Dy.CIT, Circle-2(1), Tirupathi V. M/s. Siva Sai Srinivasa Constructions, Kadapa

ITA 1262/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66596 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Opportunity of being heard
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1262/HYD/2012 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 2(1), TIRUPATHI. VS. SIVA SAI SRINIVASA CONSTRUCTIONS, RESPONDEN T KADAPA (PAN ABCFS7714G) APPELLANT BY : SHRI K.E. SUNIL BABU RESPONDENT BY : SHRI S. RAMA RAO DATE OF HEARING : 06/12/2012 DATE OF PRONOUNCEMENT : 20 /12/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT, GUNTUR, DATED 22/06/2012 FOR ASSESSM ENT YEAR 2009-10. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FIRM CARRYING ON CIVIL CONTRACT WORKS FILED ITS RETURN O F INCOME FOR THE YEAR UNDER CONSIDERATION ON 30/09/2009, ADMITTING T OTAL INCOME OF RS. 65,58,750/-, WHICH WAS PROCESSED U/S 143(1) OF THE IT ACT ON 22/03/2011. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED AND, THEREAFTER, WHIL E COMPLETING THE ASSESSMENT U/S 143(2), THE AO HAD MADE THE FOLL OWING ADDITIONS: I) RS. 25,89,655/- CLAIMED AS EXPENDITURE BEING COMPENSATION PAID TO FARMERS FOR LOSING CROPS. ITA NO. 1262/HYD/12 M/S SIVA SAI SRINIVASA CONSTRUCTIONS 2 II) 20% OF THE EXPENDITURE AMOUNTING TO RS. 59,68,1 59/- ADDED TO THE RETURN OF INCOME WHICH THE ASSESSEE HA D CLAIMED TOWARDS WAGES TO LABOURERS. III) DISALLOWANCE OF RS. 13,17,890/- DEBITED TOWARD S SALARY TO STAFF. IV) ADDITION OF RS. 74,06,820/- DEBITED BY THE ASSE SSEE TOWARDS MARGIN MONEY PAID TO THE CONTRACTOR. V) RS. 5,00,000/- AND 12,00,000/- AS CASH CREDITS U /S 68 OF THE ACT. 3. AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL BEF ORE THE CIT(A). 4. THE CIT(A) DISCUSSED THE ADDITIONS/DISALLOWANCES MADE BY THE AO AND DEALT THE SAME AS UNDER:- 5. WITH RESPECT TO THE DISALLOWANCE OF RS. 25,89,65 5/- TOWARDS COMPENSATION PAID TO FARMERS FOR LOSING CROPS, THE CIT(A)DIRECTED THE AO TO DISALLOW 5% OF THE EXPENDITURE AMOUNTING TO RS. 2,58,965/-. 6. WITH REGARD TO THE DISALLOWANCE OF RS. 59,68,159 /- TOWARDS WAGES PAID TO LABOURERS AND SALARIES PAID TO STAFF, THE CIT(A) DIRECTED THE AO TO DISALLOW 10% OUT OF THE LABOUR W AGES OF RS. 2,98,795/- AND 5% OUT OF RS. 65,89,450/- TOWARDS SA LARIES PAID TO THE STAFF. 7. WITH REGARD TO THE ADDITION OF RS. 74,06,820/-, THE CIT(A) DIRECTED THE AO TO DELETE THE ADDITION ON THE GROUN D THAT THE ASSESSEE CREDITED THE PROFIT & LOSS ACCOUNT THE ENT IRE AMOUNT OF CONTRACT RECEIPTS AND DEBITED THE AMOUNT RETAINED B Y THE PRINCIPAL CONTRACT AND THE AMOUNT RETAINED BY THE PRINCIPAL C ONTRACTOR IS ITA NO. 1262/HYD/12 M/S SIVA SAI SRINIVASA CONSTRUCTIONS 3 EXPENDITURE FOR THE SUB-CONTRACTOR, THEREFORE, THE ASSESSEE IS CORRECT IN DEBITING THE SAID AMOUNT TO THE PROFIT A ND LOSS ACCOUNT. 8. WITH REGARD TO THE DEPOSITS APPEARING IN THE BAN K ACCOUNTS, OF RS. 5,00,000/- AND RS. 12,00,000/-, THE CIT(A) H ELD THAT ALL THE ENTRIES WERE RECORDED IN THE ASSESSEES BOOKS O F ACCOUNT AND HENCE DIRECTED THE AO TO DELETE THE ADDITION. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH IN LAW AND FACTS OF THE CASE. 2. THE CIT(A) HAS FAILED TO ALLOW AN OPPORTUNITY TO THE AO UNDER RULE 46A WHILE ADMITTING FRESH EVIDENCE DURIN G THE APPELLATE PROCEEDINGS AND HENCE THE APPELLATE ORDER IS VITIATED. 3. THE CIT(A) ERRED IN NOT TAKEN INTO CONSIDERATION THE FAILURE OF ASSESSEE TO PRODUCE MATERIAL EVIDENCE IN SUPPORT OF VARIOUS EXPENSES AND CLAIMS. 4. THE CIT(A) ERRED IN DELETING THE ADDITION UNILAT ERALLY WITHOUT CALLING FOR REMAND REPORT FROM THE AO. 10. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI S. RA MA RAO REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A), WHICH ARE AS FOLLOWS:- THE APPELLANT HEREIN IS A PARTNERSHIP FIRM CARRYIN G ON THE ACTIVITY OF CIVIL CONSTRUCTION. DURING THE PREVIOUS YEAR UNDER CONSIDERATION, THE GROSS RECEIPTS OF THE APPELLANT AMOUNTED TO RS. 19,07,07,534/- CONSISTING OF SUB-CONTRACTS O F RS. 13,71,63.362/- AND THE CONTRACTS EXECUTED AS PRINCI PLE CONTRACTOR AMOUNTED TO RS. 5,35,44,172/-. THE APPEL LANT MAINTAINED BOOKS OF ACCOUNT AND AS PER THE BOOKS TH E NET PROFIT AMOUNTED TO RS. 65,58,746/-. THE DEBIT TO TH E PROFIT AND LOSS ACCOUNT INCLUDE PARTNERS INTEREST OF RS. 1 2,02,346/- AND SALARY TO PARTNERS OF RS. 10,20,000/- AGGREGATI NG TO RS. 22,22,346/-. IF THESE AMOUNTS ARE CONSIDERED, THE P ROFIT WORKS OUT TO RS. 87,81,092/- AND THE PROFIT RATE WO RKS OUT TO 4.5%. ITA NO. 1262/HYD/12 M/S SIVA SAI SRINIVASA CONSTRUCTIONS 4 11. ON THE OTHER HAND THE LEARNED DR SHRI K.E. SUNI L BABU RELIED UPON THE ORDER OF THE AO AND POINTED OUT THAT THE C IT(A) HAD FAILED TO GIVE AN OPPORTUNITY UNDER RULE 46A OF THE IT ACT TO THE AO WHILE ADMITTING FRESH EVIDENCE DURING THE APPELL ATE PROCEEDINGS TO EXAMINE THE SAME BY THE AO AND, THER EFORE, THE ORDER OF THE CIT(A) IS ERRONEOUS. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AN PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. THE CONTENTION OF THE LEARNED COUNSEL IS THA T THE AO VERIFIED THE BOOKS OF ACCOUNT AND THE AO MENTIONED THAT THE CA WAS PRESENT TIME TO TIME AND PRODUCED BOOKS OF ACCO UNT AND FURNISHED REPLIES AND THE AO DID NOT REJECT THE BOO KS OF ACCOUNT, HENCE, NO PART OF THE EXPENDITURE CAN BE DISALLOWED . 13. ON THE OTHER HAND, THE GRIEVANCE OF THE LEARNED DR IS THAT THE CIT(A) VIOLATED THE RULE 46A BY NOT GIVING AN O PPORTUNITY TO THE AO TO EXAMINE THE FRESH EVIDENCE FILED BY THE A SSESSEE AT THE TIME OF APPELLATE PROCEEDINGS AND, HENCE, THE ORDER OF THE CIT(A) IS ERRONEOUS. WE ARE OF THE OPINION THAT THE CIT(A) CANNOT DELETE THE ADDITION UNILATERALLY WITHOUT CALLING FOR THE R EMAND REPORT FROM THE AO WHEN THE ASSESSEE FILED A FRESH EVIDENC E BEFORE HIM, WHICH WAS NOT FILED DURING THE ASSESSMENT PROCEEDIN GS. THEREFORE, THE DECISION OF THE CIT(A) IS CONTRARY T O THE PROVISIONS OF RULE 46A BY NOT GIVING OPPORTUNITY TO THE AO WHI LE GIVING PARTIAL RELIEF TO THE ASSESSEE. IN THESE CIRCUMSTAN CES, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO TO CONSIDER/EX AMINE THE EVIDENCE PRODUCED BY THE ASSESSEE DURING THE APPELL ATE PROCEEDINGS IN SUPPORT OF VARIOUS EXPENSES AND CLAI MS AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER PROVIDING REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 1262/HYD/12 M/S SIVA SAI SRINIVASA CONSTRUCTIONS 5 14. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT 20 TH DECEMBER, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED:20 TH DECEMBER, 2012 KV COPY TO:- 1) DCIT, CIRCLE 2(1), ROOM NO. 401, AAYAKAR BHAV AN, KT ROAD, TIRUPATHI. 2) M/S SIVA SAI SRINIVASA CONSTRUCTIONS, 1/713-3, DWARAKA NAGAR, KADAPA 3) CIT(A), GUNTUR. 4) CIT, TIRUPATHI. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.