Kudapa Lakshmi Prasanna, Rajahmundry V. THE ACIT, CIRCLE - 1, Rajahmundry

ITA 204/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2147 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHY
• Keywords: Reasonable cause; Condonation of delay; Revised return
• Section: 68

Judgement Text

1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.165/VIZ/2013 ( / ASSESSMENT YEAR : 2008-09) ITO, WARD - 1, RAJAHMUNDRY. VS. SMT. KUDAPA LAKSHMI PRASANNA, PROP. M/S. KVR BUILDERS, D.NO. 29-10-10, GOWTHAMI LIBRARY STREET, RAJAHMUNDRY. [ PAN :AUKPK 6432 E] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) ./ I.T.A.NO.204/VIZ/2013 ( / ASSESSMENT YEAR : 2008-09) SMT. KUDAPA LAKSHMI PRASANNA, PROP. M/S. KVR BUILDERS, D.NO. 29-10-10, GOWTHAMI LIBRARY STREET, RAJAHMUNDRY. VS. ACIT, CIRCLE - 1, RAJAHMUNDRY. [ PAN:AUKPK 6432 E] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / ASSESSEE BY : SHRI G.V.N. HARI ADV. '(& ) / REVENUE BY : SHRI M.K. SETHY DR ) - / DATE OF HEARING : 16/12/2015 ) - / DATE OF PRONOUNCEMENT : 06 / 0 1 /201 6 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSE AS WELL A S REVENUE, ARE DIRECTED AGAINST THE ORDER OF CIT(A)-11, MUMBAI, CA MP AT VISAKHAPATNAM DATED 07/01/2013 FOR THE A.Y. 2008-09 . 2 . SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE C OMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3 . DURING THE COURSE OF HEARING, AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE SUBMITTED THAT THE APPEAL FILED BY THE ASS ESSE, BEFORE THE TRIBUNAL IS TIME BARRED BY 16 DAYS. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSE HAS FILED A PETITION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT AND PLEAD ED THAT THE DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL IS BEYOND HER CONTROL, AS DURING THIS PERIOD, SHE WAS SUFFERING FROM JAUNDICE. AS SOON A S SHE RECOVERED FROM ILLNESS, NECESSARY STEPS FOR FILING THE APPEAL HAVE BEEN TAKEN AND ACCORDINGLY, APPEAL HAS BEEN FILED ON 22/03/2013. THEREFORE, PRAYED FOR CONDONATION OF DELAY IN FILING THE APPEAL. THE DEPA RTMENTAL REPRESENTATIVE DID NOT OBJECT THE CONDONATION OF DE LAY IN FILING THE APPEAL. 3 4 . HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE ARE O F THE OPINION THAT THERE WAS REASONABLE CAUSE FOR NOT PRESENTING THE APPEAL WITHIN THE TIME PRESCRIBED UNDER THE ACT. THEREFORE, CONSIDER ING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO EXERCISING THE P OWERS VESTED WITH THE TRIBUNAL UNDER SEC. 253(5) OF THE INCOME-TAX AC T, 1961, WE CONDONE THE DELAY IN FILING THE APPEAL, ADMIT THE APPEAL AN D PROCEED TO DECIDE THE APPEAL ON MERITS. 5 . BRIEF FACTS OF THE CASE, ARE THAT THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, HAS FILED HER RETURN OF INCOME FOR THE A.Y. 2008-09 ON 26/11/2008 DECLAR ING LOSS OF RS.1,10,98,343/-. THE RETURN WAS PROCESSED UNDER S EC. 143(1) OF THE ACT ON 30/01/2009. THE CASE HAS BEEN SELECTED FOR SCRUTINY ASSESSMENT BY VIRTUE OF CBDT GUIDELINES AND ACCORDINGLY, NOTIC E UNDER SEC. 143(2) OF THE ACT WAS ISSUED. IN RESPONSE TO THE NOTICE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED THE INFORMATION CALLED FOR. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE OF THE A SSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED A REVISED RETURN ON 13/ 03/2009 ADMITTING A TOTAL INCOME OF RS. 3,47,430/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS CREDITED A SUM OF RS. 13,27,000/- INTO CAPITAL ACCOUNT ON VARIOUS DAT ES, THEREFORE, ISSUED A 4 SHOW-CAUSE NOTICE AND ASKED HER TO EXPLAIN THE NATU RE AND SOURCE FOR THE CREDITS IN CAPITAL ACCOUNT. HOWEVER, THE ASSES SEE NEITHER APPEARED BEFORE THE ASSESSING OFFICER NOR FURNISHED THE INFO RMATION CALLED FOR. SINCE, NO INFORMATION CAME FROM THE ASSESSEE, THE A SSESSING OFFICER, TREATED THE CASH CREDITS IN CAPITAL ACCOUNT AS INCO ME OF THE ASSESSEE UNDER SEC. 68 OF THE ACT. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, ON VERIFICATION OF LEDGER COPY OF CAPITAL ACCOUNT F ILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS TRANSFERRED AN AMOUNT OF RS. 82,83,000/- FROM PROFIT & LOSS ACCOUN T TO CAPITAL ACCOUNT. ON FURTHER VERIFICATION OF THE JOURNAL ENTRIES, THE A.O. NOTICED THAT THE ASSESSEE NARRATED THAT SHE HAS TRANSFERRED THE AMOU NT FROM THE PROFIT & LOSS ACCOUNT BEING PROFIT FOR THE YEAR. THE ASSESS ING OFFICER, THEREFORE, INFERRED THAT THE AMOUNT TRANSFERRED FROM THE PROFI T AND LOSS ACCOUNT TO THE CAPITAL ACCOUNT IS NOTHING BUT PROFIT EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, SAME IS TR EATED AS NET PROFIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6 . AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE AS SESSEE FILED A COPY OF CAPITAL ACCOUNT AND CLAIMED THAT OUT OF THE CRED ITS IN CAPITAL ACCOUNT OF RS. 13,27,000/-, AN AMOUNT OF RS. 2,40,000/- WAS BY WAY OF CASH INTRODUCTION AND BALANCE AMOUNT OF RS. 4,18,000/- F ROM THE TRANSFER OF 5 FUND FROM BANK OF MAHARASHTRA AND THE REMAINING AMO UNT OF RS. 6,00,000/- WAS FROM THE AMOUNT WITHDRAWN FROM HOUSI NG LOAN ACCOUNT. THE ASSESSEE FURTHER SUBMITTED THAT THE CASH CREDIT S IN CAPITAL ACCOUNT IS VERIFIABLE TRANSACTIONS AND THE SAME WERE FURNISHED BEFORE THE ASSESSING OFFICER, HOWEVER, THE ASSESSING OFFICER W ITHOUT AFFORDING A REASONABLE OPPORTUNITY OF HEARING, CONCLUDED THE SA ME AS INCOME FROM UNDISCLOSED SOURCE AND MADE ADDITION UNDER SEC. 68 OF THE ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) CON FRONTED WITH THE DETAILS FURNISHED BY THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING OFFICER VIDE HIS REMAND RE PORT DATED 26/11/2012 CONFIRMED THAT THE CREDITS IN THE CAPITA L ACCOUNT WERE EXAMINED AND FOUND TO BE CORRECT. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER, D ELETED THE ADDITIONS MADE UNDER SEC. 68 OF THE ACT. 7. AS FAR AS THE ADDITIONS TOWARDS NET PROFIT OF RS. 82,83,000/-, THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS. 82,83,00 0/- REPRESENTS THE SALE PROCEEDS OF FLATS SOLD DURING THE FINANCIAL YE AR. THE ASSESSEE FURTHER SUBMITTED THAT SHE HAS ADMITTED NET PROFIT OF 4% ON THE GROSS SALES OF RS. 82,83,000/-, WHICH WAS ACCEPTED BY THE ASSESSING OFFICER. WHEN THE NET PROFIT RETURNED BY THE ASSESSEE WAS ACC EPTED, THEN, FURTHER ADDITION TOWARDS GROSS SALES IS NOT CORRECT . DURING THE APPELLATE 6 PROCEEDINGS, THE CIT(A), TO ASCERTAIN THE CORRECTNE SS OF CLAIM MADE BY THE ASSESSEE, HAS DIRECTED THE ASSESSING OFFICER TO EXAMINE THE BOOKS OF ACCOUNTS AND CONFIRM WHETHER THE AMOUNT OF RS.82,83 ,000/- IS THE SALE CONSIDERATION OR THE NET PROFIT FOR THE YEAR. THE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 26/11/2012 STATED THAT THE AMOUNT OF RS. 82,83,000/- IS THE SALE PROCEEDS OF FLATS SOLD TO 1 2 PERSON AND NOT NET PROFIT EARNED DURING THE PERIOD, HOWEVER IN TWO CAS ES THERE IS A DIFFERENCE OF RS. 34,000/- EXCEPT, THIS ALL AMOUNTS ARE VERIFIED AND FOUND TO BE CORRECT. THE ASSESSING OFFICER FURTHER SUBMI TTED THAT THE NET PROFIT ADMITTED BY THE ASSESSEE ON THE GROSS SALES IS VERY LOW, WHEN COMPARED TO PROFIT MARGIN IN SIMILAR LINE OF BUSINESS. THERE FORE, REQUESTED THE CIT(A) TO ESTIMATE THE NET PROFIT @ 12% INSTEAD OF 4% DECLARED BY THE ASSESSEE. THE CIT(A), AFTER CONSIDERING THE REMAND REPORT AND EXPLANATION OF THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITIONS OF RS. 82,83,000/-. HOWEVER, THE CIT(A) AFTER CONSIDERING THE ASSESSING OFFICERS OBSERVATION REGARDING LOWER NET PROFIT OFFERED BY THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO ESTIMAT E THE NET PROFIT @12% ON GROSS RECEIPTS. AGGRIEVED BY THE CIT(A)S ORDER, THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. 8. THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSI NG OFFICER UNDER SEC. 7 68 OF THE ACT. THE DEPARTMENTAL REPRESENTATIVE FUR THER SUBMITTED THAT CIT(A) OUGHT TO HAVE SUSTAINED THE ADDITION OF RS. 9,27,000/- AS THE SAME WAS REMAIN UNVERIFIED EVEN AFTER REMAND REPORT . THE DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE TREATED THE DIFFERENCE OF RS.32.52 LAC BETWEEN THE ADVANCE RECEIVED OF RS. 50.31 LAC AS PER THE BALANCE SHEET AND THE GROSS SALES DECLARED OF RS. 82,83,000/- AS INCOME FROM UNEXPLAI NED SOURCE AS THE SOURCE FOR THE DIFFERENCE WAS REMAIN UNVERIFIED EVE N AFTER THE REMAND REPORT. AS FOR AS ESTIMATION OF NET PROFIT ON SALE S, THE LD. D.R. SUBMITTED THAT THE NET PROFIT ADMITTED BY ASSESSEE IS QUITE L OW WHEN COMPARED TO SIMILAR LINE OF BUSINESS, THEREFORE, REQUESTED TO U PHELD THE NET PROFIT ESTIMATED BY THE CIT(A). 9 . ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF CIT(A). THE A.R., H OWEVER, SUBMITTED THAT THE NET PROFIT ESTIMATED BY THE CIT(A) IS QUIT E HIGH, THEREFORE, REQUESTED TO SCALE-DOWN THE NET PROFIT ESTIMATED BY THE CIT(A) FROM 12% TO 8%. THE LD. DEPARTMENTAL REPRESENTATIVE BY COUNTER ARGUMENTS SUBMITTED THAT CONSIDERING THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, ATLEAST 10% NET PROFIT SHOULD BE E STIMATED. 10 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER MADE TH E ADDITION OF 8 RS.13,27,000/- UNDER SEC. 68 OF THE ACT, FOR THE RE ASON THAT THE ASSESSEE HAS FAILED TO PROVE THE SOURCE FOR THE CRE DIT IN THE CAPITAL ACCOUNT. THE CIT(A) AFTER CONSIDERING THE REMAND R EPORT ISSUED BY THE ASSESSING OFFICER, ACCEPTING THE EXPLANATIONS OFFER ED BY THE ASSESSEE DELETED THE ADDITIONS. ON PERUSAL OF THE COPY OF T HE REMAND REPORT WHICH WAS EXTRACTED IN THE CIT(A)S ORDER, IT IS VE RY CLEAR THAT THE ASSESSING OFFICER HAS ACCEPTED THE EXPLANATION WITH REGARD TO CREDITS IN CAPITAL ACCOUNT. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT JUSTIFIED IN FILING THE APPEAL ON THE SAME ISSUE WH ICH WAS ACCEPTED IN THE REMAND PROCEEDINGS. THE CIT(A) RIGHTLY DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER AND HIS ORDER DOES NOT REQUIR E ANY INTERFERENCE. THEREFORE, WE INCLINED TO UPHELD THE ORDER OF CIT(A ) AND REJECTED THE GROUND RAISED BY THE REVENUE. 11 . THE NEXT ISSUE IS WITH REGARD TO THE ADDITION OF RS. 82,83,000/- NET PROFIT FROM BUSINESS. THE ASSESSING OFFICER OBSERVE D THAT THE ASSESSEE HAS TRANSFERRED THE AMOUNT FROM THE PROFIT & LOSS A CCOUNT TO CAPITAL ACCOUNT, WHICH IS NOTHING BUT PROFIT EARNED DURING THE PERIOD, HENCE MADE ADDITION. THE ASSESSING OFFICER FURTHER OBSER VED THAT WHILE PASSING JOURNAL, THE ASSESSEE HAS GIVEN A NARRATION THAT THE PROFIT IS TRANSFERRED TO CAPITAL ACCOUNT, THEREFORE, INFERRED THAT THE AMOUNT TRANSFERRED TO CAPITAL ACCOUNT IS NOTHING BUT PROFI T EARNED BY THE 9 ASSESSEE FROM THE BUSINESS, THEREFORE, MADE ADDITIO NS. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT DELETED THE ADD ITIONS MADE BY THE ASSESSING OFFICER. ON PERUSAL OF THE COPY OF REMAN D REPORT SUBMITTED BY THE ASSESSING OFFICER WHICH WAS EXTRACTED IN THE CIT(A) ORDER, IT WAS CLEAR THAT THE ASSESSING OFFICER HAS ACCEPTED THE E XPLANATION OF THE ASSESSEE THAT THE AMOUNT REPRESENTS GROSS SALES AND NOT NET PROFIT. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT HAS RIGH TLY DELETED THE ADDITIONS. EVEN BEFORE US THE FACTS REMAINS SAME AN D THE REVENUE HAS NOT BROUGHT ANY NEW MATERIAL TO PROVE THAT THE FIND INGS OF THE FACTS BY THE CIT(A) WAS INCORRECT. THEREFORE, WE INCLINED TO UPHELD CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE REVENUE. 12 . THE NEXT ISSUE EMANATES FROM THE ASSESSEES APPEA L IS WITH REGARD TO ESTIMATION OF NET PROFIT. THE ASSESSEE DECLARED NET PROFIT OF 4% ON GROSS RECEIPTS. THE CIT(A) DURING THE COURSE OF AP PELLATE PROCEEDINGS AFTER CONSIDERING THE REMAND REPORT ISSUED BY THE A SSESSING OFFICER, ENHANCED THE NET PROFIT TO 12% AS AGAINST 4% DECLAR ED BY THE ASSESSEE. THE ASSESSEES CONTENTION IS THAT THE NET PROFIT ES TIMATED BY THE CIT(A) IS ON HIGHER SIDE WHEN COMPARED TO SIMILAR LINE OF BUSINESS, THEREFORE, REQUESTED TO SCALED-DOWN THE NET PROFIT TO 8%. THE DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER OF CIT( A), HOWEVER, SUBMITTED THAT IN THIS CASE AT LEAST 10% NET PROFIT SHOULD BE ESTIMATED. 10 WE HAVE HEARD BOTH THE SIDES. DURING THE COURSE OF H EARING, BOTH THE PARTIES AGREED FOR 10% NET PROFIT. THEREFORE, CONSI DERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO TO MEET THE ENDS OF JUSTICE, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE THE NET PROFIT AT 10% ON GROSS RECEIPTS. 13 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY, 2016. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 06/01/2016. VR/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE ASSESSEE SMT. KUDAPA LAKSHMI PRASANNA, PROP. M/S. KVR BUILDERS, D.NO. 29-10-10, GOWTHAMI LIBRARY STREET, RAJAHMUNDRY . 2. '(& / THE REVENUE 1) ITO, WARD-1, RAJAHMUNDRY. 2) ACIT, CIRCLE-1, RAJAHMUNDRY 3. 5 / THE CIT, RAJAHMUNDRY. 4. 5 () / THE CIT (A)-11, MUMBAI CAMP AT VISAKHAPATNAM. 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM