M/s. K.Venkataraju, Kadiyam Mandalam V. The ACIT, Rajahmundry

ITA 270/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6461 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Rejection of books of accounts; Depreciation
• Section: 44AD

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. 270 /VIZAG/ 2016 ( / ASSESSMENT YEAR: 2011 - 12 ) M/S. K. VENKATA RAJU KADIYAM MANDALAM ACIT, CIRCLE - 1, RAJAHMUNDRY [PAN NO. AABFK4007A ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.K. SETHI, DR / DATE OF HEARING : 17.11.2017 / DATE OF PRONOUNCEME NT : 22 .12.2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, RAJAHMUNDRY VIDE ITA NO.066/2014 - 15/AC C - 1 RJY/2015 - 16 DATED 1.3.2016 FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF EXECUTION OF CIVIL CONTRACT WORKS . DURING THE ITA NO.270/VIZAG/2016 M/S. K. VENKATA RAJU, KADIYAM MANDALAM 2 YEAR RELEVANT TO THE ASSESSMENT YEAR , THE ASSESSEE FIRM FILED ITS RETURN O F INCOME THROUGH E - FILING FOR THE ASSESSMENT YEAR 2011 - 12 ON 30. 0 9.2011 DECLARING TOTAL INCOME AT RS. 1,03,36,300/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON TOTAL IN COME OF RS. 2,26,89,287/ - AS UNDER . INCOME FROM MAIN CONTRACTS AS ESTIMATED RS.1,10,64,500 INCOME FROM SUB - CONTRACTS AS ESTIMATED RS.67,27,496 INCOME FROM SUB - CONTRACTS AWARDED AS ESTIMATED RS.6,94,400 RENTAL RECEIPT ASSESSED UNDER OTHER SOURCES RS.5,20,000 INTEREST RECEIVED ASSESSED UND ER OTHER SOURCES RS.36,82,891 TOTAL INCOME ASSESSED RS.2,26,89,287 THE AO DID NOT ALLOW THE DEPRECIATION ON THE INCOME ESTIMATED . 3 . THE A .O. ALSO ASSESSED THE RENTAL INCOME RECEIVED OF RS.5,20,000/ - AND INTEREST INCOME OF RS.36,82,891/ - SEPARATELY UND ER THE HEAD 'INCOME FROM OTHER SOURCES'. 4 . AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE CIT(A) AND THE LD. CIT(A) CONFIRMED THE ESTIMATION OF INCOME @ 7% ON MAIN CONTRACTS, 5% ON SUB CONTRACTS AND 1% ON SUB CONTRACTS GIVEN BY TH E ASSESSEE BY OTHER PARTIES. THE LD.CIT(A) DELETED THE ADDITION MADE ON ACCOUNT OF RENTAL INCOME AND WITH REGARD TO THE INTEREST INCOME THE ITA NO.270/VIZAG/2016 M/S. K. VENKATA RAJU, KADIYAM MANDALAM 3 LD.CIT(A)HELD THAT THE AO IS JUSTIFIED IN ASSESSING THE INTEREST INCOME SEPARATELY. 5 . AGGRIEVED BY THE ORDER OF T HE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. THE ASSESSEE THE FILED ORIGINAL GROUNDS ALONG WITH APPEAL MEMO AND SUBSEQUENTLY FILED THE REVISED GROUNDS OF APPEAL ON 20.12.2017 DURING THE APPEAL HEARING. AFTER HEARING BOTH THE SIDES, THE R EVISED GROUNDS OF APPEAL IS ADMITTED AND TAKEN UP FOR ADJUDICATION. 6 . DURING THE APPEAL HEARING, THE LD.AR HAS ARGUED FOR DEPRECIATION ALLOWANCE FROM THE ESTIMATED INCOME AND DID NOT PRESS THE OTHER GROUNDS IN THE REVISED GROUNDS OF APPEAL AS WELL AS IN THE ORIGINAL GROUNDS OF APPEAL. THEREFORE, EXCEPT GROUND NO.3, GROUND NOS. 1,2, 5 AND 6 ARE DISMISSED AS NOT PRESSED. THE ASSESSEE HAS ARGUED THAT ESTIMATION OF INCOME MADE BY THE A.O. AS WELL AS THE FIRST APPELLATE AUTHORITY IS ON HIGHER SIDE AND ARGUED THAT DEPRECIATION REQUIRED TO BE ALLOWED. THE LD. A.R. RELIED ON THE ORDERS OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 , IN ITA NO.370/VIZAG/2012 DATED 30/11/2015 WHEREIN THE C OORDINATE BENCH OF THIS TRIBUNAL ON THE SIMILA R FACT S CONFIR MED THE ESTIMATION OF INCOME AND ALLOWED THE ITA NO.270/VIZAG/2016 M/S. K. VENKATA RAJU, KADIYAM MANDALAM 4 DEPRECIATION SUBJECT TO THE CONDITION THAT THE RESULTANT INCOME SHOULD NOT BE LESS THAN THE RETURNED INCOME. THE LD. A.R. SUBMITTED THAT THE FACTS OF THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 20 11 - 12 ARE SIMILAR TO THAT OF THE FACTS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 10, HENCE THERE IS NO REASON FOR DEVIATION. 7 . ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDERS OF THE CIT(A). 8 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,03,36,200/ - AND THE A.O. COMPLETED THE ASSESSMENT ON TOTAL INCOME OF RS. 2,26,89,287/ - . IN THE ASSESSMENT P ROCEEDINGS, THE A.O. COMPLETED THE ASSESSMENT ESTIMATING THE INCOME @ 8% ON IMPUGNED CONTRACTS, 6% ON SUB CONTRACTS, 2% ON SUB CONTRACTS GIVEN, HOWEVER, THE A.O. HAS NOT ALLOWED THE STATUTORY ALLOWANCE OF DEPRECIATION. THE LD. CIT(A) HAS REDUCED THE ESTIM ATION OF INCOME BUT DID NOT ALLOW THE DEPRECIATION. THE DEPRECIATION IS A STATUTORY ALLOWANCE WHICH REQUIRE TO BE ALLOWED BY THE A.O ., A S PER THE DECISION OF HONBLE ITA NO.270/VIZAG/2016 M/S. K. VENKATA RAJU, KADIYAM MANDALAM 5 HIGH COURT IN THE CASE O F INDWELL CONSTRUCTIONS VS. CIT AND THE DECISION OF CIT. VS,. Y.R AMACHANDRA REDDY ITTA NO.48/2002 DATED 30/07/2014, HONBLE HIGH COURT HELD THAT E VEN THOUGH THE A.O. REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME DEPRECIATION IS ALLOWABLE UNLESS THERE IS AN OCCASION TO DISBELIEVE THE PURCHASE OF MACHINERY. THE ONLY ARGUMENT IN THIS CASE MADE BY THE ASSESSEE WAS TO ALLOW THE DEPRECIATION. ON THE SIMILAR FACTS AND CIRCUMSTANCES, THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 ALLOWED THE DEPRECIATION FROM THE ESTIMATION OF INCOME. FOR THE S AKE OF CONVENIENCE AND CLARIFY, WE EXTRACT RELEVANT PARAGRAPH OF THE ITATS ORDER IN PARA NOS.16 & 17, WHICH READS AS UNDER: 17. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW EXPRESSED BY THE HONBLE JURISDICTIONAL HIGH COURT AND ALSO CONSIDERING THE COORDIN ATE BENCH DECISION OF THIS TRIBUNAL, WE ARE OF THE OPINION THAT DEPRECIATION IS A ALLOWABLE DEDUCTION, EVEN AFTER ESTIMATION OF NET PROFIT FROM THE CONTRACT RECEIPTS. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION AGAINST THE INCOME ESTIMATED FROM THE CONTRACT RECEIPTS. AS FAR AS THE DISALLOWANCE OF REMUNERATION TO PARTNERS AND INTEREST ON PARTNERS CAPITAL ACCOUNT IS CONCERNED, THE STATUTE ITSELF IN SECTION 44AD OF THE ACT, ALLOWED SEPARATE DEDUCTIONS TOWARDS INTEREST ON CAPITAL ACCO UNTS AND REMUNERATION TO PARTNERS, AFTER ESTIMATION OF NET PROFIT FROM THE GROSS RECEIPTS. THE CIT (A) AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS RIGHTLY DIRECTED THE A.O. TO ALLOW REMUNERATION TO PARTNERS AND INTEREST ON PARTNERS CA PITAL ACCOUNT FROM THE NET PROFIT ESTIMATED. THEREFORE, WE FIND NO ERROR OR INFIRMITY IN THE ORDER OF THE CIT (A), HENCE, WE INCLINED TO UPHELD THE ORDER OF THE CIT (A). 18. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE TOTAL INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IN ACCORDANCE WITH THE DECISIONS RENDERED BY US ON VARIOUS ISSUES IN THE PRECEDING PARAGRAPHS. HOWEVER, THE INCOME SO COMPUTED WORKS 4OUT TO LESS THAN THE INCOME RETURNED BY THE ASSESSE, THEN, THE TOTAL INCOME SO COMPUTED SHALL NOT GO BEYOND THE ITA NO.270/VIZAG/2016 M/S. K. VENKATA RAJU, KADIYAM MANDALAM 6 RETURNED INCOME AND IT SHOULD BE RESTRICTED TO THE INCOME RETURNED BY THE ASSESSE, SINCE, THE ASSESSED INCOME SHOULD NOT BE LESS THAN THE RETURNED INCOME. 9 . IN THE INSTANT CASE THERE IS NO DISPUTE THAT FACTS ARE SIMILAR TO THAT OF THE ASSESSEES CA SE FOR THE ASSESSMENT YEAR 2009 - 10. THE LD. D.R. DID NOT BRING ANY OTHER CASE LAW OR DISTINGUISHED THE FACTS OF THE CASE. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE ITAT FOR THE EARLIER YEAR IN THE ASSESSEES OWN CASE, WE DIRECT THE A.O. TO ALLOW THE DEPRECIATION AGAINST THE INCOME ESTIMATED FROM THE CONTRACT RECEIPTS. HOWEVER, THE INCOME SO COMPUTED SHALL NOT BE LESS THAN THE RETURNED INCOME . ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 1 0 . IN THE RESULT, THE AP PEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND DEC 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM: /DATED : 22 .12.2017 VG , SPS / L.RAMA,SPS ITA NO.270/VIZAG/2016 M/S. K. VENKATA RAJU, KADIYAM MANDALAM 7 / COPY OF THE ORDER FORWARDED TO : - 1. / THE APPELLANT M/S. K. VENKATARAJU, VEMAGIRI, KADIYAM MANDALAM 2 . / THE RESPONDENT THE ACIT, CIRCLE - 1, RAJAHMUNDRY 3 . / THE CIT , RAJAHMUNDRY 4 . ( ) / THE CIT (A) , RAJAHMUNDRY 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM