The DCIT, Central Circle, Vijayawada V. M/s RK Township Promoters (P) Ltd., Hyderabad

ITA 199/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56815 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Assessee Lawyers: A V RAGHURAM
• Keywords: Rejection of books of accounts; Depreciation
• Section: 40A(3)

Judgement Text

ITA NO199.VIZAG/2011 R.K. TOWNSHIP PROMOTERS (P) LT D, HYDERABAD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 199 /VIZAG/ 20 11 ASSESSMENT YEAR : 2007 - 08 DCIT CENTRAL CIRCL E VIJAYAWADA VS. R.K. TOWNSHIP PROMOTERS (P) LTD HYDERABAD (APPELLANT) (RESPONDENT) PAN NO.AACCR 3049K APPELLANT BY: SHRI TH.L. PETER, CIT(DR) RESPONDENT BY: SHRI A.V. RAGHURAM, ADVOCATE DATE OF HEAR I NG: 0 7. 0 7.2011 DATE OF PRONOUNCEMENT: 29 . 0 8.2011 ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) HAS ERRED I N ESTIMATING THE INCOME OF THE ASSESSEE AT 12% OF THE GROSS SALES AGAINST 25% ESTIMATED BY THE ASSESSING OFFICER. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSM ENT YEAR I.E. 2007-08 ADMITTING TOTAL INCOME AT ` 98,82,940/- FROM A TURNOVER OF ` 1.07 CRORES. THE A.O. HAD COMPLETED THE ASSESSMENT DETERMINING THE T OTAL INCOME AT ` 2,70,53,970/- BY REJECTING THE BOOKS OF ACCOUNTS O F THE ASSESSEES U/S 145(3) OF THE ACT AND ESTIMATED THE INCOME AGGREGAT ING 25% OF THE GROSS SALES WHICH RESULTED IN A DEMAND OF ` 1,14,59,938/-. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) QUESTIONING THE REJECTI ON OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME. 3. THE CIT(A) HAS EXAMINED THE ISSUE OF REJECTION O F BOOKS OF ACCOUNTS AND HAVING NOTED THAT BOOKS OF ACCOUNTS ARE NOT PRO PERLY MAINTAINED AND ITA NO199.VIZAG/2011 R.K. TOWNSHIP PROMOTERS (P) LT D, HYDERABAD. 2 BILLS AND VOUCHERS ARE NOT OPEN TO VERIFICATION HE CONFIRMED THE REJECTION OF BOOKS OF ACCOUNTS. ON THE POINT OF ESTIMATION OF P ROFIT THE CIT(A) ESTIMATED THE PROFIT @ 12% ON THE TOTAL TURNOVER OF ` 10,63,92,719/- ON THE BASIS OF THE PROFIT DECLARED BY THE ASSESSEE IN PRECEDING YE ARS. 4. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE HAS PREFERRED AN APPEAL BEFORE US WITH THE SUBMISSION THAT THE CIT(A ) WAS NOT JUSTIFIED IN ESTIMATING THE INCOME @ 12% ON THE TOTAL TURNOVER A GAINST THE ESTIMATION OF PROFIT BY THE A.O. AT 25%. THE LD. D.R. FURTHER CO NTENDED THAT THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT CHALLENGED BY THE ASSE SSEE. THEREFORE, THE ORDER OF THE CIT(A) WITH REGARD TO THE REJECTION OF BOOKS OF ACCOUNTS ATTAINED THE FINALITY. THEREFORE, THE ISSUE LEFT OUT IS ONL Y WITH REGARD TO THE ESTIMATION OF PROFIT. THE BASIS FOR ESTIMATION OF THE PROFIT ADOPTED BY THE CIT(A) IS NOT PROPER AS IT WAS ON THE BASIS OF RESULTS DECLARED B Y THE ASSESSEE IN EARLIER YEARS WHICH WERE ACCEPTED BY THE A.O. THE PROPER C OURSE TO ESTIMATE THE PROFIT IS IN THE LIGHT OF PROFIT DECLARED IN THE CO MPARABLE CASES IN THE SAME LINE OF BUSINESS. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT CIT(A) HAS RIGHTLY TAKEN INTO ACCOUNT THE PROFITS DECLARED IN EARLIER YEARS. 6. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE R IVAL SUBMISSIONS IN THE LIGHT OF ORDERS OF LOWER AUTHORITIES, WE FIND THAT THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE IS NOT DISPUTED BY THE ASS ESSEE. THEREFORE, AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEES, T HE INCOME OF THE ASSESSEES IS TO BE ESTIMATED IN THE LIGHT OF COMPARABLE CASES IN THE SAME LINE OF BUSINESS OR THE PROFIT DECLARED BY THE ASSESSEE IN PRECEDING YEARS. THOUGH THE REVENUE HAS EMPHATICALLY ARGUED THAT ESTIMATION OF PROFIT AT 12% ON TOTAL SALE IS ON LOWER SIDE IN THE LIGHT OF ESTIMATION OF THE PROFIT BY THE A.O., BUT HE COULD NOT PRODUCE ANY COMPARABLE CASES IN WHICH PRO FIT OF THE SIMILAR TYPE OF BUSINESS WAS SHOWN HIGHER THAN THE PROFIT DECLARED BY THE ASSESSEES. WHILE ADJUDICATING THE ISSUE, THE CIT(A) TOOK COGNIZANCE OF THE PROFITS DECLARED BY THE ASSESSEE WHICH WERE ACCEPTED BY THE A.O. IN PRE CEDING YEARS. THE A.O. HAS ESTIMATED THE INCOME @ 25% OF THE GROSS SALES W HICH WAS REDUCED TO 12% BY THE CIT(A). ITA NO199.VIZAG/2011 R.K. TOWNSHIP PROMOTERS (P) LT D, HYDERABAD. 3 7. WE HAVE EXAMINED THE ORDER OF THE CIT(A) AND ALS O THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE PERTAINING TO T HE ASSESSMENT YEAR 2000- 01 TO 2006-07 AND THE TRIBUNAL HAS FINALLY SET ASID E THE ORDER OF THE CIT(A) AND RESTORED THE MATTER TO THE FILE OF THE A.O. FOR CONSIDERATION OF ALL THE ISSUES AFRESH. THEREFORE, THE NET INCOME DECLARED BY THE ASSESSEE AT 9.97% IN THE ASSESSMENT YEAR 2006-07 HAS NO RELEVANCE AND THE INCOME IS TO BE ESTIMATED WITHOUT BEING INFLUENCED THE INCOME ASSES SED IN EARLIER YEARS AS THE MATTER IS SUBJUDICE BEFORE THE A.O. FOR THE ASS ESSMENT YEAR 2000-01 TO 2006-07. ON CAREFUL PERUSAL OF THE ORDER OF THE A. O., WE FIND THAT HE HAS ESTIMATED THE INCOME AT 25% OF THE GROSS SALES (NET OF DEPRECIATION AND INTEREST) AFTER TAKING INTO ACCOUNT THE UNVERIFIABL E FIGURES OF CLOSING STOCK AND PROBABLE DISALLOWANCES U/S 40A(3) OF THE ACT. NO D OUBT AFTER REJECTING THE BOOKS OF ACCOUNTS, IN ESTIMATION OF INCOME, THE IND IVIDUAL DISALLOWANCES SHOULD NOT BE MADE WHILE FRAMING THE ASSESSMENT. B UT ALL THESE FACTORS SHOULD BE TAKEN INTO ACCOUNT WHILE ESTIMATING THE I NCOME OF THE ASSESSEES. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS ESTI MATED THE INCOME AT 25% OF THE GROSS SALES WHICH WAS REDUCED TO 12% BY THE CIT (A). THE ESTIMATION MADE BY BOTH THE AUTHORITIES DOES NOT APPEAR TO BE REASONABLE. WE, HOWEVER, OF THE VIEW THAT TO MEET THE ENDS OF JUSTI CE, THE INCOME OF THE ASSESSEES SHOULD BE ESTIMATED AT 15% OF THE TOTAL S ALES. WE ACCORDINGLY, MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO ESTIMATE THE INCOME OF THE ASSESSEES AT 15% OF GROSS SALES (NET OF DEPRECI ATION AND INTEREST) AND RECOMPUTE THE INCOME OF THE ASSESSEES. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29.8.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 29 TH AUGUST, 2011 ITA NO199.VIZAG/2011 R.K. TOWNSHIP PROMOTERS (P) LT D, HYDERABAD. 4 COPY TO 1 DCIT, CENTRAL CIRCLE, VIJAY AWADA 2 M/S. R.K. TOWNSHIP PROMOTERS (P) LTD., NO.301, DOYE N CHAMBERS, NEAR SARADHI STUDIO, AMEERPET, HYDERABAD 3 THE CI T, GUNTUR 4 THE CIT (A) , GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM