C M Ramesh, Hyderabad V. DCIT., Circle-3(1), Hyderabad, Hyderabad

ITA 1780/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0291 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation

Judgement Text

ITA NO.1780 OF 2014 CM RAMESH HYDERABAD PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTAN T MEMBER & SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1780/HYD/2014 (ASSESSMENT YEAR: 2008-09) SHRI C.M. R AMESH HYDERABAD PAN-ACYPC 8722 B VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO FOR REVENUE : SHRI RAJAT MITRA, DR DATE OF HEARING : 27.07.2015 DATE OF P RONOUNCEMENT : 29 .07.2015 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF T HE CIT (A)-IV HYDERABAD, DATED 12.09.2014. THE ONLY ISSUE IN THIS APPEAL IS WITH REFERENCE TO ESTIMATION OF INCOME FR OM CONTRACTS. 2. BRIEFLY STATED, ASSESSEE FILED RETURN OF INCOME ADMITTING A TOTAL INCOME OF RS.1,61,14,052, BESIDES AGRICULTURA L INCOME. ASSESSEE HAD A SMALL CONTRACT BUSINESS WITH A TURNO VER OF RS.45,23,020 AND ADMITTED PROFIT OF RS.3,61,842. SI NCE ASSESSEE FAILED TO FURNISH THE DETAILS IN SUPPORT OF CLAIM O F EXPENSES, AO ESTIMATED THE PROFIT AT 12% AND DETERMINED THE BUSI NESS INCOME AT RS.5,42,762. 3. BEFORE THE LD CIT (A) ASSESSEE CONTENDED THAT TH E TURNOVER IS VERY SMALL AND BEING IN CIVIL CONTRACT, THE PROF IT MARGIN VARIES ITA NO.1780 OF 2014 CM RAMESH HYDERABAD PAGE 2 OF 3 FROM 5% TO 12% AND ASSESSEE ALMOST ADMITTED 8%. THE REFORE, THERE IS NO NEED TO DISTURB THE ASSESSEES BOOK RES ULTS AS ASSESSEES BOOKS WERE ALSO AUDITED U/S 44AB. LD CIT (A) HOWEVER, DID NOT AGREE AND CONFIRMED THE ESTIMATION AT 12%. ASSESSEE IS AGGRIEVED. 4. LD COUNSEL SUBMITTED THAT ASSESSEE HAD VERY SMAL L TURNOVER AND MAINTAINED BOOKS OF ACCOUNTS AND EVEN FILED AN AUDIT REPORT. ASSESSEE AT THE RELEVANT POINT OF TIM E, BEING BUSY IN HIS POLITICAL WORK, COULD NOT SUBMIT THE DETAILS AS SOUGHT BY THE AO. IT WAS SUBMITTED THAT ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNTS AND OFFERED INCOME WAS ALMOST 8% OF SMALL TURNOVER. EVEN U/S 44AD, ESTIMATION OF INCOME CAN BE MADE ONL Y AT 8% AND THEREFORE, THE ESTIMATION MAY BE REDUCED TO 8%. IN SUPPORT HE FILED A COORDINATE BENCH DECISION IN THE CASE OF ACIT VS. MAA HIGH WAYS IN ITA NO.747/HYD/2009 & OTHERS, DATED 30.07.2013. LD DR HOWEVER, SUPPORTED THE ORDERS OF THE AO. 5. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RE CORD. WE ARE UNABLE TO UNDERSTAND ON WHAT BASIS THE AO RESOR TED TO ESTIMATION OF INCOME AT 12% WITHOUT MENTIONING THE NATURE OF THE CONTRACT WORK, OR THE REASON WHY THE BOOKS OF A CCOUNTS ARE REJECTED. IF ASSESSEE COULD NOT FURNISH DETAILS OF CONTRACT EXPENSES, THE BEST WAY IS TO DISALLOW THE EXPENDITU RE WHICH WAS NOT SUPPORTED BY BILLS/VOUCHERS. JUST BECAUSE BILLS AND VOUCHERS ARE NOT FURNISHED, AO, IN OUR VIEW, CANNOT RESORT TO ESTIMATION OF INCOME. EVEN WHILE ARRIVING AT THE RA TE OF INCOME ON THE TURNOVER, AO NEITHER EXAMINED THE PAST RECOR DS, NOR STATED WHY HE IS ESTIMATING INCOME AT 12%, THUS, IT IS ARBITRARY. THERE ARE VARIOUS COORDINATE BENCH DECISIONS WHICH ARE LISTED BY ITA NO.1780 OF 2014 CM RAMESH HYDERABAD PAGE 3 OF 3 THE CIT (A) IN PARA 6 OF THE ORDER, ESTIMATING INCO ME FROM 5% TO 12.5%. AO DID NOT EVEN MENTION WHETHER ASSESSEE HAS CLAIMED ANY DEPRECIATION OR INTEREST ON BORROWED FUNDS, OR EXAMINED WHETHER THE INCOME OFFERED AT AROUND 8% IS REASONAB LE OR NOT. WITHOUT EXAMINING THE NATURE OF THE BUSINESS OR REA SONS FOR OFFERING INCOME AT A PARTICULAR RATE, IN OUR VIEW, AO CANNOT REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE ARBITRARILY THE INCOME. SINCE ASSESSEE HAS OFFERED INCOME WHICH IS ON PAR WITH SI MILARLY PLACED CONTRACTORS, WE DIRECT THE AO TO ACCEPT THE INCOME RETURNED. 6. IN THE RESULTS, ASSESSEES GROUNDS ARE ALLOWED. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. S D/ - S D/ - (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH JULY, 2015. VNODAN/SPS COPY TO: 1. SHRI C.M. RAMESH, C/O P. MURALI & CO. CAS, 6-3-655/ 2/3 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1) HYDERAB AD 3. CIT(A) - IV HYDERABAD 4. CIT III HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER