,Vatram Venkateswara Rao, Eluru V. The ITO, Eluru

ITA 219/VIZ/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3875 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI SHANKAR NARAYAN
• Keywords: Rejection of books of accounts; Depreciation; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , ! . . # , & BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I.T.A.NO.219/VIZ/2017 ( / ASSESSMENT YEAR:2009-10 ) VATRAM VENKATESWARA RAO D.NO.3-105/1, AMBICA NAGAR NEAR AMBICA DEVI TEMPLE 6 TH LANE, SATRAMPADU ELURU 534007 [PAN :ABIPV7249K] VS. INCOME TAX OFFICER WARD-2 ELURU ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI, AR / RESPONDENT BY : SHRI RAVI SHANKAR NARAYAN, DR / DATE OF HEARING : 02.05.2018 / DATE OF PRONOUNCEMENT : 09.05.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A)]-2, GU NTUR VIDE ITA NO.113/2011-12 DATED 31.01.2017 FOR THE ASSESSM ENT YEAR 2009-10. 2 I.T.A NO.219/VIZ/2017 VATRAM VENKATESWARA RAO, ELURU 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE EST IMATION OF INCOME. THE ASSESSEE IS ENGAGED IN CIVIL CONTRACTS. FOR THE IMP UGNED ASSESSMENT YEAR, THE ASSESSEE RECEIVED GROSS RECEIPTS OF RS.1,93,31, 395/- AND FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,51,144/-. THE ASSESSING OFFICER (AO) HAS TAKEN UP THE CASE FOR SCRUTINY. DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED BOOKS OF ACC OUNTS, BUT COULD NOT PRODUCE THE BILLS AND VOUCHERS STATING THAT THE SAM E WERE NOT READILY AVAILABLE. THEREFORE, THE AO COMPLETED THE ASSESSM ENT ESTIMATING THE INCOME @ 9% OF GROSS RECEIPTS CLEAR OF ALL EXPENSES AND DEPRECIATION AND RESULTANT DIFFERENCE OF RS.13,88,683/- WAS ADDED TO THE RETURNED INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE W ENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) CONFIRMED THE REJECTIO N OF BOOKS OF ACCOUNTS. HOWEVER, THE LD.CIT(A) COMPARED THE EXPENDITURE FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 AND DIRECTED THE AO TO DI SALLOW THE EXPENDITURE IN PROPORTIONATE TO THE TURNOVER IN RES PECT OF MATERIALS AND LABOUR CHARGES AND WAGES. 3 I.T.A NO.219/VIZ/2017 VATRAM VENKATESWARA RAO, ELURU 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, L D.AR ARGUED THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND DURING THE ASSES SMENT, THE ASSESSEE DID NOT PRODUCE THE BILLS AND VOUCHERS SINCE THEY WERE NOT READILY AVAILABLE. THE LD.CIT(A) HAS DECIDED THE APPEAL DIRECTING THE AO TO ALLOW THE EXPENDITURE IN PROPORTIONATE TO THE TURNOVER IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE LD.AR ARGUED THAT THE ESTIMAT ION OF RESULTANT INCOME WORKS OUT TO 7.21% WHICH IS VERY HIGH IN THIS LINE OF BUSINESS AND IN THE ASSESSEES CASE THE PROFIT WAS ONLY AS DECLARED IN THE RETURN OF INCOME. DISALLOWANCE OF EXPENDITURE AS HELD BY THE LD.CIT(A ) WOULD CAUSE LOT OF FINANCIAL INJURY TO THE ASSESSEE, SINCE IT WAS VERY HIGH. THE LD.AR FURTHER SUBMITTED THAT SINCE THE AO HAS REJECTED THE BOOKS OF ACCOUNTS, IT IS A CASE FOR REASONABLE ESTIMATION OF INCOME. FOR A QUERY F ROM THE BENCH, THE LD.AR SUBMITTED THAT THE ESTIMATION OF INCOME @ 5% IS REASONABLE IN THIS LINE OF BUSINESS. 5. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE AO HAS ESTIMATED THE INCOME @9% CLEAR OF DEPRECIATION AND ALL OTHER EXPENSES SINCE THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS, B ILLS AND VOUCHERS ETC. THEREFORE, ARGUED THAT THE INCOME ESTIMATED BY THE AO IS FAIRLY REASONABLE. 4 I.T.A NO.219/VIZ/2017 VATRAM VENKATESWARA RAO, ELURU FURTHER, THE LD.CIT(A) HAS ORDERED THE AO TO DISALL OW THE EXPENSES UNDER THE HEAD MATERIAL AND LABOUR EXPENSES IN PROPORTI ON TO THE TURNOVER. THE LD.CIT(A) IS VERY FAIR IN DIRECTING THE AO TO RESTR ICT THE DISALLOWANCE TO MATERIAL AND LABOUR EXPENSES. THEREFORE, ARGUED THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE, THOUGH THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS, BUT FAILED TO PRODUCE VOUCHERS, BILLS ETC. THEREFORE, WE UPHOLD THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS. THE LD.CIT( A) THOUGH ACCEPTED THE REJECTION OF BOOKS OF ACCOUNTS DIRECTED THE AO TO D ISALLOW THE EXPENSES IN RESPECT OF MATERIALS AND LABOUR CHARGES AND WAGES I N PROPORTION TO THE TURNOVER COMPARED TO THE EARLIER ASSESSMENT YEAR. HOWEVER, THE LD.CIT(A) HAS NOT CONSIDERED THE INCREASE IN EXPENDITURE DUE TO INFLATION. THE CORRECT PROCEDURE IS ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THE AO HAS TO RESORT FOR ESTIMATION OF INCOME WHICH WOULD TAKE CA RE OF ALL OTHER RELEVANT EXPENSES. THEREFORE, WE ARE OF THE VIEW THAT THE ES TIMATION OF INCOME @ 6% OF GROSS RECEIPTS, CLEAR OF DEPRECIATION AND ALL OTHER EXPENSES IS FAIR AND REASONABLE IN THIS CASE. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE AO TO ESTIMATE THE INCOM E @ 6% OF THE GROSS 5 I.T.A NO.219/VIZ/2017 VATRAM VENKATESWARA RAO, ELURU RECEIPTS CLEAR OF ALL EXPENSES AND DEPRECIATION. T HE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 TH MAY, 2018. SD/- SD/- ( . ) ( ! . . # ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM $ /DATED : 09.05.2018 L.RAMA, SPS & ' / COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT- VATRAM VENKATESWARA RAO, D.NO.3-105/ 1, AMBICA NAGAR, NEAR AMBICA DEVI TEMPLE, 6 TH LANE, SATRAMPADU, ELURU 534007 2. / INCOME TAX OFFICER, WARD-2, ELURU 3. THE PR.COMMISSIONER OF INCOME TAX, RAJAMAHENDRAV ARAM 4. THE COMMISSIONER OF INCOME-TAX(APPEALS)-2, GUNTUR , CAMP : VISAKHAPATNAM 5. * , * , / DR, ITAT, VISAKHAPATNAM 6. / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM