D Viswanath Reddy & Company, Hyderabad V. Income-Tax Officer, Ward-1, Kurnool

ITA 147/HYD/2013

• Counselvise Citation: 14722514 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: S RAMA RAO
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 147/HYD/2013 ASSESSMENT YEAR: 2005-06 D. VISWANATH REDDY & COMPANY, HYDERABAD PAN AAEFV 5865 C VS. INCOME TAX OFFICER, WARD 1, KURNOOL (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI RAMAKRISHNA BANDI DATE OF HEARING : 01-09-2015 DATE OF PRONOUNCEMENT : 04-09-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST ORDER D ATED 14/12/12 OF LD. CIT(A) IV, HYDERABAD FOR ATY 200506. 2. GROUND NOS. 1 & 7 BEING GENERAL IN NATURE DO NO T REQUIRE ANY SPECIFIC ADJUDICATION. GROUND NOS. 2 TO 5 RAISED BY ASSESSEE ARE IN RELATION TO ESTIMATION OF TURNOVER AT RS. 3,90,72,000 BY AO AND CONFIRMED BY CIT(A) AND ESTIMATION OF NET PROFIT THEREON AT 6% BY CIT(A ), WHEREAS, GROUND NO. 6 IS AGAINST LEVY OF INTEREST U/S 234B OF THE ACT. 3. BRIEFLY THE FACTS ARE, ASSESSEE A PARTNERSHIP FI RM IS ENGAGED IN THE BUSINESS OF SAND QUARRY. FOR THE AY UNDER CONSIDERA TION, ASSESSEE FILED ITS RETURN OF INCOME ON 01/11/2005 DECLARING TOTAL INCO ME OF RS. 26,624. IN COURSE OF THE ASSESSMENT PROCEEDING, AO ON THE BASI S OF INFORMATION AVAILABLE ON RECORD, NOTICED THAT THE COMMERCIAL TA X OFFICER (CTO), CIRCLE III, KURNOOL HAS SENT A REPORT WHEREIN IT WAS STATE D THAT IN THE SALES TAX 2 ITA NO. 147 /HYD/2013 D. VISWANATH REDDY & COMPANY ASSESSMENT FOR THE FINANCIAL YEAR UNDER CONSIDERATI ON, ASSESSEES TURNOVER HAS BEEN DETERMINED AT RS. 5,41,20,000. ON THE BASI S OF THE INFORMATION RECEIVED FROM CTO, ASSESSEE WAS CALLED UPON TO EXPL AIN THE EXACT TURNOVER FROM SAND MINING AND SALE. AS OBSERVED BY AO, IN RE SPONSE TO THE QUERY RAISED BY HIM, ASSESSEE, THROUGH ITS AR APPEARED A LONG WITH BOOKS OF ACCOUNT. HE ALSO OBSERVED THAT ENQUIRY CONDUCTED TH ROUGH INSPECTOR REVEALED THAT ASSESSEE HAS PAID ROYALTY ON ACCOUNT OF SAND MINING TO THE TUNE OF RS. 1,50,48,000. HOWEVER, CONSIDERING THE F ACT THAT CTO HAS ASSESSED THE TURNOVER OF ASSESSEE AT RS. 5,41,20,00 0, HE ADOPTED THE SAID FIGURE AS GROSS SAND SALES OF ASSESSEE. AFTER DEDUC TING THEREFROM ROYALTY PAID AMOUNTING TO RS. 1,50,48,000, AO IN ABSENCE OF BILLS AND VOUCHERS TOWARDS PAYMENT OF SALARY ETC., PROCEEDED TO ESTIMA TE THE NET PROFIT AT 12.5% ON THE TURNOVER OF RS. 3,90,72,000 AND ADDED BACK THE AMOUNT OF RS. 48,84,000. BEING AGGRIEVED OF SUCH ADDITION, AS SESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF HEARING BEFORE LD. CIT(A), IT WAS S UBMITTED BY ASSESSEE THAT THE RATE OF RS. 100 PER CUBIC METER OF SAND AD OPTED BY CTO IS VERY HIGH AS LOCAL PRICE OF ONE CUBIC METER OF SAND WAS RS. 25 ONLY. IT WAS SUBMITTED, THOUGH, BEFORE CTO IT WAS SUBMITTED BY ASSESSEE SOMETIMES SAND HAS BEEN SUPPLIED FREE OF COST FOR CONSTRUCTIO N OF TEMPLES AND FURTHER, THOUGH WAYBILLS HAVE BEEN ISSUED FOR 6 CUBIC METERS AND THREE CUBIC METERS RESPECTIVELY, BUT, SOME OF THE SUPPLIES AGAI NST SUCH WAYBILLS ARE FOR TWO CUBIC METERS AND ONE CUBIC METER OF SAND AS PER THE SPECIFIC REQUEST. IT WAS SUBMITTED, WITHOUT APPRECIATING THE CONTENTI ON OF ASSESSEE, CTO HAS DETERMINED TURNOVER OF RS. 5,41,20,000. IT WAS SUBM ITTED, ASSESSEES APPEAL AGAINST THE ORDER OF CTO WAS DISMISSED ON TE CHNICAL GROUND AND PRESENTLY ASSESSEES APPEAL IS PENDING BEFORE THE H ONBLE HIGH COURT OF AP. LD. CIT(A), HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF ASSESSEE. SHE OPINED THAT ASSESSEE HAS NOT FURNISHED ANY EVID ENCE TO DISPROVE FINDINGS OF CTO. ACCORDINGLY, SHE CONFIRMED THE EST IMATION OF TURNOVER OF ASSESSEE AT RS. 3,90,72,000. HOWEVER, CONSIDERING T HE NET PROFIT RATE ADOPTED BY AO AT 12.5% TO BE ON THE HIGHER SIDE, LD . CIT(A) DIRECTED TO ESTIMATE THE PROFIT AT 6% OF THE TURNOVER. BEING AG GRIEVED OF SUCH ORDER OF LD. CIT(A), ASSESSEE HAS PREFERRED APPEAL BEFORE US . 3 ITA NO. 147 /HYD/2013 D. VISWANATH REDDY & COMPANY 5. LD. AR SUBMITTED BEFORE US, ASSESSEE FOR EXTRACT ING SAND HAS ENTERED INTO AN AGREEMENT WITH GOVT. OF AP IN PANCH AYATRAJ DEPARTMENT ON 22/05/07 AND THE IMPUGNED AY IS SECOND YEAR OF BUSI NESS OPERATION BY ASSESSEE. LD. AR SUBMITTED IN THE FIRST YEAR OF OPE RATION I.E. PRECEDING AY, ASSESSEE HAS DECLARED NET PROFIT RATE OF 0.41% WHE REAS IN THE IMPUGNED AY ON A GROSS TURNOVER OF RS. 1,58,47,587, ASSESSEE HAS DECLARED NET PROFIT RATE OF 0.2%. IT WAS SUBMITTED BY ASSESSEE, IT MAINTAINS BOOKS OF ACCOUNT WHICH WERE ALSO PRODUCED BEFORE AO. LD. AR SUBMITTED, THE BASIS ON WHICH CTO DETERMINED GROSS TURNOVER OF ASSESSEE AT RS. 5,41,20,000 IS TOTALLY IRRELEVANT CONSIDERING THE FACT THAT ADOPTI ON OF ONE CUBIC METER SAND VALUE AT RS. 100 IS HIGH AND EXCESSIVE CONSIDERING THAT LOCAL RATE OF SAND PER CUBIC METER IS RS. 25 ONLY. SIMILARLY, IT WAS S UBMITTED BY LD. AR, CTO DETERMINED GROSS TURNOVER BY ASSUMING THAT EACH LOR RY WAS BILLED WITH SIX CUBIC METERS AND THREE CUBIC METERS OF SAND. LD. AR SUBMITTED, WHEN ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT, AO SHOULD H AVE ACCEPTED THE TURNOVER DISCLOSED BY ASSESSEE WITHOUT RELYING SOLE LY UPON THE ASSESSMENT ORDER PASSED BY CTO. 6. LD. DR, ON THE OTHER HAND, SUPPORTING THE ORDER OF LD. CIT SUBMITTED BEFORE US, ASSESSEE CARRIES ON ITS BUSINESS ACTIVIT Y IN A MOST UNORGANIZED MANNER AS NEITHER ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT IN A PROPER MANNER NOR THE EXPENDITURE INCURRED ARE SUPPORTED B Y PROPER BILLS AND VOUCHERS. THEREFORE, WHEN CTO HAS ESTIMATED THE GRO SS SALES OF ASSESSEE AT RS. 5,41,20,000 ON VALID REASONS THERE IS NO REA SON FOR NOT ACCEPTING THE TURNOVER DETERMINED BY CTO AS ASSESSEE HAS NOT BROU GHT ANY EVIDENCE ON RECORD TO DISPROVE THE FINDING OF CTO. LD. DR SUBMI TTED, THE CLAIM OF ASSESSEE THAT LOCAL RATE OF SAND PER CUBIC METER IS AT RS. 25 OR THE FACT THAT EACH LORRY IS NOT ALWAYS FILLED WITH SIX CUBIC METE RS OR THREE CUBIC METERS OF SAND ARE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. LD. DR SUBMITTED, IN THE PRECEDING AY ALSO, THE TRIBUNAL HAS DIRECTED LD . CIT()A) TO ESTIMATE THE PROFIT OF ASSESSEE FROM SAND BUSINESS AT 8% BY FOLL OWING THE DECISION OF ITAT, AHMADABAD BENCH IN CASE OF ARIHANT BUILDERS. 4 ITA NO. 147 /HYD/2013 D. VISWANATH REDDY & COMPANY 7. IN THE REJOINDER, LD. AR SUBMITTED, THE DECISION OF ARIHANT BUILDERS WILL NOT APPLY TO THE FACTS OF ASSESSEES CASE AS I N THAT CASE ASSESSEE WAS INVOLVED IN CONSTRUCTION BUSINESS WHEREAS ASSESSEE IS IN THE BUSINESS OF MINING AND SALE OF SAND. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATE RIALS ON RECORD. AS IS EVIDENT, ADOPTION OF TURNOVER AT RS. 3,90,72,000 IS ON THE BASIS OF GROSS SALES DETERMINED BY CTO, KURNOOL AT RS. 5,41,20,000 IN THE YEAR UNDER CONSIDERATION. AFTER ALLOWING THE ROYALTY PAYMENT O F RS. 1,50,40,000, AO HAS DETERMINED THE GROSS TURNOVER FROM SALE OF SAND AT RS. 3,90,72,000. THOUGH, IT IS THE CLAIM OF ASSESSEE BEFORE US THAT RATE PER CUBIC METER OF SAND ADOPTED AT RS. 100 BY CTO IS HIGH AND EXCESSIV E CONSIDERING THE LOCAL RATE OF RS. 25 PER CUBIC METER OF SAND, HOWEV ER, ASSESSEE HAS NOT SUBSTANTIATED SUCH CLAIM BY PRODUCING ANY EVIDENCE AT ANY STAGE RIGHT FROM THE AO TILL THE TRIBUNAL. SIMILARLY, THERE IS NO EV IDENCE SUBMITTED BY ASSESSEE THAT EACH LORRY IS NOT ALWAYS FILLED UP EI THER WITH SIX CUBIC METERS OF SAND OR THREE CUBIC METERS OF SAND. THEREFORE, A SSESSEES CLAIM CANNOT BE ACCEPTED ON MERE FACE VALUE IN ABSENCE OF PROPER AND VALID EVIDENCE. THOUGH, LD. AR HAS SUBMITTED BEFORE US, ENTIRE MINI NG ACTIVITY OF SAND IS MONITORED BY STATE GOVT. AND ASSESSEE PAYS ROYALTY ON THE BASIS OF SAND LIFTED, IN OUR VIEW, THE BURDEN IS ON ASSESSEE TO E STABLISH THROUGH PROPER EVIDENCE THE TURNOVER DECLARED BY IT. HOWEVER, CONS IDERING THE FACT THAT RECEIPTS FROM SALE OF SAND WAS DETERMINED ONLY REL YING UPON THE ORDER OF CTO AND ASSESSEES APPEAL AGAINST DETERMINATION OF TURNOVER BY CTO, AS STATED BY LD. AR, IS PENDING BEFORE THE HONBLE HIG H COURT, WE DEEM IT PROPER TO REMIT THE ISSUE RELATING TO ESTIMATION OF TURNOVER BACK TO AO FOR DECIDING AFRESH KEEPING IN VIEW THE DECISION TO BE TAKEN OR ALREADY TAKEN BY HONBLE HIGH COURT WHILE DECIDING ASSESSEES APP EAL. SINCE, THE MAIN ISSUE RELATING TO ESTIMATION OF TURNOVER IS REMITTE D TO AO, THE OTHER RELATED ISSUE CONCERNING ESTIMATION OF NET PROFIT ON SUCH T URNOVER IS ALSO REMITTED TO THE FILE OF AO FOR DECIDING AFRESH AFTER DUE OPP ORTUNITY OF BEING HEARD TO ASSESSEE. GROUNDS RAISED ARE ALLOWED FOR STATISTICA L PURPOSES. 5 ITA NO. 147 /HYD/2013 D. VISWANATH REDDY & COMPANY 9. IN VIEW OF OUR DECISION HEREINABOVE, GROUND NO. 6 HAS BECOME INFRUCTUOUS. HENCE, DISMISSED. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 4 TH SEPTEMBER, 2015 KV COPY TO:- 1) D. VISWANATH REDDY AND COMPANY, C/O SRI S. RAMA RAO, ADVOCATE,FLAT NO. 102, SHRIYAS ELEGANCE, H. NO . 3-6-643, ST. NO. 9, HIMAYAT NAGAR, , HYDERABAD 500 02 9 2) ITO, WARD 1, KURNOOL. 3) CIT(A) - IV, HYDERABAD 4) CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.