Income Tax Officer, Ward-2, Kadapa V. Sri P. Rama Gangi Reddy, Kadapa

ITA 279/HYD/2014

• Counselvise Citation: 27922514 RSA 2014
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 279/HYD/2014 ASSESSMENT YEAR : 2010-11 INCOME-TAX OFFICER, WARD 2, KADAPA SRI P. RAMA GANGI REDDY, AYYAVARUPALLI VILLAGE, VEMPALLI, KADAPA DISTRICT. (APPELLANT) (RESPONDENT) REVENUE BY SHRI RAJAT MITRA ASSESSEE BY NONE DATE OF HEARING 15-10-2014 D ATE OF PRONOUNCEMENT 22-10-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), GUNTUR, DATED 21.11.2013 FOR THE ASSESSMENT YEAR 2010-11. 2. AS SEEN FROM THE ORDER SHEET DATED 10/06/2014, WHEN THE MATTER WAS ADJOURNED AT THE REQUEST OF ASSESSEES C OUNSEL, BOTH THE PARTIES WERE INFORMED ABOUT THE POSTING OF APPEAL O N 15/10/2014. HOWEVER, WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT FOR THE ASSESSEE NOR THERE IS ANY APPLICATION FOR A DJOURNMENT. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE QUA RE SPONDENT- ASSESSEE AFTER HEARING THE LEARNED DR. 2 ITA NO. 279/HYD/2014 SRI P. RAMA GANGI REDDY 3. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL IS ENGAGED IN EXECUTING CIVIL CONTRACT WORKS. FOR THE AY UNDER DI SPUTE, ASSESSEE FILED HIS RETURN OF INCOME ON 15/11/2010 DECLARING TOTAL INCOME AT RS. 4,79,600. DURING THE ASSESSMENT PROCEEDING, ASSESSI NG OFFICER NOTICING THAT THE NET PROFIT ARRIVED AT RS. 5,79,60 0 ON GROSS CONTRACT RECEIPTS OF RS. 2,51,42,668 WORKS OUT TO ONLY 2.3%, WHICH IS VERY LOW IN THIS LINE OF BUSINESS, PROPOSED TO ADOPT THE NET PROFIT RATE AT 12.5%. HOWEVER, ASSESSEE OBJECTED TO ADOPTION OF NET PROFI T RATE AT 12.5%. IN COURSE OF ASSESSMENT PROCEEDING, ASSESSING OFFICER NOTICED THAT ASSESSEE HAS DEBITED HUGE EXPENDITURE UNDER THE HEA D CONTRACT WORK EXPENSES, WHICH AMOUNTED TO RS. 2,33,29,290. AS AL LEGED BY ASSESSING OFFICER, THOUGH, ASSESSEE WAS CALLED UPON TO SUBSTANTIATE THE EXPENDITURE CLAIMED BY PRODUCING BOOKS OF ACCOU NT, BILLS, VOUCHERS, ETC., BUT, ASSESSEE DID NOT PRODUCE THE S AME. ASSESSING OFFICER, THEREFORE, PROCEEDED TO COMPLETE THE ASSES SMENT BY REJECTING THE BOOKS OF ACCOUNT AND ESTIMATED THE NET PROFIT A T 12.5% ON GROSS RECEIPTS OF RS. 2,51,42,668. BEING AGGRIEVED OF SUC H ASSESSMENT ORDER, SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4. DURING THE PROCEEDING BEFORE THE CIT(A), ASSESSE E CONTENDED THAT HE HAS UNDERTAKEN CONTRACT WORK ON HIS OWN AS WELL AS ON SUB- CONTRACT BASIS, RECEIPTS FOR WHICH DURING THE YEAR ARE ALMOST EQUAL. THEREFORE, ASSESSING OFFICER CANNOT ESTIMATE THE PR OFIT ON MAIN CONTRACT AND AS WELL AS ON SUB-CONTRACT APPLYING TH E SAME RATE. IT WAS FURTHER SUBMITTED THAT WHILE ESTIMATING PROFIT ON G ROSS CONTRACT RECEIPTS, ASSESSING OFFICER HAS NOT REDUCED RECOVER IES FROM THE GROSS BILLS. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, HELD THAT ESTIMATION OF PROFIT ON MAIN CONTRACT WORK SHOULD B E AT 7% AND ON SUBCONTRACT WORK AT 4%. HE FURTHER DIRECTED THE ASS ESSING OFFICER TO REDUCE DEPARTMENTAL RECOVERIES BEFORE ESTIMATING TH E PROFIT ON THE MAIN CONTRACT WORK. BEING AGGRIEVED OF THE SAID ORD ER, THE DEPARTMENT IS IN APPEAL BEFORE US. 3 ITA NO. 279/HYD/2014 SRI P. RAMA GANGI REDDY 5. WE HAVE HEARD THE LEARNED DR AND PERUSED THE ORD ERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. HAVING CONSIDERED THE SUBMISSIONS OF THE LEARNED DR, WE AR E OF THE VIEW THAT ESTIMATION OF PROFIT AT 7% ON MAIN CONTRACT WORK AN D 4% ON THE SUBCONTRACT WORK BY CIT(A) IS ON THE LOWER SIDE. I T IS OBSERVED THAT IN SIMILAR NATURE OF CASES OF REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT IN CASE OF ASSESSEES ENGAGED I N CONTRACT WORK, THIS TRIBUNAL HAS BEEN ADOPTING NET PROFIT RATE OF 8% ON MAIN CONTRACT AND 5% ON SUBCONTRACT WORK. THEREFORE, CONSISTENT W ITH THE VIEW TAKEN BY TRIBUNAL IN SIMILAR NATURE OF CASES, WE DI RECT THE ASSESSING OFFICER TO ESTIMATE NET PROFIT AT 8% ON MAIN CONTRA CT WORK AND 5% ON SUBCONTRACT WORK. HOWEVER, WE AGREE WITH THE LEARNE D CIT(A) THAT DEPARTMENTAL RECOVERIES HAVE TO BE REDUCED FROM THE GROSS CONTRACT RECEIPTS WHILE ESTIMATING PROFIT AT 8% ON THE MAIN CONTRACT WORK AS THERE IS NO PROFIT ELEMENT INVOLVED. 6. IN THE RESULT, APPEAL OF THE DEPARTMENT IS PARTL Y ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22/10/2014 SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 22 ND OCTOBER, 2014 KV COPY TO:- 1) ITO, WARD 2, SIMHAPURI COLONY, KADAPA. 2) SRI P. RAMA GANGI REDDY, AYYAVARUPALLI VILLAGE, VEMPALLI (P), KADAPA DISTRICT. 3) CIT(A), GUNTUR 4) CIT, TIRUPATHI 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD. 4 ITA NO. 279/HYD/2014 SRI P. RAMA GANGI REDDY DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER