P.Sunilal, Visakhapatnam V. THE ACIT, Visakhapatnam

ITA 227/VIZ/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8604 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA; R K SINGH
• Keywords: Opportunity of being heard; Corroborative evidences
• Section: 143(3); 263

Judgement Text

ITA NOS.227/VIZAG/2014 P. SUNILAL, VISAKHAPATNAM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.227/VIZAG/2014 ASSESSMENT YEAR : 2009 - 10 P. SUNILAL VISAKHAPATNAM VS. ACIT RANGE-5 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AIRFS 7400A ASSESSEE BY: SHRI C. SUBRAHMANYAM, AR REVENUE BY: SHRI K.V.N. CHARYA, DR & SHRI R.K. SINGH, DR DATE OF HEARING : 25.11.2014 DATE OF PRONOUNCEMENT : 25.11.2014 ORDER PER D. MANMOHAN, VICE PRESIDENT:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) VISAKHAPATNAM DATED 25.2.2014, WHEREIN T HE ONLY CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE, A CIVIL CONTRACT OR, MAINTAINED PROPER BOOKS OF ACCOUNTS AND WITHOUT EXAMINING ALL THE DETAILS, THE AO WAS NOT JUSTIFIED IN ESTIMATING THE INCOME AT 12% OF GROSS RECEIPTS OVER LOOKING THE FACT THAT EVEN AFTER THE ORDER PASSED BY THE REVISIONAL AUTHORITY, THE ASSESSING OFFICER, IN THE SUBSEQUENT ASSESSMENT YEARS, EITHER ESTIMATED NET P ROFIT AT 8% OR ACCEPTED THE BOOK RESULTS. 2. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL A RE STATED IN BRIEF. FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2 009-10, THE ASSESSEE DECLARED TOTAL INCOME OF RS.13,55,780/- AND THE ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ACCEPTING THE RETURNED INCOME . UPON EXAMINATION OF THE RECORDS, THE COMMISSIONER OF INCOME-TAX NOTICED THAT THE TOTAL AMOUNT PAID/CREDITED TO THE ASSESSEES ACCOUNT COMES TO RS .3,59,83,168/- AND THERE WAS NO MENTION IN THE TDS CERTIFICATES ABOUT THE RE TENTION MONEY WHICH WAS DEDUCTED BY THE ASSESSEE, IN WHICH EVENT THE TOTAL GROSS RECEIPTS SHOULD HAVE BEEN OFFERED TO TAX. HE FURTHER OBSERVED THAT THE EXPENDITURE CLAIMED SUCH ITA NOS.227/VIZAG/2014 P. SUNILAL, VISAKHAPATNAM 2 AS CONSUMABLES, CONSTRUCTION MATERIALS, WAGES, ETC. WERE NOT PROPERLY VERIFIED BY THE ASSESSING OFFICER VIS--VIS APPLICA BILITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. HE THEREFORE SET ASI DE THE MATTER, IN EXERCISE OF THE POWERS VESTED IN HIM U/S 263 OF THE ACT, WITH A DIRECTION TO THE AO TO GIVE THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND TO RECONSIDER THE MATTER IN ACCORDANCE WITH LAW. 3. CONSEQUENT TO THE DIRECTIONS OF THE REVISIONAL A UTHORITY, THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO FURNISH THE DETAIL S IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED THAT RETENTION MONEY WAS PAYABLE AFTER COMPLETION OF THE CONTRACT I.E. AFTER INSPECTION BY THE OTHER PARTY. THEREFORE, DEDUCTION OF RETENTION OF MONEY IS ALLOWABLE. ASSESSEE ALSO SUB MITTED CERTAIN DETAILS TO PROVE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS REASONABLE IN THE CIRCUMSTANCES OF THE CASE. 4. THE ASSESSING OFFICER WAS HOWEVER OF THE VIEW TH AT THE ASSESSEE SHOWED A LOW PROFIT OF 4% WHICH IS NOT ACCEPTABLE A ND THEREFORE ESTIMATED THE INCOME @ 12% OF GROSS RECEIPTS. THE ASSESSMENT WAS COMPLETED ACCORDINGLY U/S 143(3) R.W.S. 263 OF THE ACT. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE AO WAS NOT JUSTIFIED IN ESTIMATING THE INCOME WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS, MORE PARTICULARLY WHEN THE SAME BOOKS WERE ACCEPTED IN THE SUBSEQUENT ASSESSMENT YEAR U/S 143(3) OF THE AC T. WRITTEN SUBMISSIONS WERE ALSO FILED BEFORE THE CIT(A) TO CONTEND THAT T HERE IS NO BASIS FOR ESTIMATING THE INCOME AT 12% OF THE GROSS RECEIPTS. IN PARTICULAR, IT WAS SUBMITTED THAT THE ASSESSEE WAS ASKED TO PRODUCE TH E MAJOR VOUCHERS FOR EXPENSES WHICH WERE PRODUCED AND VERIFIED. NO SPEC IFIC DISCREPANCY WAS NOTICED BY THE AO. WITH REGARD TO THE EXPENDITURE TOWARDS SALARY AND WAGES ETC., THE ASSESSEE MAINTAINED MONTHLY REGISTERS. NO SPECIFIC DEFECTS WERE POINTED OUT IN ANY OF THE REGISTERS MAINTAINED BY T HE ASSESSEE. ITA NOS.227/VIZAG/2014 P. SUNILAL, VISAKHAPATNAM 3 6. THE LD. CIT(A) OBSERVED THAT THE EXPENSES TOWARD S SALARIES AND WAGES ARE NOT VOUCHED. THE ASSESSEE PRODUCED APPRO XIMATELY 158 VOUCHERS SAID TO BE SIGNED BY THE WORKERS. THE BASIS AND PU RPOSE OF THESE PAYMENTS COULD NOT BE CLARIFIED WITH SUPPORTING EVIDENCES. FURTHER PERUSAL OF THE REGISTERS MAINTAINED IN FORM-XIII SHOWS THAT THE EMPLO YEES LEAVE JOB GENERALLY IN LESS THAN A YEAR OR SO AND ONLY FEW EM PLOYEES CONTINUE FOR A LONG PERIOD, WHEREAS THE ASSESSEE CLAIMED TO HAVE M ADE PAYMENTS TO SEVERAL EMPLOYEES BETWEEN 2003 TO 2006. THUS, THERE IS HUG E DISCREPANCY IN THE REGISTERS MAINTAINED. HAVING REGARD TO THE OVERALL CIRCUMSTANCES, THE LD. CIT(A) CONCLUDED THAT THE REJECTION OF BOOKS OF ACC OUNTS BY THE AO IS JUSTIFIED AND THUS AFFIRMED THE ACTION OF THE AO IN ESTIMATING THE INCOME AT 12% TO THE GROSS RECEIPTS. 7. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. EVEN AT THIS STAGE LD. COUNSEL COULD NOT FURNISH ANY DETAILS WITH REGA RD TO THE SALARY AND WAGES EXPENDITURE CLAIMED IN THE BOOKS OF ACCOUNTS AND IT IS NOT IN DISPUTE THAT MAJOR CHUNK OF EXPENDITURE IS IN RESPECT OF PAYMENT OF SALARY AND WAGES. AT THE SAME TIME, THE LD. COUNSEL SUBMITTED THAT THE E STIMATE OF INCOME AT 12% IS EXCESSIVE AND UNREASONABLE HAVING REGARD TO THE FACT THAT IN THIS LINE OF BUSINESS I.E. ERECTION AND FABRICATION CONTRACTS , THE PROFIT WOULD BE AROUND 8%, WHEREAS THE AO ESTIMATED THE PROFIT AT 12% WITH OUT ANY BASIS. TO CUSHION HIS ARGUMENT, THAT THE ASSESSING OFFICER ARBITRARILY ESTIMATED PROFIT, LD. COUNSEL PLACED BEFORE US THE ORDERS OF THE ASSESSING OFFICER IN RESPECT OF THE ASSESSMENT YEARS 2010-11 & 2011-12, WHEREIN THE NEXT INCUMBENT ASSESSING OFFICER ESTIMATED THE NET PROFI T AT 8% OF THE GROSS RECEIPTS FOR THE ASSESSMENT YEAR 2010-11 AND IN RES PECT OF THE ASSESSMENT YEAR 2011-12, HE MADE SOME LUMPSUM DISALLOWANCE OF RS.2 LAKHS FOR INFLATED EXPENSES, WHICH ULTIMATELY RESULTED IN PROFIT OF 4. 68% ON THE GROSS RECEIPTS. IT WAS THUS SUBMITTED THAT THE ASSESSING OFFICER HAV ING EXAMINED THE NATURE OF BUSINESS OF THE ASSESSEE AND ESTIMATED THE INCOM E AT 8% FOR THE ASSESSMENT YEAR 2010-11 AND ONLY 4.68% FOR THE ASSE SSMENT YEAR 2011-12, ESTIMATE OF INCOME AT 12% FOR THE YEAR UNDER APPEA L IS ARBITRARY AND EXCESSIVE. ITA NOS.227/VIZAG/2014 P. SUNILAL, VISAKHAPATNAM 4 8. LD. D.R. ON THE OTHER HAND STRONGLY RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES TO SUBMIT THAT IN THE CASE OF C IVIL CONTRACTS ESTIMATE OF PROFIT AT 12% IS REASONABLE. HE ALSO SUBMITTED THA T THE BOOKS OF ACCOUNTS WERE REJECTED BECAUSE THE CLAIM OF EXPENDITURE WAS NOT PROPERLY SUPPORTED BY VOUCHERS AND THUS THE AO WAS JUSTIFIED IN ESTIMA TING OF INCOME. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORDS. THERE IS NO DISPUTE WITH REGARD TO THE FA CT THAT CERTAIN BILLS AND VOUCHERS ARE NOT PROPERLY VERIFIABLE. IN SUCH AN EV ENT OF THE MATTER, REJECTION OF THE BOOKS OF ACCOUNTS IS JUSTIFIED AND IN FACT EVEN AT THIS STAGE, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE TO PROV E THAT ALL THE DETAILS WERE MAINTAINED AS PER THE PROCEDURE PRESCRIBED. HOWEVE R, THE FACT REMAINS THAT ON THE SIMILAR SET OF FACTS, DESPITE THE DIRECTION BY THE COMMISSIONER FOR THE ASSESSMENT YEAR 2009-10, THE NEW INCUMBENT ASSESSIN G OFFICER ESTIMATED THE INCOME OF THE ASSESSEE AT 8% FOR THE ASSESSMENT YEA R 2010-11 AND VIRTUALLY ACCEPTED THE BOOKS OF ACCOUNTS FOR THE ASSESSMENT Y EAR 2011-12, WHICH RESULTED IN ACCEPTING THE INCOME EQUIVALENT TO 4.68 % OF THE GROSS RECEIPTS. EVEN IN THE SUBSEQUENT YEAR, THE ASSESSING OFFICER HAS TAKEN NOTE OF THE FACT THAT THE ADDRESSES OF THE PERSONS WHO RECEIVED THE WAGES ARE NOT AVAILABLE AND BILLS AND VOUCHERS ARE NOT PROPERLY MAINTAINED BUT DESPITE THAT THE NET INCOME FROM THE CONTRACT WORKS IS ESTIMATED AT 8% O F THE GROSS RECEIPTS. HAVING REGARD TO THE SUBSEQUENT ORDERS PASSED BY TH E ASSESSING OFFICER IN RESPECT OF THE ASSESSMENT YEAR 2010-11 AND 2011-12, WE ARE OF THE VIEW THAT THE ESTIMATE OF PROFIT AT 12% IN THE YEAR UNDER APP EAL IS ARBITRARY AND EXCESSIVE. IN OUR CONSIDERED OPINION, EVEN IN THIS YEAR, ESTIMATE OF NET INCOME AT 8% OF THE GROSS RECEIPTS WOULD MEET THE E NDS OF JUSTICE AND WE DIRECT ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER14 SD/- SD/- (J. SUDHAKAR REDDY) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT VG/SPS VISAKHAPATNAM, DATED 25 TH NOVEMBER, 2014 ITA NOS.227/VIZAG/2014 P. SUNILAL, VISAKHAPATNAM 5 COPY TO 1 SRI C. SUBRAHMANYAM, CHARTERED ACCOUNTANT, 102, L AKSHMI APTS., FACOR LAYOUT, WALTAIR UPLANDS, VISKHAPATNAM-530 003. 2 THE ADDL. CIT, RANGE-5, VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM