The Deccan Engineering & Refrigeration Company , Hyderabad V. Income Tax Officer, Ward-10(3) , Hyderabad

ITA 1464/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9356 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-03-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 23-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Principle of natural justice; FORM 26AS
• Section: 144; 143(3); 142(1); 143(2); 44AB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH SMC , HYDERABAD BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1464/HYD/2019 ASSESSMENT YEAR: 2016 - 17 DECCAN ENGINEERING & REFRIGERATION COMPANY, HYDERABAD. PAN: AACFT 7160 J VS. INCOME TAX OFFICER, WARD - 10(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI C. SURESH REVENUE BY: SHRI SANJEEV BHAGAT, DR DATE OF HEARING: 08/3/2021 DATE OF PRONOUNCEMENT: 11 /3/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A) - 6, HYDERABAD IN APPEAL NO. 10307/2018 - 19/A3/CIT (A) - 6, DATED 17/06/2019 PASSED U/S. 144 R.W.S 250(6) OF THE ACT FOR THE AY 2016 - 17. 2. THE ASSESSEE HAS RAISED SEVEN GROUNDS IN ITS APPE AL AND THEY ARE EXTRACTED HEREIN BELOW FOR REFERENCE: - 1. THE LD. CIT (A) HAS ERRED IN LAW IN FAILING TO NOTE THAT THE AO HAS TRAVELLED BEYOND THE PARAMETERS OF LIMITED SCRUTINY AND IN GROSS VIOLATION OF THE RELEVANT INSTRUCTIONS ISSUED BY THE CBDT HAS PASSED THE ASSESSMENT ORDER U/S. 144 OF THE IT ACT WITHOUT OBTAINING THE APPROVAL OF THE PR. CIT. IN THE RESULT THE LD. CIT (A) FAILED TO NOTE 2 THAT THE ASSESSMENT ORDER PASSED BY THE LD. AO IS NOT AS PER LAW AND IS LIAB LE TO BE QUASHED. 2. THE LD. CIT (A) FAILED TO NOTE THAT THE MANDATE OF THE AO U NDER THE LIMITED SCRUTINY WAS THE VERIFICATION OF WHETHER THE CONTRACT RECEIPTS / SALES, TURNOVER HAVE BEEN CORRECTLY OFFERED FOR TAX, AND HAVING FOUND THAT THE SAME HAVE BEEN CORRECTLY CONSIDERED IN THE COMPUTATION OF THE INCOME, RESORTING TO ESTIMATION OF INCOME BY REJECTING THE BOOKS OF ACCOUNTS REPRESENTS AN ACTION WHICH IS NOT IN ACCORDANCE WITH UNDERLYING FACTS, AND THE PRINCIPLES OF NATURAL JUSTICE. 3. THE LD. CIT (A) FAI LED TO NOTE THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT HAD BEEN DULY AUDITED U/S. 44AB OF THE ACT AND HENCE HAVING FOUND THAT THE CONTRACT RECEIPTS AS PER THE BOOKS OF ACCOUNTS IS MORE THAN THE GROSS RECEIPTS AS PER FORM 26AS, THE LD. AO HAD ERRED ON FACT S AND IN LAW IN REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT AND ESTIMATING THE INCOME AT 8% OF THE GROSS RECEIPTS. 4. THE LD. CIT (A) FAILED TO NOTE THAT IN MAKING THE BEST JUDGMENT ASSESSMENT U/S. 144 OF THE ACT, THE LD. AO HAD ERRED IN LAW IN NOT TA KING INTO ACCOUNT THE PREVIOUS RETURNS AND ASSESSMENTS OF THE ASSESSEE, AND IN PARTICULAR IN FAILING TO NOTE THAT FOR THE ASSESSMENT Y E AR 2012 - 13 THE APPELLANTS ASSESSMENT HAD BEEN COMPLETED U/S. 143(3) OF THE ACT ON THE BASIS OF BOOKS OF ACCOUNTS. IN TH E RESULT, THE LD. CIT (A) ERRED IN LAW IN NOT HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE AO IS INVALID IN LAW AND IS LIABLE TO BE QUASHED. 5. THE LD. CIT (A) ERRED IN LAW IN HOLDING THAT THE APPELLANT S TOTAL INCOME MUST BE ESTIMATED @ 6% OF THE GROSS RECEIPTS FAILING TO NOTE THAT AS IN EARLIER YEARS THE ASSESSMENT OF THE APPELLANT HAD TO BE DONE ON THE BASIS OF THE AUDITED BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY THE APPELLANT AND DULY EVIDENCED BY UN DERLYING RECORDS. THUS, THE ORDER PASSED BY THE CIT (A) IS ERRONEOUS IN LAW. 6. THE LD. CIT (A) ERRED IN FACTS AND IN LAW IN NOT HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE LD. AO, WARD - 10(3), HYDERABAD U/S. 144 OF THE ACT IS BOTH ERRONEOUS AND INVALI D IN LAW AND IS HENCE LIABLE TO BE QUASHED. 7. ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN EXECUTION OF ELECTRICAL FIXTURES AND MAINTENANCE CO NTRACT MAINLY FOR DEFENCE AND RAILWAY AUTHORITIES OF THE CENTRAL GOVERNMENT FILED ITS RETURN OF INCOME FOR THE AY 2016 - 17 ON 3 17/10/2016 DECLARING TOTAL INCOME OF RS. 7,34,510/ - . THE CASE WAS SELECTED FOR LIMITED SCRUTINY UNDER CASS FOR THE FOLLOWING REASON S: - (I) WHETHER SALES / TURNOVER / RECEIPTS HAVE BEEN CORRECTLY OFFERED FOR TAX AND (II) WHETHER CONTRACT RECEIPTS / FEES HAVE BEEN CORRECTLY OFFERED FOR TAX . 3.1. SUBSEQUENTLY, NOTICE U/S. 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE ON 26/7/2017. THEREAFTER, ON SEVERAL DATES NOTICE U/S. 142(1) WERE ALSO ISSUED WHICH WAS ACKNOWLEDGED BY THE ASSESSEE HOWEVER, THERE WAS NO RESPONSE FROM THE ASSESSEE. SUBSEQUENTLY, THE ASSESSEE FURNISHED ITS FINANCIAL STATEMENTS AND AUDIT REPORT . ON PE RUSING THE RECORD S , THE LD. AO OBSERVED VARIOUS DISCREPANCIES AND FINALLY AFTER REJECTING THE BOOKS OF ACCOUNTS ESTIMATED THE NET PROFIT OF THE ASSESSEE @ 8% OF THE GROSS TURNOVER. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ORDER OF THE LD. AO BY AGREEING W ITH HIS VIEW. 4. AT THE OUTSET, THE LD. AR SUBMITTED BEFORE ME THAT THE LD. AO HAS EXCEEDED HIS LIMIT BECAUSE THE PROCEEDINGS BEING ON LIMITED SCRUTINY, THE LD.AO HAD VENTURED TO EXAMINE THE ENTIRE BOOKS OF ACCOUNTS WITHOUT OBTAINING PERMISSIONS FROM THE PR. CIT WHICH IS IN VIOLATION OF THE CBDT CIRCULAR. IT WAS THEREFORE PLEADED THAT THE ASSESSMENT ORDER PASSED BY THE LD. AO MAY BE QUASHED. THE LD. AR FURTHER SUBM ITTED 4 THAT THE ASSESSEE IS IN POSSESSION OF ALL THE BILLS AND VOUCHERS TO ESTABLISH THE GENUINENESS OF THE EXPENDITURE CLAIMED BY IT AS DEDUCTION. THE LD. DR ON THE OTHER HAND ARGUED BY STATING THAT THE REASONS FOR SELECTING THE CASE FOR LIMITED SCRUTINY W AS TO VERITY WHETHER THE ENTIRE RECEIPTS WAS CORRECTLY OFFERED FOR TAX. THEREFORE, THE CASE OF THE ASSESSEE HAS A WIDER SCOPE TO VERIFY THE BOOKS OF ACCOUNTS . IT WAS THEREFORE, PLEADED THAT THE ORDERS OF THE LD. REVENUE AUTHORITIES MAY BE SUSTAINED. 5. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE ORDERS OF THE LD. AO IT IS APPARENT THAT THE ASSESSEE FAILED TO PROMPTLY CO - OPERATE BEFORE THE LD. AO IN HIS PROCEEDINGS. MOREOVER, AS ARGUED BY THE LD. DR , IT IS OBVIOUS THAT THE ENTIRE SCOPE OF THE LIMITED SCRUTINY IN THE CASE OF THE ASSESSEE WAS TO VERIFY WHETHER THE ASSESSEE HAS OFFERED ITS ENTIRE INCOME CORRECTLY FOR TAX. THE CONNOTATION CORRECTLY OFFERED TO TAX HAS A WIDER SCOPE BECAUSE ONLY AFTER EXA MINING THE AGGREGATE INCOME AND THE AGGREGATE EXPENDITURE, THE CORRECT INCOME CAN BE DETERMINED WHICH IS REQUIRED TO BE OFFERED TO TAX. NEEDLESS TO MENTION THAT AS PER THE COMPUTATION STATEMENT ONLY THE TOTAL INCOME OF THE ASSESSEE AFTER SETTING OFF OF A PPROPRIATE LOSSES IS TAXABLE. SINCE, THE ASSESSEE HAD NOT PRODUCED PROPER EXPLANATION AND EVIDENCE FOR THE CLAIM OF DEDUCTION S , THE LD. AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME @8% OF THE 5 TURNOVER WHICH WAS FURTHER CONFIRMED BY THE LD. CIT (A). THEREFORE, I DO NOT FIND MUCH MERIT IN THE ARGUMENTS ADVANCED BY THE LD. AR. HOWEVER, KEEPING IN VIEW OF THE SUBMISSION OF THE LD. AR THAT THE ASSESSEE IS IN POSSESSION OF ALL THE BILLS AND VOUCHER S TO ESTABLISH THE GENUINENESS OF THE INCOME DECLARED BY IT, IN THE INTEREST OF JUSTICE, I HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD. AO FOR DE - NOVO CONSIDERATION. 6. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. PRONOUNCED IN THE OPEN COURT ON THE 11 TH MARCH, 2021. SD/ - ( A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER HYDERABAD, DATED: 11 TH MARCH, 2021. OK K C OPY TO: - 1) THE DECCAN ENGINEERING & REFRIGERATION COMPANY C/O. M/S. SEKHAR AND SURESH, CHARTERED ACCOUNTANTS, 133/4, RP ROAD , SECUNDERABAD. 2) INCOME TAX OFFICER (AO), WARD - 10(3), RANGE - 10, 5 TH FLOOR, INCOME TAX TOWERS, AC GUARDS, MASAB TANK, HYDERABAD. 3) THE COMMISSIONER OF INCOME TAX (APPEALS) - 6, HYDERABAD. 4) THE PRINCIPAL COMMISSIONER OF INCOME TAX - 6, HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE