ACIT, Tirupathi V. M/s Srinivasa Constructiions, Tirupathi

ITA 1038/HYD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69996 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Rejection of books of accounts; Unexplained investment; Search and seizure; Loose papers; Document seized; Documents seized
• Section: 143(3); 133A; 153A; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1. 1038/H/10 2004- 05 THE ACIT, CENTRAL CIRCLE, TIRUPATHI M/S SRINIVASA CONSTRUCTIONS, TIRUPATHI PAN AAZFS7091Q 2. 1039/H/10 2005- 06 -DO- -DO- 3. 1040/H/10 2006- 07 -DO- -DO- 4. 1041/H/10 2007- 08 -DO- -DO- 5. 2179/H/10 2004- 05 M/S SRINIVASA CONSTRUCTIONS, TIRUPATHI PAN AAZFS7091Q THE ACIT, CENTRAL CIRCLE, TIRUPATHI 6. 2180/H/10 2006- 07 -DO- -DO- 7. 1580/H/10 2004- 05 -DO- -DO- AND C.O. NO. AY CROSS OBJECTOR RESPONDENT 8. 9/H/11 (IN ITA NO. 1038/H/10) 2004- 05 M/S SRINIVASA CONSTRUCTIONS, TIRUPATHI PAN AAZFS7091Q THE ACIT, CENTRAL CIRCLE, TIRUPATHI 9. 10/H/11 (IN ITA NO. 1039/H/10) 2005- 06 -DO- -DO- 10. 11/H/11 (IN ITA NO. 1040/H/10) 2006- 07 -DO- -DO- 11 12/H/11 (IN ITA NO. 1041/H/10) 2007- 08 -DO- -DO- ASSESSEE BY: SRI V. RAGHAVENDRA RAO REVENUE BY: SRI D. SUDHAKAR RAO DATE OF HEARING: 06/11/2013 DATE OF PRONOUNCEMENT: 18/12/2013 O R D E R I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 2 PER CHANDRA POOJARI, AM: ALL THESE APPEALS PERTAINING TO ONE ASSESSEE, ARE DIRECTED AGAINST THE ORDERS OF CIT(A) BY THE ASSESS EE AS WELL AS REVENUE AND THE ASSESSEE ALSO FILED CROSS OBJECT IONS. AS IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS AND COS, THE SAME ARE CLUBBED AND HEARD TOGETHER, THEREFORE, A C OMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. ITA NOS. 1038, 1039, 1040 & 1041/HYD/2010 AND C.O. NOS. 9, 10, 11 & 12/HYD/2011 BY ASSESSEE FOR ASSESSMEN T YEARS 2004-05 TO 2007-08. 2. THESE APPEALS AND C.OS ARE DIRECTED AGAINST A COMMON ORDER OF CIT(A), TIRUPATHI DATED 14/05/2010. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FIRM CONSTITUTED BY A DEED OF PARTNERSHIP ON 08/05/2003 IS ENGAGED IN CONSTRUCTION AND SALE OF FLATS. THERE WAS A SEAR CH AND SEIZURE ACTION U/S 132 CARRIED OUT IN THE CASE OF S RI T.S. RAJASHEKARA GUPTA ON 09/03/2007. ALONG WITH ACTION U/S 132, A SURVEY U/S 133A HAD BEEN CONDUCTED AT ONE OF THE CONSTRUCTION SITES I.E. YADAVA COLONY, AIR BYE-PASS ROAD, TIRUPATHI WHERE THE ASSESSEE FIRM HAD UNDERTAKEN A MULTI- STORIED RESIDENTIAL PROJECT IN THE NAME OF ANNAMAY YA TOWERS. 4. DURING THE COURSE OF SEARCH AT THE RESIDENCE OF THE MANAGING PARTNER SRI T.S. RAJASHEKARA GUPTA, LOOSE PAPERS WERE SEIZED AND MARKED AS PAGE 1 & 2 OF ANNEXURE A/ TSR/01. THIS IS A COMPUTERIZED PRINT OUT DEPICTING THE DETA ILS OF FLATS SOLD AND MONIES RECEIVED IN ANNAMAYYA TOWERS ON 30/10/2006 AND CONTAINS DETAILS SUCH AS FLAT NUMBER , NAME OF THE CUSTOMER, PRICE AT WHICH FLAT WAS SOLD, TOTAL A MOUNTS RECEIVED, AMOUNTS DUE AT PRESENT STAGE, BALANCE AMO UNT PAYABLE ETC. PAGE 2 OF THIS ANNEXURE IS AN ABSTRACT OF I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 3 ACCOUNTS AS ON 30/11/2006 PERTAINING TO ANNAMAYYA T OWERS WHICH INTER ALIA INDICATES THAT THE SAID LAND WAS P URCHASED AT RS. 1,20,58,830/- AGAINST WHICH THE INVESTMENT IS R EFLECTED IN THE RETURNS OF INCOME AT RS. 28,04,625/- ONLY IMPLY ING IN SUPPRESSION OF INVESTMENT TO AN EXTENT OF RS. 92,54 ,205/-. BASED ON THE ABOVE TWO SEIZED DOCUMENTS, THE ASSESS ING OFFICER HAD ADDED BACK THE UNEXPLAINED INVESTMENT O F RS. 92,54,205/-. 5. WHILE EXAMINING THE PROFITABILITY RETURNED BY TH E ASSESSEE FIRM ON THE SALE OF FLATS, THE ASSESSING O FFICER HAD OBSERVED THAT EXCEPT THE VOUCHERS IMPOUNDED AS BUND LE NO. 7 CONTAINING SERIAL NO. 1 TO 225 DURING THE COURSE OF SURVEY U/S 133A, ALL OTHER VOUCHERS FURNISHED DURING THE ASSES SMENT PROCEEDINGS WERE ALL SELF MADE VOUCHERS AND HENCE N OT RELIABLE. HE HAD ALSO RELIED ON THE OBSERVATION DUR ING THE SEARCH THAT BOOKS OF ACCOUNT WERE NOT MADE AVAILABL E TO THE SEARCH TEAM BUT THEY WERE FURNISHED LATER DURING TH E ASSESSMENT PROCEEDINGS ONLY AND HENCE CAME TO A CON CLUSION THAT THE SAME WERE NOT RELIABLE. THE ASSESSING OFFI CER HAD ASSAILED THE METHOD OF ACCOUNTING ADOPTED BY THE AS SESSEE THAT NO TRUE PROFITS CAN BE DEDUCTED FROM THEREON. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNT AFTER GIVING AN OP PORTUNITY AND ESTIMATED THE NET PROFIT AT 28% OF THE SALE PRO CEEDS OFFERED IN THE RETURNS OF INCOME FOR EACH ASSESSMEN T YEAR INVOLVED HERE: S.NO. AY TOTAL RECEIPTS AS PER RETURN OF INCOME NET PROFIT ESTIMATED AT 28% (IN RS.) 1 2004-05 45,75,000 12,81,000 2 2005-06 1,67,43,000 46,88,000 3 2006-07 1,78,66,000 50,02,000 4 2007-08 3,76,67,000 1,05,46,000 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE CIT(A) IN THE SAID ASSESSMENT YEARS UNDER CONSIDERATION. I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 4 7. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSIONS, WHICH WERE EXTRACTED BY THE CIT(A) IN THE IMPUGNED ORDER AT PAGES 3 & 4 AND THE SAME WERE FOR WARDED TO THE ASSESSING OFFICER. AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE AND THE REMAND REPORT OBTAINED FROM TH E ASSESSING OFFICER, THE CIT(A) OBSERVED THAT REJECTI ON OF BOOKS OF ACCOUNT IS NOT AT ALL WARRANTED AND ALSO OBSERVE D THAT ESTIMATION OF INCOME AT 28% IS ALSO NOT AT ALL WARR ANTED. THE RELEVANT FINDINGS OF THE CIT(A) ARE AS UNDER: 7.1 THE ASSESSING OFFICER HAD EXAMINED VOUCHERS FOR AY 2006-07 IN TWO CATEGORIES IMPOUNDED U/S 133A DURING SEARCH AND VOUCHERS FOR VALUE BELOW RS. 5,00 0/- FURNISHED LATER. WITHOUT GIVING ANY COHERENT, VERIF IABLE EVIDENCE, SUCH VOUCHERS ARE DISMISSED AS SELF-MADE WHILE NOTHING IS COMMENTED ABOUT 225 VOUCHERS IMPOUNDED. MOREOVER, THIS OBSERVATIONS IS EXTENDED OR EXTRAPOLATED TO ALL ASSESSMENT YEARS ON A BLANKET M ODE AND ASSESSING OFFICER RESORTED TO REJECTING BOOKS O F ACCOUNT. THIS MANNER OF REJECTING BOOKS IS INCORREC T AS IT IS A DUTY CAST UPON THE ASSESSING OFFICER TO DEMONS TRATE THE BOOKS ARE DEFECTIVE. NOR THIS GIVES A RIGHT OF WAY TO EXTEND THE REJECTION OF BOOKS TO ALL ASSESSMENT YEA RS WITHOUT FINDING OBJECTS IN BOOKS OF RESPECTIVE ASSESSMENT YEARS. 7.2 THERE IS LOT OF STRENGTH IN THE APPELLANTS ARGUMENTS THAT THE ESTIMATION OF PROFITS BE BASED U PON REASONABLE COMPARISON BUT THE ASSESSING OFFICER HAS NOT BROUGHT ANY SUCH COMPARABLE CASES WHILE HARPING UPON 28% NET PROFIT BUT HE HAD RELIED UPON HYPOTHET ICAL EXTRAPOLATIONS. HENCE, THIS IS NOTHING BUT A HIGH P ITCHED ADDITION WITHOUT APPRECIATING THE MATERIAL AVAILABL E ON HAND AND WITHOUT CONSIDERING THE APPELLANTS EXPLANATIONS AND WITHOUT BRINGING ANY SUBSTANTIVE MATERIAL ON RECORD. HENCE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIONS ARISING OUT OF EST IMATION OF NET PROFIT AT 28%, AS BASELESS AND IMAGINARY. 8. AGGRIEVED, BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL BEFORE US FOR THE ASSESSMENT YEARS UNDER CONSIDERATION REGARDING DELETION OF ADDITIONS ARISI NG OUT OF ESTIMATION OF NET PROFIT RATE AT 28% OF GROSS RECEI PTS. I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 5 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE DEPARTMENT IS NOT IN APPEAL BEFORE US AGAINST THE FINDING OF CIT(A) THAT REJECTION OF BOO KS OF ACCOUNT IS NOT WARRANTED, BUT, IS ONLY AGAINST DELETION OF ADDITIONS ARISING OUT OF ESTIMATION OF NET PROFIT AT 28% OF G ROSS RECEIPTS. IN OUR OPINION, THE DEPARTMENT CANNOT CHALLENGE DEL ETION OF ADDITIONS ARISING OUT OF ESTIMATION OF INCOME AT 28 %, UNLESS CHALLENGING THE DECISION OF THE CIT(A) ON REJECTION OF BOOKS OF ACCOUNT. IF THE DEPARTMENT WANTS TO CHALLENGE THE D ELETION OF ADDITIONS ARISING OUT OF ESTIMATION OF INCOME, FIRS T, IT HAS TO CHALLENGE THE DECISION OF THE CIT(A) ON REJECTION O F BOOKS OF ACCOUNT BY ASSESSING OFFICER, THAT THE REJECTION OF BOOKS OF ACCOUNT IS NOT AT ALL WARRANTED. THE CIT(A) HAS OBS ERVED, IN FIRST PLACE, AT PARA 6.4, AS UNDER: 6.4............ I AM NOT INCLINED TO ACCEPT THAT TH E RATIO IN THE CASE OF HM ESUF & HM ABDUL ALI SUPRA IS APPLICA BLE TO THE GIVEN FACTS OF THE CASE AS THE ASSESSING OFF ICER COULD NOT ESTABLISH ANY ESCAPED TURNOVER OR ESCAPED RECEIPTS. THE REASONING GIVEN BY THE ASSESSING OFFI CER FOR REJECTING THE BOOKS OF ACCOUNT IS THOROUGHLY SH AKY AND NOTHING HAS BEEN BROUGHT ON RECORD TO SUBSTANTI ATE THAT THE TRUE PROFITS CANNOT BE DEDUCTED THEREFROM AS HELD IN THE CASE OF KRISHNASWAMY MUDALIAR SUPRA. MOREOVER, IT IS INCORRECT TO APPLY THE FINDINGS IN AY 2006-07, HOWEVER, SHAKY THEY ARE, TO THE PROCEEDING S IN ALL OTHER THREE ASSESSMENT YEARS IN QUESTION WITHOU T EXAMINING THE RESPECTIVE ACCOUNTS AND THEIR RELIABI LITY. THUS, THE REJECTION OF BOOKS OF ACCOUNTS IS HELD TO BE WITHOUT ANY BASIS AND REASONING. 10. IN VIEW OF THE ABOVE, IN OUR CONSIDERED VIEW, U NLESS AND UNTIL, THE DEPARTMENT CHALLENGES THE DECISION OF TH E CIT(A) ON REJECTION OF BOOKS OF ACCOUNT, CANNOT CHALLENGE THE DELETION OF ADDITIONS. THEREFORE, WE DISMISS THE GROUNDS TAKEN BY THE REVENUE IN ALL THE ASSESSMENT YEARS UNDER CONSIDERA TION. I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 6 11. IN THE RESULT, ALL THE FOUR APPEALS OF REVENUE ARE DISMISSED. 12. COMING TO THE C.OS. OF 9 TO 12/HYD/2011, AS WE HAVE UPHELD THE ORDER OF CIT(A) IN REVENUE APPEALS, THE GROUNDS RAISED BY THE ASSESSEE IN C.OS. BECOME INFRUCTUOUS AND THE SAME ARE DISMISSED AS INFRUCTUOUS. 13. AT THE TIME OF HEARING, REFERRING TO THE GROUND NO. 2 IN C.O. NO. 12/HYD/2011 THE LEARNED COUNSEL SUBMITTED THAT SEARCH AND SEIZURE OPERATIONS TOOK PLACE ON 09/03/2 007, BEING SO, THE AY 2007-08 IS OUT OF THE PURVIEW OF S ECTION 153A OF THE ACT AND FOR THIS PROPOSITION, HE RELIED ON T HE DECISION OF THE BANGALORE TRIBUNAL IN THE CASE OF AN RANGA SWAM Y VS. ACIT, (134 TTJ 723). THOUGH THE ASSESSEE ARGUED THI S ISSUE BEFORE US, THIS GROUND DOES NOT REQUIRE ANY ADJUDIC ATION AS WE HAVE DISMISSED THE REVENUE APPEAL IN ITA NO. 1041/H YD/2010 AND, HENCE, WE ARE NOT INCLINED TO ENTERTAIN THIS G ROUND BEING RAISED BY THE ASSESSEE. 14. IN THE RESULT, ALL THE C.OS. FILED BY THE ASSES SEE ARE ALSO DISMISSED. ITA NOS. 2179 AND 2180/HYD/2011 BY ASSESSEE FOR A YS 2004-05 AND 2006-07. 15. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST A COMMON ORDER PASSED BY THE CIT(CENTRAL), HYDERABA D DATED 25/03/2011 U/S 263 OF THE IT ACT, RELATING TO THE A SSESSMENT YEARS 2004-05 & 2006-07. 16. THESE APPEALS BECOME INFRUCTUOUS AS WE HAVE CONFIRMED THE ORDER OF CIT(A), DATED 14/05/2010 FO R AY 2004- 05 AND 2006-07 (SUPRA) WHEREIN THE CIT(A) DELETED T HE ADDITIONS MADE BY THE ASSESSING OFFICER IN ASSESSME NT ORDER. I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 7 BEING SO, THE ORDER PASSED BY THE CIT U/S 263, DATE D 25/03/2011 DOES NOT HAVE LEGS TO STAND IN THE EYE O F LAW IN VIEW OF PRINCIPLES OF DOCTRINE OF MERGER. THEREFORE , THESE TWO APPEALS FILED BY THE ASSESSEE ARE DISMISSED AS INFR UCTUOUS. 17. IN THE RESULT, THESE TWO APPEALS ARE DISMISSED. ITA NO. 1580/HYD/2012 BY THE ASSESSEE FOR AY 2004-0 5. 18. THIS IS AN APPEAL EMANATED FROM THE CONSEQUENTI AL ORDER PASSED U/S 143(3) READ WITH SECTION 263 OF TH E IT ACT. AS WE HAVE HELD THAT THERE CANNOT BE ANY ORDER U/S 263 FOR THE AY 2004-05 IN ITA NO. 2179/HYD/2011, THERE IS NO QU ESTION OF PASSING ANY CONSEQUENTIAL ORDER TO THAT EFFECT. ACC ORDINGLY, THIS APPEAL IS ALSO DISMISSED AS INFRUCTUOUS. 19. IN THE RESULT, THIS APPEAL IS DISMISSED. 20. TO SUM THE APPEALS BY THE REVENUE BEING ITA NOS . 1038, 1039, 1040, & 1041/HYD/2010 AND THE APPEALS B Y THE ASSESSEE BEING ITA NOS. 2179 & 2180/HYD/11 AND 1580/HYD/12 AS WELL AS THE C.OS. 9 TO 12/HYD/2012 A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18/12/2013 SD/- SD/- (SAKTIJIT DEY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 18 TH DECEMBER, 2013 KV I.T.A. NOS. 1038 TO 1041/H/10, 2179 & 2180/H/11 AN D COS. 9 TO 12/H/12 M/S SRINIVASA CONSTRUCTIONS 8 COPY FORWARDED TO: 1. ACIT, CENTRAL CIRCLE, TIRUPATHI 2. M/S SRINVASA CONSTRUCTIONS, 233 CHINNA BAZAR, TIRUPATHI 3. CIT(A), TIRUPATHI 4 CIT(CENTRAL), HYDERABAD 5 THE DR, ITAT, HYDERABAD