Sri K. Sudarshan Reddy (Individual), Warangal V. Asst. Commissioner of Income Tax, Circle -1, Warangal

ITA 1355/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66547 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISH S GUPT
• Assessee Lawyers: K V CHALAMAIAH
• Keywords: Opportunity of being heard
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO .1355/HYD/12 ASST. YEAR 2009-10. SRI K. SUDARSHAN REDDY, WARANGAL. PAN:ADOPK6272F V/S. ACIT, CIR-1, WARANGAL. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.V. CHALAMAIAH. RESPONDENT BY : SMT.AMISH S. GUPT DATE OF HEARING 05 - 12 - 2012 DATE OF PRONOUNCEMENT 05-12-2012 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THIS APPEAL BEING AGGRIEVED BY THE ORDER PASSED BY THE CIT (A)-IV, HYDERABAD IN APPEAL NO.02 54/2011-12/CIT (A)-VI, HYDERABAD PERTAINING TO THE ASSESSMENT YEAR 2 009-10. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO E STIMATION OF PROFIT AT 10% ON THE TOTAL TURNOVER OF RS.2,59,82,21 3/- WITHOUT SEGREGATING THE SUB-CONTRACTS PORTION WHICH ACCORDING TO TH E ASSESSEE SHOULD HAVE BEEN ASSESSED AT A LOWER RATE. 3. BRIEF FACTS OF THE ISSUE ARE, THE ASSESSEE IS AN INDIVIDU AL ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACT WORKS. FOR THE IMPUGNED ITA NO.1355 OF 2012 K. SUDARSHAN REDDY, HYD. 2 ASSESSMENT YEAR, IT FILED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.18,19,090/-. IN COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS , THE AO INFERRING THAT THE ASSESSEE HAD NOT MADE FULL DISCLOSURE OF ALL MATERIALS FOR COMPLETION OF THE ASSESSMENT AND THE EXPENDITURE CLAI MED ARE NOT VERIFIABLE, PROCEEDED TO COMPLETE THE ASSESSMENT U/S 144 R EAD WITH SECTION 143(3) BY ESTIMATING THE INCOME BY APPLYING THE RATE OF 10% ON THE GROSS CONTRACT RECEIPTS OF RS.2,59,82,213/-. THE A SSESSEE BEING AGGRIEVED OF SUCH ESTIMATION OF INCOME FROM CONTRACT RECEI PTS FILED AN APPEAL BEFORE THE CIT (A). THE CIT (A) ALSO CONCURRED WITH THE FINDINGS OF THE AO AND SUSTAINED THE ESTIMATION MADE AT 10% OF THE GROSS CONTRACT RECEIPTS. 4. THE LEARNED AR SUBMITTED BEFORE US THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN ESTIMATING THE PROFIT BY APPLYI NG THE FLAT RATE OF 10% ON THE GROSS CONTRACT RECEIPTS AS IT ALSO INCLUDED RE CEIPTS TOWARDS EXECUTION OF WORK AS SUB-CONTRACTOR. THE LEARNED AR SUB MITTED THAT THE RATE OF PROFIT APPLICABLE TO RECEIPTS TOWARDS WORK EXECUTED AS A MAIN CONTRACTOR CANNOT BE APPLIED TO WORK EXECUTED AS A SUB- CONTRACTOR. THE LEARNED AR REFERRING TO A CHART SUBMIT TED BEFORE US THAT DURING THE YEAR, THE ASSESSEE HAS ALSO EXECUTED WORK ON SUB- CONTRACT BASIS FOR AN AMOUNT OF RS.1,05,39,749/- WHICH HA S TO BE ASSESSED AT A LOWER RATE. IN SUPPORT OF SUCH CONTENTION, T HE LEARNED AR HAS RELIED UPON A DECISION OF ITAT, HYDERABAD BENCH IN T HE CASE OF E. ESWAR REDDY & CO., HYDERABAD VS. ACIT, HYDERABAD (ITA N OS. 668/HYD/2009 FOR ASSESSMENT YEAR 2003-04 AND ITA NO. 670/HYD/2009 FOR ASSESSMENT YEAR 2004-05 DATED 31-1-2011 . 5. THE LEARNED DR SUPPORTED THE ORDER OF THE CIT (A) . ITA NO.1355 OF 2012 K. SUDARSHAN REDDY, HYD. 3 6. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES AND PE RUSED THE MATERIAL ON RECORD. THE ONLY DISPUTE IN THE PRESENT A PPEAL IS WITH REGARD TO THE ESTIMATION OF PROFIT AT 10% ON THE TUR NOVER RELATING TO WORK EXECUTED AS A SUB-CONTRACTOR. THE ASSESSEE THROUGH A CHA RT SUBMITTED BEFORE US HAS CLAIMED TO HAVE EXECUTED WORK ON A SUB- CONTRACT BASIS FOR AN AMOUNT OF RS.1,05,39,749, OUT OF TOTAL TURNOVER OF RS.2,83,08,571/-. IT IS THE CLAIM OF THE ASSESSEE THAT THE RATE APPLIED WHILE ESTIMATING THE PROFIT IN CASE OF MAIN CONTRACT, CAN NOT BE APPLIED TO THE WORK EXECUTED AS A SUB-CONTRACTOR. WE FIND FORCE IN THE AFORESAID CONTENTION OF THE LEARNED AR. THE PROFIT D ERIVED FROM MAIN CONTRACT WORK CANNOT BE EQUAL TO THE PROFIT DERIVED FR OM SUB-CONTRACT WORK. THIS TRIBUNAL HAS CONSISTENTLY HELD IN A SERIES OF DECISIONS THAT IN CASE OF WORK EXECUTED AS A SUB-CONTRACTOR, WHILE ESTIMATING PROFIT, A LOWER RATE HAS TO BE APPLIED, COMPARED TO THEN THE R ATE APPLIED TO THE WORK EXECUTED AS A MAIN CONTRACTOR. HOWEVER, THE ASSESSEE IS REQUIRED TO SUBMIT NECESSARY EVIDENCE SUCH AS COPIES OF THE CO NTRACTS AND OTHER DETAILS TO PROVE THE FACT THAT HE HAS EXECUT ED THE WORK ON SUB-CONTRACT BASIS. CONSIDERING THE TOTALITY OF FACTS AN D THE CIRCUMSTANCES OF THE CASE, WE REMIT THE MATTER BACK TO THE FILE OF THE AO BEFORE WHOM THE ASSESSEE SHALL PRODUCE NECESSARY EVIDENCE WITH REGARD TO HIS CLAIM THAT HE HAS EXECUTED SOME OF THE WO RKS ON SUB- CONTRACT BASIS. IF ON VERIFICATION, THE ASSESSEES CLAIM IS FOUND TO BE CORRECT THEN THE AO SHALL ESTIMATE THE PROFIT ON THE SUB -CONTRACT PORTION OF THE WORK AT A LOWER RATE KEEPING IN VIEW THE DECI SIONS OF THIS TRIBUNAL ON THIS ASPECT. THE AO SHALL AFFORD A REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THIS MATTE R. ITA NO.1355 OF 2012 K. SUDARSHAN REDDY, HYD. 4 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS T REATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 05-12-2012. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 5 TH DECEMBER, 2012 COPY FORWARDED TO: 1. SRI K. SUDARSHAN REDDY, H.NO.5-11-186, NAIMNAGAR, HANAMKONDA, WARANGAL. 2. 3. 4. ACIT, CIR-1, WARANGAL. COMMISSIONER OF INCOME-TAX (APPEALS) VI, HYDERABAD. CIT CONCERNED, HYDERABAD. 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. JMR *