Kavuri Prasad, Hyderabad V. Dy. Commissioner of Income Tax, Warangal

ITA 1369/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82435 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 18-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MIITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Depreciation; Corroborative evidences
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1369/HYD/2013 ASSESSMENT YEAR : 2005-06 KAVURI PRASAD, WARANGAL PAN APDPK 9190 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 1, WARANGAL. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI RAJAT MIITRA DATE OF HEARING 15-10-2014 DATE OF PRONOUNCEMENT 22-10-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-18, DATED 20.0 1.2013 FOR THE ASSESSMENT YEAR 2005-06. 2. ASSESSEE HAS RAISED IN TOTAL SEVEN GROUNDS. GR OUND NOS. 1 & 7 BEING GENERAL IN NATURE ARE NOT REQUIRED TO BE ADJU DICATED. AT THE OUTSET, LEARNED AR SUBMITTED THAT HE DOES NOT WANT TO PRESS GROUND NO. 6, ACCORDINGLY, THE SAME IS DISMISSED AS NOT PR ESSED. 3. IN GROUND NO. 2, ASSESSEE HAS CHALLENGED THE EST IMATION OF PROFIT ON CONTRACT WORK AT 8% AND NOT REDUCING THE DEPARTMENTAL RECOVERIES FROM THE GROSS RECEIPTS WHILE ESTIMATIN G PROFIT. 2 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD 4. BRIEFLY THE FACTS ARE, ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM EXECUTION OF CONTRACT WORKS. FOR THE AY UNDER DISPUTE, ASSESSEE FILED HIS RETURN OF INCOME ON 01/11/05 DECLARING TO TAL INCOME OF RS. 19,70,040 BESIDES AGRICULTURAL INCOME OF RS. 1,95,0 00. IN COURSE OF ASSESSMENT PROCEEDING, AS MENTIONED BY ASSESSING OF FICER IN THE ASSESSMENT ORDER, THOUGH ASSESSEE WAS CALLED UPON T O FURNISH COPIES OF THE AGREEMENTS, BOOKS OF ACCOUNT, BILLS AND VOUC HERS AND PROOF TOWARDS EXPENDITURE INCURRED, BUT, ASSESSEE FAILED TO PRODUCE THE SAME IN SPITE OF AVAILING ADEQUATE OPPORTUNITY. ASS ESSING OFFICER, THEREFORE, PROPOSED TO ESTIMATE THE NET PROFIT FROM CONTRACT WORK AT 8% ON THE TOTAL CONTRACT RECEIPTS WITHOUT DEPRECIAT ION. AS STATED BY ASSESSING OFFICER IN THE ASSESSMENT ORDER, SINCE AS SESSEE ACCEPTED ESTIMATION OF PROFIT AT 8% AS PROPOSED BY ASSESSING OFFICER, INCOME FROM CONTRACT WORKS WAS ESTIMATED AT 8% WITHOUT ALL OWING DEPRECIATION. ASSESSEE, HOWEVER, CHALLENGED THE EST IMATION OF PROFIT AT 8% IN AN APPEAL PREFERRED BEFORE THE CIT(A). IT WAS SUBMITTED BY ASSESSEE THAT ESTIMATION OF PROFIT AT 8% IS VERY HI GH CONSIDERING THE FAT THAT ASSESSEE HAS UNDERTAKEN CONTRACT WORK FOR INDIAN RAILWAYS AT VARIOUS PLACES. IT WAS FURTHER SUBMITTED THAT WHILE ESTIMATING THE NET PROFIT, ASSESSING OFFICER SHOULD HAVE CONSIDERED ON LY NET CONTRACT RECEIPTS AFTER REDUCING THE DEPARTMENTAL RECOVERIES OF RS. 1,07,60,479. CIT(A), HOWEVER, DID NOT ACCEPT THE SU BMISSIONS OF ASSESSEE AND SUSTAINED THE PROFIT ESTIMATED MADE BY ASSESSING OFFICER ON CONTRACT RECEIPTS. 5. THOUGH, LEARNED AR MADE A FEEBLE ATTEMPT FOR RED UCING THE NET PROFIT RATE ADOPTED AT 8%, BUT, THE MAIN THRUST OF HIS ARGUMENT IS, DEPARTMENTAL RECOVERIES OF RS. 1,07,60,479 SHOULD H AVE BEEN REDUCED FROM THE GROSS CONTRACT RECEIPTS BEFORE EST IMATING THE PROFIT. IN THIS CONTEXT, HE RELIED ON A DECISION OF THE HON BLE SUPREME COURT IN CASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR VS. CIT , 115 ITR 524. 3 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE DEPARTMENTAL AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RE CORD. AS CAN BE SEEN, ASSESSEE DURING THE YEAR HAS EXECUTED THE CON TRACT WORKS OF INDIAN RAILWAYS ON HIS OWN. IN OTHER WORDS, ASSESSE E WAS EXECUTING THE WORK AS MAIN CONTRACTOR. THEREFORE, ADOPTION OF NET PROFIT RATE AT 8%, IN OUR VIEW, IS REASONABLE AND CONSISTENT WITH THE NET PROFIT RATE ADOPTED BY ITAT, HYDERABAD BENCHES IN SIMILAR NATUR E OF CASES. HOWEVER, WE FIND MERIT IN THE CONTENTION OF LEARNED AR THAT DEPARTMENTAL RECOVERIES SHOULD BE REDUCED FROM THE GROSS CONTRACT RECEIPTS BEFORE ESTIMATING THE PROFIT AS THERE IS N O PROFIT ELEMENT INVOLVED IN IT. IN THIS CONTEXT WE RELY ON THE DECI SION OF THE HONBLE SUPREME COURT IN CASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR VS. CIT (SUPRA). IN THIS VIEW OF THE MATTER, WE DIRECT THE ASSESSING OFFICER TO VERIFY AND REDUCE THE DEPARTMENTAL RECOVERIES FROM GROSS CONTRACT RECEIPTS, THEN, ESTIMATE PROFIT AT 8% ON THE NET C ONTRACT RECEIPTS. THIS GROUND IS PARTLY ALLOWED. 8. THE NEXT ISSUE AS RAISED IN GROUND NO. 3 IS RELA TING TO ASSESSMENT OF INTEREST EARNED ON BANK DEPOSITS AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. IT IS THE CONTENTION OF LEARNED AR THAT INTEREST ON FDRS IS T O BE TREATED AS BUSINESS INCOME AS DEPOSITS WERE MADE FOR BUSINESS PURPOSES. HOWEVER, THE LEARNED AR FAIRLY SUBMITTED THAT DURIN G THE YEAR ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT INTEREST EARNED O N FIXED DEPOSITS CANNOT BE TREATED AS BUSINESS INCOME. 4 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD 10. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT( A) IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES. AS IS EVIDENT FROM THE MATERIAL ON RECORD, INTEREST WAS EARNED ON FIXED DE POSITS KEPT WITH THE BANK, THEREFORE, THE APPROPRIATE HEAD UNDER WHI CH THE INTEREST INCOME IS TO BE ASSESSED IS INCOME FROM OTHER SOUR CES. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY ASSESSEE. 11. GROUND NO. 4 IS IN RESPECT OF TREATMENT OF AGRI CULTURAL INCOME AS INCOME FROM OTHER SOURCES. 12. IN COURSE OF ASSESSMENT PROCEEDING, WHILE EXAMI NING THE RETURN OF INCOME, ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS. 1,95,000. AS NOTED BY AS SESSING OFFICER, THOUGH ASSESSEE WAS ASKED TO FURNISH SPECIFIC INFOR MATION IN SUPPORT OF AGRICULTURAL OPERATIONS AND SALE OF AGRICULTURAL PRODUCE, ASSESSEE DID NOT FURNISH ANY EVIDENCE BY WAY OF SALE BILLS, EXPENDITURE INCURRED ON AGRICULTURAL ACTIVITY TO PROVE THE FACT THAT AGR ICULTURAL OPERATION WAS CARRIED OUT BY HIM. HE, THEREFORE, TREATED THE AGRI CULTURAL INCOME SHOWN AS INCOME FROM OTHER SOURCES. CIT(A) ALSO CO NFIRMED THE VIEW OF THE ASSESSING OFFICER. 13. THE LEARNED AR SUBMITTED BEFORE US THAT THE DEP ARTMENTAL AUTHORITIES WERE NOT JUSTIFIED IN REJECTING ASSESSE ES CLAIM OF AGRICULTURAL INCOME IN ITS ENTIRETY. LEARNED AR REF ERRING TO A COPY OF THE SALE DEED DATED 04/12/04, ENGLISH VERSION OF WH ICH IS PLACED AT PAGE 30 OF ASSESSEES PAPER BOOK, SUBMITTED THAT AS SESSEE HAS PURCHASED A MANGO GARDEN TO THE EXTENT OF ABOUT 10 ACRES AND ASSESSEE IS DERIVING INCOME FROM THE SAID MANGO GAR DEN. IT WAS FURTHER SUBMITTED THAT BESIDES THE MANGO GARDEN, AS SESSEE IS ALSO THE OWNER OF ABOUT 10 ACRES OF AGRICULTURAL LAND OU T OF WHICH LAND ADMEASURING 5.06 ACRES, HE SOLD ON 24/11/2004. IT W AS, THEREFORE, 5 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD SUBMITTED THAT SINCE ASSESSEE IS HAVING SUBSTANTIAL LAND HOLDING, EARNING OF AGRICULTURAL INCOME BY ASSESSEE CANNOT B E TOTALLY DISBELIEVED ONLY BECAUSE, ASSESSEE DID NOT PRODUCE ANY BILLS AND VOUCHERS TOWARDS EXPENDITURE INCURRED IN AGRICULTUR AL ACTIVITY. 14. THE LEARNED DR, ON THE OTHER HAND, RELYING UPON THE OBSERVATIONS MADE BY ASSESSING OFFICER AND CIT(A), SUBMITTED THAT AS ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCE EITHER IN RESPECT OF EARNING OF AGRICULTURAL INCOME OR WITH R EGARD TO EXPENDITURE INCURRED IN AGRICULTURAL ACTIVITY, HIS CLAIM OF AGR ICULTURAL INCOME CANNOT BE ACCEPTED. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. AS CAN BE SEEN FROM THE ORDERS PASSED BY ASSESSING OFFICER AND CIT(A), THE FACT THAT ASSESSEE WAS HAVING AGRICULTU RAL LAND HOLDING HAS NOT BEEN DISPUTED. FURTHER, THE SALE DEEDS ENCL OSED IN THE PAPER BOOK CLEARLY INDICATE AGRICULTURAL LAND HOLDING OF ASSESSEE. THEREFORE, THE CLAIM OF ASSESSEE THAT IT WAS EARNING INCOME FR OM THE MANGO GARDENS AND CARRYING OUT AGRICULTURAL ACTIVITY CANN OT BE TOTALLY DISBELIEVED. FURTHER CONSIDERING THE FACT THAT ASSE SSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT IN RESPECT OF AGRICULTU RAL INCOME AND ALSO NOT PRODUCED ANY SUPPORTING EVIDENCE TO PROVE THE EARNING OF AGRICULTURAL INCOME AS SHOWN IN THE RETURN OF INCOM E, ASSESSEES CLAIM CANNOT BE ACCEPTED IN TOTO. CONSIDERING THE F ACTS AND MATERIALS ON RECORD, WE ARE OF THE VIEW THAT 50% OF THE AMOUN T SHOWN BY ASSESSEE CAN REASONABLY BE HELD TO BE AGRICULTURAL INCOME EARNED BY ASSESSEE. ACCORDINGLY, WE DIRECT ASSESSING OFFICER TO ACCEPT 50% OF THE AMOUNT SHOWN BY ASSESSEE AS AGRICULTURAL INCOM E. THIS GROUND IS PARTLY ALLOWED. 16. THE NEXT ISSUE AS RAISED IN GROUND NO. 5 IS WIT H REGARD TO ADDITION OF AN AMOUNT OF RS. 4,45,000 AS UNEXPLAINE D CREDIT. 6 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD 17. BRIEFLY THE FACTS RELATING TO THE ISSUE ARE, DU RING ASSESSMENT PROCEEDING WHILE EXAMINING ASSESSEES CAPITAL ACCOU NT, ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN AN AMOUNT O F RS. 4,45,300 AS RECEIPT FROM SALE OF AGRICULTURAL LAND. AS THE S AID AMOUNT WAS NOT OFFERED TO TAX, ASSESSING OFFICER CALLED UPON ASSES SEE TO FURNISH THE DETAILS RELATING TO THE SAID TRANSACTION. AS MENTIO NED BY ASSESSING OFFICER, IN SPITE OF ADEQUATE OPPORTUNITY BEING GRA NTED, ASSESSEE DID NOT FURNISH ANY EVIDENCE EXCEPT A COPY OF SALE DEED . ASSESSING OFFICER NOTED THAT ASSESSEE DID NOT FURNISH EVIDENC E THAT LAND SOLD BY HIM WAS AGRICULTURAL LAND AND AGRICULTURAL OPERATIO NS WERE CARRIED ON TILL THE DATE OF TRANSFER. HE, THEREFORE, TREATED THE AMOUNT OF RS. 4,45,000 AS INCOME OF ASSESSEE. ASSESSEE CHALLENGED THE ADDITION MADE IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIR MED THE ADDITION BY OBSERVING THAT ASSESSEE HAS ONLY SUBMITTED A PHO TO COPY OF THE SALE DEED BEFORE THE ASSESSING OFFICER WHICH CANNOT BE TREATED AS AN AUTHENTIC DOCUMENT IN ABSENCE OF ORIGINAL DOCUMENT. HE FURTHER OBSERVED THAT THOUGH ASSESSEE CALLED UPON FOR INFOR MATION U/S 133(6) TO CORRECTNESS OF ASSESSEES CLAIM FROM MANDAL REVE NUE OFFICER, BUT, NO REPLY WAS RECEIVED BY ASSESSING OFFICER. HE, THE REFORE, HELD THAT AS ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS BY SUB MITTING ORIGINAL DOCUMENTARY EVIDENCE BEFORE ASSESSING OFFICER, ADDI TION IS JUSTIFIED. 18. THE LEARNED AR SUBMITTED BEFORE US THAT WHEN AS SESSEE IS THE SELLER OF LAND, ORIGINAL DOCUMENT WILL NOT BE AVAI LABLE WITH HIM, THEREFORE, HE SUBMITTED A COPY OF THE REGISTERED SA LE DEED BEFORE ASSESSING OFFICER IN SUPPORT OF SALE OF LAND. IN TH IS CONTEXT, LEARNED AR REFERRED TO THE COPY OF THE SALE DEED PLACED AT PAGE 34 OF ASSESSEES PAPER BOOK AND SPECIFICALLY DREW OUR ATT ENTION TO THE ENDORSEMENT MADE BY THE SUB-REGISTRAR. THUS, IT WAS SUBMITTED BY LEARNED AR, WHEN THERE IS A REGISTERED SALE DEED SH OWING SALE OF LAND BY ASSESSEE FOR A CONSIDERATION OF RS. 4,45,000 THE RE IS NO REASON IN TREATING THE SAID AMOUNT AS UNEXPLAINED INCOME OF A SSESSEE. 7 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD 19. THE LEARNED DR, ON THE OTHER HAND, SUPPORTING THE ORDER OF CIT(A), SUBMITTED THAT AS ASSESSEE FAILED TO FURNIS H THE ORIGINAL SALE DEED FOR VERIFICATION, THE ADDITION MADE IS JUSTIFI ED. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. AS CAN SEEN, FROM THE STAGE OF ASSESSMENT ITSELF, A SSESSEE HAS CLAIMED THAT IT HAS RECEIVED AN AMOUNT OF RS. 4,45, 000 AS SALE CONSIDERATION FOR SALE OF 5.06 ACRES OF AGRICULTURA L LAND TO ONE MR. RAVI BABU OF WEST GODAVARI DISTRICT, AND TO THIS EF FECT, A COPY OF ALE DEED WAS ALSO PRODUCED BEFORE ASSESSING OFFICER. A REFERENCE TO THE SALE DEED COPY, WHICH IS ALSO PLACED AT PAGE 34 OF ASSESSEES PAPER BOOK ALONG WITH ENGLISH TRANSLATION COPY, DOES INDI CATE THAT THE SALE DEED IS REGISTERED WITH SUB-REGISTRAR, KAMAVARUPUKO TA ON 24/11/04 AS REGISTERED DOCUMENT NO. 1773/2004. THEREFORE, WH EN THERE IS A REGISTERED DOCUMENT SHOWING SALE OF LAND BY ASSESSE E, ASSESSEES CLAIM CANNOT BE DISBELIEVED OR REJECTED WITHOUT MAK ING PROPER ENQUIRY. FURTHER, IT IS TO BE OBSERVED THAT ASSESSI NG OFFICER HAS SOUGHT INFORMATION U/S 133(6) FROM THE MRO. HOWEVER , BECAUSE NO INFORMATION WAS RECEIVED FROM THE CONCERNED MRO CLA IM OF SALE BY ASSESSEE CANNOT BE TREATED AS FALSE. WHEN FROM DOCU MENT SUBMITTED BY ASSESSEE, IT APPEARS THAT IT IS A REGISTERED DOC UMENT, THEN, THE DUTY OF ASSESSING OFFICER WAS TO CONDUCT NECESSARY ENQUIRY WITH THE REGISTERING AUTHORITY TO FIND OUT THE VERACITY OF A SSESSEES CLAIM. WITHOUT MAKING ANY SUCH ENQUIRY ASSESSING OFFICER C ANNOT MAKE THE ADDITION PURELY ON PRESUMPTIONS AND SURMISES. FURT HER, THE REASONING OF THE ASSESSING OFFICER AS WELL AS CIT(A ) THAT ASSESSEE FAILED TO PRODUCE ORIGINAL SALE DEED, IS TOTALLY UN REASONABLE FOR THE REASON, ASSESSEE BEING SELLER OF LAND, ORIGINAL SAL E DEED WILL NOT BE AVAILABLE WITH ASSESSEE AS IT WILL BE WITH THE PURC HASER OF LAND. THEREFORE, ASSESSEES CLAIM CANNOT BE DISALLOWED OR DISBELIEVED MERELY FOR THE REASON THAT ASSESSEE FAILED TO PRODU CE ORIGINAL SALE 8 ITA NO. 1369/HYD/2013 SRI KAVURI PRASAD DEED. IF THE ASSESSING OFFICER HAD ANY DOUBT IN RES PECT OF ASSESEES CLAIM HE SHOULD HAVE CONDUCTED APPROPRIATE ENQUIRY WITH THE REGISTERING AUTHORITY SINCE THE INFORMATION WAS AVA ILABLE WITH THE ASSESSING OFFICER. HAVING UNDERTAKEN ANY SUCH EXERC ISE, ADDITION MADE BY HIM CANNOT BE SUSTAINED. ACCORDINGLY, WE DE LETE THE SAME. THIS GROUND IS ALLOWED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22/10/2014 SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 22 ND OCTOBER, 2014 KV COPY TO:- 1) SHRI KAVURI PRASAD, C/O SRI S. RAMA RAO, ADVOCAT E, FLAT NO. 102, SHRIYAS ELEGANCE, H.NO. 3-6-643, ST. NO. 9, HI MAYAT NAGAR, HYDERABAD 500 029 2) DCIT, CIRCLE 1, WARANGAL. 3) CIT(A)-18, MUMBAI 4) CIT-5/6, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.