASSESSEE RELIED ON THE CASE OF DCIT VS. M. RAMA RAO IN ITA NO.184/VIZAG/2010 DATED 27.12.2010 OF ITAT VIZAG BE NCH AND SUBMITTED THAT THE ADDITION MADE BY THE A.O. MAY BE REDUCED. THE LD. CIT(A) BY CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, HE HAS OBSERVED THAT THE BOOK RESULTS ADOPTED BY THE ASSESSEE IS TO O LOW. BUT AT THE SAME TIME, ESTIMATION ADOPTED BY THE A.O. IS TOO HI GH AND A.O. HAS NOT GIVEN COGENT REASONS AS TO WHY SUCH A PERCENTAGE WA S ADOPTED. BY FOLLOWING THE ORDER OF VISAKHAPATNAM BENCH IN THE C ASE OF M. RAMA RAO (SUPRA) THE CIT(A) DIRECTED THE A.O. TO ADOPT 6.5% ON THE GROSS RECEIPTS. 3. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE LD. CIT(A) PASSED THE COMBINED ORDER FOR ASSESSMENT YEA RS 2008-09 & 2009-10 AND DIRECTED THE A.O. TO ADOPT 6.5% ON GROS S BUSINESS RECEIPTS INSTEAD OF 10% ADOPTED BY HIM. WE FIND THAT THE AS SESSEE IS A CIVIL CONTRACTOR AND IS NOT ABLE TO PRODUCE BILLS AND VOU CHERS IN RESPECT OF VARIOUS EXPENDITURES INCURRED. UNDER THESE CIRCUMS TANCES, THE A.O. REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED INCOME AT 10%. THE LD. ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 5 CIT(A) REDUCED IT TO 6.5% WITHOUT RECORDING ANY REA SONS, SIMPLY BY FOLLOWING THE TRIBUNAL DECISION, WHICH IS NOT RELE VANT. IN THE CASE OF ESTIMATION, OF FACTS AND CIRCUMSTANCES OF EACH CASE HAS TO BE EXAMINED. IN THE PRESENT CASE AFTER CONSIDERING THE ASSESSMEN T ORDER AS WELL AS CIT(A) ORDER AND ALSO DETAILS FILED BEFORE US, WE A RE OF THE OPINION THAT ESTIMATION AT 8% ON GROSS RECEIPTS INSTEAD OF 6.5% ON GROSS RECEIPTS IS TO BE ADOPTED. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A). WE DIRECT THE A.O. TO ADOPT ESTIMA TION AT 8% ON GROSS RECEIPTS FOR THE ASSESSMENT YEAR 2008-09 AS WELL AS 2009-10 ALSO. 5. SO FAR AS TREATMENT OF INTEREST RECEIPTS ON FDRS FOR ASSESSMENT YEAR 2008-09 OF ` 3,61,934/-, THE A.O. HAS TREATED IT AS AN INCOME FROM OTHER SOURCES. ON APPEAL, IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE DEPOSITS WERE MADE BY THE ASSESSEE FOR THE PURPOSE OF BANK GUARANTEE TO OBTAIN THE TENDERS AND SUBMITTED THAT IT HAS TO BE TREATED AS A BUSINESS INCOME. THE LD. CIT(A) BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HAS TREATED IT AS A BUSINESS INCOME. THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE BEFORE US TO SHOW THAT THE DEP OSITS MADE BY THE ASSESSEE ARE FOR THE PURPOSE OF BUSINESS. THEREFOR E, IT CANNOT BE SAID THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE F ROM THE BANK DEPOSITS IS INCOME FROM BUSINESS. THEREFORE, WE HO LD THAT INTEREST ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 6 RECEIVED BY THE ASSESSEE IS INCOME FROM OTHER SOUR CES AND WE ACCORDINGLY REVERSE THE ORDER OF THE CIT(A). 6. IN VIEW OF OUR DECISION IN THE ASSESSMENT YEAR 2 008-09, THE YEAR UNDER CONSIDERATION I.E. 2009-10, INTEREST INCOME I S TREATED AS AN INCOME FROM OTHER SOURCES. 7. THE GROUND RAISED BY THE DEPARTMENT IN RESPECT OF SEIGNIORAGE & SALES TAX RELATING TO ASSESSMENT YEAR 2009-10, THE A.O. HAS NOTED FROM THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE AS E XPENDITURE UNDER HEAD SEIGNIORAGE & SALES TAX OF ` 56,42,897/-. HOWEVER, FROM THE TDS CERTIFICATES ISSUED BY THE DEDUCTORS (GOVERNMEN T DEPARTMENTS), IT IS NOTICED THAT ACTUAL RECOVERIES UNDER THE HEADS INCL UDING INCOME TAX OF ` 10,27,693/- ARE AT ` 56,06,025/-. THUS THE EXCESS CLAIM OF EXPENDITURE OF ` 35,872/- ( ` 56,42,897 MINUS ` 56,07,025/-) IS DISALLOWED. AS INCOME TAX IS NOT ALLOWABLE UNDER SEC. 40(A)(II) OF THE ACT, THE COMPONENT OF INCOME TAX OF ` 10,27,693/- AMONG THE RECOVERIES IS DISALLOWED. ON APPEAL, IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSING OFFICER MENTIONED IN HIS ORDER THAT THERE IS A VARIATION OF EXPENDITURE UNDER THE HEAD SEIGNIORAGE & SALES TAX AND CESS ETC. AND ALSO FURTHER STATED THAT THE INCOME TAX COMPONENT W AS INCLUDED AMONG RECOVERIES UNDER THE HEAD SEIGNIORAGE AND SALES TAX AND FURTHER ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 7 SUBMITTED THAT ONCE THE BOOKS OF ACCOUNTS ARE REJEC TED AND INCOME IS ESTIMATED, THE ASSESSING OFFICER IS PRECLUDED FROM INVOKING ANY OTHER PROVISIONS OF THE INCOME TAX ACT TO MAKE FURTHER AD DITION. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIED, IT WAS REJECTED BY THE ASSESSING OFFICER AND NOW, BASED ON THE RELIANCE ON THE SAME BOOKS FOR THE PURPOSES OF MAKING FURTHER ADDITIONS IS IMPROPE R AND UNJUST. THE ESTIMATION OF INCOME TAKES CARE OF IRREGULARITIES C OMMITTED BY THE ASSESSEE, BUT MAKING FURTHER ADDITIONS AMOUNT TO DO UBLE ADDITION WHICH IS NOT PERMITTED BY LAW. THE LD. CIT(A) AFTER CONS IDERING THE EXPLANATION OF THE ASSESSEE, HE HAS OBSERVED THAT O NCE THE INCOME IS ESTIMATED, NO OTHER ADDITION IS PERMISSIBLE ON THE BASIS OF REJECTED BOOKS AND AS SUCH THE IMPUGNED ADDITION MADE BY THE A.O. IS SET ASIDE AND ALLOWED THE CLAIM OF THE ASSESSEE. WE FIND NO REASON TO INTERFERE IN THE ORDER PASSED BY THE CIT(A). THIS GROUND OF APP EAL RAISED BY THE REVENUE IS DISMISSED. 8. SO FAR AS CROSS APPEALS FILED BY THE ASSESSEE IS CONCERNED, IN VIEW OF OUR DECISION ABOVE FOR ASSESSMENT YEARS 2008-09 & 2009-10, THE CROSS APPEALS BECOME INFRUCTUOUS AND ARE DISMISSED. ITA NOS.10 & 11/VIZAG/2013 C.O. NOS35&36/VIZAG/2013 DWARAKA TIRUMALA CONSTRUCTIONS, ELURU 8 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 ARE PARTLY ALLOWED AND THE CROSS APPEALS FILED BY THE ASSESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 TH APR16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 19.04.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1, ELURU 2. / THE RESPONDENT M/S. DWARAKA TIRUMALA CONSTRUCT IONS, 28-1-38, 7 TH LINE, SANTHINAGAR, ELURU, W.G. DIST, A.P. 3. ) / THE CIT, GUNTUR 4. ) ( ) / THE CIT(A),GUNTUR 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM