ITO. Ward-11(3), Hyderabad V. Shri Pathru Patel, Hyderabad

ITA 1167/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66267 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Keywords: Depreciation; Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1167/HYD/2011 ASSESSMENT YEAR : 2006-07 ITO, WARD-11(3), HYDERABAD. .... APPELLANT VS. SHRI PATHURU PATEL, BALANAGAR, HYDERABAD. RESPONDENT PAN:AAQPP 7011 A APPELLANT BY : SHRI K. VISWANATHAM RESPONDENT BY : NONE DATE OF HEARING : 02-08-2012 DATE OF PRONOUNCEMENT : 07-09-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST ORDER DATED 31-3-2011 OF CIT (A)-VI, HYDERABAD PASS ED IN ITA NO.423/08-09/CIT(A)-VI/10-11 AND IT PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. DESPITE NOTICE, THERE WAS NO APPEARANCE ON BEHAL F OF THE ASSESSEE-RESPONDENT DURING THE COURSE OF HEARING OF THIS APPEAL. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL EX PARTE ON MERITS, AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATI VE. 2 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS BEF ORE US:- 1. THE LD. CIT (A) ERRED BOTH IN FACTS AND IN LAW. 2. THE LD. CIT (A) FAILED TO APPRECIATE THAT THE ESTIMATED RATE OF PROFITS ADOPTED AT 6% OF GROSS RECEIPTS BY THE AO IS LESS THAN THE RATE ADOPTED IN SIMILAR CASES. 3. THE LD. CIT (A) ERRED IN DIRECTING TO ADOPT T HE ESTIMATED RATE OF PROFIT @ 2.7% OF THE GROSS RECEIP TS. 4. THE LD. CIT (A) ERRED IN ADOPTING TO ESTIMATE THE INCOME OF THE APPELLANT AT THE AVERAGE OF THE ASST. YEARS 2007-08 AND 2008-09 I.E. AVERAGE OF 2.42% AND 3.47% BASED ON ASSESSED INCOME. 5. THE CIT (A) FAILED TO APPRECIATE THAT THE ADOPTION AVERAGE RATE OF INCOME BASED ON ASSESSED INCOME OF PRECEDING OR SUCCEEDING YEARS EVEN IN CAS E OF FAILURE OF THE ASSESSEE TO PRODUCE BOOKS OF ACCO UNT IS DEVIATION OF ESTABLISHED NORMS. 6. THE CIT (A) FAILED TO ADOPT THE RATE OF PERCENTAGE THAT IS ADOPTED IN COMPARABLE CASES. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 4. THE SOLE GROUND OF CHALLENGE IN THE PRESENT APPE AL OF THE REVENUE IS DIRECTION OF THE CIT (A) TO ESTIMATE THE PROFIT AT 2.7% OF THE GROSS RECEIPTS. 5. BRIEFLY THE FACTS ARE, THE ASSESSEE AN INDIVIDU AL IS ENGAGED IN JOB WORK. FOR THE ASSESSMENT YEAR UNDER DISPUTE , THE ASSESSEE FILED RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.4,26,910. INITIALLY, THE RETURN WAS PROCESSED U/S 143(1) OF T HE ACT AND A REFUND OF RS.3,92,540 WAS GRANTED TO THE ASSESSEE. 3 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD. SUBSEQUENTLY, NOTICE U/S 143(2) AND 143(1) WERE ISS UED TO THE ASSESSEE CALLING FOR PRODUCTION OF BOOKS OF OTHER I NFORMATION FROM THE ASSESSEE. THE ASSESSEE HOWEVER DID NOT RESPOND TO THESE NOTICES. THE AO ISSUED A SHOW CAUSE NOTICE TO THE A SSESSEE PROPOSING TO ESTIMATE INCOME AT 15% OF THE TOTAL JO B WORK RECEIVED FROM FABRICATION AND GALVANISING. THIS SH OW CAUSE NOTICE ALSO WENT UNATTENDED BY THE ASSESSEE. THE AO THERE FORE COMPLETED THE ASSESSMENT BY ESTIMATING THE NET PRO FIT AT 6% OF THE GROSS RECEIPTS FROM JOB WORK AND DETERMINED THE TOTAL INCOME AT RS.31,48,000/- 6. THE ASSESSEE BEING AGGRIEVED OF THE ASSESSMENT M ADE, FILED AN APPEAL BEFORE THE CIT (A). IN COURSE OF HEARING BEFORE THE CIT (A), IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THA T THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE RATE OF PROFIT IN SIMILAR LINE OF BUSINESS IS 6%. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED BEFORE THE CIT (A) THAT E XCEPTING THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSMENT IN CASE O F EARLIER AND SUBSEQUENT ASSESSMENT YEARS I.E. 2003-04, 2004-05, 2005-06 2007-08 AND 2008-09 WERE COMPLETED U/S 143(3) AND T HE PERCENTAGE OF INCOME ASSESSED ON THE GROSS RECEIPTS FROM JOB WORK VARIED BETWEEN 1.28% TO 3.47%. 7. THE ASSESSEE IN ITS WRITTEN SUBMISSIONS CONTENDE D THAT THE AO HAS NOT ALLOWED THE CLAIM OF DEPRECIATION FROM T HE ESTIMATED INCOME. THE CIT (A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE THOUGH AGREED WITH THE AOS VIEW THAT INC OME IS TO BE ESTIMATED IN ABSENCE OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, HE WAS HOWEVER OF THE VIEW THAT THE ADOPTION OF RATE O F PROFIT AT 6% IS HIGH AND EXCESSIVE. HE THEREFORE DIRECTED THE A O TO ESTIMATE THE PROFIT AT 2.70% OF THE GROSS RECEIPTS. THE OPE RATIVE PORTION 4 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD. OF THE ORDER OF THE CIT (A) IS EXTRACTED HEREUNDER FOR THE SAKE OF CONVENIENCE:- 7. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPEL LANT AS ALSO THE REMAND REPORT AND ASSESSMENT RECORDS. FROM THE SAME IT COULD BE SEEN THAT THE APPELLANT HAD BEEN PROVIDED SUFFICIEN T OPPORTUNITY TO PROVIDE THE INFORMATION CALLED FOR BY THE ASSESSING OFFICER. ONLY DUE TO THE NON COOPERATION OF THE APPELLANT TO THE VARI OUS NOTICES ISSUED, THE AO HAD PROCEEDED TO COMPLETE THE ASSESSMENT U/S . 144, ESTIMATING THE INCOME OF THE APPELLANT. HENCE, I DO NOT FIND A NY INFIRMITY IN THE ACTION OF THE ASSESSING OFFICER. HOWEVER, AS FAR AS THE ADOPTION OF 6% OF THE GROSS RECEIPTS IS CONCERNED, HOWEVER, IT HAS BEEN PROPOUNDED IN VARIOUS JUDICIAL PRONOUNCEMENTS THAT A BEST JUDGMENT ASSESSMENT ALSO CANNOT BE MADE ARBITRARILY. THE LIM ITS OF POWERS ARE IMPLICIT IN THE EXPRESSION 'BEST OFFICE JUDGMENT'. THE JUDGMENT IS A FACULTY TO DECIDE MATTERS, WHICH WEIGHS WITH WISDOM TRULY AND LEGALLY. IT DOES NOT DEPEND UPON AN ARBITRARY CAPRI CE OF A JUDGE BUT ON SETTLED AND INVARIABLE PRINCIPLES OF JUSTICE. MA KING SUCH OBSERVATIONS, IN THE CASE OF DCIT VS UNITED VANASPA TI LTD ( 275 ITR 124), HON'BLE CHANDIGARH BENCH' HAVE OPINED THAT EV EN A BEST JUDGEMENT. .... 'SHOULD NOT BE WILD ONE BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRCUMSTANCES O F EACH CASE'. IT IS FURTHER SEEN THAT IN THE CASE OF AJAY GOYAL VS ITO ( 99 TTJ (JD) 164) HON'BLE JODHPUR BENCH OF THE ITAT HAD OBSERVED THAT THE POSITION OF LAW IS WELL SETTLED BY NOW BY A CATENA OF DECISI ONS THAT THE BEST GUIDE FOR ESTIMATION OF THE TRADING RESULTS AFTER R EJECTING THE BOOKS IS EITHER THE PAST HISTORY OF THE ASSESSEE OR ANY OTHE R COMPARABLE CASE. IT WAS EVEN OPINED THAT THE PAST HISTORY OF THE ASS ESSEE TAKES PREFERENCE OVER A COMPARABLE CASE. IT IS SEEN THAT IN THE PRESENT APPEAL, NO COMPARABLE CASE HAS BEEN SPECIFICALLY BR OUGHT ON RECORD BY THE ASSESSING OFFICER. AS AGAINST THIS THE PAST HISTORY OF THE APPELLANT IS AVAILABLE. WHEREIN THE PERCENTAGE OF A SSESSED INCOME TO GROSS RECEIPTS VARIED FROM 1.28 TO 3.47. HOWEVER, T HE SCRUTINY ASSESSMENTS WERE COMPLETED NOT ON ESTIMATION BASIS BUT FOR VARIOUS OTHER REASONS. HOWEVER, THE NET PROFIT ADOPTED VARI ED FROM 1.28% TO 3.47%. IT IS ALSO PERTINENT TO NOTE IN THIS CONNECT ION THAT THE AO WHO HAD COMPLETED THE ASSESSMENT FOR THE YEAR 2006-07 E STIMATING THE INCOME @6 % , IN THE ASST YEAR I.E. 2008-09 HAD DISALLOWED 20% OF THE GALVANISING EXPENSES DUE TO THE REASON THAT THERE W ERE CASH PAYMENTS, AND THE SAME HAD BEEN AGREED BY THE APPEL LANT. CONSIDERING ALL THE ABOVE FACTS, I FIND IT GENUINE TO ESTIMATE THE 5 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD. INCOME OF THE APPELLANT AT THE AVERAGE OF THE ASST. YEARS 2007-08 AND 2008-09 I.E. AVERAGE OF 2.42% AND 3.47 0 /0, WHICH ARE THE IMMEDIATELY SUCCEEDING YEARS, WHEREIN ESPECIALLY THE APPELLATE HAD AGREED FOR THE ADDITIONS AND NOT CONTESTED IN APPEAL. THE AVERAGE OF THE TWO PERCENTAGES WORKS OUT TO 2.70 % THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ADOPT THE PERCENTAGE OF 2.70 0 /0 OF THE GROSS RECEIPTS AND ARRIVE AT THE PROFIT CHARGEABLE TO TAX. THE INCOME ARRIVED AT IS CLEAR OF ALL DEDUCTIONS LIKE DEPRECIATION ETC. RELIANCE F OR THIS PROPOSITION IS PLACED IN THE DECISION OF HON'BLE ANDHRA PRADESH HI GH COURT, IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (232 ITR 776) , WHEREIN IT WAS HELD THAT NO DEDUCTION FROM THE INCOME SO ESTIMATED IS TO BE GIVEN TOWARDS DEPRECIATION, INTEREST AND REMUNERATION PAY ABLE TO PARTNERS ETC. 8. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED BEF ORE US THAT THE CIT (A) WAS NOT JUSTIFIED IN REDUCING THE ESTIM ATION MADE BY THE AO AT 6%. THE LD. DR SUBMITTED THAT WHEN THE AS SESSEE FAILED TO PRODUCE HIS BOOKS OF ACCOUNTS AND OTHER MATERIAL S IN SPITE OF OPPORTUNITY GIVEN BY THE AO, THE AO WAS JUSTIFIED I N ESTIMATING THE PROFIT AT 6%. 9. WE HAVE HEARD SUBMISSIONS OF THE LEARNED DR AND PERUSED THE MATERIAL ON RECORD. AFTER GOING THROUGH THE OR DERS PASSED BY THE CIT (A) AND THE AO WE FIND THAT THE AO HAS ESTI MATED THE PROFIT AT 6% OF THE GROSS RECEIPTS BY OBSERVING THA T IT IS IN TUNE WITH PROFITS DECLARED BY OTHER ASSESSEES IN SIMILA R LINE OF BUSINESS. HOWEVER, THE AO HAS NOT MENTIONED WHICH ARE THE CASES HE HAS EXAMINED IN THIS REGARD. ON THE OTHER HAND, IT IS EVIDENT FROM THE ORDER OF THE CIT (A) THAT IN THE A SSESSMENTS COMPLETED U/S 143(3) FOR THE EARLIER AND SUBSEQUENT ASSESSMENT YEARS THE AO HAS ASSESSED THE RECEIPTS FROM JOB WO RK AT THE FOLLOWING PERCENTAGE. 6 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD. ASST. YEAR PERCENTAGE OF PROFIT ASSESSED 2003-04 1.28 2004-05 1.73 2005-06 1.53 2007-08 2.42 2008-09 3.47 10. THE ABOVE FIGURES REVEAL THAT THE ASSESSEES PR OFIT OVER THE YEARS HAS VARIED BETWEEN 1.28% TO 3.47%.WHEN THE AO HAS COMPLETED THE ASSESSMENT U/S 143(3) FOR THE ABOVE A SSESSMENT YEARS ACCEPTING THE PROFIT RATES BETWEEN 1.28% TO 3 .47%, THERE IS NO JUSTIFIABLE REASON ON HIS PART TO ADOPT THE R ATE OF PROFIT AT 6% THAT TOO WITHOUT BRINGING ANY SPECIFIC INSTANCE TO SHOW THAT PROFIT RATE IS ACTUALLY 6% IN THIS LINE OF BUSINESS . WE THEREFORE FIND NO INFIRMITY IN THE ORDER PASSED BY THE CIT (A ) WHICH IS UPHELD. 11. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 7-9-2012. SD/- S D/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 7 TH SEPT. 2012. 7 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD. COPY TO:- 1) SRI POTHURU PATEL, M/S. BRIGHT GALVANISHING WORK S, 11- 186/1/B, COOPERATIVE IE BALANAGAR, HYDERABAD. 2) ITO, WARD-11(3), HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 8 ITA NO. 1167 OF 2011 SRI POTHURU PATEL, HYD.