ITO., Ward- 16(2), Hyderabad, Hyderabad V. M/s Neelimala Estates (P) Limited, Hyderabad

ITA 1649/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5861 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-07-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 28-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Corroborative evidences
• Section: 133A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 1649 & 1650/HYD/2014 ASSESSMENT YEARS: 2004-05 & 2005-06 INCOME-TAX OFFICER, WARD 16(2), HYDERABAD. VS. NEELIMA ESTATES (P) LTD., HYDERABAD. PAN AABCN 5962 A (ASSESSEE ) (RESPONDENT) REVENUE BY : SMT. U. MINI CHANDRAN ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 21-12-2016 DATE OF PRONOUNCEMENT 30-12-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE ORDERS OF CIT(A) - V, HYDERABAD, BOTH, DATED 2 1/07/2015 FOR AYS 2004-05 AND 2005-06 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL (REVISED), WHICH ARE COMMON IN BO TH THE APPEALS, EXCEPT THE QUANTUM OF ADDITION: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ESTIMAT E THE INCOME @ 8% ON THE UNACCOUNTED RECEIPTS AT RS. 98,04,559/- FOR AY 2004-05 AND AT RS. 40,14,167/- FOR AY 2005-06. 2. THAT IN THE FACTS & CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ENTIRE EXPENDITURE FOR EARNING THE GROSS RECEIPTS INCLUDING UNACCOUNTED RE CEIPTS WERE ALREADY BOOKED, CLAIMED AND ALLOWED AND HENCE UNACC OUNTED RECEIPTS SHOULD SUFFER TAX ENTIRELY. 2. TO DISPOSE OF THESE APPEALS, WE REFER TO THE FAC TS FROM AY 2004-05. 2 ITA NO. 1649 & 1650/H/14 NEELIMALA ESTATES (P) LTD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ADDITIO N OF RS. 98,04,559/ WAS ORIGINALLY MADE ON THE GROUND THAT T HE TOTAL TURNOVER ADMITTED IN THE RETURN OF INCOME WAS RS.1,62,61,243 /-. HOWEVER AS PER THE DOCUMENTS AND ACCOUNTING SHEETS MAINTAINED BY THE ASSESSEE WHICH WERE IMPOUNDED DURING THE COURSE OF SURVEY U/S 133A OF THE INCOME TAX ACT, 1961, THE GROSS RECEIPT S OF THE ASSESSEE WAS FOUND AT RS.2,60,65,802/-. THE DIFFERE NTIAL AMOUNT OF RS.98,04,559/- WAS ADDED TO THE INCOME RETURNED AS 'SUPPRESSED RECEIPTS'. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) AND THE CIT(A) EXTRACTED THE SUBMISSIONS OF THE ASS ESSEE AT PAGES 3 & 4 OF HIS ORDER. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) OBSERVED THAT T HE AO APPARENTLY MADE THE ADDITIONS BASED ON THE IMPOUNDED MATERIAL AND ON THE ONLY GROUND THAT THE GROSS RECEIPTS APPEARING IN THE IMPOUNDED MATERIAL ARE MORE THAN T HE TURNOVER ADMITTED IN THE PROFIT AND LOSS ACCOUNT. 5.1 CIT(A) OBSERVED THAT THE AO WHILE MAKING THE A DDITION ORIGINALLY VIDE HIS ORDER DATED 25.1.2007, COULD NO T MAKE ANY OBSERVATION ON THE STATUS OF THE BOOKS OF ACCOUNTS AS THE ASSESSEE HAS NOT RESPONDED TO THE SEVERAL NOTICES SERVED ON HIM, AND WAS COMPELLED TO COMPLETE THE ASSESSMENT U/S 144 OF THE INCOME TAX ACT, BASED ON THE AVAILABLE INFORMATION ON HAND. 5.2 HE OBSERVED THAT IT IS ALSO APPARENT FROM THE ORDER DATED 26.3.2013 OF THE AO THAT THE ASSESSEE HAS FILED A L ETTER EXPLAINING THE CIRCUMSTANCES UNDER WHICH THE BUSINESS IS DISCO NTINUED DUE TO THE TRAGIC AND SUDDEN DEMISE OF THE DIRECTORS OF TH E COMPANY AND REQUESTED FOR ESTIMATING THE INCOME AT AROUND 3% TO 4% OF THE TOTAL TURNOVER INCLUDING THE SUPPRESSED TURNOVER, WHICH W AS REJECTED BY THE AO ON THE GROUND THAT NO SUPPORTING EVIDENCE WA S FILED. 3 ITA NO. 1649 & 1650/H/14 NEELIMALA ESTATES (P) LTD. 5.3 THE CIT(A) OBTAINED A COPY OF THE IMPOUNDED MA TERIAL FROM THE ASSESSEE TO EXAMINE THE CLAIM OF THE ASSESSEE REGAR DING THE EXPENDITURE RECORDED IN THE IMPOUNDED MATERIAL. THE ASSESSEE OUGHT TO HAVE PROVED THAT THE EXPENDITURE RECORDED IN THE IMPOUNDED MATERIAL HAS NOT BEEN CLAIMED IN THE PROFIT AND LOS S ACCOUNT IN THE COURSE OF ASSESSMENT PROCEEDING U/S143(3), AS HE HA S CLAIMED THAT THE LEARNED ASSESSING OFFICER WHILE TREATING THE EN TIRE RECEIPTS IN THE ROUGH CASH BOOK AS INCOME HAS IGNORED THE RELEVANT EXPENDITURE AGAINST THE SUPPRESSED RECEIPTS WHICH WERE ALSO PAR T OF THE IMPOUNDED MATERIAL. 5.4 THE AR OF THE ASSESSEE ARGUED BEFORE THE CIT(A ) THAT THE IMPOUNDED MATERIAL ALSO CONTAINED RELEVANT EXPENDIT URE AGAINST THE SUPPRESSED RECEIPTS OF RS.98,04,559/- AND APPRISED CIT(A) THAT THE COMPANY HAS NOT BEEN DOING ANY BUSINESS ACTIVITY SI NCE 2009-10 IN VIEW OF DEMISE OF THE KEY MANAGERIAL PERSONS SRI. A RAMAKRISHNA PRASAD AND SRI KODURI VENKATESWAR RAO, AND THE WHER EABOUTS OF THE OTHER EMPLOYEES OR ACCOUNTANTS WERE NOT TRACEABLE. HENCE, HE WAS UNABLE TO FURNISH THE BOOKS OF ACCOUNTS AND OTHER P ARTICULARS OF EXPENDITURE IN THE FORM OF BILLS OR VOUCHERS IN SUP PORT OF THE EXPENDITURE INCURRED AGAINST THE ADDITIONAL RECEIPT S WHICH WERE NOT RECORDED IN THE BOOKS. THE AR ARGUED BEFORE THE CI T(A) THAT IN VIEW OF THE COMPELLING CIRCUMSTANCES OF THE DEMISE OF TH E KEY MANAGERIAL PERSONNEL AND NON AVAILABILITY OF BOOKS OF ACCOUNTS , AN ESTIMATION BASIS MAY BE ADOPTED TO BE FAIR TO THE ASSESSEE. 5.5 THE CIT(A) OBSERVED THAT IN THIS CASE, THE AO A LSO COULD NOT ESTABLISH THE CLAIM OF THE EXPENDITURE NOR THE CORR ECTNESS OF THE BOOKS OF ACCOUNTS AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE, AS THE SAME COULD NOT BE SUBJECTED TO SCRUTINY BY A O IN SPITE OF HIS SEVERAL NOTICES, AND DUE TO NON AVAILABILITY OF REC ORDS, THE SCRUTINY PROCEEDINGS U/S143(3) ALSO COULD NOT BE COMPLETED I N DETAIL AS PER THE DIRECTIONS OF THE ITAT. 4 ITA NO. 1649 & 1650/H/14 NEELIMALA ESTATES (P) LTD. 5.6 IN VIEW OF THE FOREGOING REASONS AND IN THE AB SENCE OF BOOKS AND RECORDS AND OTHER CIRCUMSTANCES, CIT(A) HAS ACC EPTED THAT TO BE FAIR TO THE ASSESSEE WHOSE PRESENT DIRECTORS ARE AL READY IN DISTRESS, A FAIR ESTIMATION OF THE PROFIT ON THE TOTAL TURNOV ER WOULD BE APPROPRIATE TO CONCLUDE THE ISSUES BEFORE HIM. AS T HE ASSESSEE HAS ALREADY FURNISHED ITS RETURN BY DECLARING ITS PROFI T FOR THE TURNOVER AS PER BOOKS OF ACCOUNTS, THE CONTENTION OF THE ASSESS EE TO ESTIMATE THE INCOME ON THE ENTIRE TURNOVER IS NOT TENABLE. HENCE IN ORDER TO BE FAIR AND EQUITABLE TO THE ASSESSEE AS WELL AS THE D EPARTMENT, CIT(A) DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCO ME AT 8% ON THE ADDITIONAL RECEIPTS OF RS.98,04,559/-. THE SAID PER CENTAGE WOULD BE A FAIR ESTIMATION KEEPING IN VIEW THE CLAIM OF THE AS SESSEE THAT HE HAS UNDERTAKEN SOME CONSTRUCTION WORKS ON BEHALF OF HIS CUSTOMERS ON THE PLOTS PURCHASED BY THEM. 5.7 THE CIT(A), THEREFORE, DIRECTED THE AO TO ADD R S. 7,84,365/- @ 8% TO THE TOTAL INCOME AS INCOME RETURNED, OUT OF T HE TOTAL ADDITION OF RS. 98,04,559/-, AND THE BALANCE AMOUNT OF RS. 90, 20,194 IS TO BE DELETED. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US FOR BOTH THE AYS UNDER CONSIDERATION. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. ON ENQUIRY WITH THE COUNSEL OF THE ASSES SEE ABOUT THE INCOME DECLARED BY THE ASSESSEE ON DECLARED RECEIPT S, HE CONFIRMED THAT THE ASSESSEE HAS DECLARED THE INCOME @ 12%. TH EREFORE, WE FIND IT APPROPRIATE TO DIRECT THE AO TO CALCULATE T HE ADDITIONAL INCOME @ 12% ON THE ADDITIONAL RECEIPTS OF RS. 98,04,559/ - IN STEAD OF 8% AS DIRECTED BY CIT(A). WE ORDER ACCORDINGLY. 8. AS THE FACTS AND GROUNDS ARE MATERIALLY IDENTICA L IN AY 2005-06 TO THAT OF AY 2004-05, FOLLOWING THE CONCLUSIONS DR AWN THEREIN, WE 5 ITA NO. 1649 & 1650/H/14 NEELIMALA ESTATES (P) LTD. DIRECT THE AO TO CALCULATE THE ADDITIONAL INCOME @ 12% ON THE ADDITIONAL RECEIPTS IN STEAD OF 8% AS DIRECTED BY T HE CIT(A). 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 30 TH DECEMBER, 2016 KV COPY TO:- 1) ITO, WARD 16(2), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004 2) M/S NEELIMALA ESTATES (P) LTD., FLAT NO. 203, RA J RESIDENCY, NEAR NANDI NAGAR COLONY, BANJARA HILLS, HYDERABAD . 3) CIT(A) V, HYDERABAD 4 CIT IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE