The ITO, Ward-1, Tanuku V. Sri Atmakuri Pullaiah, Tanuku

ITA 163/VIZ/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7143 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-10-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Keywords: Depreciation
• Section: 145

Judgement Text

ITA NO.163/V/10 A.PULLAYYA, TANUKU IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 163 /VIZAG/ 20 10 ASSESSMENT YEAR : 2007 - 08 ITO WARD - 1 TANUKU VS. SRI ATMAKURI PULLAYYA TANUKU (APPELLANT) (RESPONDENT) PAN NO.ACQPA 0067H APPELLANT BY: SHRI R.K. SINGH, DR RESPONDENT BY: SHRI Y. RATNAKAR, ADVOCATE ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DELETING THE ADDITIONS MADE BY THE A.O. ON E STIMATION OF INCOME AT 8% OF THE GROSS CONTRACT RECEIPTS CLEAR OF DEPRECIA TION AFTER INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF AUTHORITIES BELOW. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DECLARED NET PROFIT OF RS.3,65,300 /- ON THE GROSS RECEIPTS OF RS.1,27,74,798/- WHICH COMES TO A RATE OF 2.8% WHIC H IS VERY LOW IN THE LINE OF BUSINESS CARRIED ON BY THE ASSESSEE. ON VERIFIC ATION OF THE BOOKS OF ACCOUNTS, IT WAS NOTICED BY THE A.O. THAT ASSESSEE HAS MAINTAINED ONLY SELF- MADE VOUCHERS FOR SAND, METAL, BRICK, LABOUR CHARGE S AND CAR MAINTENANCE. HE ACCORDINGLY, INVOKED THE PROVISIONS OF SECTION 1 45 OF THE ACT AND ESTIMATED THE NET PROFIT AT 8% OF THE GROSS CONTRAC T RECEIPTS OF RS.1,27,74,798/- CLEAR OF DEPRECIATION AND CALCULAT ED THE NET PROFIT AT RS.10,21,984/-. ITA NO.163/V/10 A.PULLAYYA, TANUKU 2 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSIONS THAT WHILE CALCULATING THE GROSS RECEIP TS, THE A.O. HAS NOT TAKEN INTO ACCOUNT THE CERTAIN DEDUCTIONS IN THE GROSS BI LLS AGGREGATING TO RS.11,36,828/- FROM THE TOTAL GROSS BILLS. BESIDES , HE HAS NOT ALLOWED THE DEPRECIATION AND INTEREST PAID TO THE BANKS. HE HA S ALSO MAINTAINED THE PROPER BOOKS OF ACCOUNTS BUT THE A.O. HAS ESTIMATED THE PROFITS WITHOUT REJECTING THE BOOKS OF ACCOUNTS. THEREFORE, THE AD DITIONS MADE BY THE A.O. ARE NOT SUSTAINABLE. 5. BEING CONVINCED WITH THE EXPLANATIONS, THE CIT(A ) HAS DELETED THE ADDITIONS AND ACCEPTED THE NET PROFIT SHOWN BY THE ASSESSEES. 6. NOW THE REVENUE IS IN APPEAL BEFORE US WITH THE SUBMISSIONS THAT BEFORE INVOKING THE PROVISIONS OF SECTION 145, THE A.O. HAS RECORDED THAT THE ASSESSEE HAS MAINTAINED ONLY SELF-MADE VOUCHERS FOR SAND, METAL, BRICKS, LABOUR CHARGES AND CAR MAINTENANCE. SINCE THE BOOK S OF ACCOUNTS ARE NOT PROPERLY VERIFIABLE AND TRUE PROFIT CANNOT BE WORKE D OUT, THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145 AND ESTIMATED THE NET PROFIT. THE CIT(A) WITHOUT TAKING INTO ACCOUNT THAT IN THE CASE OF THE CIVIL CONTRACTOR, THE PROFIT DECLARED BY THE ASSESSEE IS VERY LOW AND THE BOOKS OF ACCOUNTS ARE NOT PROPERLY MAINTAINED BY HIM, HAS DELETED THE ENTIRE ADDITIONS. HE FURTHER PLACED A HEAVY RELIANCE UPON THE ORDER OF THE A.O. 7. THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE O RDER OF THE CIT(A) AND ALSO REITERATED ITS CONTENTIONS AS RAISED BEFOR E HIM. 8. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES, WE FIND THAT A.O. HAS INVOKED THE PROVISIONS OF SECTION 145 AFTER HAVING NOTICED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEES ARE NOT VERI FIABLE AS THE EXPENSES WERE CLAIMED ON THE BASIS OF SELF-MADE VOUCHERS FOR SAND, METAL, BRICK, LABOUR CHARGES AND CAR MAINTENANCE. THEREFORE, THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145. SO FAR AS ESTIMATIO N OF NET PROFIT ON GROSS RECEIPTS IS CONCERNED, WE FIND THAT A.O. HAS NOT TA KEN INTO ACCOUNT THE DEDUCTIONS ON GROSS BILLS AGGREGATING TO RS.11,36,8 28/- FROM THE TOTAL GROSS ITA NO.163/V/10 A.PULLAYYA, TANUKU 3 BILLS BESIDES HE HAS NOT ALLOWED THE INTEREST PAID TO BANKS AND THE DEPRECIATION. ACCORDING TO US THESE 3 ITEMS SHOULD HAVE BEEN TAKEN INTO ACCOUNT BY THE ASSESSING OFFICER WHILE ESTIMATING T HE NET PROFIT AT 8%. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DI RECT THE A.O. TO ESTIMATE THE PROFIT AT 8% ON THE NET GROSS RECEIPTS. WHILE COMPUTING THE GROSS RECEIPTS, THE A.O. SHOULD VERIFY THE CLAIM OF DEDUC TION OF GROSS BILLS AGGREGATING TO RS.11,36,828/- FROM THE TOTAL GROSS BILLS AND IF CONVINCED ALLOW THE SAME. OUT OF THE AFORESAID NET PROFIT, THE DEP RECIATION OF RS.46,737/- AND THE INTEREST PAID TO BANK AT RS.72,098/- BE ALS O ALLOWED. ACCORDINGLY, WE RESTORE THE MATTER TO THE FILE OF THE A.O. TO RECOM PUTED THE NET PROFIT IN TERMS INDICATED ABOVE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 2.3.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 2 ND MARCH, 2011 COPY TO 1 ITO WARD - 1, TANUKU 2 SRI ATMAKURI PULLAYYA, S/O SRI BULLAYYA, D.NO.3 - 127, PYDIPARRU, TANUKU MANDAL 3 THE CI T, RAJAHMUNDRY 4 THE CIT (A) , RAJAHMUNDRY 5 THE D R, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM