ITO, Ward-8(2), Hyderabad, Hyderabad V. M/s Sri Rama Enterprises, R.R.Dist

ITA 28/HYD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0323 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K A SAI PRASAD
• Section: 133A

Judgement Text

ITA NOS 28 AND 29 RAMA ENTERPRISES RR DISTT PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 28 & 29/HYD/2015 (ASSESSMENT YEARS: 2007-08 & 2008-09) INCOME TAX OFFICER, WARD 8(2) HYDERABAD VS. M/S.SRI RAMA ENTERPRISES, DOOR NO.6-2 NARASIMHA REDDY ROAD, SHAMSHABAD, R.R.DISTT. PAN: ABAFS 6680 F (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAJAT MITRA, DR FOR ASSESSEE : SHRI K.A. SAI PRASAD DATE OF HEARING : 30.07.2015 DATE OF PRONOUNCEMENT : 30.07.2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, J.M. THESE TWO APPEALS ARE PREFERRED BY REVENUE IN THE RESPECTIVE A.YS AGAINST THE ORDER OF THE CIT (A)-II I, HYDERABAD, DATED 7 TH OCTOBER, 2014. THE REVENUE IS AGGRIEVED ON DELETIO N OF THE ADDITIONS MADE BY THE AO IN ESTIMATING THE COMM ISSION INCOME AND ALSO ALLOWING THE EXPENDITURE AT A HIGHE R RATE. 2. BRIEFLY STATED, ASSESSEE FIRM IS ENGAGED IN CHIT FUND BUSINESS, BUT SOME OF THE CHITS WERE NOT REGISTERED . IN THE SURVEY CONDUCTED U/S 133A ON 21.02.2008, THE SURVE Y PARTY ESTIMATED THE INCOME FROM UNREGISTERED CHITS AT 3% AS ASSESSEE WAS RECEIVING COMMISSION IN THE SAID BUSINESS AS A FOREMAN. AO IN THE COURSE OF ASSESSMENT PROCEEDINGS ISSUED A SH OW CAUSE ITA NOS 28 AND 29 RAMA ENTERPRISES RR DISTT PAGE 2 OF 4 NOTICE TO THE ASSESSEE THAT THE INCOME OF THE CHITS CAN BE ESTIMATED AT 3%. HOWEVER, WHILE PASSING THE ORDER, HE ESTIMATED COMMISSION AT 5%. NOT ONLY THAT HE ALLOWED 25% OF T HE COMMISSION ESTIMATED AS EXPENDITURE AND MADE ADDITI ONS IN THE ASSESSMENT. 3. BEFORE THE LD CIT (A) ASSESSEE SUBMITTED THAT TH EY WERE NOT GETTING EVEN 3% AND SOME TIMES THEY PAY HIGHER COMM ISSION ALSO TO THE AGENTS AND REFERRED TO THE STATEMENTS RECORD ED IN THE COURSE OF SURVEY. ON THE SUBMISSIONS OF THE ASSESSE E, LD CIT (A) ALLOWED ASSESSEES CONTENTIONS AND ESTIMATED THE IN COME AT 3% AND FURTHER ALLOWED EXPENDITURE THEREON AT 70% FOLL OWING THE ASSESSEES CLAIM IN EALRIER YEARS. THE ORDER OF THE CIT (A) IS AS UNDER: 6. I HAVE GONE THROUGH THE FACTS AND ISSUES CAREFU LLY. I HAVE ALSO GONE THROUGH THE STATEMENT OF SRI P. RAMASWAMY, PARTNER OF THE APPELLANT FIRM, RECORDED DURING THE COURSE OF SURVEY ON 21-02-2008 - A COPY OF WHICH WAS FILED IN THE PAPER BOOK. IN Q.NO.10 OF TH E ABOVE STATEMENT, THE SURVEY TEAM WORKED OUT THE COMMISSION FOR THE F.Y 2006-07 AT RS.16,49,250/- AFTER VERIFYING THE RECORDS FOUND DURING THE SURVEY . HOWEVER, THE AO ESTIMATED THE FOREMAN COMMISSION AT 5% IN THE ASSESSMENT AND WORKED OUT THE COMMISSION AT RS.24,78,750/- WITHOUT ANY SPECIFIC REASONS. I DO NOT SEE ANY REASON TO DEVIATE FROM TH E FIGURE ARRIVED AT BY THE SURVEY TEAM. I, THEREFORE , DIRECT THE AO TO ADOPT THE FIGURE OF RS.16,49,250/- AS WORKED OUT BY THE SURVEY TEAM. HENCE, THIS GROUND O F APPEAL IS ALLOWED. 7. WITH REGARD TO GROUND NO.3, THE AO ESTIMATED THE EXPENDITURE @ 25% ON THE GROSS COMMISSION. THE APPELLANT FILED COPY OF RETURNS FOR THE ,EARLIER TW O ASSESSMENT YEARS I.E., 2005-06 AND 2006-07 IN THE PAPER BOOK. AS CAN BE SEEN FROM THESE RETURNS, THE ITA NOS 28 AND 29 RAMA ENTERPRISES RR DISTT PAGE 3 OF 4 NET PROFIT WORKED OUT TO 26.5% FOR THE AY 2005-06 AND 27.45% FOR THE AY 2006-07 WHICH MEANS THE EXPENDITURE IS ABOUT 70% OF THE GROSS COMMISSION. HOWEVER, THE ESTIMATION OF THE AO AT 25% IS ON LOWE R SIDE. 70% OF EXPENDITURE ON GROSS COMMISSION WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE EXPENDITURE AT 70% ON THE GRO SS COMMISSION OF RS.16,49,250/-. HENCE, THIS GROUND OF APPEAL IS ALLOWED. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO N OT SEE ANY REASON TO INTERFERE WITH THE SAID ORDER. AS RIGHTLY CONSIDERED BY THE LD CIT (A), THE COMMISSION CANNOT BE ESTIMATED AT 5% WITHOUT THERE BEING ANY BASIS AND THE ACTION OF THE AO IS ITSELF ARBITRARY. NOT ONLY THAT EVEN THE EXPENDITURE AT 25 % IS NOT HAVING ANY BASIS. THE LD CIT (A) CONSIDERED THE ASS ESSEES RETURNS IN EARLIER YEARS AND ARRIVED AT REASONABLE EXPENDITURE OF 70%. NOTHING WAS BROUGHT ON RECORD TO COUNTER THE F INDINGS OF THE LD CIT (A). THEREFORE, WE FIND NO MERIT IN THE CONTENTIONS AND ACCORDINGLY THE GROUNDS ARE DISMISSED. 5. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2015. S D/ - S D/ - (B. RAMAKOTAIAH) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 30 TH JULY, 2015. ITA NOS 28 AND 29 RAMA ENTERPRISES RR DISTT PAGE 4 OF 4 VNODAN/SPS COPY TO: 1. INCOME TAX OFFICER WARD 8(2), 8 TH FLOOR, D-BLOCK, IT TOWERS, AC GUARDS, HYDERABAD 2. M/S. SRI RAMA ENTERPRISES, DOOR NO.6-2, NARASIMHA R EDDY ROAD, SHAMSHABAD, R.R. DISTRICT. 3. CIT(A) III HYDERABAD 4. CIT II HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER