M/s Eswar Constructions, Vijayawada, Hyderabad V. The DCIT, Circle-2(1), Vijayawada

ITA 169/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56795 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income
• Section: 143(3); 263

Judgement Text

ITA NOS.168/VIZ/2011 MARUTHI CONSTRUCTIONS, 169/V/201 1 ESWAR CONSTNS., VJA 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO .168 /VIZAG/ 20 11 ASSESSMENT YEAR : 2006 - 07 M/S. MARUTHI CONST RUCTIONS VIJAYAWADA VS. DCIT, CIRCLE - 2(1) VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AAFFM 0355D ITA NO.169/VIZAG/2011 ASSESSMENT YEAR : 2006 - 07 M/S. ESWAR CONSTRUCTIONS VIJAYAWADA VS. DCIT, CIRCLE - 2(1) VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AAAFE8119J A PPELLANT BY: SHRI S. RAMA RAO, ADVOCATE RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) DATE OF HEARING : 2 5. 0 7.2011 D ATE OF PRONOUNCEMENT: 0 9 . 0 8.2011 ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEES AGAI NST THE RESPECTIVE ORDER OF THE CIT PASSED U/S 263 OF THE INCOME-TAX A CT (HEREINAFTER CALLED AS AN `ACT) DIRECTING THE A.O. TO MAKE A FRESH ASSESS MENT IN THE LIGHT OF THE OBSERVATIONS MADE IN THE ORDER. THE ORDER OF THE C IT IS ASSAILED ON COMMON GROUNDS IN BOTH THE APPEALS WHICH ARE AS UNDER: 1. THE ORDER OF THE LD. CIT IS ERRONEOUS BOTH ON FACTS AND IN LAW 2. THE LD. CIT ERRED IN HOLDING THAT THERE IS AN ERROR IN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/ S 143(3) OF THE I.T. ACT ON 23.5.2008 WITHOUT POINTING OUT ANY SPEC IFIC ERROR IN THE ASSESSMENT; 3. THE LD. CIT ERRED IN HOLDING THAT THE ORDER OF THE ASSESSING OFFICER PASSED U/S 143(3) IS IN ANY WAY PREJUDICIAL TO THE INTEREST OF THE REVENUE; 4. THE LD. CIT OUGHT TO HAVE SEEN THAT THE ENTIRE INTE REST ON THE FDRS MADE BY THE APPELLANT WAS ALREADY ADMITTED IN THE RETURN OF ITA NOS.168/VIZ/2011 MARUTHI CONSTRUCTIONS, 169/V/201 1 ESWAR CONSTNS., VJA 2 INCOME FILED AND THERE IS NO ERROR IN THE ASSESSMEN T ORDER. THE LD. CIT OUGHT TO HAVE SEEN THAT THE ASSESSING OFFICER W HILE COMPLETING THE REGULAR ASSESSMENT EXAMINED THE ISSUE AND CONCL UDED THAT THE ENTIRE INTEREST IS ADMITTED AND NO FURTHER ADDITION NEED BE MADE; 5. THE LD. CIT OUGHT TO HAVE APPRECIATED THE EVIDENCE PRODUCED BY THE APPELLANT AND ACCEPTED THAT THE APPELLANT OFFER ED THE ENTIRE INTEREST INCOME IN THE RETURN OF INCOME FILED BY IT . 6. THE LD. CIT ERRED IN DIRECTING THE ASSESSING OFFICE R TO EXAMINE THE PERCENTAGE OF PROFIT ASSESSED IN THE REGULAR ASSESS MENT WITHOUT POINTING OUT ANY ERROR IN THE INCOME DETERMINED THE ASSESSING OFFICER; 7. THE LD. CIT ERRED IN COMPARING THE CASE OF THE APPE LLANT HEREIN WITH OTHERS AND IN COMING TO THE CONCLUSION THAT TH E RATE OF PROFIT ASSESSED IS LESSER; 8. THE LD. CIT ERRED IN HOLDING THAT FOR ADOPTING A HI GHER RATE OF PROFIT THE PROVISIONS OF SEC. 263 CAN BE APPLIED; 9. THE LD. CIT ERRED IN SETTING ASIDE THE ORDER OF THE ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER FOR MAKING REASSE SSMENT WITHOUT FINDING ANY ERROR IN THE ASSESSMENT MADE AND WITHOU T MAKING ANY OBSERVATION THAT THE ORDER OF THE ASSESSMENT IS IN ANY WAY PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 2. SINCE THE FACTS AND THE GROUNDS IN THESE APPEALS ARE COMMON, WE PREFER TO DISPOSE OF THESE APPEALS THROUGH THIS CON SOLIDATED ORDER. 3. THE GROUND NOS.1, 2, 3, 9 & 10 ARE GENERAL OF NA TURE AND DOES NOT REQUIRE ANY INDEPENDENT ADJUDICATIONS. 4. WITH REGARD TO THE GROUND NOS.4&5, RELATING TO I NTEREST ON FDRS, THE CIT HAS NOTICED THAT THE ASSESSING OFFICER AFTER RE JECTING THE BOOKS OF ACCOUNTS HAS ESTIMATED THE INCOME AT 9% ON THE GROS S CONTRACTUAL RECEIPTS SUBJECT TO DEDUCTION OF INTEREST AND REMUNERATION U /S 40(B) WITHOUT APPLYING HIS MIND TO THE NATURE OF INTEREST RECEIVED ON FDRS WITH THE BANKS. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT THESE FDRS WERE PURCHASED ON ACCOUNT OF BUSINESS EXIGENCIES. THERE FORE, THE INTEREST RECEIVED THERE ON IS A BUSINESS INCOME WHICH WAS TA KEN INTO ACCOUNT BY THE ASSESSING OFFICER WHILE ESTIMATING THE BUSINESS INC OME OF THE ASSESSEES. BEING NOT CONVINCED WITH THE EXPLANATION OF THE ASS ESSEE, THE CIT DIRECTED ITA NOS.168/VIZ/2011 MARUTHI CONSTRUCTIONS, 169/V/201 1 ESWAR CONSTNS., VJA 3 THE A.O. TO EXAMINE THE ISSUE AFRESH AND TREAT IT A S INCOME FROM OTHER SOURCES. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE TRIBUNAL WITH THE SUBMISSION THAT IT WAS A BUSINESS INCOME AND WA S TAKEN INTO ACCOUNT BY THE A.O. WHILE ESTIMATING THE INCOME. 6. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED THA T BUSINESS INCOME WAS ESTIMATED BY THE ASSESSING OFFICER AFTER REJECT ING THE BOOKS OF ACCOUNTS OF THE ASSESSEES. WHILE REJECTING THE BOOKS OF ACC OUNTS, THE A.O. HAS NOT EXAMINED THE ISSUE OF RECEIPT OF INTEREST ON FDRS. WHILE ESTIMATING THE INCOME OF THE ASSESSEES, THE ASSESSING OFFICER HAS ONLY APPLIED HIS MIND TO THE CONTRACTUAL RECEIPTS OF THE ASSESSEES. THEREFO RE, THE INTEREST ON FDRS RECEIVED BY THE ASSESSEE WAS NOT TAKEN INTO ACCOUNT BY THE A.O. WHILE ESTIMATING THE BUSINESS INCOME OF THE ASSESSEES ON CONTRACTUAL RECEIPTS. THEREFORE, THE CIT HAS RIGHTLY HELD THAT NON-CONSID ERATION OF INTEREST RECEIVED ON FDRS MAKES THE ASSESSMENT ORDER ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT WHILE ESTIMATING THE INCOME OF THE ASSESSEES, THE ASSESSING OFFICER HAS SIMPLY EXAMINED THE NATURE OF CONTRACTUAL RECEIPTS, BILLS AND VOUCHERS THEREOF. HAVING NOTED VARIOUS DEFECTS THEREIN, THE BOOKS OF ACCOUNTS WERE REJECTED AND ESTIMATED THE INCOME AT 9% ON THE GROSS CONTRACTUAL RECEIPT S UBJECT TO DEDUCTION OF INTEREST AND REMUNERATION U/S 40(B) OF THE ACT. NO WHERE HE HAS EXAMINED THE ISSUE OF RECEIPT OF INTEREST ON FDRS IN THE ASS ESSMENT ORDER. THEREFORE, THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO T HE NATURE OF RECEIPTS OF THE INTEREST ON FDRS WHILE FRAMING AN ASSESSMENT. THUS , NON-CONSIDERATION OF THE INTEREST EARNED ON FDRS MAKES THE ASSESSMENT OR DER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORD INGLY, WE ARE OF THE VIEW THAT THIS NATURE OF RECEIPT OF INTEREST ON FDRS SHO ULD BE EXAMINED BY THE ITA NOS.168/VIZ/2011 MARUTHI CONSTRUCTIONS, 169/V/201 1 ESWAR CONSTNS., VJA 4 ASSESSING OFFICER INDEPENDENTLY WITHOUT BEING INFLU ENCED WITH THE DIRECTIONS OF THE CIT TO TREAT THIS INCOME AS INCOME FROM OTHE R SOURCES. 8. WITH REGARD TO GROUND NOS.6 TO 8, WHICH RELATE T O AN ESTIMATION OF INCOME, WE FIND THAT CIT HAS SET ASIDE THE ASSESSME NT ORDER ON THE GROUND THAT IN SIMILAR LINE OF BUSINESS TRIBUNAL HAS ESTIM ATED THE NET PROFIT AT 12.5% AND THE A.O. HAS ESTIMATED IT TO BE AT 9% AND DIREC TED THE A.O. TO RE- ESTIMATE THE NET INCOME OF THE ASSESSEES, KEEPING I N VIEW THE NET INCOME ASSESSED IN THE CASE OF SHRI TUMMALA VENKATESWARA R AO, SHRI TUMMALA MURALI KRISHNA AND M/S. TUMMALA INFRASTRUCTURE LTD. IN WHICH NET INCOME WAS ESTIMATED AT 12.5%. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT BEFORE ESTIMATING THE INCOME OF THE ASSESSEES, THE ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND AFTER REJECTING THE SA ME, HE ESTIMATED THE INCOME. ONCE THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE BOOKS OF ACCOUNTS AND THE INCOME DECLARED BY THE ASSESSEE BE FORE ESTIMATING THE INCOME FROM THE BUSINESS OF THE ASSESSEE, IT IS NOT PROPER TO SAY THAT HE HAS NOT APPLIED HIS MIND AND HIS ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. COUNSEL FOR THE ASSESSEE F URTHER CONTENDED THAT IT IS A SETTLED POSITION OF LAW THAT WHERE THE ASSESSING OFFICER HAS APPLIED HIS MIND TO MAKE CERTAIN ESTIMATIONS, HIS ORDER CANNOT BE RE VISED BY THE CIT ONLY FOR THE SIMPLE REASON THAT ESTIMATION MADE BY THE A.O. IS ON LOWER SIDE. 10. THE LD. D.R. ON THE OTHER HAND HAS PLACED A HEA VY RELIANCE UPON THE ORDER OF THE CIT. 11. HAVING CAREFULLY EXAMINED THE ORDER OF THE CIT AS WELL AS THE A.O. IN THE LIGHT OF RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNTS AS WELL AS BILLS AND VOUCHERS AND AFTER NOTICING CERTAIN DEFECTS THEREIN, HE REJECTED THE B OOKS OF ACCOUNTS AND ESTIMATED THE INCOME AT 9% ON THE GROSS CONTRACTUAL RECEIPTS SUBJECT TO DEDUCTION OF INTEREST AND REMUNERATION U/S 40(B) OF THE ACT. ONCE THE ITA NOS.168/VIZ/2011 MARUTHI CONSTRUCTIONS, 169/V/201 1 ESWAR CONSTNS., VJA 5 ASSESSING OFFICER HAS EXAMINED THE ISSUE AND MADE E STIMATION OF AN INCOME, HIS ESTIMATION CANNOT BE REVISED BY THE CIT ONLY FO R THE REASON THAT HE DOES NOT AGREE WITH THE ESTIMATION MADE BY THE A.O. IT IS A SETTLED POSITION OF LAW THAT CIT CANNOT THRUST HIS OPINION/VIEW UPON THE AS SESSING OFFICER. WE, THEREFORE, OF THE CONSIDERED OPINION UNDER THE GIVE N FACTS AND CIRCUMSTANCES OF THE CASE THAT REVISION MADE BY THE CIT ON THIS I SSUE IS NOT PROPER. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT IN THIS REGARD. 12. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED. PRONOUNCE D IN THE OPEN COURT ON 9.8.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 9 TH AUGUST, 2011 COPY TO 1 S. RAMA RA O, ADVOCATE, FLAT NO.102, SHRIYAS RESIDENCY, ROAD NO.9, HIMAYATHNAGAR, HYDERABAD 2 DCIT, CIRCLE - 2(1), VIJAYAWADA 3 THE CI T, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM