The ACIT, Circle-1, Rajahmundry V. Sri MV Krishna Reddy., Rajahmundry

ITA 192/VIZ/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1670 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 14-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGHDR
• Keywords: Rejection of books of accounts
• Section: 143(3)

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.192/VIZAG/2008 ASSESSMENT YEAR: 2005-06 ACIT, CIRCLE-1, RAJAHMUNDRY VS. M.V. KRISHNA REDDY, RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO. ADPPM 4844 C CO NO.15/VIZAG/2008 ASSESSMENT YEAR 2005-06 M.V. KRISHNA REDDY, RAJAHMUNDRY VS. ACIT, CIRCLE-1, RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO. ADPPM 4844 C APPELLANT BY: SHRI D S SUNDER SINGH,DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 11.01.2008 PAS SED BY THE LD CIT (A), RAJAHMUNDRY AND THEY RELATE TO THE ASSESSMENT YEAR 2005-06. 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE READ AS UNDER: PAGE 2 OF 4 2. THE CIT (A) ERRED IN RESTRICTING THE NET PROFIT AT THE RATE OF 8.5% WITHOUT GIVING ANY VALID JUSTIFICATION. 3. THE CIT (A) ERRED IN ALLOWING THE EXPENDITURE ON INTEREST PAID BY THE ASSESSEE FROM THE INTEREST EARNED FROM THE F IXED DEPOSITS, WITH A VIEW THAT THE INTEREST EXPENDITURE HAS DIREC T NEXUS WITH THE DEPOSITS MADE. 3. IN THE CROSS OBJECTION, THE ASSESSEE IS ASSAILING THE DECISION OF THE LD CIT (A) IN UPHOLDING THE REJECTION OF BOOKS OF ACCO UNTS AND IN NOT ACCEPTING THE BOOK RESULTS. 4. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A CIVIL CONTRACTOR. HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005- 06 ADMITTING A TOTAL INCOME OF RS.37,22,730/-. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT MOST OF THE EXPENDITURE CLAIMED BY THE ASSESSEE ARE SUPPORTED B Y SELF MADE VOUCHERS AND SOME OF THE EXPENDITURE ARE NOT SUPPORTED BY AN Y BILL. ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE PROFIT AT 12.5% OF THE NET CONTRACT RECEIPTS. THE AO ALSO ADDED GROSS INTE REST RECEIVED FROM BANK AMOUNTING TO RS.4,93,386/- TO THE INCOME SO ARRIVED , WITHOUT DEDUCTING THE INTEREST EXPENDITURE. AGGRIEVED, THE ASSESSEE CARRI ED THE MATTER IN APPEAL. THE LD CIT (A) UPHELD THE REJECTION OF BOOKS OF ACC OUNTS. HOWEVER, HE DIRECTED THE AO TO ADOPT THE NET PROFIT AT 8.5% OF THE CONTRACT RECEIPTS IN PLACE OF 12.5%. THE LD CIT (A) ALSO DIRECTED TO DED UCT THE INTEREST EXPENDITURE OF RS.4,09,108/- AGAINST THE INTEREST I NCOME. AGGRIEVED BY THE ORDER OF THE LD CIT (A), THE REVENUE HAS FILED APPE AL BEFORE US AND THE ASSESSEE IS BEFORE US BY FILING THE CROSS OBJECTION . PAGE 3 OF 4 5. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. ON A CAREFUL PERUSAL OF THE ASSESSMENT ORDER, WE NOTICE THAT THE VARIOUS EXPENDITURE CLAIMED BY THE ASSESSEE ARE SUPPORTED B Y SELF MADE VOUCHERS ONLY. HENCE THE AO HAS REJECTED THE BOOKS OF ACCOUN TS AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAID DECISION. CO MING TO THE ESTIMATION OF INCOME, WE NOTICE THAT THE AO HAS ESTIMATED THE NET PROFIT AT 12.5%, WHICH WAS REDUCED BY THE LD CIT (A) TO 8.5%. THE LD AR C ONTENDED THAT THE AVERAGE NET PROFIT DISCLOSED BY THE ASSESSEE IN THE EARLIER YEARS AND ALSO IN THE SUCCEEDING YEAR WORKS OUT TO ONLY 5% ONLY AND A CCORDINGLY PLEADED THAT THE RATE OF 8.5% ADOPTED BY THE LD CIT(A) IS ON THE HIGHER SIDE. WHEN A SPECIFIC QUERY WAS RAISED TO THE AR AS TO WHETHER T HE ASSESSMENT OF EARLIER YEARS WERE DONE U/S 143(3) OR U/S 143(1), THE LD A R PLEADED HIS IGNORANCE. WE NOTICE THAT IN THE IMMEDIATELY PRECEDING ASSESSM ENT YEAR, THE NET PROFIT DISCLOSED BY THE ASSESSEE WORKS OUT TO 7.18% OF THE GROSS RECEIPTS. EXCEPT THE COMPARATIVE STATEMENT, THE ASSESSEE COULD NOT P LACE ANY MATERIAL TO COMPEL US TO INTERFERE WITH THE DECISION OF LD CIT( A). SIMILARLY, THE REVENUE ALSO COULD NOT PLACE ANY MATERIAL IN THIS REGARD. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY NECESSITY TO INTERFERE WITH THE DEC ISION OF THE LD CIT (A). 6. THE AO HAS ASSESSED THE INCOME EARNED ON THE DEPOSITS UNDER THE HEAD BUSINESS. ACCORDINGLY THE LD CIT (A) HAS OBS ERVED THAT THE ASSESSEE HAS RECEIVED THE INTEREST INCOME FROM THE BANK FROM THE FIXED DEPOSITS THAT WERE PARKED AS MARGIN MONEY DEPOSITS. ACCORDINGLY T HE LD CIT(A) HAS HELD THAT THE SAID DEPOSITS ARE HAVING A DIRECT NEXUS WI TH THE BANK LOAN AND DIRECTED THE AO TO DEDUCT THE INTEREST EXPENDITURE. SINCE THE DECISION TAKEN BY LD CIT (A) IS IN ACCORDANCE WITH THE DECISION CO NSISTENTLY RENDERED BY THE TRIBUNALS, WE UPHOLD THE SAME. PAGE 4 OF 4 7. IN THE RESULT THE APPEAL OF THE REVENUE AS WE LL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30.11.2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATED 30 TH NOVEMBER, 2009. COPY TO 1 THE ACIT, CIRCLE-1, RAJAHMUNDRY 2 SRI M.V. KRISHNA REDDY, 46-16-37, NEAR PARK DANAV AIPETA, RAJAHMUNDRY 3 THE CIT RAJAHMUNDRY 4 THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM