Income Tax Officer, Ward -2, Nellore V. M/s Creative Constructions, Nellore

ITA 1340/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66550 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIDISHA KALRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMB ER ITA NO.1340/HYD/2012 (ASSESSMENT YEAR 20 05-06) INCOME TAX OFFICER, WARD 2, NELLORE. V/S. M/S. CREATIVE CONSTRUCTIONS, NELLORE. ( PAN - AAEFC 0620 N) (APPELLANT) (RESPONDENT) APPELLANT BY : S MT. VIDISHA KALRA DR DEPARTMENT BY : NONE DATE OF HEARING 4.12.2012 DATE OF PRONOUNCEMENT 12.12.2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) GUNTUR DATED 12 .9.2011 FOR THE ASSESSMENT YEAR 2005-006. 2. AT THE OUTSET, WE MAY NOTE THAT THERE IS NO APP EARANCE ON BEHALF OF THE ASSESSEE-RESPONDENT AT THE TIME OF HEARING O N THIS APPEAL ON 4.12.2012. THE NOTICE OF HEARING SENT TO THE ASSE SSEE HAS BEEN RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE ENDORSE MENT NO SUCH ADDRESSEE IN THIS DOOR NO.. IN THE ABSENCE OF ANY OTHER OR ALTERNATIVE ADDRESS OF THE ASSESSEE AVAILABLE ON RECORD, WE HEARD THE MATTER E X-PARTE QUA THE ASSESSEE- AND PROCEED TO DISPOSE OFF THIS APPEAL, B ASED ON THE MATERIAL AVAILABLE ON RECORD. ITA NO.1340/HYD/2012 M/S. CREATIVE CONSTRUCTIONS, NELLORE. 2 2. EFFECTIVE GRIEVANCE OF THE REVENUE IN THIS APP EAL RELATES TO THE ACTION OF THE CIT(A) IN GRANTING RELIEFS TO THE ASS ESSEE OUT OF THE ESTIMATED INCOME FROM THE BUSINESS OF CONSTRUCTION AND BY WAY OF GRANT OF INTEREST AND REMUNERATION TO PARTNERS, AND ALSO BY DELETING AN A DDITION OF RS.10 LAKHS MADE BY THE ASSESSING OFFICER UNDER S.68 OF THE ACT , DISBELIEVING THE ASSESSEES CLAIM WITH REGARD TO THE AMOUNTS INTRODU CED BY THE PARTNERS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM, CARRYING ON CIVIL CONTRACT WORKS AS A SUB-CONTRACTOR, FILED ITS RETUR N OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 1.11.2005, ADMITTING A T OTAL INCOME OF RS.4,45,270. ASSESSMENT WAS COMPLETED ON 13.9.2007 , DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.4,95,770, AFTER MAKING DISALLOWANCE OF MESS EXPENSES OF RS.35,500 AND MATERIAL EXPENDITURE OF RS.15,000. 4. THEREAFTER, THE COMMISSIONER OF INCOME-TAX GUN TUR BY HIS ORDER UNDER S.263 DATED 31.3.2010 CANCELLED THE SAID ASSE SSMENT MADE BY THE ASSESSING OFFICER, VIDE ORDER DATED 13.9.2007, BY P OINTING OUT VARIOUS DISCREPANCIES AND DIRECTED THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT DULY EXAMINING THE ISSUES RAISED IN THE SHOW-CAUSE NOTICE ISSUED UNDER S.263 OF THE ACT. WHILE COMPLETING THE FRESH ASSESSMENT THEREAFTER IN PURSUANCE OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX, THE AS SESSING OFFICER MADE AN ADDITION OF RS.10-LAKHS UNDER S.69 OF THE ACT, DISB ELIEVING THE ASSESSEES CLAIM OF THE PARTNERS HAVING INTRODUCED RS.1 LAKH E ACH BY WAY OF CAPITAL, ON ACCOUNT OF PAUCITY OF EVIDENCE TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE IN THAT BEHALF. HE HAS ALSO REJECTED THE BOOKS OF ACCO UNT OF THE ASSESSEE, ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE THE BILL S/VOUCHERS FOR ALL THE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT AND ES TIMATED THE INCOME AT 8% FROM CONTRACT WORKS ON TOTAL GROSS BILLS OF RS.1,68 ,88,464, WHICH WORKED OUT TO RS.13,51,077, AND ACCORDINGLY COMPLETED THE ASSE SSMENT ON A TOTAL ITA NO.1340/HYD/2012 M/S. CREATIVE CONSTRUCTIONS, NELLORE. 3 INCOME OF RS.23,51,077, VIDE ORDER OF ASSESSMENT D ATED 31.12.2010 PASSED UNDER S.143(3) READ WITH S.263 OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT MADE AS ABOVE, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). WITH REGARD TO THE ADDITION OF RS.10 LAKHS, THE CIT(A), OBSERVING THAT THE CAPITAL CONTR IBUTIONS MADE BY THE PARTNERS WAS NOT DURING THE ASSESSMENT YEAR APPEAL AND AS SUCH THE ADDITION OF RS.10-LAKHS MADE BY THE ASSESSING OFFICER IN THE YEAR UNDER APPEAL, IS NOT JUSTIFIED, DELETED THE SAME. WHILE THUS DELETING T HIS ADDITION, THE CIT(A), HOWEVER, DIRECTED THE ASSESSING OFFICER TO CONSIDER THE APPROPRIATE ADDITION, IF NEED BE, IN THE RELEVANT YEAR IN WHICH SUCH CONTRIB UTIONS WERE MADE. AS FOR ESTIMATION OF THE INCOME OF THE ASSESSEE, WHO IS ON LY A SUB-CONTRACTOR, FINDING THE RATE OF 8% APPLIED BY THE ASSESSING OFF ICER TO BE ON HIGHER SIDE, THE CIT(A) HELD THAT APPLICATION OF A RATE OF 6% WO ULD MEET THE ENDS OF JUSTICE, AND ACCORDINGLY DIRECTED THE ASSESSING OFF ICER TO RECOMPUTE THE INCOME ACCORDINGLY. THE CIT(A) ALSO FOUND MERIT IN THE GRIEVANCE OF THE ASSESSEE WITH REGARD TO PARTNERS REMUNERATION AND INTEREST ON CAPITALS OF PARTNERS, AND ACCORDINGLY DIRECTED THE ASSESSING OF FICER TO ALLOW REMUNERATION AND INTEREST ON PARTNERS CAPITAL IN THE FIRM. HE, HOWEVER, DIRECTED THE ASSESSING OFFICER TO BE CAUTIOUS, WHILE GIVING EFFE CT TO HIS ORDER AND RECOMPUTING THE TOTAL INCOME TO BE ASSESSED, AND EN SURE THAT THE INCOME THUS RECOMPUTED IS NOT LESS THAN THE INCOME RETURNE D BY THE ASSESSEE. HE FURTHER DIRECTED THAT IN CASE THE INCOME THUS RE-CO MPUTED FALLS BELOW THE RETURNED INCOME, THE ASSESSMENT SHOULD BE COMPLETED ON THE RETURNED INCOME ALONE. 5. AGGRIEVED BY THE RELIEFS GRANTED BY THE CIT(A) , REVENUE PREFERRED THE PRESENT APPEAL BEFORE US. ITA NO.1340/HYD/2012 M/S. CREATIVE CONSTRUCTIONS, NELLORE. 4 6. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED DEP ARTMENTAL REPRESENTATIVE, RELIED UPON THE DECISION OF THE TRIBUNAL OF THE HYD ERABAD BENCH IN THE CASE OF ACIT V/S. ESSVY CONSTRUCTIONS, SECUNDERABAD (ITA NO .149/HYD/2010 OF ASSESSMENT YEAR 2006-07), WHEREIN THE COORDINATE BE NCH OF THE TRIBUNAL, VIDE ORDER DATED 16.7.2010, HAS, FOLLOWING THE DECI SION OF THIS TRIBUNAL DTED 23.10.2009 IN ITA NO.308/HYD/2009 IN TEJA CONSTRUCT IONS V/S. ACIT DATED 23.10.2009, HELD IN THE FOLLOWING MANNER 5. RESPECTFULLY FOLLOWING THE SAME RATIO LAID DOW N IN THE ORDER CITED SUPRA, WE DIRECT THE ASSESSING OFFICER TO ASSESSEE'S THE INCOME OF THE ASSESSEE AT 9% OF THE GROSS RECEIPTS IN CASE OF MAIN CONTRACTS AND 8% IN CASE OF SUB-CONTRACT RECEIPTS A ND THEREAFTER THE ASSESSEE IS ENTITLED FOR DEDUCTION TOWARDS REMUNERA TION AND INTEREST TO PARTNERS ON THE PROFIT ESTIMATED. IN A SUBSEQUENT AND RECENT DECISION, IN THE CASE OF ACIT V/S. M/S TEJA CONSTRUCTIONS (ITA NO.1191/HYD/2011 DATED 17-2-2012 ), THE HYDERABAD BENCH OF THE TRIBUNAL, CONSISTENTLY FOLLOWED BY THI S TRIBUNAL IN SIMILAR CASES OF CIVIL CONTRACTORS, DIRECTED THE ASSESSING OFFICE R TO ESTIMATE PROFIT IN THE CASE OF THE THREE CATEGORIES OF CONTRACTS IN THE FO LLOWING MANNER:- HOWEVER, THE ISSUE IS COVERED BY THE ORDER OF THE I NCOME-TAX APPELLATE TRIBUNAL IN THE ASSESSEES OWN CASE FOR T HE EARLIER YEAR. FOR THAT YEAR THE INCOME-TAX APPELLATE TRIBUNAL HAS EST IMATED THE PROFITS OF THE ASSESSEE @9% ON OWN CONTRACT WORKS, 8% ON CO NTRACTS TAKEN BY THE ASSESSEE ON SUBCONTRACTS AND @ 5% ON CONTRAC TS GIVEN BY THE ASSESSEE TO 3 RD PARTY ON SUBCONTRACTS. IT IS SEEN FROM THE ORDER OF THE CIT(A) THAT THE CI T(A) HAS DIRECTED FOR ESTIMATING THE PROFIT AT 6% BY ASSUMING THAT THE AS SESSEE HAS EXECUTED THE CIVIL CONSTRUCTION ON SUB-CONTRACT BASIS. HOWEVER, THERE IS NO CLARITY AS TO THE MATERIAL, BASED ON WHICH THE CIT(A) HAS COME TO SUC H A CONCLUSION. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER TO VERIFY THE MATERIAL ON RECORD AS TO THE NATURE OF CONTRACT WORKS EXECUTED BY THE ASSESSEE, VIZ. ITA NO.1340/HYD/2012 M/S. CREATIVE CONSTRUCTIONS, NELLORE. 5 WHETHER AS A CONTRACTOR, SUB-CONTRACTOR OR BY GIVIN G SUB-CONTRACTS TO OTHERS, AND THEN ESTIMATE THE INCOME OF THE ASSESSEE IN ACC ORDANCE WITH THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN SIMILAR CA SES, AS NOTED ABOVE. THE ASSESSING OFFICER SHALL ALSO ALLOW INTEREST AND REM UNERATION PAID TO THE PARTNERS, FROM THE INCOME SO DETERMINED, AS PER THE RATIO LAID DOWN BY THE TRIBUNAL IN THE DECISION NOTED ABOVE. THE ASSESSI NG OFFICER SHALL PASS APPROPRIATE ORDER OF ASSESSMENT IN ACCORDANCE WITH LAW, AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. AS FOR THE GRIEVANCE OF THE REVENUE WITH REGARD TO THE ADDITION OF RS.10 LAKHS UNDER S.68 OF THE ACT, CONSIDERING THE FINDING OF THE CIT(A) THAT THE INTRODUCTION OF CAPITAL BY THE PARTNERS HAS NOT TAKEN PLACE DURING THE PREVIOUS YEAR RELEVANT TO THE YEAR UNDER APPEAL, WH ICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENT ATIVE BY BRINGING ANY MATERIAL ON RECORD BEFORE US, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE CIT(A) IN THAT BEHALF. WE ACCORDINGLY UPHOLD THE O RDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE IN THAT BEHALF. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 12.12.2012 SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/- 12 TH DECEMBER, 2012 COPY FORWARDED TO: 1. M/S. CREATIVE CONSTRUCTIONS, D.NO.12/464, OLD HOSPITAL RAOD, NELLORE. 2. 3. 4. 5. INCOM E - TAX OF F ICER, WARD 2, NELLORE. COMMISSIONER OF INCOME-TAX(APPEALS) GUNTUR COMMISSIONER OF INCOME-TAX GUNTUR DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD B.V.S.