Income Tax Officer, Ward - 1, Kadapa V. Sri M. Rama Murthy, Kadapa

ITA 1396/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74730 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Section: 143(3)

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. 1396/HYD/2012 ASSESSMENT YEAR 2009-10 THE INCOME TAX OFFICER WARD-1 KADAPA VS. SRI M. RAMA MURTHY KADAPA PAN: AHOPM6203E APPELLANT RESPONDENT APPELLANT BY: SRI JEEVAN LAL LAVIDIYA RESPONDENT BY: SRI A.V. RAGHU RAM DATE OF HEARING: 26.03.2014 DATE OF PRONOUNCEMENT: 26.03.2014 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL BY REVENUE IS DIRECTED AGAINST ORDER O F THE CIT(A), GUNTUR DATED 24.7.2012 FOR ASSESSMENT YEAR 2009-10. 2. THE REVENUE RAISED THE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO RESTRICT THE RATE OF INCOME ESTIMATION TO 3.5% INSTEAD OF 12.5% IGNORING THE ITAT'S VARIOUS DECISIONS OF UNIFORMLY ESTIMATING THE PROFIT FROM MAIN CONTRACTS @ 8% TO @ 12.5% AND @ 5% TO @ 7% ON THE SUB-CONTRACTS DEPENDING ON THE FACTUAL SITUATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CONTRACTOR CARRYING ON CIVIL CONTRACT WORKS, FILED ITS RETURN OF INCOME FOR THE A.Y. 2009-10 ON 30.09.2009, DECLARING TOTAL INCOME OF RS. 4,21,420/-. IT IS SEEN FROM THE ASSESSMENT ORDER THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS C ALLED FOR THE DETAILS OF BOOKS OF ACCOUNT, SUPPORTING BILLS/VOUCH ERS ETC., FOR THE 2 ITA NO. 1396/HYD/2012 SRI M. RAMA MURTHY =================== EXPENDITURE INCURRED. THE ASSESSEE'S AR APPEARED ON 16.11.2011 AND FURNISHED THE INFORMATION PARTLY BUT DID PRODUC E BOOKS OF ETC. BILLS/VOUCHERS ETC. THEREFORE, WHILE COMPLETING THE ASSESSMENT ORDER U/S. 143(3 ) DATED 30.12.2011 . THE ASSESSING OFFICER HAS OPINED THAT SINCE THE ASSESSEE COULD NOT PRODUCE TH E BOOKS OF ACCOUNT AND BILLS AND VOUCHERS ETC.' THE EXPENDITUR E CLAIMED BY THE ASSESSEE IS NOT VERIFIABLE AND THE TRUE PROFIT COUL D NOT BE DEDUCTED AND ESTIMATED THE NET INCOME @ 12.5% OF THE NET REC EIPTS, BY RELYING ON THE DECISIONS OF ITAT, HYDERABAD, AFTER ALLOWING DEPARTMENTAL RECOVERIES OF RS. 13,093/-, WHICH COMES TO RS. 2,40,88,202/- AND NO FURTHER DEDUCTIONS WERE ALLOWE D, BY RELYING ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V S C I T (232 ITR 776) (1999). 4. ON APPEAL THE CIT(A) OBSERVED THAT THE ASSESSEE IS A ELECTRICAL CONTRACTOR AND NOT A CIVIL CONTRACTOR. THE ESTIMATION OF INCOME BY THE AO AT 12.5% IS VERY HIGH. HE CONSIDE RED THE ASSESSEE'S TRACK RECORD AND OBSERVED THAT INCOME OF THE ASSESSEE DETERMINED BY THE AO AT 12.5% IS ARBITRARY IN NATUR E AS AGAINST 1.82% OF NET PROFIT DECLARED BY THE ASSESSEE. HE D IRECTED THE AO TO RESTRICT THE ESTIMATION OF INCOME AT 3.5% OF THE GR OSS RECEIPTS. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE T HROUGH THE MATERIAL ON RECORD. THE ASSESSEE'S TRACK RECO RD FOR VARIOUS ASSESSMENT YEARS IS AS FOLLOWS: 3 ITA NO. 1396/HYD/2012 SRI M. RAMA MURTHY =================== S. NO. A.Y. TURNOVER (RS.) NET PROFIT (RS.) RATE OF PROFIT (%) ASSESSMENT (SECTION) 1. 2008-09 2,02,34,878 5,40,980 2.67 143(3) 2. 2009-10 2,40,88,202 3,88,569 30,11,025 1.61 12.50 143(3) 3. 2010-11 1,74,63,030 3,46,446 + 3,00,000 1.98 3.70 143(3) 4. 2011-12 1,59,96,766 4,97,382 3.11 143(1) 5. 2012-13 2,80,98,754 9,34,229 3.32 ROI 6. 2013-14 1,78,88,336 8,88,113 4.96 ROI 6. AS SEEN FROM THE ABOVE TABLE, THE ASSESSEE HAS BEEN DECLARING NET PROFIT AT 1.61 TO 4.96% FOR VARIOUS Y EARS AS MENTIONED IN THE ABOVE TABLE. IN THE ASSESSMENT YE AR UNDER CONSIDERATION THE ASSESSEE DECLARED NET PROFIT RATE OF 1.61% WHICH IS VERY LOW. AS AGAINST THIS, THE AO ESTIMATED INC OME AT 125.%% ON GROSS RECEIPTS WHICH IS VERY HIGH. CONSIDERING RES ULTS OF VARIOUS ASSESSMENT YEARS, THE CIT(A) HAS GIVEN A FINDING TO ESTIMATE THE INCOME AT 3.5%. IN THIS ASSESSMENT YEAR, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY BOOKS OF ACCOUNT BEFORE THE ASSESSING AUTHORITY. BEING SO, THE AO HAD NO OTHER OPTION BUT TO ESTIMATE THE INCOME OF THE ASSESSEE. WE HAVE GONE THROUGH THE NET PROFIT RATE OF THE ASSESSEE FOR VARIOUS ASSESSM ENT YEARS IS AS FOLLOWS: A.Y. NET PROFIT (%) 2008-09 2.67 2010-11 3.70 2011-12 3.11 2012-13 3.32 2013-14 4.96 AVERAGE NET PROFIT 3.55% 7. SINCE THE CIT(A) ADOPTED NET PROFIT AT 3.5% WHICH I S NOT IN PARITY WITH THE AVERAGE NET PROFIT WORKED OUT FOR T HE ABOVE 4 ITA NO. 1396/HYD/2012 SRI M. RAMA MURTHY =================== ASSESSMENT YEARS AS ABOVE, WE ARE INCLINED TO DIREC T THE AO TO ESTIMATE THE INCOME OF THE ASSESSEE AT 3.55% OF THE GROSS RECEIPTS. 8. IN THE RESULT, REVENUE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26 TH MARCH, 2013 SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 26 TH MARCH, 2014 TPRAO COPY TO: 1. THE INCOME TAX OFFICER, WARD-1, SIMHAPURI COLONY, K ADAPA-516 001. 2. SRI M. RAMA MURTHY, 7/501-1-6, VIDYAMANDIR SCHOOL L ANE, NGO COLONY, KADAPA-516 002. 3. THE CIT(A), GUNTUR 4. THE CIT, TIRUPATI. 5. THE DR, B BENCH, ITAT, HYDERABAD.