M/s Sree Lalitha Constructions, Visakhapatnam V. THE ACIT., CENTRAL CIRCLE - 2, Visakhapatnam

ITA 163/VIZ/2013

• Counselvise Citation: 16325314 RSA 2013
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Rejection of books of accounts; Depreciation; Search and seizure
• Section: 143(3); 153A; 132; 15

Judgement Text

ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.158 TO 161/VIZAG/2013 ASSESSMENT YEARS : 2007 - 08 TO 2010 - 11 R ESPECTIVELY SLC PROJECTS PVT. LTD VISAKHAPATNAM VS. ACIT CENTRAL CIRCLE - 2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAJCS 8616C ITA NO S . 162 TO 164 /VIZAG/ 20 13 ASSESSMENT YEAR S : 2004 - 05 TO 2006 - 07 RESPECTIVELY SREE LALITHA CONSTRUCTIONS VISAKHAPATNAM VS. ACIT CENTRAL CIRCLE - 2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AATFS 5754L ASSESSEE BY : SHRI I. KAMA SASTRY, CA REVENUE BY : SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 10.12.2013 DATE OF PRONOUNCEMENT : 13 .12.2013 ORDER PER B. RAMAKOTAIAH:- THESE APPEALS ARE BY ASSESSEE AGAINST THE ORDERS O F THE CIT(A), HYDERABAD DATED 28.12.2012 IN THE CASE OF RESPECTIV E ASSESSEES. THE ASSESSEE HAS RAISED VARIOUS GROUNDS INCLUDING THE J URISDICTIONAL GROUNDS. WE HAVE HEARD LD. COUNSEL AND LD. D.R. IN DETAIL. 2. M/S. SREE LALITHA CONSTRUCTIONS WAS A PARTNERSHI P FIRM OPERATED UPTO ASSESSMENT YEAR 2006-07 AND THEN CONVERTED INTO A C OMPANY. ACCORDINGLY, THE ASSESSEES ARE FILING RETURNS. THE ASSESSEES AR E ENGAGED IN EXECUTION OF CIVIL CONTRACTS. A SEARCH AND SEIZURE OPERATION WA S CONDUCTED U/S 132 OF THE ACT IN THE CASE OF M/S. SLC PROJECTS ON 14.7.2009. A NOTICE U/S 153A OF THE ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 2 ACT WAS ISSUED NOT ONLY IN THE CASE OF SLC PROJECTS BUT ALSO ERSTWHILE PARTNERSHIP FIRM M/S SREE LALITHA CONSTRUCTIONS. I N THE COURSE OF SEARCH PROCEEDINGS, CERTAIN INCRIMINATING DOCUMENTS WERE F OUND OUT AND THE STATEMENT FROM MANAGING DIRECTOR WAS RECORDED U/S 1 32(4) OF THE ACT, WHEREIN HE HAS ADMITTED INCOME AT 9.5% NET OF DEPRE CIATION IN ALL THE IMPUGNED ASSESSMENT YEARS. 3. HOWEVER, SUBSEQUENTLY THE MANAGING DIRECTOR RETR ACTED THE STATEMENT WITH REFERENCE TO THE ERSTWHILE PARTNERSHIP FIRM SR EE LALITHA CONSTRUCTIONS ON THE REASON THAT THOSE ASSESSMENTS HAVE BEEN COMPLET ED U/S 143(3) OF THE ACT. THE ASSESSING OFFICER IN THE COURSE OF ASSESS MENTS U/S 153A EXAMINED THE ISSUES IN DETAIL AND CAME TO THE CONCLUSION THA T BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE RELIED UPON. ACCORDINGLY, HE ES TIMATED THE INCOME AT 12% ON THE GROSS RECEIPTS, NET OF PERMISSIBLE DEDUC TIONS. IN ADDITION HE ALSO BROUGHT TO TAX INTEREST INCOME ADMITTED BY ASSESSEE SEPARATELY AS INCOME FROM OTHER SOURCES AND OTHER INCOMES. THE ASSESSEE CONTENDED VARIOUS ISSUES BEFORE THE LD. CIT(A) INCLUDING COMPLETION O F ASSESSMENTS IN THE CASE OF FIRM ON JURISDICTIONAL MATTERS. THE LD. CIT(A) REJECTED THE ASSESSEES CONTENTIONS AS FAR AS ISSUES OF JURISDICTION IS CON CERNED. HOWEVER, CONSIDERING THE ASSESSEES SUBMISSIONS AND KEEPING IN MIND THE ADMISSION MADE BY THE MANAGING DIRECTOR IN THE COURSE OF SEAR CH PROCEEDINGS U/S 132(4) OF THE ACT, HE HAS ESTIMATED THE INCOME AT 9 .5% OF GROSS RECEIPTS NET OF DEPRECIATION. ACCORDINGLY, THE APPEALS WERE PAR TLY ALLOWED. 4. BEFORE US, THE LD. COUNSEL REITERATED THE SUBMIS SIONS MADE BEFORE THE LD. CIT(A). THE FIRST CONTENTION RAISED BY THE LD. COUNSEL WAS THAT IN THE CASE OF M/S. SREE LALITHA CONSTRUCTIONS, THERE WAS NO SEARCH AND THE ASSESSING OFFICER ISSUED THE NOTICE U/S 153A OF THE ACT VIDE THE NOTICE DATED 09.08.2010 STATING THAT THERE WAS A SEARCH INITIATE D U/S 132 OF THE ACT, WHICH IS NOT CORRECT. HE ELABORATED VARIOUS FACTS ON THE ABOVE ISSUE AND RELIED ON CASE LAW THAT ASSESSEE BEING A SEPARATE ENTITY A NO TICE U/S 153A OF THE ACT CANNOT BE ISSUED WHEN THE SEARCH WAS CONDUCTED IN T HE CASE OF THE COMPANY ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 3 M/S. SLC PROJECTS LTD. WHICH IS AN INDEPENDENT PER SON AS FAR AS IT ACT IS CONCERNED. THE NEXT CONTENTION OF THE LD. COUNSEL IS THAT ASSESSMENTS HAVE BEEN COMPLETED ORIGINALLY IN THESE CASES IN ASSESSM ENT YEARS 2004-05, 2005- 06 & 2006-07 IN THE HANDS OF THE ERSTWHILE FIRM U/S 143(3) OF THE ACT VIDE THE ORDERS DATED 07.03.2006 FOR A.Y. 2004-05 DATED 23.1 0.2007 FOR A.Y. 2005-06 AND DATED 24.12.2008 FOR A.Y. 2006-07 AND THUS NO A SSESSMENTS WERE PENDING WHEN THE SEARCH HAS TAKEN PLACE. THEREFORE , ASSESSING OFFICER DOES NOT HAVE ANY JURISDICTION TO INITIATE PROCEEDINGS U /S 153A OR REASSESS THE ASSESSMENTS WITHOUT ANY INCRIMINATING MATERIAL. TH E THIRD CONTENTION RAISED BY THE ASSESSEE COUNSEL WAS THAT THE INCRIMINATING MATERIAL REFERRED TO BY THE ASSESSING OFFICER PERTAINING TO ASSESSMENT YEAR 200 9-10/2010-11 AND AS THERE WAS NO INCRIMINATING MATERIAL, ASSESSING OFFI CER WAS PRECLUDED IN MAKING THE RE-ASSESSMENT ON THE SAME ISSUES WHICH W ERE EXAMINED AND CONCLUDED IN THE PROCEEDINGS U/S 143(3) OF THE ACT VIDE THE RESPECTIVE ORDERS PASSED. THEREFORE, IT WAS THE CONTENTION THAT AS F AR AS THE ASSESSMENTS IN THE CASE OF SREE LALITHA CONSTRUCTIONS ARE CONCERNE D, THE ORDERS ARE BAD IN LAW. 5. WITH REFERENCE TO THE ISSUES IN M/S. SLC PROJECT S PVT. LTD., THE LD. COUNSEL HOWEVER RESTRICTED THE ARGUMENTS TO THE EST IMATION OF INCOME RELYING ON THE DECISIONS BY VARIOUS TRIBUNALS. IT WAS THE SUBMISSION THAT EVEN THOUGH AFTER ESTIMATING INCOME AT 9.5% THE ASSESSEE COMPANY WAS ENTITLED TO DEPRECIATION AND IF THE SAME IS ALLOWED, ASSESSE E HAS NO GRIEVANCE IN THE ASSESSMENTS. LD. COUNSEL PLACED A CHART OF VARIOUS DEPRECIATION CLAIMS IN RESPECTIVE ASSESSMENT YEARS TO SUBMIT THAT DEPRECIA TION BEING STATUTORY ALLOWANCE, THE SAME IS REQUIRED TO BE ALLOWED. 6. THE LD. D.R. HOWEVER SUBMITTED THAT NOTICE U/S 1 53A OF THE ACT WAS ISSUED IN THE CASE OF ERSTWHILE FIRM ALSO AS IT WAS SUCCEEDED BY THE ASSESSEE SLC PROJECTS LTD IN WHOSE CASE A SEARCH WAS INITIAT ED AND ACCORDINGLY SINCE BOTH THE ASSESSEES PERTAINING TO THE SAME BUSINESS THE REVENUE IS CORRECT IN ISSUING THE NOTICE TO THE ERSTWHILE FIRM. HE RELIE D ON THE ORDER OF THE CIT(A) ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 4 IN THIS REGARD. WITH REFERENCE TO THE REJECTION OF BOOKS OF ACCOUNTS, IT WAS SUBMITTED THAT THE ASSESSEES BOOKS OF ACCOUNTS WER E NOT ACCEPTED DURING THE SCRUTINY ASSESSMENT COMPLETED IN THE CASE OF ER STWHILE FIRM AND SO THE AO WAS CORRECT IN ESTIMATING THE INCOMES. HE FURTH ER SUBMITTED THAT ON THE BASIS OF THE STATEMENT GIVEN BY THE M.D. IN THE COU RSE OF SEARCH PROCEEDINGS, THE LD. CIT(A) DETERMINED THE NET INCOME INCLUSIVE OF ALLOWANCE FOR DEPRECIATION AT 9.5% OF THE GROSS RECEIPTS AND THIS SHOULD BE CONFIRMED AS THE SAME IS BASED ON THE STATEMENT OF THE M.D. HE ALSO PLACED RELIANCE ON THE FINDINGS OF THE AO AND CIT(A) IN THIS REGARD. 7. WE HAVE CONSIDERED THE ISSUE AND EXAMINED T HE VARIOUS PAPER BOOKS PLACED ON RECORD YEAR WISE AND THE RELEVANT CASE LA W. AS CAN BE SEEN FROM THE ASSESSMENTS, THERE ARE TWO DIFFERENT SETS OF AS SESSMENT ORDERS PASSED BY THE AO U/S 153A OF THE ACT. 8.1 AS FAR AS ERSTWHILE FIRM M/S. SREE LALITHA CONS TRUCTIONS IS CONCERNED, AS RIGHTLY POINTED OUT BY THE LD. COUNSEL, THIS FIR M IS A SEPARATE ENTITY WITH A SEPARATE PAN NO. AND WAS ASSESSED SEPARATELY UP TO ASSESSMENT YEARS 2006- 07. THE ASSESSEE FILED RETURNS OF INCOME IN RESPEC TIVE ASSESSMENT YEARS AND ASSESSMENTS U/S 143(3) WERE ALSO COMPLETED. IN THO SE SCRUTINY PROCEEDINGS, THE BOOKS OF ACCOUNTS WERE REJECTED AND ASSESSMENTS HAVE BEEN COMPLETED ESTIMATING INCOME. BY THE TIME THE SEARCH OCCURRED IN THE CASE OF THE COMPANY, THESE ASSESSMENTS HAVE BEEN COMPLETED AND CONCLUDED AND NO APPEALS WERE ALSO EVEN PENDING. THUS BY THE TIME S EARCH PROCEEDINGS HAVE OCCURRED NO PROCEEDINGS ARE PENDING, THEREFORE NONE OF THE ASSESSMENTS IN THIS CASE GET ABATED. FURTHER, AS SEEN FROM THE OR DERS AND THE MATERIAL ON RECORD, THERE IS NO INCRIMINATING MATERIAL PERTAINI NG TO THIS FIRM. EVEN IN THE COURSE OF SEARCH, NO BOOKS OF ACCOUNTS AND VOUCHERS WERE FOUND AND IT WAS ADMITTED THAT THE M.D. CONSEQUENT TO THE COMPLETION OF THE ASSESSMENTS, THE RELEVANT BOOKS OF ACCOUNTS AND VOUCHERS WERE SHIFTE D TO A GODOWN AND THEY WERE NOT ABLE TO LOCATE THE RELEVANT BOOKS OF ACCOU NTS. EVEN THOUGH THE LD. D.R. ARGUED THAT NON-AVAILABILITY OF BOOKS OF ACCOU NTS ITSELF IS INCRIMINATING, ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 5 WE ARE NOT IN AGREEMENT WITH THE ABOVE ARGUMENTS. EVEN IN THE OTHER PAPERS IMPOUNDED/SEIZED IN THE COURSE OF PROCEEDING S, THERE WAS NO REFERENCE TO ANY OF THE IMPUGNED ASSESSMENT YEARS O N 2004-05, 2005-06 & 2006-07 PERTAINING TO THE ASSESSEE. THEREFORE, THE ASSESSMENTS CONCLUDED THEREIN, PARTICULARLY WITH REFERENCE TO ESTIMATION OF INCOME IN THE ORDERS U/S 143(3) OF THE ACT HAS BECOME FINAL. CONSEQUENTLY, ASSESSING OFFICER CANNOT RE-AGITATE AND RE-DETERMINE THE ESTIMATION OF INCOM E IN THE PRESENT PROCEEDINGS. BE THAT AS IT MAY, EVEN THE JURISDICT ION ITSELF IS NOT CORRECT. THE ASSESSEE, IF AT ALL THERE IS ANY INCRIMINATING MATE RIAL, SHOULD HAVE BEEN CONSIDERED UNDER PROVISIONS OF SECTION 153C OF THE ACT. AS SEEN FROM THE NOTICES, ASSESSEE WAS ISSUED NOTICES U/S 153A OF TH E ACT AS IF THERE WAS A SEARCH ON THE ASSESSEE WHICH IS NOT CORRECT. ACCOR DINGLY, EVEN THE ISSUANCE OF NOTICE IS BAD IN LAW. FOR THESE REASONS, WE ARE NOT IN A POSITION TO UPHOLD PROCEEDINGS COMPLETED BY THE ASSESSING OFFICER IN T HE THREE IMPUGNED ASSESSMENT YEARS PERTAINING TO THE ASSESSEE FIRM. 9. IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. V S. DCIT 137 ITD 287 (MUM) (SB). THE SPECIAL BENCH OF THE ITAT HAS HELD THAT PROVISIONS OF SECTION 153A COMING TO OPERATION IF SEARCH OR REQUISITION I S INITIATED AFTER 31.5.2003. THE SPECIAL BENCH FURTHER HELD THAT IN CASE ASSESSM ENT HAS ABATED, AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISD ICTION U/S 153A IN WHICH ASSESSMENT SHALL BE MADE FOR EACH ASSESSMENT YEAR S EPARATELY. THUS IN CASE WHERE ASSESSMENT HAS ABATED, THE AO CAN MAKE ADDITI ON IN THE ASSESSMENT, EVEN IF ANY INCRIMINATING MATERIAL HAS BEEN FOUND B UT IN OTHER CASES, SPECIAL BENCH HELD THAT ASSESSMENT HELD U/S 153A CAN BE MAD E ONLY ON THE BASIS OF INCRIMINATING MATERIAL WHICH IN THE CONTEXT OF RELE VANT PROVISIONS MEANS BOOKS OF ACCOUNTS AND OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH, BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT O R UNDISCLOSED INCOME OR PROPERTY DISCLOSED DURING THE SEARCH. IN THE PRESE NT CASE THE ASSESSMENTS HAVING BEEN COMPLETED U/S 143(3) OF THE ACT BEFORE THE DATE OF SEARCH AND AS THERE WAS NO ASSESSMENT PENDING IN THIS CASE, A CCORDINGLY THERE CANNOT BE ANY RE-ASSESSMENT ON THE ISSUE OF ESTIMATION OF INCOME, AS THERE IS NO ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 6 INCRIMINATING MATERIAL FOUND DURING THE SEARCH. IN THE CASE OF ASP SOFTWARE SOLUTIONS PVT. LTD. 84 DTR (HYD)(TRIB.) 35 THE COOR DINATE BENCH AT HYDERABAD TRIBUNAL HAS EXAMINED THE ISSUANCE OF NOTICE U/S 15 3A OF THE ACT OR 153C OF THE ACT AND CONSIDERED AS UNDER: COMING TO THE OTHER CONTENTIONS ABOUT THE JURISDICT ION FOR INITIATION OF PROCEEDINGS UNDER S.153C, THESE ISSUE S HAVE BECOME ACADEMIC IN NATURE. HOWEVER, AS SEEN FROM THE ADDI TIONAL GROUNDS RAISED, AND PAPER BOOK FILED, THE ASSESSING OFFICER HAS ISSUED A NOTICE UNDER S.153A WHEN THE ASSESSEE IS NOT A SEAR CHED PARTY. REVENUE DID NOT BRING OUT ANYTHING ON RECORD TO SUB MIT THAT THE NOTICE UNDER S.153C HAS BEEN ISSUED. AS SEEN FROM THE NOTICE ITSELF, THIS NOTICE WAS ISSUED/TYPED AS A NOTICE UN DER S.153C. THIS WAS CORRECTED BY WAY OF INK TO BE THAT OF 153A. TH E LEARNED DEPARTMENTAL REPRESENTATIVE WAS SPECIFICALLY ASKED TO ENQUIRE AND PLACE ON RECORD, WHETHER THE NOTICE WAS ISSUED UNDE R S. 153A OR UNDER S.153C. HOWEVER, NO INFORMATION WAS PLACED O N RECORD. AS SEEN FROM THE ORDER PLACED ON RECORD, THERE IS NO F INDING BY THE ASSESSING OFFICER WHO COMPLETED THE SEARCH ASSESSME NT, THAT THESE DOCUMENTS PERTAINED TO THE ASSESSEE. NOR THERE IS ANYTHING IN THE PROCEEDINGS INITIATED THAT THESE ARE REQUIRED TO BE CONSIDERED IN THE CASE OF THE ASSESSEE. THEREFORE, ON THE PRELIM INARY ISSUE OF JURISDICTION ITSELF, AS THE ASSESSEE IS NOT A SEARC HED PARTY, NOTICE UNDER S.153A CANNOT BE ISSUED, AND THE ASSESSEE HAV ING BEEN ISSUED A NOTICE UNDER S.153A, PROCEEDINGS UNDER S.1 53C CANNOT BE COMPLETED. 10. RESPECTFULLY FOLLOWING THE ABOVE, WE HOLD THAT ASSESSING OFFICER HAVING ISSUED A NOTICE U/S 153A OF THE ACT, COULD NOT HAVE COMPLETED PROCEEDINGS WHICH ARE SUPPOSED TO BE DONE U/S 153C OF THE ACT I F THERE IS ANY INCRIMINATING MATERIAL AND ACCORDINGLY, THE PROCEED INGS ITSELF BECOME BAD IN LAW. IN VIEW OF THE ABOVE, WE HAVE NO HESITATION I N SETTING ASIDE THE ORDERS PASSED BY THE AUTHORITIES IN ITA NOS.162, 163 & 164 IN THE CASE OF SRI LALITA CONSTRUCTIONS.. SINCE WE HAVE CONSIDERED THE ISSUE ON JURISDICTION OTHER CONTENTIONS OF ASSESSMENT ON MERITS OF ADDITION MAD E BECOMES ACADEMIC. ACCORDINGLY, THE GROUNDS ARE CONSIDERED ACADEMIC. 11. IN THE RESULT, THE THREE APPEALS 162 TO 164/VIZ AG/2013 ARE ALLOWED. ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 7 ITA NOS.158 TO 161/VIZAG/2013: 12. AS BRIEFLY STATED ABOVE, THERE WAS A SEARCH IN THE CASE OF THE ASSESSEE M/S SLC PROJECTS LTD AND THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS IN THE COURSE OF ASSESSMENT PROCEEDINGS U/ S 153A OF THE ACT. THE AO ESTIMATED THE INCOME AT 12% ON THE GROSS RECEIP TS WHICH THE LD. CIT(A) REDUCED IT TO 9.5% ON THE GROSS RECEIPTS NET OF DEP RECIATION. IN THE COURSE OF ARGUMENTS, VARIOUS LEGAL ISSUES WERE RAISED BUT THE Y ARE NOT SERIOUSLY PRESSED AND THE ARGUMENTS OF THE LD. COUNSEL ARE WI TH REFERENCE TO ESTIMATION OF INCOME AT 9.5%. RELYING ON VARIOUS O RDERS OF THE ITAT ON SIMILAR ISSUE IN THE CASE OF CONTRACTORS, IT WAS TH E SUBMISSION OF THE LD. COUNSEL THAT THE DEPRECIATION CLAIMED BY THE ASSESS EE MAY BE ALLOWED EVEN IF THE ESTIMATION AT 9.5% IS KEPT AT THE SAME LEVEL. IN THE COURSE OF ARGUMENTS, LD. COUNSEL ALSO DID NOT PRESS CLAIM OF HIGHER DEPRECIATION CLAIMED IN THE RETURNS OF INCOME AND HAS SUBMITTED THAT IF DEPRECIATION AT THE NORMAL RATE IS ALLOWED THAT WOULD BE SUFFICIENT . LD. COUNSEL ALSO FAIRLY ADMITTED THAT IF DEPRECIATION OF CLAIM IS ALLOWED, THE INCOMES BEING DETERMINED WILL BE LESS THAN THE RETURNED INCOME IN A.Y. 2009-10 AND SO THE RETURNED INCOME MAY BE DIRECTED TO BE ACCEPTED IN T HAT YEAR WHICH INCLUDES THE ADDITIONAL INCOME OF RS.54.50 LAKHS OFFERED IN THE COURSE OF SEARCH. IN SUPPORT OF CLAIM FOR DEPRECIATION, THE LD. COUNSEL RELIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF C. ESWAR REDDY AND COMPANY ITA NO.668 & 670/HYD/2009 DATED 31.1.2011. THE LD. COUNSEL ALSO RELIED WITH THE DECISION OF THE ITAT JAIPUR IN THE CASE OF RAKESH VS. ACIT I N ITA NO.209 TO 215/JP/2007 BESIDES DECISIONS IN THE CASE OF R.V.S. AND SONS DAIRY FARM VS. CIT MADRAS AND OTHER CASES FOR ALLOWANCE OF VARIOUS DEDUCTIONS. IT IS ALSO SUBMITTED THAT THE COORDINATE BENCH OF THE ITAT HYD ERABAD IN THE CASE OF ENGINEERING & CONSTRUCTIONS PVT. LTD. VS. ITO IN IT A NO.3794/MUM/2005 CONSIDERED THAT ASSESSING OFFICER SHOULD HAVE BASED THE ESTIMATION UPON THE PREVIOUS YEARS FIGURES OF THE SAME ASSESSEE OR PRE VAILING RATE IN SIMILAR INDUSTRY. IT WAS MAINLY CONTENDED THAT SINCE IT IS A COMPANY, THERE IS NO CLAIM FOR DEDUCTION OF REMUNERATION AND INTEREST TO PARTNERS AND THE ASSESSEES CLAIM IS RESTRICTED ONLY TO DEPRECIATION . ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 8 13. WE HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE ASSESSEE AND PERUSED THE VARIOUS CASE LAW AND THE FACTS OF THE C ASE. AS SEEN FROM THE ORDERS IN THE ASSESSEES OWN CASE COMPLETED BY ASSE SSING OFFICERS IN A.Y. 2004-05 TO 2006-07, IN THE STATUS OF SRI LALITHA CO NSTRUCTIONS BEFORE IT BECAME COMPANY, THE ASSESSEE HAS ACCEPTED THE REJEC TION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOMES. EVEN BEFORE US , ASSESSEE IS NOT PRESSING FOR ACCEPTANCE OF THE BOOKS OF ACCOUNTS AN D HAS AGREED TO ESTIMATION OF INCOME. THEREFORE, THE ONLY ISSUE FO R CONSIDERATION IN THESE APPEALS IS THE ESTIMATION OF INCOME. 14. AS SEEN FROM THE RECORD IN A.Y. 2004-05 ON A TU RNOVER OF RS.5.97 CRORES, THE ASSESSEE ACCEPTED ESTIMATION AT 8.5% LE SS DEPRECIATION, INTEREST AND REMUNERATION. IN A.Y. 2005-06 HOWEVER THE ASSE SSEE ACCEPTED INCOME AT 6% NET ON TURNOVER OF RS.10.70 CRORES. IN A.Y. 2006-07 ON A TURNOVER OF RS.8.54 CRORES, THE ASSESSEE ACCEPTED ESTIMATION AT 10.5% BEFORE DEPRECIATION. THUS AS CAN BE SEEN FROM THE ABOVE T HREE ORDERS OF THE FIRM BEFORE IT BECAME COMPANY, ASSESSEE IS ACCEPTING VA RIOUS RATES OF ESTIMATION. THEREFORE, THERE CANNOT BE CONSISTENT RATE TO BE C ONSIDERED IN ARRIVING AT THE ESTIMATION IN THE HANDS OF THE ASSESSEE IN THE LATE R YEARS FROM 2007-08 TO 2010-11 WHICH ARE UNDER CONSIDERATION NOW. 15. IT IS ALSO A FACT THAT ASSESSEES MANAGING DIRE CTOR HAS ACCEPTED 9.5% IN THE STATEMENTS GIVEN U/S 132(4) WHICH WAS HOWEVE R LATER RETRACTED. THE LD. CIT(A) BASED ON THE ABOVE HAS REDUCED THE ESTIM ATION FROM 12% TO 9.5% AS DECLARED BY THE ASSESSEE MD IN THE COURSE O F SEARCH. 16. THE INCOME TAX APPELLATE TRIBUNAL IS ESTIMATING THE INCOME FROM 8% TO 12.5% DEPENDING ON THE NATURE OF CONTRACT WORK, BUSINESS OF THE ASSESSEE, TURNOVER AND THE MACHINERY EMPLOYED IN T HE BUSINESS. THUS THERE IS NO FIXED RATE OF UNIFORM ESTIMATION AND THE CASE S ARE DECIDED ON THE BASIS OF FACTS IN EACH CASE. HOWEVER, THE SPECIAL BENCH OF THE ITAT INDORE IN THE ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 9 CASE OF ARIHANT BUILDERS, DEVELOPERS & INVESTORS PV T. LTD. 106 ITD 10 HAVE HELD THE RATE OF 8%, NET OF DEPRECIATION AS REASONA BLE AFTER REJECTION OF BOOKS OF ACCOUNTS. THERE ARE MANY OTHER CASES, WHE REIN ON SUB-CONTRACT PAYMENTS, INCOME WAS ESTIMATED AT 5% NET. CONSIDER ING ABOVE JUDICIAL PRECEDENTS, WE ARE OF THE OPINION THAT ESTIMATION O F INCOME AT 9.5% BY THE CIT(A) IS ON HIGHER SIDE. CONSIDERING THE PAST REC ORD OF THE ASSESSEE, WE ARE OF THE OPINION THAT IT IS REASONABLE TO ESTIMATE 5% INCOME NET OF DEPRECIATION ON SUB-CONTRACT PAYMENTS AND 8% NET OF DEPRECIATION ON THE BALANCE OF THE CONTRACT RECEIPTS, OUT OF THE TOTAL TURNOVER SHOWN BY THE ASSESSEE. THIS SHOULD MEET THE END OF JUSTICE ON THE FACTS OF THE CASE. HOWEVER, OTHER INCOMES OFFERED BY THE ASSESSEE, WITH REFERENCE TO UNDISCLOSED INCOME BEING ADDED IN A.Y. 2009-10 AND OTHER INCOMES NOT CONNECT ED WITH THE CONTRACT RECEIPTS SHOULD BE ACCEPTED AS SUCH. THIS ESTIMATI ON OF 8% ON ASSESSEES CONTRACT WORKS AND 5% ON SUB-CONTRACT WORKS IS ONLY LIMITED TO THE CONTRACT RECEIPTS. WITH THESE DIRECTIONS, THE ASSESSING OFF ICER IS DIRECTED TO MODIFY THE COMPUTATION OF INCOME ACCORDINGLY. ASSESSEES GROU NDS ARE CONSIDERED ALLOWED ACCORDINGLY. 17. IN THE RESULT, THESE FOUR APPEALS FROM 158 TO 1 61 ARE PARTLY ALLOWED. 18. IN THE RESULT, APPEALS FILED BY THE ASSESSEE IN ITA NOS.162/VIZAG/2013, 163/VIZAG/2013 & 164/VIZAG/2013 ARE ALLOWED AND APPEALS OF ASSESSEE IN ITA NOS.158/VIZAG/2013, 159/VIZAG/2013, 160/VIZAG/2 013 & 161/VIZAG/2013 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13 TH DEC13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH DECEMBER, 2013 ITA NOS.162 TO 164/VIZAG/2013 SREE LALITHA CONSTRUCTIONS, VSKP ITA NOS.158 TO 161/VIZAG/2013 SLC PROJECTS LTD., VSKP 10 COPY TO 1 SLC PROJECTS PVT. LTD., 50 - 104 - 2, PLOT NO.A - 20, TPT COLONY, SEETHAMMADARA, VISAKHAPATNAM 2 SREE LALITHA CONSTRUCTIONS, 50 - 104 - 2, PLOT NO.A - 20, TPT COLONY, SEETHAMMADARA, VISAKHAPATNAM 3 ACIT CENTRAL CIRCLE - 2, VISAKHAPATNAM 4 THE CI T, VISAKHAPATNAM 5 THE CIT (A) , VISAKHAPATNAM 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM