Income Tax Officer, Ward-1, Hyderabad, Mahabubnagar V. V Bala Swamy, Mahabubnagar Dist

ITA 1734/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0404 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Section: 143(3); 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1734/HYD/2014 ASSESSMENT YEAR 2010-2011 INCOME TAX OFFICER, WARD-1 MAHABUBNAGAR. VS. MR. V. BALA SWAMY KOTHAKOTA, MAHABUBNAGAR DIST. PAN AECPV9718C (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAMAKRISHNA BANDI FOR ASSESSEE : - NONE - DATE OF HEARING : 09.07.2015 DATE OF PRONOUNCEMENT : 10 .07.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-V, HYDERABAD DA TED 07.08.2014 WHEREBY HE RESTRICTED THE TRADING ADDITI ON MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSE E BY ESTIMATING THE INCOME OF THE ASSESSEE AT 6% OF GROS S RECEIPTS IN PLACE OF THE NET PROFIT RATE OF 12.5% A PPLIED BY THE A.O. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO IS CARRYING ON THE BUSINESS OF PROVI DING MAN POWER TO VARIOUS COMPANIES AS A LABOUR CONTRACT OR. DURING THE YEAR UNDER CONSIDERATION, HE HAD CONSTRU CTED 2 ITA.NO.1734/HYD/2014 MR. V. BALASWAMY, KOTHAKOTA, MAHABUBNAGAR DIST., GROUND PLUS TWO FLOORS BUILDING AT KOTHAKOTA, MAHABUBNAGAR DISTRICT. THE RETURN OF INCOME FOR THE SAID YEAR HOWEVER WAS NOT FILED BY THE ASSESSEE. THE A.O . THEREFORE, ISSUED A NOTICE UNDER SECTION 148 ON 27.03.2012, IN RESPONSE TO WHICH, THE RETURN OF INC OME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE A SSESSEE ON 22.02.2013 DECLARING TOTAL INCOME OF RS.10,40,47 0. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SA ID RETURN, GROSS RECEIPTS FROM THE BUSINESS OF PROVIDI NG MAN POWER TO VARIOUS COMPANIES WERE SHOWN BY THE ASSESS EE AT RS.3,38,43,095 AND EXPENSES WERE CLAIMED ON ACCO UNT OF WAGES TO SKILLED LABOUR AMOUNTING TO RS.1,82,35, 200 AND WAGES TO UNSKILLED LABOUR AMOUNTING TO RS.1,15,63,602 BESIDES OTHER EXPENSES. ALTHOUGH THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT FOR VERIFICA TION BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SUPPORTING BILLS AND VOUCHERS TO SUBSTANTIATE HIS CLAIM OF VARIOUS EXPENSES COULD NO T BE PRODUCED BY THE ASSESSEE INSPITE OF SUFFICIENT OPPO RTUNITY PROVIDED IN THIS REGARD. THE A.O. THEREFORE, REJECT ED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED HIS INCOME FROM THE BUSINESS OF PROVIDING MAN POWER AT RS.42,42,887 BY APPLYING THE NET PROFIT RATE OF 12. 5% TO THE GROSS RECEIPTS OF RS.3,39,43,095 AS REFLECTED I N FORM NO.26AS. THIS ESTIMATION OF INCOME MADE BY THE A.O. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 VIDE ORDER DATED 31.03.2013 RESULTED IN SUBSTANTIAL TRADING ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA.NO.1734/HYD/2014 MR. V. BALASWAMY, KOTHAKOTA, MAHABUBNAGAR DIST., 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3) READ WITH SECTION 147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHA LLENGING INTER ALIA, THE TRADING ADDITION MADE BY THE A.O. I T WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT HE WAS A SUB-CONTRACTOR AND THIS POSITION WAS CLEARLY EVIDENT FROM THE FACT THAT TAX @ 1% ONLY WAS DEDUCT ED FROM HIS GROSS RECEIPTS. RELYING ON THE VARIOUS DEC ISIONS OF THE TRIBUNAL, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE NET PROFIT RATE OF 12.5% APPLIED BY THE A.O. WAS ON THE HIGHER SIDE AND THE SAME BE RESTRIC TED TO 6% AS APPLIED BY THE TRIBUNAL IN THE CASE OF SUB- CONTRACTORS. 4. LD. CIT(A) FOUND MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE AND RESTRICTED THE TRADING ADD ITION MADE BY THE A.O. BY ESTIMATING THE INCOME OF THE ASSESSEE BY APPLYING THE NET PROFIT RATE OF 6% ON G ROSS RECEIPTS IN PLACE OF 12.5% APPLIED BY THE A.O. THE REASONING GIVEN BY THE LD. CIT(A) FOR ARRIVING AT T HIS CONCLUSION AS CONTAINED IN PARAGRAPHS 4.3 TO 4.5 OF HIS IMPUGNED ORDER ARE REPRODUCED BELOW : 4.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT FOR FAILURE O N THE PART OF THE ASSESSEE TO PRODUCE VOUCHERS I BILLS IN SUPPORT OF EXPENDITURE U/S 145 OF THE ACT. REGARDIN G THE ADOPTION OF PERCENTAGE OF 12.5% ON THE GROSS RECEIPTS, THE ASSESSEE RELIED ON THE DECISIONS OF I TAT, HYDERABAD, A BENCH IN THE CASE OF TEJA CONSTRUCTIONS VS. ACIT, ITA NO.308/HYD/2009 DATED 4 ITA.NO.1734/HYD/2014 MR. V. BALASWAMY, KOTHAKOTA, MAHABUBNAGAR DIST., 23.10.2009 (2010) 5 TAXMANN.COM 61 (HYD - ITAT) AND THE CASE OF M/S. C. GOPAL REDDY AND COMPANY, ITAT A BENCH, ITA.NO.500/HYD/2012 FOR A.Y. 2009- 10. 4.4. AS OBSERVED IN THE CASE OF M/S C. GOPAL REDDY & COMPANY, IN THE CASE OF CIVIL CONTRACTS, TH E A.O. HAD ESTIMATED INCOME ON THE GROSS RECEIPTS @ 12.5% ON OWN CONTRACTS, AFTER REJECTING BOOKS OF ACCOUNT, THE HONBLE ITAT HELD THAT ESTIMATION OF INCOME ON GROSS RECEIPTS @ 8% IS JUSTIFIED ON OWN CONTRACT WORKS AND 6% ON SUB-CONTRACT WORKS, RELYIN G ON THE DECISION OF M/S. C.EASWAR REDDY, ITA.NO.668/HYD/2012 AND ITA.NO.670/HYD/09, WHICH HELD AS UNDER : 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE C1T(A) AFTER REFERRING THE DECISION OF THIS TRIBUNAL IN THE CASE OF KRISHNAMOHAN CONSTRUCTIONS (SUPRA) AND THE SPECIAL BENCH DECISION IN ARIHANT BUILDERS (SUPRA) ESTIMATED THE PROFIT AT 8% FOR MAIN CONTRACT AND FOR SUB-CONTRACT AT 5%. IT MAY NOT BE OUT OF PLACE TO MENTION THAT THIS TRIBUNAL UNIFORMLY ESTIMATING THE PROFIT FROM MAIN CONTRACT AT 8% TO 12.5% DEPENDING UPON THE FACTUAL SITUATION AND 5% TO 7% ON THE SUBCONTRACT DEPENDING UPON THE FACTUAL SITUATION. THEREFORE, IN OUR OPINION, ESTIMATION OF PROFIT AT 8% BY THE CIT(A) ON MAIN CONTRACT AND 5% ON SUB CONTRACT IS JUSTIFIED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED' 8. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE UPHOLD THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO ESTIMATE THE PROFIT FROM MAIN CONTRACT AT 8% AND 6% ON SUB- CONTRACTS. 4.5 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE ITAT AND SINCE THE APPELLANT WAS CARRYING THE BUSINESS AS A LABOUR CONTRACTOR PROVIDING MAN-POWER 5 ITA.NO.1734/HYD/2014 MR. V. BALASWAMY, KOTHAKOTA, MAHABUBNAGAR DIST., ON SUB-CONTRACT BASIS TO VARIOUS COMPANIES FOR LAST SEVERAL YEARS, I ALSO ADOPT THE INCOME @ 6% ON GROS S RECEIPTS OF RS.3,39,43,095 AT RS.20,36,586 IN PLACE OF RS.42,42,887 ADOPTED BY THE AO AT 12.5% OF GROSS PROFITS. HENCE. THE APPELLANT GETS A RELIEF OF RS.22,06,301. THE A.O. IS DIRECTED ACCORDINGLY. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. IN THIS CASE, THE HEARING WAS INITIALLY FIXED BEFORE THE TRIBUNAL ON 23.03.2015. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE SAID DATE OF HEARING. THE HEARING, THEREFORE, WAS ADJOURNED TO 09.07.2015 AND A NOTICE OF THE SAME WAS SENT TO THE ASSESSEE THROUGH THE O/O.LD. D.R. ON 09.07.2015, NOBODY HOWEVER APPEARED ON BEHALF OF THE ASSESSEE A T THE TIME OF HEARING DESPITE THE FACT THAT THE NOTICE OF THE SAID HEARING SENT THROUGH THE DEPARTMENT HAS BEEN DULY SERVED ON THE ASSESSEE ON 25.05.2015, A PROOF OF WH ICH IS PLACED ON RECORD BEFORE US. THIS APPEAL OF THE REVE NUE IS THEREFORE BEING DISPOSED OF EXPARTE QUA THE RESPOND ENT- ASSESSEE, AFTER HEARING THE ARGUMENT OF THE LEARNED D.R. AND PERUSING THE RELEVANT MATERIAL ON RECORD. 6. IT IS OBSERVED THAT THE BUSINESS OF PROVIDING MAN-POWER SERVICES TO VARIOUS COMPANIES IS CARRIED BY THE ASSESSEE IN THE CAPACITY OF A SUB-CONTRACTOR AN D THERE IS NOTHING BROUGHT ON RECORD BY THE DEPARTMENT TO D ISPUTE THIS POSITION, WHICH IS CLEARLY EVIDENT FROM THE FA CT THAT TAX @ 1% ONLY WAS DEDUCTED FROM THE GROSS RECEIPTS OF THE 6 ITA.NO.1734/HYD/2014 MR. V. BALASWAMY, KOTHAKOTA, MAHABUBNAGAR DIST., ASSESSEE. IN THE VARIOUS CASES INVOLVING THE ISSUE OF ESTIMATION OF INCOME OF SUB-CONTRACTORS, THIS TRIBU NAL HAS TAKEN A CONSISTENT VIEW THAT A NET PROFIT RATE OF 6 % CAN FAIRLY AND REASONABLY BE APPLIED AND THE LD. CIT(A) HAS FOLLOWED THIS CONSISTENT VIEW TAKEN BY THE TRIBUNAL WHILE APPLYING THE NET PROFIT RATE OF 6% IN THE CASE OF T HE ASSESSEE FOR ESTIMATING HIS INCOME FROM THE BUSINES S OF PROVIDING MAN-POWER SERVICES IN PLACE OF 12.5% APPL IED BY THE A.O. WE, THEREFORE, FIND NO JUSTIFIABLE REAS ON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS THIS APPEA L OF THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.07.2015. SD/- SD/- (SAKTIJIT DEY) (P.M. JAGTAP) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 10 TH JULY, 2015 VBP/- COPY TO : 1. THE I NCOME TAX OFFICER, WARD - 1, MAHABUBNAGAR. 2. MR. V. BALA SWAMY, 19 - 16/1, MAIN ROAD, KOTHAKOTA, MAHABUBNAGAR DISTRICT. 3. CIT(A) - V, HYDERABAD. 7. CIT - IV, HYDERABAD 8. D.R. ITAT A BENCH, HYDERABAD. 9. GUARD FILE