The ITO Ward-2(2) Guntur, Guntur V. M/s Siri Constructions, Guntur

ITA 284/VIZ/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80130 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 20-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Opportunity of being heard
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH , VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL.NO. ITA NO. AY APPELLANT RESPONDENT 1 284/V/11 2005-06 INCOME TAX OFFICER, WARD 2(2), GUNTUR SIRI CONSTRUCTIONS, GUNTUR PAN AAWFS 3030N 2 371/V/11 2005-06 SIRI CONSTRUCTIONS, GUNTUR PAN AAWFS 3030N INCOME TAX OFFICER, WARD 2(2), GUNTUR REVENUE BY SHRI D. MANOJ KUMAR ASSESSEE BY SHRI G.V.N. HARI DATE OF HEARING 08-07-2014 DATE OF PRONOUNCEMENT 08-07-2014 O R D E R PER BENCH.: THESE ARE CROSS APPEALS FILED FOR THE ASSESSMENT Y EAR 2005-06 AND ARE DIRECTED AGAINST THE ORDER OF CIT(A), GUNTUR DA TED 15/12/2010. 2. THE ASSESSEE DERIVES INCOME FROM CONTRACTS. FOR THE AY 2005-06 ASSESSEE FILED ITS RETURN OF INCOME ADMITTING TAXAB LE INCOME OF RS. 61,130/-. AO PASSED AN ORDER U/S 143(3) READ WITH S ECTION 144 OF THE IT ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 9,24,562/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE FIRST APPELLATE AUTHORITY. 2 ITA NOS. 284 & 371/VIZ/11 SIRI CONSTRUCTIONS 3. THE FIRST APPELLATE AUTHORITY, ON THE ISSUE OF E STIMATION OF PROFIT, DIRECTED THE AO AS FOLLOWS: 4.3.3 IN AS MUCH AS THE BUSINESS RESULTS ARE CONCE RNED, IN PRINCIPLE, I AGREE WITH THE AO. BUT, HOWEVER, WHAT WERE THE PERCENTAGES ON CONTRACT RECEIPTS IN THE EARLIER YEA RS IS NOT KNOWN. HENCE, THE AO IS DIRECTED TO VERIFY THE PERCENTAGES FOR THE LAST THREE YEARS AND TAKE THE AVERAGE. IF SUCH AVERAGE EXCEEDS 8% BUT BELOW 12.5%, THEN, THE AO IS DIRECTED TO KEEP THE 12.5% A S ADOPTED BY THE AO. IN CASE SUCH PERCENTAGE EXCEEDS 12.5%, THEN TO TAKE THAT PERCENTAGE. IN CASE THAT AVERAGE IS BELOW 8%, THEN TAKE 8%. THUS, THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED. 4. ON THE ISSUE OF ADDITION AS UNEXPLAINED INCOME O N ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNERS DURING THE YEAR, THE CIT(A) AT PARA 4.3.2 HELD AS FOLLOWS: 4.3.2. ON VERIFICATION OF THE APPEAL RECORDS FOR TH E YEAR UNDER CONSIDERATION, IT IS SEEN THAT ON PLAIN PAPERS DETA ILS LIKE SERIAL NO., EXTENT OF LAND, CROPS GROWN, YIELD PER ACRE, RATE P ER QUINTAL, AMOUNT ETC. WAS SHOWN. ALL COLUMNS WERE FILLED IN AND NOT SIGNED BY THE PARTNERS BUT BY THE AR. THUS, AMOUNTS WERE ARRIVED AT SO AS TO MATCH THE CAPITALS INTRODUCED DURING THE YEAR. SINC E, SUCH EVIDENCES OR DETAILS WERE ONLY SELF SERVING, THE SA ME CANNOT BE TAKEN COGNIZANCE AND IN THE PROCESSES, I AM IN FULL AGREEMENT WITH THE DECISION OF THE AO AND AS SUCH THIS GROUND OF A PPEAL IS TREATED AS DISMISSED. 5. AGGRIEVED WITH THE ORDER OF THE LEARNED CIT(A), BOTH THE PARTIES FILED CROSS APPEALS ON THE ISSUE OF ESTIMATION OF INCOME. ASSESSEE FILED APPEAL ON THE ISSUE OF ADDITION ON ACCOUNT OF FRESH CAPITA L INTRODUCED BY THE PARTNERS DURING THE YEAR. 6. WE HAVE HEARD SHRI D. MANOJ KUMAR, SR. LEARNED D R ON BEHALF OF THE REVENUE AND SHRI G.V.N. HARI, LEARNED COUNSEL O N BEHALF OF THE ASSESSEE. 7. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRC UMSTANCES OF THE CASE, PERUSING THE MATERIAL ON RECORD AND THE ORDER S OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS: 3 ITA NOS. 284 & 371/VIZ/11 SIRI CONSTRUCTIONS 8. ON THE ISSUE OF ESTIMATION OF PROFIT OF THE ASSE SSEE, WE FIND NO INFIRMITY IN THE DIRECTIONS GIVEN THE LEARNED CIT(A ). THE GRIEVANCE OF THE ASSESSEE IS THAT THE AO HAS IN THE CONSEQUENTIAL OR DER ADDED THE ESTIMATE IN QUESTION TO THE RETURNED INCOME. FURTHER, HE SUB MITTED THAT INTEREST PAID ON PARTNERS CAPITAL HAS TO BE GRANTED AS A DEDUCTIO N FROM THE INCOME ESTIMATED. HE POINTED OUT THAT INTEREST ON PARTNERS CAPITAL STANDS ON THE SAME FOOTINGS AS SALARY PAID TO PARTNERS AND DENIAL OF DEDUCTION IS BAD IN LAW. 9. THE LEARNED DR OPPOSED THE CONTENTIONS OF THE LE ARNED COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT ESTIMATION OF INCOM E TAKES CARE OF ALL THESE ASPECTS. 10. IN OUR VIEW, THE CONTENTIONS OF THE LEARNED COU NSEL FOR THE ASSESSEE HAVE MERIT. HENCE, WE DIRECT THE AO TO GRANT DEDUCT ION OF INTEREST PAID ON PARTNERS CAPITAL FROM THE PROFIT ESTIMATED FROM THE CONTRACTS AS PER THE DIRECTIONS OF THE CIT(A). THE AO SHALL NOT, SEPARAT ELY, ADD THE ESTIMATED INCOME TO THE INCOME RETURNED BY THE ASSESSEE, AS I T TANTAMOUNTS TO DOUBLE ADDITION. 11. ON THE ISSUE OF ADDITION ON THE GROUND THAT PAR TNERS HAVE NOT EXPLAINED THE INTRODUCTION OF FRESH CAPITALS, WE FI ND THAT THE CIT(A) HAS TAKEN ON RECORD THE MATERIAL AND EVIDENCES FILED BY THE ASSESSEE. IN OUR VIEW, THESE EVIDENCES WERE NOT PROPERLY EVALUATED B Y THE CIT(A). UNDER THESE CIRCUMSTANCES, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORD ANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. 4 ITA NOS. 284 & 371/VIZ/11 SIRI CONSTRUCTIONS 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. PRONOUNCED IN THE OPEN COURT ON 08/07/2014. SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM, DATED: 8 TH JULY, 2014 KV COPY TO:- 1) ITO, WARD 2(2), GUNTUR 2) SIRI CONSTRUCTIONS, C/O M/S N. KOTESWARA RAO & C O.,CAS., D.NO. 23-6-17/2, PATNAM BAZAR, GUNTUR 522 003. 3) CIT(A), GUNTUR 4) CIT), GUNTUR 5)THE DEPARTMENTAL REPRESENTATIVE, I.T. A.T., VIZAG.