M/s Ramakrishna & Co., Visakhapatnam V. THE ITO, WARD - 3, Rajahmundry

ITA 235/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2098 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A NARAYANA RAODR
• Assessee Lawyers: C SUBRAHMANYAMAR

Judgement Text

ITA NO.235/VIZAG/2013 M/S. RAMAKRISHNA & CO., VISAKHAPATNAM 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.235/VIZAG/2013 ( / ASSESSMENT YEAR: 2006-07) M/S. RAMAKRISHNA & CO. VISAKHAPATNAM VS. ITO WARD - 3 RAJAHMUNDRY [PAN: AANFR 3682E ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.85/VIZAG/2013 (ARISING OUT OF I.T.A.NO.235/VIZAG/2013) ( / ASSESSMENT YEAR: 2006-07) ITO WARD - 3 RAJAHMUNDRY VS. M/S. RAMAKRISHNA & CO. VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM,AR / RESPONDENT BY : SHRI A. NARAYANA RAO,DR / DATE OF HEARING : 16.11.2015 / DATE OF PRONOUNCEMENT : 05.02.2016 ITA NO.235/VIZAG/2013 M/S. RAMAKRISHNA & CO., VISAKHAPATNAM 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 14.2.2013 AND IT PERTAI NS TO THE ASSESSMENT YEAR 2006-07. THE CROSS APPEAL FILED BY THE REVENUE IN SUPPORT OF THE ORDER OF CIT(A). 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A PARTNE RSHIP FIRM CONSISTING OF 4 PARTNERS HAS FILED RETURN OF INCOME FOR THE YE AR UNDER CONSIDERATION ON 16.8.2011. IN HIS RETURN OF INCOME ASSESSEE HAS CLAIMED CERTAIN DEVELOPMENT EXPENSES AND A.O. CALLED THE ASSESSEE T O SUBMIT THE DETAILS IN RESPECT OF THE DEVELOPMENT EXPENDITURE I NCURRED BY THE ASSESSEE. IN RESPONSE TO THAT, THE ASSESSEE HAS SU BMITTED THAT THE FIRM CONSISTED OF 4 PARTNERS NAMELY (I) SHRI GANNAMANEED I VENKATA RAM KRISHNA; (II) SHRI SAJJA VENKATESWARA RAO; (III) SH RI MEKA RAMA SWAMY AND (IV) SHRI MEKA VENKATA SUBBA RAO AND WAS CONSTI TUTED A PARTNERSHIP DEED DATED 1.4.1982 FOR THE PURPOSE OF CONSTRUCTION OF THEATRE FOR WHICH LAND WAS PURCHASED AND DEVELOPMEN T ACTIVITY WAS CARRIED. IT WAS SUBMITTED BEFORE THE A.O. THAT THE FIRM REALIZED THAT A CINEMA THEATRE COULD NOT BE CONSTRUCTED IN THAT LAN D DUE TO WET QUALITY OF THE SOIL AND ALSO SOME DIFFERENCES AROSE BETWEEN THE PARTNERS AND THEREFORE THE PROJECT WAS ABANDONED. HE HAS ALSO F ILED DETAILS IN ITA NO.235/VIZAG/2013 M/S. RAMAKRISHNA & CO., VISAKHAPATNAM 3 RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE. T HE A.O. AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE AND A LSO SUBMISSIONS, HE CAME TO A CONCLUSION THAT ALL THE VOUCHERS FILED BY THE ASSESSEE ARE SELF- MADE VOUCHERS AND THEREFORE HE HAS DISALLOWED 50% O F THE EXPENDITURE INCURRED BY THE ASSESSEE. ON APPEAL, CIT(A) CONFIR MED THE ORDER OF THE A.O. 3. ON BEING AGGRIEVED ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER I.E. 50% OF THE EXPENSES INCURRED BY THE ASSESSEE HIGHLY EXCESSIVE AND ONCE THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IS NOT DOUBTED, ASSESSING OFFIC ER IS NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE. HE SUBMITTED THAT ENT IRE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED. 4. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TED THE ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ONLY ISSUE FOR CONSIDERATION BEFORE US IS WHETHER T HE DISALLOWANCE MADE BY THE A.O. IS JUSTIFIED OR NOT. IT APPEARS FROM T HE RECORD THAT THE ASSESSEE HAS PURCHASED SOME LAND FOR THE PURPOSE OF CONSTRUCTION OF THEATRE. AFTER DEVELOPING THE LAND THEY CAME TO KN OW THAT THE ITA NO.235/VIZAG/2013 M/S. RAMAKRISHNA & CO., VISAKHAPATNAM 4 CONSTRUCTION OF THEATRE IS NOT FEASIBLE AND THEREFO RE THEY ABANDONED THE PROJECT AND CLAIMED THE DEVELOPMENT EXPENDITURE. T HE A.O. HAS NOT DISPUTED THE PURCHASE OF THE LAND AND DEVELOPMENTAL ACTIVITIES ALSO. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS WHEN THE A .O. HAS ASKED THE ASSESSEE THE NATURE OF THE EXPENSES, IT WAS SUBMITT ED THAT THE LAND PURCHASED BY THE ASSESSEE WAS LOW LEVEL AND MOST OF THE EXPENDITURE INCURRED TO BRING THE LAND INTO HIGH LEVEL BY FILLI NG WITH SAND TO STRENGTHEN THE FOUNDATION. HOWEVER, THE A.O. WAS O F THE OPINION THAT IN THE DOCUMENT IT WAS MENTIONED AS MERAKA LAND. THER EFORE, THERE IS NO NEED OF LEVELING THE LAND. WE FIND THAT THE RECITAL IN THE DOCUMENT MERAKA LAND DOES NOT MEAN THAT THE LAND IS AT HIGH LEVEL AREA. MERAKA MEANS IT MAY BE IN UPLAND OR LOW LAND. IT IS GENER ALLY USED IN THE DOCUMENT WITH REFERENCE TO DRY LAND. IT IS ALSO FA CT THAT THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNTS AND VOUCHERS A LSO. THE A.O. HAS DOUBTED THE VOUCHERS ON THE GROUND THAT ALL THE VOU CHERS ARE SELF MADE VOUCHERS. IN THIS CONTEXT, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT MOST OF THE EXPENDITURE INCURRED FOR THE PURPOSE OF PURCHASE OF SAND AND LABOUR PAYMENTS AND COOLIE PAY MENTS. WE THEREFORE, BY CONSIDERING THE ENTIRE FACTS AND CIRC UMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE DISALLOWANCE MADE BY THE A.O., AT 50% IS HIGHLY EXCESSIVE. THUS, WE RESTRICT THE DISALLOWAN CE TO 25%, TO MEET ITA NO.235/VIZAG/2013 M/S. RAMAKRISHNA & CO., VISAKHAPATNAM 5 THE ENDS OF JUSTICE. THUS, THIS APPEAL FILED BY TH E ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 7. THE C.O. FILED BY THE REVENUE IS SUPPORTIVE TO T HE ORDER OF CIT(A) AND IN VIEW OF THE AFORESAID FINDINGS, THE C.O. FIL ED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 TH FEB16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 5.2.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. RAMAKRISHNA & COMPANY, C/O C. SUBRAHMANYAM, CHARTERED ACCOUNTANT, 102, LAKSHMI APARTMENTS, FACO R LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM 2. / THE RESPONDENT ITO WARD-3, RAJAHMUNDRY 3. ) / THE CIT, VISAKHAPATNAM 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM