M/s. Sai Balaji Enterprises, Hyderabad V. Addl.CIT, Range-9, Hyderabad

ITA 1502/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82265 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 14-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P MOHAN REDDY
• Keywords: Unexplained cash credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1502/HYD/2013 ASSESSMENT YEAR 2010-201 M/S. SAI BALAJI ENTERPRISES, HYDERABAD. PAN ABKFS-8882-P VS. ADDL. CIT, RANGE-9 HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE MR. K.C. DEVDAS FOR REVENUE MR. P. MOHAN REDDY DATE OF HEARING 30.06.2014 DATE OF PRONOUNCEMENT 06.08.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-VI, HYDERABAD DATED 27.08.2013 FOR T HE ASSESSMENT YEAR 2010-2011. ASSESSEE IS AGGRIEVED ON THE CONFIRMATION OF ADDITION OF 2% ON SUB-CONTRACTS AND OF RS.6,36,121 AS UNEXPLAINED CASH CREDIT. 2. BRIEFLY STATED, ASSESSEE IS A SUB-CONTRACTOR FO R M/S. IVRCL LTD., FOR EXECUTION OF VARIOUS ROAD CONS TRUCTION PROJECTS. IT FILED RETURN OF INCOME DECLARING PROFI T OF RS.73,85,210. ASSESSEE UNDERTOOK WORKS TO AN EXTEN T OF RS.17.20 CRORES OUT OF WHICH, RS.11.16 CRORES SEEM S TO BE BY WAY OF DEBIT NOTES TOWARDS MATERIAL/LABOUR CHARGES. ASSESSEE CONTENDED THAT ON NET RECEIPTS OF RS.5,82,60,686 (E XCLUDING THE DEBIT NOTES) ASSESSEE PROFIT COMES TO 11%. A.O. EVEN THOUGH HAS NOTED THAT MANY OF THE VOUCHERS ARE NOT VERIFIABLE, 2 ITA.NO.1502/HYD/2013 M/S. SAI BALAJI ENTERPRISES, HYDERABAD. HAS ACCEPTED THE PROFIT AT 11% ON THE NET RECEIPTS AS EXPLAINED BY THE ASSESSEE. HOWEVER, CONSIDERING THE ORDER FOR A.Y. 2009- 2010 THE DEBIT NOTES TO AN EXTENT OF RS.11.16 CRORE S WAS CONSIDERED AS SUB-CONTRACT AND ON THAT 2% PROFIT WA S ESTIMATED. ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THERE CAN NOT BE ANY PROFIT ON THE MATERIAL SUPPLIES, REL IED ON THE CASE LAW OF BRIJ BHUSHANLAL PRADYUMNA KUMAR VS. CIT 115 ITR 524 (SC) AND OTHER DECISIONS TO CONTEND THAT MATERI AL SUPPLIED BY THE CONTRACTOR MUST NOT BE CONSIDERED FOR ESTIMA TION OF PROFIT. LD. CIT(A) HOWEVER, NOTICED THAT HIS PREDEC ESSOR IN A.Y. 2009-2010 DELETED THE ADDITION BUT ITAT ON FURTHER APPEAL VIDE ORDERS IN ITA.NO.237/HYD/2013 DATED 7 TH JUNE, 2013 AND MA.NO.174/HYD/2013 DATED 8 TH AUGUST, 2013 UPHELD THE ADDITION OF 2% ON THE SUB CONTRACTS. IN VIEW OF THI S, LD. CIT(A) CONFIRMED THE ADDITION AND DISMISSED ASSESSEES APP EAL. 3. THE OTHER ADDITION MADE BY THE A.O. IS WITH REFERENCE TO THE SUNDRY CREDITORS. A.O. NOTICED THA T AN AMOUNT OF RS.84,73,029 WERE REFLECTED UNDER THE HEAD SUND RY CREDITORS. SINCE ASSESSEE DID NOT FURNISH CONFIRMA TIONS WITH REFERENCE TO MR. SHINTAL RS.1,87,450/- AND MR.SUPPA N RS.4,48,671, HE MADE THE ADDITION OF RS.6,36,121 AS UNEXPLAINED CASH CREDIT. LD. CIT(A) ALSO IN THE ABS ENCE OF CONFIRMATION FROM THE ABOVE TWO PERSONS CONFIRMED T HE SAME. HENCE, THE PRESENT APPEAL BY THE ASSESSEE ON THE TW O ISSUES. 4. AFTER HEARING THE RIVAL CONTENTIONS, WE ARE NOT IN AGREEMENT WITH THE ASSESSEES GROUND NO.2 ON THE IS SUE OF ESTIMATION OF INCOME AT 2% ON DEBIT NOTES. THE ITAT HAS REVERSED THE LD. CIT(A) ORDER IN A.Y. 2009-2010 AND CONFIRMED THE ADDITION MADE BY THE A.O. THE A.O. AS WELL AS T HE LD. CIT(A) FOLLOWED THE ORDER IN A.Y. 2009-2010 AND LD. CIT(A) 3 ITA.NO.1502/HYD/2013 M/S. SAI BALAJI ENTERPRISES, HYDERABAD. PARTICULARLY FOLLOWED THE COORDINATE BENCH DECISION IN A.Y. 2009-2010. SINCE THE FACTS ARE SIMILAR AND ISSUE BE ING SAME BEING A COORDINATE BENCH DECISION, WE CANNOT DIFFER FROM THE ORDER OF THE ITAT IN EARLIER ASSESSMENT YEAR. FURTH ER, WHAT WE NOTICED IS THAT THE ASSESSEE EVEN THOUGH HAS TURNOV ER OF RS.17.20 CRORES, EXPLAINED THE GROSS PROFIT ONLY ON THE NET RECEIPTS EXCLUDING THE EXPENDITURE STATED TO HAVE B EEN INCURRED BY THE PRINCIPAL CONTRACTOR. IF THAT BEING SO, WHY THAT TURNOVER HAS COME TO THE ASSESSEES BOOKS IS NOT EX PLAINED. EITHER THERE SHOULD BE ESTIMATION ON THE TOTAL TURN OVER OR ESTIMATION ON OWN TURNOVER AND ESTIMATION ON OTHERS TURNOVER AS SUB CONTRACT AT DIFFERENT RATES. ASSESSEE IS NOT OBJECTING TO THE REJECTION OF THE BOOKS OF ACCOUNTS. THE ONLY OB JECTION IS TO THE ESTIMATION OF INCOME AT 2% ON THE SO-CALLED SUB -CONTRACTS (DEBIT NOTES ISSUED BY IVRCL). ON THE FACTS OF THE CASE, WE DO NOT SEE ANY REASON TO DEVIATE FROM THE ORDERS OF TH E COORDINATE BENCH AND ACCORDINGLY, THE ESTIMATION AT 2% STANDS CONFIRMED. GROUND N.2 OF THE ASSESSEE IS REJECTED. 5. COMING TO THE ISSUE OF UNEXPLAINED CASH CREDIT, IT WAS THE SUBMISSION THAT THE RECEIPTS ARE OF TRADE R ECEIPTS, THEREFORE, COULD NOT HAVE BEEN CONSIDERED AS UNEXPL AINED CASH CREDIT. THIS ARGUMENT OF THE ASSESSEE HAS VALIDITY. WHAT WE NOTICED FROM THE ORDER OF THE A.O. IS THAT HE HAS E XAMINED THE SUNDRY CREDITORS OUTSTANDING ON THE LAST DAY OF THE YEAR AND ASKED FOR CONFIRMATIONS. IN THE ABSENCE OF CONFIRMA TIONS ABOUT THESE TWO AMOUNTS, A.O. SHOULD HAVE EXAMINED HOW TH E CREDITS HAVE OCCURRED IN THE BOOKS OF ACCOUNTS. IF THESE ARE PERTAINING TO THE MATERIAL PURCHASE OR LABOUR SUPPL Y, THE SAME COULD HAVE BEEN DISALLOWED. IF THEY ARE PERTAINING TO SOME ADVANCE RECEIVED, THE NATURE OF ADVANCE COULD HAVE BEEN EXAMINED. NOTHING HAS BEEN DONE. IT IS ALSO NOT SUR E WHETHER 4 ITA.NO.1502/HYD/2013 M/S. SAI BALAJI ENTERPRISES, HYDERABAD. THESE CREDITS WERE CREDITS DURING THE YEAR OR CARRI ED OVER AMOUNTS FROM EARLIER YEARS. JUST BECAUSE, ASSESSEE COULD NOT FURNISH CONFIRMATION LETTERS FOR THE YEAR ENDING BA LANCE, IT CANNOT BE TREATED AUTOMATICALLY AS INCOME UNDER SEC TION 68, UNLESS IT IS ESTABLISHED THAT THE CREDIT OCCURED DU RING THE YEAR AND THE CREDITS ARE NOT TRADE CREDITS. SINCE THE CO MPLETE DETAILS ARE NOT ON RECORD AND A.O./LD. CIT(A) HAS NOT EXAMI NED THE ISSUE IN CORRECT PERSPECTIVE, WE ARE OF THE OPINION THAT MATTER SHOULD BE RE-EXAMINED BY THE A.O. ASSESSEE SHOULD B E GIVEN DUE OPPORTUNITY TO SUBSTANTIATE ITS CONTENTIONS. FO R THESE REASONS, GROUND NO.3 IS ALLOWED AND THE ISSUE IS RE STORED TO THE FILE OF A.O. TO DO ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT O N 06.08.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 06 TH AUGUST, 2014. VBP/- COPY TO 1. M/S. SAI BALAJI ENTERPRISES, 1-1-394/9-1, BLOCK- 9, PHASE-1, MOHAN NAGAR, KOTHAPETA, DILSUKHNAGAR, HYDERABAD 500 035. 2. ADDL. CIT, RANGE-9, I.T. TOWERS, HYDERABAD 3. CIT(A)-VI, HYDERABAD 4. CIT-VI, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD.