V, Satyanarayana Reddy, Hyderabad V. The Addl.CIT, Kurnool

ITA 1742/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66581 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: K A SAI PRASAD
• Section: 44AD; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1742/HYD/2011 ASSESSMENT YEAR: 2008-09 V. SATYANARAYANA REDDY, APPELLANT NANDYAL, KURNOOL DT. (PAN ACPPV 1382 F) VS. ADDL. COMMISSIONER OF INCOME-TAX, RESPONDENT KURNOOL RANGE, KURNOOL. APPELLANT BY : SHRI K.A. SAI PRASAD RESPONDENT BY : SMT. AMISHA S. GUPT DATE OF HEARING : 13/12/2012 DATE OF PRONOUNCEMENT : 28/12/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 29/07/2011 FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND CARRYING ON THE BUSINESS OF EXECUTIO N OF CONTRACT WORKS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESS EE FILED HIS RETURN OF INCOME ON 01/11/2008 DECLARING TOTAL INCO ME OF RS. 26,20,680/-. THE CASE WAS CONVERTED INTO SCRUTINY A ND THE AO ISSUED NOTICE U/S 143(2) OF THE ACT, IN RESPONSE TO WHICH THE ITA NO. 1742/HYD/2011 SHRI V. SATYANARAYANA REDDY 2 ASSESSEE PRODUCED ACCOUNT BOOKS AND VOUCHERS. THE A SSESSEE FILED AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET A LONG WITH RETURN OF INCOME AS REQUIRED UNDER THE PROVISIONS OF THE I T ACT. HOWEVER, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSE E BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT AND ESTIMATED THE INCOME AT 8% ON GROSS BILLS CLEAR OF ALL EXPENSES. THE AO WORKED UT THE TOTAL INCOME AT RS. 1,23,35,658/-. 3. ON APPEAL, BEFORE THE CIT(A), IT WAS CONTENDED B Y THE AR OF THE ASSESSEE THAT THE ESTIMATION OF PROFIT AT 8% WA S ON HIGHER SIDE. HE FURTHER CONTENDED THAT THE AO OUGHT TO HAVE ALL OWED INTEREST PAYMENT CLAIMED BY THE ASSESSEE EVEN IF THE PROFIT WAS ESTIMATED REJECTING THE ACCOUNT BOOKS. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) DISCUSSED THE ISSUE AT LENGTH WITH THE CASE OF ARIH ANT BUILDERS, DEVELOPERS AND INVESTORS PVT LTD. VS. ACIT, 106 ITD 10 AND INDWELL CONSTRUCTIONS VS. CIT, 232 ITR 776 AND CONFIRMED TH E ACTION OF THE AO IN I) REJECTING THE BOOKS OF ACCOUNT, II) ADOPTI NG THE RATE OF 8% BY THE AO AND III) REJECTING THE ALTERNATIVE CONTEN TION OF THE ASSESSEE THAT HAVING ESTIMATED THE INCOME, THE AO S HOULD HAVE CONSIDERED THE ALLOWANCE OF INTEREST AND DEPRECIATI ON THEREFROM AS DEDUCTION. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. WE FIND THAT THE SPECIAL BENCH OF THIS TRIBU NAL IN THE CASE OF ITA NO. 1742/HYD/2011 SHRI V. SATYANARAYANA REDDY 3 M/S ARIHANT BUILDERS (P) LIMITED VS. ACIT (291 ITR 49) (AT) (SB) CONSIDERED SIMILAR FACTS AND HELD AS FOLLOWS:- III) THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PAYMENTS MADE ON ACCOUNT OF LABO UR CHARGES AND CARTAGE EXPENSES, BECAUSE THE ASSESSEE CLAIMED DEDUCTION OF THE AMOUNT. HOWEVER, THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF TH E CLAIM. THE ASSESSING OFFICER ALSO HELD THAT THE ASSESSEE H AD NOT MAINTAINED PROPER MUSTER ROLL AS TO WHERE THE LABOU RERS WERE EMPLOYED AND FOR WHICH PARTICULAR WORK THEY WERE EN GAGED. CONSIDERING THE FINDING OF THE AUTHORITIES BELOW TH E REJECTION OF ACCOUNTS U/S 145(2) WAS JUSTIFIED. IV) THAT THE CASE RELATED TO THE ASSESSMENT YEAR 19 92-93. SECTION 44AD INSERTED WITH EFFECT FROM APRIL 1, 199 4, MAKES A SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS O F BUSINESS OF CIVIL CONSTRUCTION. IT PROVIDES THAT NOTWITHSTANDIN G ANYTHING CONTAINED IN SECTIONS 28 TO 43C IN THE CASE OF THE ASSESSEE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION A SUM EQUAL TO 8 PER CENT OF THE GROSS RECEIPTS PAID OR PAYABLE TO T HE ASSESSEE IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR AS THE CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SUM DECLARE D BY THE ASSESSEE IN HIS RETURN OF INCOME, SHALL BE DEEMED T O BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS OR PROFESSI ON BUT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY I N CASE THE AFORESAID GROSS RECEIPTS PAID OR PAYABLE EXCEED AN AMOUNT OF RS. 40 LAKHS. THOUGH STRICTLY THESE PROVISIONS WERE INSERTED IN THE ACT WITH EFFECT FROM APRIL 1, 1994, THESE PROVI SIONS COULD BE A GUIDELINE FOR THE PURPOSE OF APPLYING A PARTIC ULAR NET PROFIT RATE IN THE CASE OF A CIVIL CONTRACTOR EVEN IN EARLIER YEARS. THE ASSESSEE WAS A CIVIL CONTRACTOR ENGAGED IN CONSTRUCTION WORK TAKEN ON CONTRACT AND THE GROSS R ECEIPTS OF THE ASSESSEE WERE BELOW RS. 40 LAKHS. THE NET PROFI T RATE OF 12.5 PER CENT APPLIED BY THE AUTHORITIES BELOW IN T HE CASE OF THE ASSESSEE WAS EXCESSIVE AND EXORBITANT. A NET PR OFIT RATE OF 8 PERCENT ON THE GROSS RECEIPTS WOULD BE REASONABLE . 7. SINCE THE ASSESSEE IS ENGAGED IN THE EXECUTION O F CIVIL CONTRACTS, RESPECTFULLY FOLLOWING THE SPECIAL BENCH DECISION OF THE ITAT IN THE CASE OF ARIHANT BUILDERS (SUPRA), WE C ONFIRM THE ORDER ITA NO. 1742/HYD/2011 SHRI V. SATYANARAYANA REDDY 4 OF THE CIT(A) IN UPHOLDING THE ACTION OF THE AO IN ESTIMATING THE INCOME AT 8% ON GROSS BILLS CLEAR OF ALL EXPENSES. THEREFORE, THE GROUND NOS. 1 TO 9 RAISED BY THE ASSESSEE IN THIS R EGARD ARE DISMISSED. 8. GROUND NO. 10 IS REGARDING INTEREST LEVIED U/S 2 34A AND B OF THE ACT. SINCE CHARGING INTEREST U/S 234A & B IS CO NSEQUENTIAL IN NATURE, WE CONFIRM THE ORDER OF THE CIT(A) AND THIS GROUND OF THE ASSESSEE IS ALSO DISMISSED. 9. GROUND NO. 11 REGARDING INITIATION OF PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE ACT, IS PREMATURE IN NATURE, THERE FORE, NO ADJUDICATION IS REQUIRED TO BE GIVEN BY US. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 28 TH DECEMBER, 2012. KV COPY TO:- 1) SHRI V. SATYANARAYANA REDDY, C/O B. NARSING RAO & C O., CAS, PLOT NO. 554, ROAD NO. 92, JUBILEE HILLS, HYDE RABAD 96 2) ADDL. CIT, KURNOOL RANGE, KURNOOL. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.