THE ACIT, Hyderabad V. M/s Southland Stone&Slate Exporters, Hyderabad

ITA 1027/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53851 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: A V RAGHURAM
• Section: 80HHC; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JM ITA NO.1027/HYD/2010 ASSESSMENT YEAR 2004-05 THE ACIT, CIRCLE 6(1), HYDERABAD. VS M/S SOUTHLAND STONE & SLATE EXPORTERS, HYDERABAD. (PAN AACFS8929A) APPELLANT RESPONDENT APPELLANT BY : SHRI B.V. PRASAD REDDY RESPONDENT BY : SHRI A.V. RAGHU RAM DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 27.12.2011 ORDER PER ASHA VIJAYARAGHAVAN, JM. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) TIRUPATHI DATED 23.4.2 010 AND PERTAINS TO THE ASSESSMENT YEAR 2004-05. 2. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF EXPORT OF STONE AND SLAT E. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2004-05 ON 1.11.2004 ADMITTING AN INCOME OF RS.8,58,813/-. THE ASSESSMENT WAS COMPLETED U/S 144 OF THE IT ACT ESTI MATING THE INCOME AT 12.5%. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE PERCENTAGE HAS NE VER EXCEEDED 12.5% IN THE PREVIOUS 3 YEARS AND HENCE THERE IS NO BASIS FOR THE ASSESSING OFFICER TO ESTIMATE THE NET PROFIT AT 12. 5%. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FURNISHED A COMPARATI VE STUDY OF ITA NO.1027 OF 2010 M/S SOUTHLAND STONES & SLATE EXPORTERS, HYDERABAD 2 GROSS PROFITS AND NET PROFITS IN THE 3 PREVIOUS YEA RS JUSTIFYING THE ASSESSEES NET PROFITS WHICH HAS BEEN ADMITTED AS 7 .5%. FURTHER, THE DC HAD NOT ALLOWED THE CLAIM FOR DEDUCTION U/S 80HHC. 3. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIE D ON THE FOLLOWING CASE LAWS: A) MAHARAJASRI BP SINGHDEV (76 ITR 690) (SC) B) POPULAR ELECTRIC CO. PVT. LTD. (203 ITR 630 (CAL .) C) VELUKUTTI (1966) (60 ITR 239) (SC) D) LAKSHMI TEA CO. LTD., (1992) (42 ITD 642) 4. WITH RESPECT TO THE CLAIM U/S 80HHC, THE CIT(A) DIRECTED TO ALLOW THE DEDUCTION U/S 80HHC AS PER FORM 10CCAC FR OM NET PROFITS WHICH HAVE BEEN ESTIMATED AND ALSO TO ALLOW DEDUCTION U/S 40(B). THE CIT(A) ALLOWED DEDUCTION FOR PARTNERS REMUNERATION AND ALSO INTEREST ON CAPITAL. 5. WITH RESPECT TO THE ESTIMATION OF THE NET PROFI T AT 12.5% BY THE ASSESSING OFFICER, THE CIT(A) OBSERVED THAT THO UGH THE ASSESSEE HAD NOT APPEARED IN RESPONSE TO THE NOTICES, THE AS SESSEE HAD FURNISHED ADEQUATE MATERIAL BEFORE THE ASSESSING OF FICER. FURTHER, THE CIT(A) OBSERVED THAT IT WAS NOT APPROPRIATE ON THE PART OF ASSESSING OFFICER TO DISREGARD THE PAST RECORD AND PAST RESULTS OF THE ASSESSEES FIRM EVEN THOUGH HE WAS RIGHT IN MAK ING EX-PARTY ASSESSMENT BY REJECTING THE BOOK RESULTS. THE CIT( A) FURTHER HELD AS FOLLOWS : IT HAS BEEN DEMONSTRATED THAT THE HIGHER NET PROFIT IN THE LAST FOUR YEARS IS 11.4% AND THE LEAST IS 9.26%. H ENCE, IT ITA NO.1027 OF 2010 M/S SOUTHLAND STONES & SLATE EXPORTERS, HYDERABAD 3 WOULD BE JUDICIOUS TO ESTIMATE THE NET PROFIT AT 9% CONSIDERING THAT THERE IS FALL IN THE GP RATIO. 6. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE U S. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI. A.V. RAGHU RAM SUPPORTED THE ORDER OF THE CIT(A). 7. WE HEARD BOTH THE PARTIES. CONSIDERING THE NATU RE OF BUSINESS THAT THE ASSESSEE IS ENGAGED IN THE NET PR OFIT ADMITTED IS LOW AND IN THE ABSENCE OF BOOKS OF ACCOUNTS, BILLS AND VOUCHERS WE ARE INCLINED TO ESTIMATE THE NET PROFIT AT 10% O F THE GROSS TURNOVER, TAKING INTO CONSIDERATION THE FACT THAT T HE HIGHER NET PROFIT IN THE LAST FOUR YEARS IS 11.4% AND THE LEAS T IS 9.26% 8. THE SECOND ISSUE RAISED BY THE DEPARTMENT IS AS FOLLOWS: THE CIT(A) ERRED IN ALLOWING THE DEDUCTIONS UNDER SECTION 80HHC AND UNDER SECTION 40(B)(IV) & (V) OF THE ACT FROM THE NET PROFIT ESTIMATED @ 9% OF THE TURNOVER. IT IS SE TTLED LAW THAT ONCE THE NET INCOME IS ESTIMATED, NO FURTHER DISALLOWANCE CAN BE ALLOWED SINCE THE NET INCOME IS NET OF ALL THE EXPENDITURE INCURRED BY THE ASSESSEE 9. WE FIND THAT FOR THE EARLIER YEAR I.E., ASSESS MENT YEAR 2002- 03, 80HHC DEDUCTION HAS BEEN GIVEN BY THE ASSESSING OFFICER. FURTHER, AS POINTED OUT BY THE CIT(A), 80HHC DEDUCT ION CANNOT BE DISALLOWED WITHOUT FINDING ANY DEFECT IN FORM 10CCA C. HENCE WE DIRECT THAT THE DEDUCTION U/S 80HHC SHOULD BE ALLOW ED TO THE ASSESSEE. ITA NO.1027 OF 2010 M/S SOUTHLAND STONES & SLATE EXPORTERS, HYDERABAD 4 10. AS REGARDS DEDUCTION U/S 40(B), THE FIRM IS E NTITLED AS PER THE STATUTE FOR THE SAME AND HENCE IS ALLOWED. ACC ORDINGLY, THE 5 TH GROUND RAISED BY THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE REVENUES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT 27. 12. 2011 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 DECEMBER,. 2011 COPY FORWARDED TO: 1. THE ACIT, CIRCLE 6(1), HYDERABAD 2. M/S SOUTHLAND STONE & SLATE EXPORTERS, D.NO.6-3-57 0, NO.201, LUMBINI ROCKDALE, SOMAJIGUDA, HYDERABAD 3. THE CIT(A) TIRUPATHI & HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/