The ITO, Ward-1., Rajahmundry V. Sri M Srinivasa Rao., Rajahmundry

ITA 183/VIZ/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0759 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 21-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Deemed to accrue or arise in india
• Section: 44AD; 133A

Judgement Text

ITA NO.183/VIZAG/2006 M SRINIVASA RAO, RJY. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.183/VIZAG/2006 ASSESSMENT YEAR: 2001-02 ITO WARD-1, RAJAHMUNDRY M SRINIVASA RAO, RAJAHMUNDRY (APPELLANT) VS. (RESPONDENT) PAN NO: AGQPM 1902 M APPELLANT BY: SHRI G.S.S. GOPINATH DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT (A) ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND ON THE FACTS OF THE CASE 2. THE CIT (A) ERRED IN GIVING RELIEF BY ESTIMATING IN COME @ 8% OF THE TURNOVER U/S 44AD 3. THE CIT (A) IS ERRED IN ESTIMATING THE INCOME @ 8% ON ADDITIONAL TURNOVER AS THE ASSESSEE HAS NOT MET ANY ADDITIONAL EXPENDITURE ON SALE OF THREE FLATS. 4. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THE F ACT THAT THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION OF RS.11,40,400/- BEING THE DIFFERENCE IN SALE OF FLATS AS UNDISCLOSE D INCOME. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF A PPEAL HEARING. ITA NO.183/VIZAG/2006 M SRINIVASA RAO, RJY. PAGE 2 OF 5 2. THE FACTS BORN OUT FROM THE RECORD ON IMPUGNED I SSUES ARE THAT THE ASSESSEE HAS RETURNED ITS INCOME AT RS.35,000/- FRO M THE SALE OF THREE FLATS DURING THE RELEVANT PREVIOUS YEAR IN RESPECT OF ITS PROJECT ISWARYA RESIDENCY. ON DETAILED ENQUIRY CONDUCTED BY SUMMONING THE SAID PURCHASERS THE AO NOTICED THAT THEY HAVE PAID THE COST OF FLAT MORE T HAN WHAT IS DECLARED BY THE ASSESSEE. THERE UPON THE AO ADOPTED DIFFERENTIA L AMOUNT IN THE SALE VALUE IN RESPECT OF THESE THREE FLATS AT RS,11,40,4 00/- AND MADE THE ADDITION OF THE SAME. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WITH THE SUBMISSION THAT SINCE THE ASSESSEES TOTAL TURNOVER/ RECEIPTS ARE LESS THAN RS.40.00 LAKHS THE PROFIT ON THE CONSTRUCTION ACTIV ITIES ARE TO BE COMPUTED AS PER THE PROVISIONS OF SEC.44AD OF THE ACT. IF AT ALL ANY ADDITION IS REQUIRED TO BE MADE ON THIS ACCOUNT, THE ADDITIONAL SALE CONSIDERATION IS REQUIRED TO BE TREATED AS ADDITIONAL TURNOVER OF TH E ASSESSEE AND THE PROFIT THEREON WAS REQUIRED TO BE ESTIMATED AT 8%. 4. CIT (A) REEXAMINED THE ISSUE IN THE LIGHT OF THE SE PROPOSITION AND BEING CONVINCED WITH IT CIT (A) WORKED OUT THE PROF IT AT RS.1,45,232/- AND GRANTED A RELIEF OF RS.10,30,168/-. 5. NOW THE REVENUE IS BEFORE US WITH THE SUBMISSION THAT THE UN DISCLOSED RECEIPTS WERE DETECTED BY THE AO DURING T HE COURSE OF THE ASSESSMENT PROCEEDING AS SUCH THE UNDISCLOSED RECEI PTS SHALL BE TREATED AS INCOME OF THE ASSESSEE. 6. THE LD COUNSEL FOR THE ASSESSEE BESIDES PLACING HIS RELIANCE UPON THE ORDER OF THE CIT (A), HAS CONTENDED THAT THE IMPUGN ED ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ABHI DEVELOPERS VS. ITO ITA NO.183/VIZAG/2006 M SRINIVASA RAO, RJY. PAGE 3 OF 5 REPORTED AT 12 SOT 444 (AHD) AND THE OTHER ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. SAI KRUPA CONSTRUCTION CO. 13 SOT 4 59. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND WE FIND THAT EVEN IF T HE UNDISCLOSED RECEIPTS ARE TO BE TAKEN INTO ACCOUNT, THE TOTAL TURNOVER/RE CEIPTS DID NOT EXCEED A SUM OF RS.40,00,000/- DURING THE YEAR. THEREFORE, S EC. 44AD CAN BE APPLIED TO THE ASSESSEES CASE. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS. THEREFORE, THE IN COME OF THE ASSESSEE HAS TO BE ESTIMATED BY THE AO. SINCE THE TOTAL TURN OVER OF THE ASSESSEE IS LESS THAN RS.40 LAKHS THE PROFIT IS TO BE ESTIMATED AT 8% OF THE GROSS RECEIPTS IN ACCORDANCE WITH THE PROVISIONS OF SEC.4 4AD OF THE ACT. IN THE CASE OF ABHI DEVELOPERS VS. ITO, THE TRIBUNAL HAS A DJUDICATED THE IDENTICAL ISSUE AND HAS HELD THAT WHERE THE GROSS RECEIPTS OF THE ASSESSEE, CIVIL CONTRACTOR NOT EXCEEDING RS.40 LAKHS AND IT HAVING RETURNED INCOME AT 9.5% OF THE GROSS RECEIPTS, NO FURTHER ADDITION COULD BE MADE WHILE WORKING U/S 44AD ON ACCOUNT OF `ON MONEY PROMISED TO BE RETURN ED BY ONE OF THE PARTNERS IN A STATEMENT RECORDED DURING SURVEY U/S 133A OF THE ACT. RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: THE RECEIPT OF THE ASSESSEE INCLUDING THAT OF ON MONEY DOES NOT EXCEED RS.40 LAKHS. THUS THE ASSESSEE IS NOT UN DER A LEGAL OBLIGATION TO MAINTAIN BOOKS OF ACCOUNT. THE BOOKS OF ACCOUNT, IF ANY MAINTAINED, WERE NOT PRODUCED RELYI NG ON THE PROVISIONS OF SEC.44AD AND THE NET INCOME SHOWN IS MORE THAN 8 PER CENT THE MINIMUM WHICH CAN BE ASSESSED A S DEEMED INCOME OF ASSESSEE UNDER S.44AD. UNDER S.44A D THE AO CANNOT ASSESS INCOME OF AN ASSESSEE MORE THAN 8 PER CENT UNLESS ASSESSEE HIMSELF SHOW MORE THAN 8 PER CENT. THE AO DOES NOT HAVE POWER TO ASSESS ANYTHING IN EXCESS OF RETURNED INCOME IF THE RETURNED INCOME IS MORE THAN 8 PER CE NT WHILE COMPUTING THE INCOME OF ASSESSEE UNDER S.44AD OF TH E ACT. A PERUSAL OF ASSESSMENT ORDER WILL REVEAL THAT ADDITI ON OF RS.6,07,830/- HAS BEEN MADE ONLY ON THE BASIS OF TH E FACT ITA NO.183/VIZAG/2006 M SRINIVASA RAO, RJY. PAGE 4 OF 5 THAT PARTNER OF ASSESSEE FIRM IN THE STATEMENT RECO RDED AT THE TIME OF SURVEY HAD ADMITTED TO SHOW THE SAID ON MO NEY AS INCOME. CIT (A) HAS ALSO UPHELD THE ADDITION ON THI S SCORE ONLY. OTHERWISE THERE IS NO DISPUTE REGARDING THE A PPLICABILITY OF S.44AD OF THE ACT ON THE FACTS OF THE CASE OF AS SESSEE. NOW THE ONLY QUESTION WHICH SURVIVES FOR CONSIDERATION IS THAT WHETHER ONLY ON THE BASIS OF STATEMENT MADE BY THE PARTNER DURING THE COURSE OF SURVEY SUCH ADDITION COULD BE SUSTAINED?. AS PER WELL-SETTLED LAW THERE IS A BASIC DIFFERENCE BETWEEN THE STATEMENT RECORDED UNDER S.133A OF THE ACT AS COMPA RED TO STATEMENT RECORDED UNDER S.132(4). IN THE PRESENT CA SE THE STATEMENT HAS BEEN RECORDED UNDER S.133A OF THE ACT . IT IS NOT THE CASE OF REVENUE THAT THE TOTAL RECEIPTS OF THE ASSESSEE EXCEEDED RS.40 LAKHS SO AS TO SAY THAT THE INCOME O F ASSESSEE IS NOT ASSESSABLE UNDER S.44AD OF THE ACT. THERE IS NO MATERIAL ON RECORD TO SHOW THAT ALL THE EXPENDITURE INCURRED IN RESPECT OF CIVIL WORK WERE DULY CLAIMED BY THE ASSE SSEE AND THE RECEIPT OF ON MONEY WAS THE NET INCOME OF THE ASSESSEE PARTICULARLY WHEN ASSESSEE HAS NOT MAINTAINED THE B OOKS OF ACCOUNT, OR THEY HAVE NOT BEEN PRODUCED OR RELIED U PON BY THE ASSESSEE. THERE IS NO MATERIAL WITH THE DEPARTM ENT TO ARRIVE AT A CONCLUSION THAT FOR RECEIVING ON MONEY ASSESSEE DID NOT INCUR ANY EXPENDITURE. AS POINTED OUT EARLI ER, THAT THE ONLY BASE FOR THE REVENUE TO ASSESS THE ON MONEY IN ITS ENTIRETY, IS THE STATEMENT OF PARTNER RECORDED DURI NG THE COURSE OF SEARCH. NO EVIDENTIARY VALUE CAN BE ATTAC HED TO SUCH STATEMENT UNLESS IT IS SUPPORTED BY SOME MATER IAL. IN THIS VIEW OF THE SITUATION, IT CAN BE HELD THAT THE RE IS NO MATERIAL WITH THE DEPARTMENT TO MAKE ADDITION OF O N MONEY IN ITS ENTIRETY AND WHAT IS ASSESSABLE UNDER S.44AD IS 8 PER CENT OF THE GROSS RECEIPT OR MORE PROFITS SHOWN BY ASSESSEE IN ITS RETURN OF INCOME. IN THE PRESENT CASE ASSESSEE H AS SHOWN INCOME OF MORE THAN 8 PER CENT THEREFORE, NO ADDITI ON CAN BE MADE BY AO WHILE WORKING UNDER S.44AD 8. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT (A) AND FOUND THAT THE CIT (A) HAS ADJUDICATED THE ISSUE IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE TRIBUNAL IN THE AFORESAID CASE. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) WE CONFIRM HIS ORDER. ITA NO.183/VIZAG/2006 M SRINIVASA RAO, RJY. PAGE 5 OF 5 9. IN THE RESULT THE APPEAL FILED OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17.5.2010. SD/- SD/- (B R BASKARAN) (SUNIL KUMAR YADA V) ACCOUNTANT MEMBER JUDICIAL MEMBER PVV/SPS VISAKHAPATNAM, DATE: 17 TH MAY, 2010 COPY TO 1 ITO WARD-1, RAJAHMUNDRY 2 SRI MUDRAGADA SRINIVASA RAO, D.NO.35-12-29, MANGA LAVARAPUPETA, RAJAHMUNDRY 3 4 THE CIT (A) RAJAHMUNDRY THE CIT RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM