M/s RR Constructions, Vijayawada V. THE DCIT, Vijayawada

ITA 248/VIZ/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8736 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S MURTHY
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3); 263

Judgement Text

ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 1 , , 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.248/VIZAG/2015 ( / ASSESSMENT YEAR: 2010-11) M/S. R.R. CONSTRUCTIONS, VIJAYAWADA DCIT, CIRCLE - 2(1), VIJAYAWADA [PAN NO. AADFR5608L ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI P.S. MURTHY, DR / DATE OF HEARING : 20.02.2018 / DATE OF PRONOUNCEMENT : 28.02.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX {CIT}, VIJAYAWADA DATED 27.3.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. ALL THE GROUNDS OF APPEAL ARE RELATED REVISION U /S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') BY THE CIT. IN ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 2 THIS CASE, THE ASSESSEE FILED RETURN OF INCOME ADMI TTING TOTAL INCOME OF ` 37,88,885/-. THE A.O. HAS TAKEN UP THE CASE FOR SC RUTINY AND CALLED FOR THE RELEVANT INFORMATION AND EXAMINED THE BOOKS OF ACCOUNTS. SINCE THE A.O. WAS NOT SATISFIED WITH THE BOOK RESULTS, INVOK ED THE PROVISIONS U/S 145(3) OF THE ACT AND COMPLETED THE ASSESSMENT ESTI MATING THE INCOME @ 8% ON OWN CONTRACTS AND 5% ON SUB CONTRACT WORKS GIVEN TO OTHERS AND ACCORDINGLY, COMPLETED THE ASSESSMENT U/S 143(3 ) OF THE ACT BY AN ORDER DATED 27.3.2015 ON TOTAL INCOME OF ` 40,09,400/-. THE GROSS TOTAL INCOME WAS WORKED OUT TO ` 80,21,700/- AND THE A.O. HAS ALLOWED THE DEPRECIATION, REMUNERATION AND INTEREST PAID ON CAP ITAL AND COMPUTED THE TOTAL INCOME AT ` 40,09,400/-. SUBSEQUENTLY, THE CIT HAS TAKEN UP THE CASE FOR REVISION U/S 263 OF THE ACT AND ISSUED THE SHOW CAUSE NOTICE WITH THE FOLLOWING ERRORS, WHICH ARE STATED TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. (I)THE A.O. HAS ESTIMATED THE INCOME @ 5% ON SUB CO NTRACTS GIVEN TO OTHERS WITHOUT COLLECTING ANY MATERIAL AND THE DETAILS AND THE RELEVANT PARTICULARS. (II) THE A.O. HAS COMPLETED THE ASSESSMENT ESTIMATI NG THE INCOME @ 8% ON OWN CONTRACT WITHOUT OBTAINING THE RELEVANT MATERIAL IN DICATING THE BASIS FOR MAKING ESTIMATION OF INCOME @ 8% ON CONTRACT RECEIPTS. (III) THE A.O. HAS ALLOWED THE DEPRECIATION OF ` 28,23,214/- FROM THE ESTIMATED INCOME. THE LD. CIT(A) IS OF THE VIEW THAT THE EXP ENDITURE REQUIRED TO BE ALLOWED U/S 30 TO 38 OF THE ACT DEEMED TO HAVE BEEN ALLOWED AND THERE NO CASE FOR ALLOWING DEPRECIATION SEPARATELY FROM THE ESTIM ATED INCOME. (IV)THE ASSESSEE HAD INVESTED A SUM OF ` 42,39,000/- IN THE LAND. THE TOTAL ACCUMULATED INVESTMENT MADE IN THE LAND WAS ` 1,54,47,855/- AND THE A.O. HAS NOT CALLED THE RELEVANT DETAILS AND EXAMINED THE SO URCES/PURPOSES, ETC. (V) THE A.O. HAS NOT VERIFIED THE UNSECURED LOANS A ND MERELY ACCEPTED THE LETTERS FILED BY THE ASSESSEE WITHOUT EXAMINING THE IDENTIT Y, GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 3 THE ASSESSEE FILED REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE LD. CIT. NOT BEING SATISFIED WITH THE REPLY OF THE ASS ESSEE, THE LD. CIT HELD THE ASSESSMENT MADE U/S 143(3) OF THE ACT DATED 13. 12.2012 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, ACCORDINGLY SET ASIDE THE ASSESSMENT ORDER MADE BY THE A.O. AND DIR ECTED THE A.O. TO RE-DO THE ASSESSMENT AS PER THE DIRECTIONS GIVEN IN THE REVISION ORDER. AGGRIEVED BY THE ORDER OF THE LD. CIT, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 3. DURING THE APPEAL HEARING, THE LD. A.R. OF THE A SSESSEE ARGUED THAT IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AFTER VERIFICATION OF ALL THE DETAILS REQUIRED FOR ASSESSMENT AND IN THE PROCESS THE ISSUES RAISED BY THE LD. CIT WERE ALSO CONSIDERED BY THE A.O. THE AR SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS, VOUCHE RS AND SUBMITTED THE RELEVANT INFORMATION WITH REGARD TO THE EXPENDI TURE DEBITED TO THE P&L ACCOUNT, EXPLAINED THE INVESTMENTS MADE DURING THE YEAR AND FILED THE CONFIRMATIONS LETTERS IN RESPECT OF LOANS AND S UNDRY CREDITORS ETC. AND THE AO HAS COMPLETED THE ASSESSMENT AFTER VERIF YING THE ENTIRE INFORMATION PLACED BEFORE HIM. THE A.O. CONCLUDED THAT THE TRUE AND CORRECT PROFITS CANNOT BE ARRIVED AT FROM THE BOOKS OF ACCOUNTS AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS AND COMP UTED THE ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 4 ASSESSMENT ESTIMATING THE INCOME @ 8% ON OWN CONTRA CTS AND 5% ON SUB CONTRACTS. THE LD. A.R. FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THE RELEVANT EVIDENCES IN RESPECT OF THE INVESTMENTS MADE DURING THE YEAR AND UNSECURED LOANS ACCEPTED DURING THE YEAR, THEREFORE , THERE IS NO CASE FOR REVISION U/S 263 OF THE ACT. THE LD. CIT WAS OF THE VIEW THAT THE AO HAS NOT MADE THE INVESTIGATION TO THE LEVEL OF HIS EXPECTATION HENCE TAKEN UP THE CASE FOR REVISION WHICH IS NOT PERMITT ED IN LAW. IN THE EYES OF THE LD. CIT, THE A.O. SHOULD HAVE DONE MORE ENQU IRIES AND OBTAINED SOME MORE INFORMATION BEFORE COMPLETING THE ASSESSM ENT, WHICH TANTAMOUNT TO INADEQUATE ENQUIRY, BUT NOT THE LACK OF ENQUIRY. THE LD. A.R. FURTHER SUBMITTED THAT INADEQUATE ENQUIRY IS N OT A CASE FOR REVISION U/S 263 OF THE ACT. THE CASE OF THE ASSESSEE IS TH AT INADEQUATE ENQUIRY, HENCE, REQUESTED TO QUASH THE REVISION ORDER PASSED U/S 263. 4. THE LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF TH E ACT ON 31.12.2012. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAS CALLED FOR EVIDENCES IN RESPECT OF EXPENSES CLAIMED BY THE ASS ESSEE UNDER VARIOUS HEADS AND VERIFIED THE VOUCHERS/BILLS AND THE SAME IS EVIDENT FROM THE ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 5 ASSESSMENT ORDER. SINCE THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE EXPENSES WITH PROPER EVIDENCES, THE A.O. INVOKED TH E PROVISIONS OF SECTION 145(3) OF THE ACT AND ACCORDINGLY, COMPLETE D THE ASSESSMENT BY ESTIMATION OF INCOME. ONCE THE ASSESSMENT IS COMPL ETED BY REJECTION OF BOOKS OF ACCOUNTS ON ESTIMATION BASIS, THERE IS NO MERIT IN THE ARGUMENT OF LD. CIT THAT THE A.O. HAS NOT CONDUCTED THE PROP ER ENQUIRY. THE A.O. RESORTS TO ESTIMATION OF INCOME ONLY AS A LAST RESO RT, WHEN THE ASSESSEE FAILS TO FURNISH THE COMPLETE INFORMATION FOR COMPL ETING THE ASSESSMENT. THE ESTIMATION OF INCOME @ 8% ON OWN CONTRACTS IS S UPPORTED BY NUMBER OF JUDGEMENTS INCLUDING THE DECISION OF SPEC IAL BENCH IN THE CASE OF ARIHANT BUILDERS, DEVELOPERS & INVESTORS (P.) LTD. V. ASSISTANT COMMISSIONER OF INCOME-TAX*, CIRCLE I(1), INDORE, [2007] 106 ITD 10 (INDORE) AND SIMILARLY THE ESTIMATION OF INCOME @ 5% ALSO A PPEARS TO BE REASONABLE AND SUPPORTED BY THE NUMBER OF DECISI ONS. THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEW, HENCE, THERE IS NO CASE FOR MAKING REVISION U/S 263 OF THE ACT. ACCORDINGLY, THE ORDE R OF THE LD. CIT ON THE ISSUE OF ESTIMATION OF INCOME FAILS. 6. THE NEXT ISSUE FOR TAKING THE CASE FOR REVISION U/S 263 OF THE ACT IS THE ALLOWANCE OF DEPRECIATION FROM THE ESTIMATED IN COME. THE A.O. COMPLETED THE ASSESSMENT BY ESTIMATING THE INCOME @ 8% ON OWN CONTRACTS AND 5% ON SUB CONTRACTS AND FROM THE RESU LTANT PROFIT, THE ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 6 A.O. HAS ALLOWED THE DEPRECIATION AS ALLOWABLE AS P ER THE ACT. THE LD. CIT HAS TAKEN UP THE CASE FOR REVISION U/S 263 OF T HE ACT, HOLDING THAT ONCE THE INCOME IS ESTIMATED, THE EXPENDITURE U/S 30 TO 38 OF THE ACT DEEMED TO HAVE BEEN CONSIDERED AND THUS, IN THE OP INION OF THE LD. CIT, NO DEPRECIATION REQUIRED TO BE ALLOWED SEPARAT ELY FROM THE ESTIMATED INCOME. HOWEVER, DEPRECIATION ALLOWANCE IS STATUTORY ALLOWANCE, WHICH REQUIRED TO BE ALLOWED EVEN IF THE INCOME IS ESTIMATED. HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT IN T HE CASE OF CIT VS Y. RAMACHANDRA REDDY, [2014] 50 TAXMANN.COM 129 (ANDHRA PRADESH) SUPPORTS THIS VIEW. FURTHER, IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09, THE ITAT VISAKHAPATNAM IN ITA NO.447/VIZAG/2013 DATED 6.11.2015 HELD THAT DEPRECI ATION IS AN ALLOWABLE DEDUCTION EVEN AFTER ESTIMATION OF NET PR OFIT AND GROSS PROFIT. HENCE, IT IS ESTABLISHED THAT THE A.O. HAS TAKEN ON E OF THE POSSIBLE VIEWS SUPPORTED BY THE LEGAL PRECEDENTS. HENCE, THERE IS NO CASE FOR REVISION U/S 263 OF THE ACT. 7. THE NEXT ISSUE FOR REVISION U/S 263 OF THE ACT I S INVESTMENTS MADE IN LAND. THE ASSESSEE HAD MADE INVESTMENTS OF ` 42,39,000/- IN THE LAND AND THE ACCUMULATED INVESTMENT WAS ` 1,54,47,855/-. DURING THE ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED BY THE ASS ESSEE THAT THE SOURCES OF THEM HAVE FLOWN OUT OF FUNDS USED FROM T HE OD LIMIT OF ` ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 7 100 LAKHS HELD WITH THE CORPORATION BANK AND IT WAS VERIFIED DURING THE SCRUTINY ASSESSMENT WITH NECESSARY DOCUMENTS. THER EFORE, THE ISSUE WITH REGARD TO THE INVESTMENTS WAS VERIFIED BY THE ASSESSING OFFICER DURING THE SCRUTINY ASSESSMENT PROCEEDINGS AND AFTE R COMPLETE VERIFICATION OF THE INVESTMENTS WITH RELEVANT DOCUM ENTS AND THE BOOKS OF ACCOUNTS THE A.O. HAS ACCEPTED THE INVESTMENTS M ADE BY THE ASSESSEE. ONCE THE A.O. HAS MADE COMPLETE ENQUIRIE S, THERE IS NO CASE FOR REVISION U/S 263 OF THE ACT. 8. THE NEXT ISSUE FOR REVISION U/S 263 OF THE ACT W AS UNSECURED LOANS. THE ASSESSEE HAS STATED BEFORE THE CIT THAT THE ASSESSEE HAD FURNISHED THE CONFORMATION FROM SUNDRY DEBTORS, SUN DRY CREDITORS, UNSECURED LOANS, ETC., WHICH WAS VERIFIED BY THE A. O. BEFORE COMPLETING THE ASSESSMENT. ONCE THE ASSESSEE SUBMITS THE CONF IRMATION LETTERS, BURDEN SHIFTS TO THE REVENUE AND BURDEN OF THE ASSE SSEE STANDS DISCHARGED AND THE LD. CIT CANNOT HOLD THAT THE A.O . HAS NOT MADE THE ENQUIRY. IF THE COMPLETE DETAILS WERE NOT OBTAINED AS EXPECTED BY THE LD. CIT, AT BEST IT CAN BE SAID THAT INADEQUATE ENQ UIRY. INADEQUATE ENQUIRY IS NOT A CASE FOR REVISION U/S 263 OF THE A CT. ONLY LACK OF ENQUIRY IS A CASE FOR REVISION U/S 263 OF THE ACT. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF MALABAR INDUSTRIES COMPANY LIMITED VS. CIT 243 ITR 83 (SC) AND THE DECISION OF ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 8 CIT VS. MAX INDIA LIMITED 166 TAXMAN.COM 188. FURT HER, HONBLE ITAT, KOLKATA HAS EXAMINED THIS ISSUE IN VINOD AGARWAL VS . PCIT 80 TAXMAN.COM 171 AND HELD THAT FOR REVISION OF THE AS SESSMENT ORDER, THE ASSESSMENT ORDER PASSED BY THE A.O. SHOULD BE ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ONCE T HE ASSESSEE FURNISHES THE REQUIRED INFORMATION, WHICH IS BEING VERIFIED B Y THE A.O., THERE IS NO CASE FOR REVISION. ONCE THE A.O. HAS CONDUCTED ENQ UIRY AND HE IS SATISFIED WITH THE REPLY GIVEN ON THE ENQUIRIES RAI SED, THE PRINCIPAL CIT CANNOT INTERVENE THROUGH REVISION TO COME TO A CONC LUSION THAT ASSESSMENT ORDER PASSED BY THE A.O. WAS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR LACK OR INADEQUATE ENQUIRY. IN THE INSTANT CASE, THE A.O. WITH REGARD TO THE ESTIMATION OF INCOME AND THE DEPRECIATION HAS TAKEN ONE OF THE PO SSIBLE VIEWS, IN RESPECT OF THE INVESTMENTS MADE, SUNDRY CREDITORS A ND UNSECURED LOANS, THE A.O. COLLECTED THE INFORMATION AFTER CONDUCTING THE ENQUIRIES AND COMPLETED THE ASSESSMENT. THEREFORE, THERE IS NO C ASE FOR REVISION U/S 263 OF THE ACT AND THE LD. PCIT HAS NOT MADE OUT A CASE OF NOT CONDUCTING THE ENQUIRY ON ANY OF THE ISSUES. THE A SSESSEES CASE IS SQUARELY COVERED BY HONBLE SUPREME COURT IN THE CA SE OF CIT VS. MAX INDIA LIMITED 166 TAXMAN.COM 188 AND THE HONBLE SU PREME COURT IN THE CASE OF CIT GUJARAT II VS. QUALITY STEEL SUPPLY COMPLEX 395 ITR 1. ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 9 AND CIT VS. Y. RAMACHANDRA REDDY 50 TAXMANN.COM 129 (AP. HENCE, WE ARE UNABLE TO SUSTAIN THE ORDER OF THE LD. PCIT AND DO NOT FIND ANY REASON TO UPHOLD THE ORDER. ACCORDINGLY, THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT IS SET ASIDE AND WE ALLOW TH E APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 28 TH FEB18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 28.02.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. R.R. CONSTRUCTIONS, D.NO.27 -11-24, MARY STREET, GOVERNORPET, VIJAYAWADA 2. / THE RESPONDENT THE DCIT, CIRCLE-2(1), VIJAYAWA DA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM ITA NO.248/VIZAG/2015 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 10 SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR 21.02.2018 SR.P S 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 22.02.2 018 SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS