Dachireddy Venkata Narsimha Reddy, Hyderabad V. Addl. Commissioner of Income Tax, Range-9, Hyderabad

ITA 1370/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66546 (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: 05-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISH S GUPT
• Assessee Lawyers: S RAMA RAO
• Keywords: Opportunity of being heard

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 .1370/HYD/12 ASST. YEAR 2009-10 SRI DACHIREDDY VENKATA NARSIMHA REDDY, HYDERABAD. PAN:ABVPD6156E V/S. ADDITIONAL. CIT, RANGE-9, HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI S.RAMA RAO 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)-VI, HYDERABAD PASSED IN ITA NO.056 1/2011- 12/CIT(A),HYDERABAD PERTAINING TO THE ASSESSMENT YEAR 20 09-10. 2. THE ASSESSEE HAS RAISED THREE EFFECTIVE GROUNDS. THE GR IEVANCE OF THE ASSESSEE IS ONLY CONFINED TO THE ESTIMATION OF THE PROFIT IN CASE OF WORK EXECUTED AS A SUB-CONTRACTOR BY APPLYING THE RATE OF 9% WHICH HAS ALSO BEEN APPLIED TO WORK EXECUTED AS THE MAIN CON TRACTOR. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL DE RIVING INCOME FROM EXECUTION OF CIVIL CONTRACT WORK. FOR THE ASSESSMENT YEAR UNDER ITA NO.1370 OF 2012 SRI D. VENMKATA NARSIMHA RE DDY, HYD. 2 DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME DECLARIN G A TOTAL INCOME OF RS.78,26,190/-. IN COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER CALLED FOR VARIOUS DETAILS FROM THE ASSESSEE WITH REGARD TO THE CONTRACT WORK EXECUTED BY HIM DURING THE YEAR. THE ASSESSING OFFICER FINDING THAT THE ASSESSEE HAS NOT MAINTAINE D PROPER BILLS AND VOUCHERS IN RESPECT OF THE EXPENDITURES CLAIMED PROCEEDED TO ESTIMATE THE INCOME AFTER REJECTING THE BOOKS OF ACCOUNTS. AS OBSERVED IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ESTIMATED THE PROFIT AT THE RATE OF 9% ON RS.13,77,05,814/- OUT OF A TOTAL CO NTRACT RECEIPTS OF RS. 14,52,75,510/- BY TREATING IT AS WORK EXECUTED AS A MAIN CONTRACTOR AND ESTIMATED PROFIT AT THE RATE OF 2% ON R S.75,69,696/- BY TREATING IT AS SUB-CONTRACT WORK. THE ASSESSEE CHALLENGED THE PROFIT SO ESTIMATED BY THE ASSESSING OFFICER BY FILING AN APPEAL BE FORE THE CIT (A). THE CIT (A) DID NOT ACCEPT THE CONTENTIONS RAISED BY THE ASSESSEE AND SUSTAINED THE ESTIMATION OF PROFIT MADE BY THE ASSE SSING OFFICER. 4. THE LEARNED AR SUBMITTED BEFORE US THAT THE LOWER AUTHORITIES HAVE COMPLETELY MISCONCEIVED THE FACTS BY ESTIMATING THE P ROFIT AT THE RATE OF 9% ON THE TURNOVER OF RS.13,77,05,814/- BY T REATING IT AS WORK EXECUTED AS A MAIN CONTRACTOR. THE LEARNED AR SUBMITTED THAT THE DURING THE RELEVANT YEAR, THE ASSESSEE HAD RECEIPTS FROM WORK EXECUTED AS A MAIN CONTRACTOR, WORK EXECUTED AS A SUB-CONTRACTOR A ND FROM WORK GIVEN TO OTHERS ON SUB-CONTRACT BASIS. THE LEARNED AR SUBMITTED THAT THE TURNOVER OF RS. 13,77,05,814/- WHICH WAS TREATED AS RECEIPTS TOWARDS MAIN CONTRACT WORK ACTUALLY INCLUDES AN AMOUNT OF RS.5,00,56,006/- RECEIVED TOWARDS WORK EXECUTED ON SUB-CO NTRACT BASIS. THE LEARNED AR RELYING UPON THE DECISIONS OF IN COME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES IN THE CASES OF M/S. C. ESWAR ITA NO.1370 OF 2012 SRI D. VENMKATA NARSIMHA RE DDY, HYD. 3 REDDY & CO. ITA NO.668 & 670/HYD/2009 DATED 31-1-201 1 AND IN CASE OF SREC PROJECTS(P) LTD., (ITA NO.974 TO 980/HYD/09 DA TED 27 TH AUGUST, 2010) SUBMITTED THAT IN CASE OF SUB-CONTRACT WORK , PROFIT HAS TO BE ESTIMATED AT THE RATE OF 5%. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE O THER HAND, SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE ONLY GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO ESTIMATION OF PROFIT AT 9% ON THE TURNOVER RELATI NG TO THE WORK EXECUTED AS A SUB-CONTRACTOR. IT IS THE SUBMISSIONS OF THE ASSESSEE THAT THE TOTAL TURNOVER OF THE ASSESSEE FROM EXECUTION O F WORK CONTRACT COMPRISES OF THE FOLLOWING THREE CATEGORIES. (A) WORK EXECUTED AS A MAIN CONTRACTOR (B) WORK EXECUTED ON SUB-CONTRACT BASIS (C ) WORK GIVEN BY THE ASSESSEE TO OTHERS ON SUB-CONTRACT BASIS AS IT APPEARS THE ASSESSEE HAS NO GRIEVANCE IN RESPECT OF THE RATE OF PROFIT APPLIED TO THE FIRST AND THIRD CATEGORY OF REC EIPTS. HOWEVER, SO FAR AS WORK EXECUTED ON SUB-CONTRACT BASIS TURNOVER OF WH ICH ACCORDING TO THE ASSESSEE, AMOUNTS TO RS.5,00,56,006/-, IT IS THE S UBMISSIONS OF THE ASSESSEE THAT THE RATE OF PROFIT APPLIED IN RESPECT OF MAIN CONTRACT WORK SHOULD NOT HAVE BEEN APPLIED TO THE SUB CONTRA CT WORK ALSO. WE FIND FORCE IN THE AFORESAID CONTENTION OF THE LEARN ED AR. THE PROFIT DERIVED FROM MAIN CONTRACT WORK CANNOT BE THE SAME IN CA SE OF SUB CONTRACT WORK ALSO AS THE MAIN CONTRACTOR WOULD HAVE RETA INED HIS MARGIN OF PROFIT FROM THE TOTAL CONTRACT RECEIPTS. THIS TRIBUNAL HAS ITA NO.1370 OF 2012 SRI D. VENMKATA NARSIMHA RE DDY, HYD. 4 CONSISTENTLY HELD THE VIEW IN A SERIES OF DECISIONS THAT IN CASE OF WORK EXECUTED AS A SUB-CONTRACTOR WHILE ESTIMATING THE PROFI T, A LOWER RATE IS TO BE APPLIED COMPARED TO THE RATE APPLIED TO WORK E XECUTED AS A MAIN CONTRACTOR. IN A RECENT DECISION, THE INCOME-TAX APPELLA TE TRIBUNAL, HYDERABAD BENCH IN CASE OF ACIT V/S. M/S TEJA CONSTRUCTION S (ITA NO.1191/HYD/2011 DATED 17-2-2012 DIRECTED TO ESTIMATE PROFIT IN THE CASE OF THE AFORESAID THREE CATEGORIES OF CONTRACTS BY OBSE RVING IN THE FOLLOWING 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 TRIBU NAL HAS ESTIMATED THE PROFITS OF THE ASSESSEE @9% ON OWN CO NTRACT WORKS, 8% ON CONTRACTS TAKEN BY THE ASSESSEE ON SUB CONTRACTS AND @ 5% ON CONTRACTS GIVEN BY THE ASSESSEE TO 3 RD PARTY ON SUBCONTRACTS. HOWEVER, THE ASSESSEE IS ALSO REQUIRED TO SUBMIT NECESSARY E VIDENCE SUCH AS, COPIES OF THE CONTRACT AND OTHER DETAILS TO PROVE THE FACT THAT HE HAS EXECUTED THE WORK ON SUB-CONTRACT BASIS. CONSIDER ING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE, WE DEE M IT PROPER TO REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICE R BEFORE WHOM THE ASSESSEE SHALL PRODUCE NECESSARY EVIDENCE WITH REGARD TO HIS CLAIM THAT HE HAS EXECUTED SOME OF THE WORK ON SUB-CONTRACT BASI S. IF ON VERIFICATION THE ASSESSEES CLAIM IS FOUND TO BE CORRECT, THE N THE ASSESSING OFFICER SHALL ESTIMATE THE PROFIT ON THE SUB-CONTR ACT PORTION OF THE WORK KEEPING IN VIEW THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S TEJA CONSTRUCTION (SUPRA) AND AFTER AFFORDING A REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.1370 OF 2012 SRI D. VENMKATA NARSIMHA RE DDY, HYD. 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. 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. C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, H.NO.3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD. 2. 3. 4. ADDITIONAL. CIT, RANGE-9, HYDERABAD. COMMISSIONER OF INCOME-TAX (APPEALS) VI, HYDERABAD. CIT CONCERNED, HYDERABAD. 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. JMR *