D. Venugopal Reddy, Hyderabad V. Addl. CIT, Range-9, Hyderabad

ITA 1422/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1415 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 1422/HYD/2012 ASSESSMENT YEAR : 2009-10 D. VENUGOPAL REDDY, APPELLANT HYDERABAD. (PAN AHDPD 6554G) VS. ADDL. COMMISSIONER OF INCOME-TAX, RESPONDENT HYDERABAD. APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SMT. AMISHA S. GUPT DATE OF HEARING : 01/01/2013 DATE OF PRONOUNCEMENT : 04/01/ 2013 ORDER PER B.R. BASKARAN, A.M.: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16-07-2012 PASSED BY LD CIT(A-VI, HYDERABAD A ND IT RELATES TO THE ASSESSMENT YEAR 2009-10. 2. THE GROUNDS URGED BY THE ASSESSEE GIVE RISE T O THE FOLLOWING ISSUES:- (A) WHETHER LD CIT(A) IS JUSTIFIED IN UPHOLDING RE JECTION OF BOOKS. (B) WHETHER LD CIT(A) IS JUSTIFIED IN UPHOLDING TH E ESTIMATION OF INCOME FROM CONTRACT BUSINESS AT 9% O F GROSS CONTRACT RECEIPTS. (C) WHETHER LD CIT(A) IS JUSTIFIED IN NOT EXCLUDIN G THE RECOVERIES FROM THE GROSS CONTRACT RECEIPTS. 2 ITA NO. 1422/HYD/2012 SHRI D. VENUGOPAL REDDY (D) WHETHER THE LD CIT(A) IS JUSTIFIED IN CONFIRMI NG THE ADDITION MADE TO INCOME FROM LIQUOR BUSINESS. (E) WHETHER THE LD CIT(A) IS JUSTIFIED IN CONFIRMI NG THE INTEREST LEVIED U/S 234A AND 234B OF THE ACT. 3. THE FACTS NECESSARY FOR DISPOSAL OF THE ISSU ES URGED BEFORE US ARE STATED IN BRIEF. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION BY DECLARIN G A TOTAL INCOME OF RS.38,95,620/-.THE ASSESSEE HAD, INTER AL IA, DECLARED INCOME FROM CIVIL CONTRACT BUSINESS AND IN COME FROM WINE SHOP. DURING THE COURSE OF ASSESSMENT PROCEED ING, THE AO NOTICED MANY DEFECTS IN THE BOOKS MAINTAINED FOR CONTRACT BUSINESS AND HENCE SHE REJECTED THE BOOKS OF ACCOUN T. THE AO ESTIMATED THE INCOME FROM CIVIL CONTRACT BUSINESS @ 9% OF THE GROSS CONTRACT RECEIPTS NET OF ALL DEDUCTIONS. THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT RELATING TO WINE SHOP BUSINESS. HENCE THE AO ESTIMATED THE TURNOVER AT 124% OF THE COST OF GOODS AND ACCORDINGLY ARRIVED AT THE DIFFERENCE IN TURNOVER SO ESTIMATED AND THAT REPORTED BY THE ASSESSEE AT RS.5 ,98,132/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE. THE ASSESSEE CHALLENGED THE ADDITIONS BEFORE LD CIT(A), BUT COULD NOT SUCCEED. HENCE THE ASSESSEE HAS FILED THIS APP EAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THOUGH THE LD A.R WOULD CONTEN D THAT THERE WAS NO NECESSITY TO REJECT THE BOOKS OF ACCOU NT, YET WE NOTICE THAT BOTH THE TAX AUTHORITIES HAVE POINTED O UT MANY 3 ITA NO. 1422/HYD/2012 SHRI D. VENUGOPAL REDDY DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE A SSESSEE. THE AO HAS PARTICULARLY OBSERVED THAT THE ASSESSEE DID NOT PRODUCE PROPER BILLS/VOUCHERS FOR SEVERAL PURCHASES AND HENCE THE ENTRIES IN THE BOOKS OF ACCOUNTS COULD NOT BE V ERIFIED; THE ASSESSEE DID NOT MAINTAIN QUANTITATIVE DETAILS FOR THE MATERIALS ETC. THE AO HAS ALSO DRAWN SUPPORT FROM THE DECISI ONS RENDERED BY THE CO-ORDINATE BENCHES IN OTHER CASES FOR TAKING THE DECISION TO REJECT THE BOOKS OF ACCOUNT. UNDER THESE CIRCUMSTANCES, THE LD CIT(A) HAS ALSO UPHELD THE RE JECTION OF BOOKS OF ACCOUNT WITH THE FOLLOWING OBSERVATIONS:- 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE A R AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN HER OR DER. THE ASSESSING OFFICER HAS POINTED OUT VARIOUS DEFIC IENCIES IN THE BOOKS WHICH IN MY VIEW RENDER THE BOOKS OF ACCOUNT INCAPABLE OF REFLECTING THE TRUE PROFITS OF THE BUSINESS. THERE IS NO REASON WHY THE QUANTITATIVE DETAILS CANNOT BE ASCERTAINED IN THE ASSESSEES LINE OF BUS INESS. THE QUANTITATIVE DETAILS OUGHT TO BE VERY MUCH VERI FIABLE AS FAR AS THE PURCHASES ARE CONCERNED. THERE IS NO REASON WHY THE ASSESSEE COULD NOT HAVE MAINTAINED QUANTITATIVE DETAILS OR A STOCK REGISTER SHOWING UTILIZATION OF THE MATERIALS FOR ITS VARIOUS PROJEC TS. THIS ITSELF IS A MAJOR DEFECT MAKING THE BOOKS LIABLE TO BE REJECTED. FURTHER, THE ASSESSING OFFICER HAS POINT ED OUT OTHER DEFECTS WHEREBY THE EXPENSES BECOME INCAPABLE OF VERIFICATION. I, THEREFORE, HOLD THAT THE ASSESSIN G OFFICER WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. IN OUR CONSIDERED VIEW, THE TAX AUTHORITIES HAVE MA DE OUT A CASE IN SUPPORT OF THEIR DECISION TO REJECT THE BOO KS OF ACCOUNT, WHICH COULD NOT BE CONTROVERTED BY THE ASSESSEE BY ANY OTHER EFFECTIVE MATERIAL. HENCE, WE AFFIRM THE ORDER OF LD. CIT(A) ON THIS ISSUE. 4 ITA NO. 1422/HYD/2012 SHRI D. VENUGOPAL REDDY 5. THE NEXT ISSUE RELATES TO THE ESTIMATION OF I NCOME FROM CIVIL CONTRACT BUSINESS AT 9% OF THE GROSS CONTRACT RECEIPTS. THE LD COUNSEL SUBMITTED THAT THE TRIBUNAL, IN OTHE R CASES, HAS ALSO BEEN ESTIMATING THE INCOME @ 8% OF THE GROSS C ONTRACT RECEIPTS. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY DEDUCTION FOR DEPRECIATION, WHICH IS A STATUTORY DEDUCTION. ACCORDINGLY, HE PRAYED THAT THE INCOME FROM CIVIL CONTRACT BUSINESS MAY BE ESTIMATED AT 8% OF THE GRO SS CONTRACT RECEIPT BEFORE ALLOWING DEPRECIATION. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ESTIMATE OF 9% MADE B Y THE TAX AUTHORITIES IS QUIET REASONABLE IN THE FACTS AND CI RCUMSTANCES OF THE CASE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS; CA SE LAW RELIED UPON BY THE ASSESSEE AND THE ORDERS OF THE T AX AUTHORITIES IN THIS REGARD. THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN ITS ORDER DATED 31-01-2011 IN THE CASE OF M/S C. ESWARA REDDY & CO., IN ITA NO.668, 670, 685 & 686/H YD/2009, HAS OBSERVED THAT THE PROFIT RATIO CANNOT BE CONSTA NT FACTOR AND IT WOULD FLUCTUATE DEPENDING UPON VARIOUS FACTO RS. WE NOTICE THAT THE ASSESSING OFFICER HAS SIMPLY RELIED UPON CERTAIN DECISIONS RENDERED BY THE CO-ORDINATE BENCHES TO ES TIMATE THE INCOME @ 9% OF THE GROSS CONTRACT RECEIPTS. THE LD A.R HAS ALSO PLACED RELIANCE IN THE CASE OF M/S C.ESWARA RE DDY & CO (REFERRED SUPRA) TO CONTEND THAT THE TRIBUNAL HAS E STIMATED THE PROFIT @ 8%. THUS, IT IS NOTICED THAT BOTH THE PAR TIES ARE PLACING HEAVY RELIANCE ON THE DECISIONS RENDERED BY THE CO- ORDINATE BENCHES, RATHER PLACING RELIANCE ON THE FA CTS SURROUNDING THE INSTANT CASE. UNDER THESE CIRCUMST ANCES, IN 5 ITA NO. 1422/HYD/2012 SHRI D. VENUGOPAL REDDY OUR VIEW, WE ARE ALSO FORCED TO ESTIMATE THE INCOME IN ORDER TO PUT THE DISPUTE ON REST. ACCORDINGLY, WE DIRECT TH E ASSESSING OFFICER TO ESTIMATE THE INCOME FROM CONTRACT BUSINE SS AT 8% OF THE GROSS CONTRACT RECEIPTS, NET OF DEPRECIATION. IN OUR VIEW, THE ABOVE SAID ESTIMATE WOULD MEET THE ENDS OF JUST ICE AND WE ORDER ACCORDINGLY. WE MAKE IT CLEAR THAT THE DEPRE CIATION SHALL BE DEEMED TO HAVE BEEN ALLOWED WHEN THE PROFIT IS E STIMATED AT 8% OF THE GROSS CONTRACT RECEIPT. 7. THE NEXT ISSUE RELATES TO THE DEDUCTION OF R ECOVERIES FROM THE GROSS CONTRACT RECEIPTS. THOUGH THE LD D.R TOO K A PLEA THAT THE ASSESSEE DID NOT RAISE THIS GROUND BEFORE LD CIT(A), YET WE NOTICE THAT THE ASSESSEE HAS RAISED THIS PLE A BEFORE THE FIRST APPELLATE AUTHORITY IN GROUND NO. 4 URGED BEF ORE HIM. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF BR IJ BHUSHANLAL KUMAR (1978) (115 ITR 524). THE CO-ORDI NATE BENCH HAS ALSO FOLLOWED THE ABOVE SAID APEX COURTS DECISION IN THE CASE OF M/S C. ESWARA REDDY & CO (REFERRED SUPR A). ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO ALLOW THE DEDUCTION OF RECOVERIES FROM THE GROSS CONTRACT RECEIPTS AS PER THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF BRIJ BHUSHANLAL K UMAR (REFERRED SUPRA). 8. THE NEXT ISSUE RELATES TO THE ESTIMATION OF THE INCOME FROM WINE SHOP BUSINESS. IT WAS BROUGHT TO OUR NOT ICE THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IS CONSISTENTLY E STIMATING INCOME FROM WINE SHOP BUSINESS AT 5% OF THE SALES. THE LD 6 ITA NO. 1422/HYD/2012 SHRI D. VENUGOPAL REDDY CIT(A) HAS GIVEN A FINDING THAT THE INCOME DETERMIN ED BY THE ASSESSING OFFICER AFTER MAKING THE ADDITIONS WORK O UT TO LESS THAN 5% OF THE PURCHASES AND ACCORDINGLY CONFIRMED THE SAID ADDITION. UNDER THESE CIRCUMSTANCES, WE DO NOT FIN D ANY REASON TO INTERFERE WITH HIS DECISION ON THIS ISSUE . 9. THE LAST ISSUE RELATES TO THE CHARGING OF IN TEREST U/S 234A AND 234B. THOUGH THE ASSESSEE HAS RAISED THIS GROU ND BEFORE US, YET NO MATERIAL WAS PLACED BEFORE US TO SHOW TH AT THE SAID INTEREST WAS NOT CHARGEABLE IN THE FACTS AND CIRCUM STANCES OF THE CASE. HENCE, WE DO NOT FIND ANY MERIT ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 04/01/2013. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R HYDERABAD, DATED:4 TH JANUARY, 2013 COPY TO:- 1) SHRI D. VENUGOPAL REDDY, C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H.NO. 3- 6-643, ST. NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029. 2) ADDL. CIT, RANGE 9, HYDERABAD 3) THE CIT(A)-VI, HYDERABAD 4) CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.