Super Constructions, Hyderabad V. ACIT, Circle-6(1), Hyderabad

ITA 1629/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1327 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R LAKSHMAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation
• Section: 32; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1629/HYD/12 : A SSTT. YEAR 2009-10 M/S. SUPER CONSTRUCTIONS, HYDERABAD. ( PAN - AAVFS 2242 P) V/S. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 6(1), HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SHRI R.LAKSHMAN DATE OF HEARING 30.01.2013 DATE OF PRONOUNCEMENT 22.2.2013 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERABAD, DATED 21.08.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPEA L READ AS FOLLOWS- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN C OMPLETING THE ASSESSMENT EX-PARTE U/S. 144 OF THE I.T. ACT W ITHOUT CONSIDERING THE FACT THAT THE APPELLANT RESPONDED T O THE NOTICES ISSUED BY THE ASSESSING OFFICER AND PRODUCE D ALL THE NECESSARY EVIDENCES. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN A PPLYING THE PROVISIONS OF SEC.145 OF THE I.T. ACT WHEN NO SPECI FIC ERROR WAS FOUND IN THE BOOKS OF ACCOUNT MAINTAINED. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ESTIM ATION OF INCOM E AT 8% ON THE GROSS RECEIPTS WITHOUT CONSIDERING THE CIRCUMSTANCES PREV AILING AT THE RELEVANT POINT OF TIM E AND WITHOUT CONSIDERING THE NATURE OF THE BUSINESS ACTIVITY. ITA NO.1629/ HYD/2012 M/S. SUPER CONSTRUCTIONS, HYDERABAD. . 2 5. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN NOT ALLOWING DEDUCTION U/S. 40(B) OF THE I.T. ACT. 6. .. 3. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF T HE REVENUE AUTHORITIES AND OTHER MATERIAL ON RECORD. BESIDES THE GROUND QUESTIONING THE JUSTIFICATION FOR COMPLETING THE ASSESSMENT EX- PARTE UNDER S.144 OF THE ACT, THE GRIEVANCE OF THE ASSESSEE, WHO IS ENGA GED IN THE BUSINESS OF EXECUTING CIVIL CONTRACTS, RELATES TO DETERMINING T HE INCOME OF THE ASSESSEE, ESTIMATING THE SAME ADOPTING A RATE OF 8% , AND DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION IN RESPECT OF PARTNE RS REMUNERATION AND INTEREST ON CAPITAL. ON CAREFUL CONSIDERATION OF THE MATTER, WE FIND THAT THE ISSUE RELATING TO RATE TO BE ADOPTED FOR ESTIMA TION OF ASSESSEES INCOME FROM CIVIL CONTRACT WORKS, IS COVERED BY THE CONSIS TENT VIEW TAKEN BY THE TRIBUNAL IN SIMILAR MATTERS. IN ONE SUCH DECISION IN THE CASE OF TEJA CONSTRUCTIONS IN I TA NO.308/HYD/2009 FOR ASSESSMENT YEAR 2005-06, THI S TRIBUNAL VIDE ORDER DATED 23.10.2009, HAS HELD AS FOLLOWS- 'THE ASSESSEE HAD A HIGHER RATE OF PROFIT ON THE CO NTRACTS EXECUTED BY THE ASSESSEE ITSELF. IN THESE CONTRACT S, THE ASSESSEE AGREED THAT HIS INCOME IS AT 90% OF THE GROSS RECEI PTS. THUS, ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO ESTI MATE THE INCOME ON THE CONTRACTS EXECUTED BY THE ASSESSEE'S OWN AT 9%. IN CASE OF CONTRACTS TAKEN BY ASSESSEE ON SUB CONTR ACT, THE INCOME TO BE ESTIMATED AT 8% OF THE GROSS RECEIPTS. IN CASE OF CONTRACTS GIVEN BY THE ASSESSEE TO THE 3 RD PARTY ON SUB CONTRACT, INCOME TO BE ESTIMATED AT 5%. THIS IS, BECAUSE, WH EN THE ASSESSEE GIVEN CONTRACT TO THE OTHER PARTIES ON SUB CONTRACT, THE ASSESSEE CANNOT KEEP THE SAME PERCENTAGE OF PROFIT AT 9%, IT HAS TO FOREGO CERTAIN PORTION OF PROFIT I.E., AROUND 5% TO THE SUB CONTRACTORS. SIMILAR POSITION IN THE CASE OF CONTR ACTS TAKEN BY ASSESSEE ON SUB CONTRACT FROM OTHER PARTIES. FURTH ER, IN OUR OPINION, THE ASSESSEE IS ENTITLED FOR DEPRECIATION AND REMUNERATION, AND INTEREST TO PARTNERS ON THE PROFI T ESTIMATED BY ASSESSING OFFICER AT APPLICABLE RATES, BECAUSE THE INCOME ESTIMATED AS ABOVE OF THE ASSESSEE IS BEFORE THE DE PRECIATION AND INTEREST AND REMUNERATION OF THE PARTNERS. ACCORDI NGLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE INCOME OF THE ASSESSEE AFRESH. ACCORDINGLY, THIS GROUND OF THE ASSESSEE A PPEAL IS PARTLY ALLOWED.' ITA NO.1629/ HYD/2012 M/S. SUPER CONSTRUCTIONS, HYDERABAD. . 3 4. FOLLOWING THE ABOVE ORDER, FOR THE IMMEDIATELY SUCCEEDING YEAR, VIZ. ASSESSMENT YEAR 2006-07 IN ACIT V/S. TEJ A CONSTRUCTIONS, SECUNDERABAD, VIDE PARAS 10 AND 12 OF ITS ORDER DAT ED 17.2.2012, COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.1191/HY D/2011 HAS HELD AS FOLLOWS- 10. THE FIRST TWO GROUNDS ARE AGAINST THE ORDER O F THE CIT(A) (A) DIRECTING THE ASSESSING OFFICER TO ESTIMATE THE INC OME OF THE ASSESSEE @ 9% ON OWN CONTRACT WORKS, 8% ON CONTRACT S TAKEN BY ASSESSEE ON SUBCONTRACTS AND @ 5% ON CONTRACTS GIVE N BY THE ASSESSEE TO 3 RD PARTY ON SUBCONTRACTS AND (B) DIRECTING THE ASSESSING OFFICER TO ALLOW REMUNERATION, INTEREST O N CAPITAL AND DEPRECIATION OUT OF ESTIMATED INCOME. THE REVENUE S UBMITS THAT WHEN NET INCOME IS ESTIMATED ALL OTHER EXPENDITURE AND DEDUCTIONS SUCH AS REMUNERATION TO PARTNERS AND DEPRECIATION I S DEEMED TO HAVE BE TAKEN CARE OF IN VIEW OF THE CASE LAW IN TH E CASE OF M/S INDWELL CONSTRUCTIONS 232 ITR 776 (AP) AS DECIDED BY THE JURISDICTIONAL AP HIGH COURT AND ALSO DECISION IN T HE CASE OF M/S AYYAPPA INFRA PROJECTS P. LTD IN ITA NO.608/H/2009 . HOWEVER THE ISSUE IS COVERED BY THE ORDER OF THE ITAT IN THE AS SESSEES OWN CASE FOR THE EARLIER YEAR. FOR THAT YEAR THE ITAT H AS ESTIMATED THE PROFITS OF THE ASSESSEE @ 9% ON OWN CONTRACT WORKS, 8% ON CONTRACTS TAKEN BY ASSESSEE ON SUBCONTRACTS AND @ 5 % ON CONTRACTS GIVEN BY THE ASSESSEE TO 3 RD PARTY ON SUBCONTRACTS. THIS ESTIMATE ACCORDING TO ITAT IS BEFORE ALLOWING REMUN ERATION, INTEREST ON CAPITAL AND DEPRECIATION AND HENCE ITAT DIRECTED THAT THESE AMOUNTS SHOULD BE REDUCED OUT OF THE ESTIMATE D INCOME. THE RELIANCE OF THE REVENUE ON OTHER CASES WHERE THE ES TIMATED INCOME INCLUDES DEDUCTION OF REMUNERATION, INTEREST ON CAP ITAL AND DEPRECIATION DOES NOT REALLY HELP THE REVENUES CAS E. ESTIMATE OF INCOME MAY VARY FROM CASE TO CASE. THE ESTIMATE MAY BE GROSS PROFITS AFTER WHICH OTHER EXPENDITURE MAY BE ALLOWE D OR THE ESTIMATE MAY OF THE NET INCOME AFTER ALL THE EXPEND ITURE. THE ITAT HAS HELD IN THE ASSESSEES OWN CASE THAT THEIR ESTI MATE OF INCOME AS A PERCENTAGE OF GROSS RECEIPTS IS PRIOR TO ALLOW ANCE OF DEPRECIATION, INTEREST ON CAPITAL AND REMUNERATION. THE CIRCUMSTANCES THIS YEAR BEING IDENTICAL AS THE EARL IER YEAR AND AS DEPARTMENT HAS NOT BROUGHT ANYTHING ON RECORD TO PE RSUADE US TO TAKE A DIFFERENT VIEW, RESPECTFULLY FOLLOWING THE D ECISION OF THE COORDINATE BENCH, WE UPHOLD THE ORDER OF THE CIT(A) REGARDING THE RATE OF PROFITS TO BE ADOPTED ON THE GROSS RECEIPTS AND A FURTHER ALLOWANCE OF REMUNERATION, INTEREST ON CAPITAL AND DEPRECIATION. THE REVENUES APPEAL ON THESE ISSUES IS DISMISSED. 12. REGARDING DEPRECIATION, IT IS ALLOWABLE U/S 32 OF THE IT ACT AND IT FALLS UNDER THE PROVISION OF SECTION 30 TO 38 AN D BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT WHILE ESTIMATIN G THE INCOME OF THE ASSESSEE. HENCE WITH RESPECT TO DEPRECIATION, THE GROUND OF APPEAL RAISED BY THE REVENUE IS ALLOWED. HENCE GRO UND NO.3 RAISED BY THE REVENUE IS PARTLY ALLOWED. ITA NO.1629/ HYD/2012 M/S. SUPER CONSTRUCTIONS, HYDERABAD. . 4 5. THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL DATED 31.1.2011 IN THE CROSS-APPEALS IN THE CASE OF M/S. C. ESWARA REDDY & CO., HYDERABAD ITA NOS.668 & 670/HYD/2009 FOR ASSESSMENT YEARS 2003-04 AND 2005 IS ALSO TO THE SAME EFFECT. 6. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCE S OF THE PRESENT CASE IN THE LIGHT OF THE CONSISTENT VIEW TAKEN BY T HE COORDINATE BENCHES OF THIS TRIBUNAL IN SIMILAR MATTERS, BESIDES THE PLEA OF THE ASSESSEE IN THIS APPEAL WITH REGARD TO INADEQUACY OF OPPORTUNITY GIV EN BY THE ASSESSING OFFICER BEFORE RESORTING TO COMPLETING THE ASSESSME NT UNDER S.144 OF THE ACT, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RECOMPUTE THE INCOME OF THE ASSESSEE APPLYING THE RATES MENTIONED IN THE ORDER OF THIS TRIBUNAL DATED 17.2.2012 IN ITA NO.1191/HYD/2011 FO R THE ASSESSMENT YEAR 2006-07, AND THEREAFTER ALLOW INTEREST AND REM UNERATION TO THE PARTNERS IN TERMS OF S.40(B) OF THE ACT, BUT NOT DE PRECIATION UNDER S.32 OF THE ACT. HE SHALL REFRAME THE ASSESSMENT AFRESH I N ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 22 ND FEBRUARY, 2013 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 22ND FEBRUARY, 2013 COPY FORWARDED TO: 1. M/S. SUPER CONSTRUCTIONS, C/O. SHRI S.RAMA RAO, FLAT NO.102, SHIRYA'S ELEGANCE, NO.3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 ITA NO.1629/ HYD/2012 M/S. SUPER CONSTRUCTIONS, HYDERABAD. . 5 2. ASST. COMMISSIONER OF INCOME-TAX CIRCLE 6(1), HY DERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) IV, HYDERABAD 4. COMMISSIONER OF INCOME - TAX III HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S