M/s Vijayalakshmi Enterprises, Visakhapatnam V. The ACIT, Circle-2(1), Vijayawada., Vijayawada

ITA 3/VIZ/2012

• Counselvise Citation: 325314 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Application of stay
• Section: 143(3); 263

Judgement Text

ITA NO. 3/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA ITA NO.160/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VSKP SP NO.7/VIZAG/2013 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 3 /VIZAG/ 20 1 2 ASSESSMENT YEAR : 2007 - 08 M/S. VIJAYALAKSHMI EN TERPRISES VIJAYAWADA VS. ACIT CIRCLE - 2(1) VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AADPF 9138M ITA NO.160/VIZAG/2012 ASSESSMENT YEAR : 2007 - 08 M/S. VIJAYALAKSHMI ENTERPRISES VISAKHAPATNAM VS. ACIT CIRCLE - 2(1) VIJAYAWADA (APPELLANT) (RESPONDEN T) SP NO.7/VIZAG/2013 ASSESSMENT YEAR : 2007 - 08 M/S. VIJAYALAKSHMI ENTERPRISES VIJAYAWADA VS. ACIT CIRCLE - 2(1) VIJAYAWADA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM, CA REVENUE BY : SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 11.12.2013 DATE OF PRONOUNCEMENT : 13 .12.2013 ORDER PER B . RAMAKOTAIAH : - THE ASSESSEE PREFERRED APPEAL IN ITA NO 3/ VIZAG/2013 BEING AGGRIEVED BY THE ORDER U/S 263 OF THE INCOME - TAX ACT DATED 28.10.2011 PASSED BY LD. CIT(A), VIJAYAWADA PERTAINING T O THE ASSESSMENT YEAR 2007 - 08. IN THE GROUNDS BEFORE US, THE ASSESSEE HAS BASICALLY CHALLENGED THE ORDER PASSED BY CIT(A) U/S 263 OF THE ACT SETTING ASIDE THE ASSESSMENT WITH A DIRECTION TO MODIFY THE ORDER AS PER THE REASONS MENTIONED IN THE ORDER. IN T HE GROUNDS RAISED BEFORE US, THE ASSESSEE NOT ONLY CHALLENGED THE ITA NO.3/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA ITA NO.160/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VSKP SP NO.7/VIZAG/2013 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA 2 JURISDICTION U/S 263 OF THE ACT BUT ALSO CHALLENGED THE DIRECTIONS GIVEN THEREIN. THE LD. CIT ON EXAMINATION OF THE ORDER PASSED U/S 143(3) OF THE ACT ESTIMATING THE INCOME AT 6% ON THE GR OSS RECEIPTS AND ALLOWING INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS OF RS.8 , 96 , 55 1 / - AS A DEDUCTION, INVOKED JURISDICTION U/S 263. THE LD. CIT WAS OF THE OPINION THAT THE ORDER OF THE AO IS NOT CORRECT IN THE SENSE THAT HONBLE A.P. HIGH COURT HELD IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT 232 ITR 776 THAT NO DEDUCTION/ADDITION ARE REQUIRED TO BE MADE WHEN INCOME WAS ESTIMATED AT NET INCOME BASIS. THE ASSESSEE CONTESTED THE SAME SUBMITTING THAT THE DECISION WAS NOT APPLICABLE AS THERE WAS CHANGE IN THE PROVISIONS OF THE ACT SUBSEQUENTLY AND FURTHER , COORDINATE BENCHES AT HYDERABAD AND ALSO VARIOUS HIGH COURTS OF RAJASTHAN AND ORISSA HAVE ALLOWED THE DEDUCTIONS U/S 40 OF THE ACT. T HEREFORE, PROCEEDINGS U/S 263 ARE NOT CORRECT. WHILE REJECTING TH E ABOVE CONTENTION OF THE ASSESSEE, THE LD. CIT DIRECTED THE AO TO DISALLOW THE AMOUNTS ALLOWED BY THE AO IN THE ORDER. AT THE SAME TIME, HE ALSO EXAMINED THE RECEIPTS RECEIVED BY THE ASSESSEE BY WAY OF TDS CERTIFICATES AND THE AMOUNTS ACCOUNTED IN THE P& L ACCOUNT AND NOTICED THAT THE GROSS RECEIPTS ACCOUNTED IN TDS CERTIFICATES WAS AT RS.8,67,73,973/ - WHEREAS THE GROSS RECEIPTS TAKEN BY THE AO WE RE AT RS.8,28,35,629/ - . HE ACCORDINGLY, DIRECTED THE AO TO ADOPT THE CORRECT FIGURE AND ESTIMATE THE INCOME ON THE DIFFERENCE OF THE AMOUNT AS WELL. 2. IN THE COURSE OF PRESENT PROCEEDING S, LD. COUNSEL DID NOT PRESS THE ISSUE ON GROSS TURNOVER AND ACCORDINGLY, THE GROUND IS TAKEN AS WITHDRAWN. CONSEQUENTLY, THE GROUND NO.1 WHICH IS ON THE JURISDICTION OF THE CIT U/S 263 OF THE ACT ALSO BECOMES INFRUCTUOUS , AS PART OF THE ORDER IS ACCEPTED BY THE ASSESSEE. 3. HOWEVER, THE ISSUE AGITATED IS WITH REFERENCE TO THE DIRECTION GIVEN BY THE CIT IN DISALLOWING THE PARTNERS INTEREST AND REMUNERATION AFTER ESTIM ATION OF N ET PROFIT AT 6% ON THE RECEIPTS . I T WAS SUBMITTED THAT THIS ISSUE IS FAIRLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF PRECISION FABRICATORS, KHAMMAM IN ITA ITA NO.3/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA ITA NO.160/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VSKP SP NO.7/VIZAG/2013 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA 3 NO.384/H YD /12 DATED 8.1.2013 WHEREIN SIMILAR FACTS ON AN ORDER U/S 263 , THE COORDINATE BENCH HAS HELD AS UNDER: 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS EVIDENT FROM THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT THAT THE ASSESSMENT ORDER HAS BEEN CANCELLED HOLDING IT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE FOLLOWING REASONS: - A) ESTIMATION OF PROFIT @9% OF THE GROSS CONTRACT RECEIPTS IS WITHOUT ANY BASIS. (B) WHEN THE PROFIT IS ESTIMATED, NO FURTHER DEDUCTION CAN BE GIVEN TOWARDS PAYMENT OF INTE REST AND REMUNERATION TO THE PARTNERS IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CASE OF M/S INDWELL CONSTRUCTIONS _ _V/S. CIT. WE FIND THAT SIMILAR AND IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THIS BENCH OF INCOME - TAX APPELLATE TR IBUNAL IN THE CASE OF KISHORE CONSTRUCTIONS V/S. ITO ITA NO.212/HYD/2012 DT. 20 - 12 - 2012 WHEREIN IT HELD AS FOLLOWS: ' IN THE LIGHT OF THE PRINCIPLES OF LAW DISCUSSED HEREIN ABOVE, IT CANNOT BE SAID THAT THE ASSESSMENT ORDER IS ERRONEOUS OR PREJUDICIAL TO TH E INTERESTS OF REVENUE. SIMILARLY, THE OBSERVATION OF THE CIT WITH REGARD TO ALLOWANCE OF FURTHER DEDUCTION TOWARDS PAYMENT OF REMUNERATION AND INTEREST TO THE PARTNERS TO BE NOT IN ACCORDANCE WITH THE JUDGMENT OF THE HON'BLE A.P. HIGH COURT IN THE CASE OF INDWELL LIMITED (SUPRA) AND THEREFORE THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IS NOT CORRECT. THIS TRIBUNAL IN A NUMBER OF ITS DECISIONS AFTER TAKING NOTE OF THE DECISION OF HON'BLE A.P. HIGH COURT IN INDWELL LIMITED (SUPRA) HAD HELD THAT IN CASE OF PARTNERSHIP FIRM ENGAGED IN EXECUTION OF CIVIL CONTRACT WORK FURTHER DEDUCTION TOWARDS REMUNERATION AND INTEREST PAYMENT TO THE PARTNERS IS ALLOWABLE AFTER ESTIMATING THE PROFIT AT A FIXED RATE. IN SUCH VIEW OF THE MATTER, THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL O THE INTERESTS OF REVENUE. IN FACT, THE CIT IN PARA 4.3 OF THE ORDER HAS HIMSELF REFERRED TO ONE OF THE ORDER OF THE INCOME - TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES WHEREIN THE TRIBUNAL HAS UPHELD THE ESTIMATION OF PROFIT AT 8% AND THEREAFTER ALLOWED REMUNERATION AND INTEREST PAYMENT TO THE PARTNERS. IT IS FURTHER SEEN FROM THE ORDER OF THE CIT THOUGH HE HAS HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVE NUE AS THE ESTIMATION OF PROFIT AT 8.30% IS WITHOUT ANY BASIS. ULTIMATELY, THE CIT HIMSELF HAS SET ASIDE THE ASSESSMENT AND DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEE AS THE ASSESSING OFFICER MAY THINK FIT. THE ABOVE DIRECTION OF THE CIT MAKES TWO THINGS VERY CLEAR, FIRSTLY, THE CIT AGREES THAT ESTIMATION OF INCOME HAS TO BE MADE IN THE CASE OF THE ASSESSEE AND SECONDLY THE CIT HIMSELF IS NOT SURE WHAT RATE ITA NO.3/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA ITA NO.160/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VSKP SP NO.7/VIZAG/2013 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA 4 OF PROFIT TO BE APPLIED. WHEN THE CIT HIMSELF IS NOT SURE OF THE RATE OF P ROFIT TO BE APPLIED AND LEFT IT TO THE DISCRETION OF THE ASSESSING OFFICER, THE ASSESSMENT ORDER COULD NOT HAVE BEEN HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS TO REVENUE ONLY BECAUSE THE PROFIT HAS BEEN ESTIMATED BY APPLYING THE RATE OF 8.30%. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES AND IN THE CONTEXT OF DISCUSSIONS MADE HEREIN ABOVE, WE ARE OF THE VIEW THAT THE CIT IS NOT JUSTIFIED IN INVOKING HIS JURISDICTION U/S 263 OF THE ACT TO CANCEL THE ASSESSMENT ORDER PASSED U/S 143(3) OF TH E ACT. ACCORDINGLY, THE ORDER PASSED BY THE CIT U/S 263 IS SET ASIDE AND GROUND RAISED BY THE ASSESSEE IS ALLOWED.' IN VIEW OF THE ABOVE, WE ACCEPT THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE AND HOLD THAT THE ORDER PASSED BY THE COMMISSIONER U/S 263 OF THE ACT CANCELLING THE ASSESSMENT ORDER IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY THE SAME IS SET ASIDE. 4. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF P. EASHWAR REDDY AND COMPANY IN ITA NO.668/H YD /2009 DATED 31.1.2011. 5. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE DIRECTION GIVEN BY THE CIT IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY WE MODIFY THE SAME AND DIRECT THE ASSESSING OFFICER TO ALLOW THE INTEREST AND REMUNERATION AS ALLOWED IN THE ORDER U/S 143(3) OF THE ACT. WITH THIS DIRECTION MODIFYI NG THE ORDER OF THE CIT PARTLY , APPEAL OF THE ASSESSEE IS CONSIDERED PARTLY ALLOWED. 6. THE APPEAL IN ITA NO.160 IS ON CONSEQUENTIAL ORDER PASSED BY THE AO AS PER THE DIRECTION OF THE CIT U/S 263 OF THE ACT. ASSESSEE HAS PREFERRED DIRECT APPEAL TO THE IT AT ON THE REASON THAT THE CIT(A) IS NOT ENTERTAINING THE APPEALS WHEN CIT DIRECTS UNDER SECTION 263 OF THE ACT. WE ARE OF THE OPINION THAT DIRECT APPEAL TO THE ITAT IS NOT MAINTAINABLE EVEN THOUGH THE CIT DIRECTS U/S 263 OF THE ACT. AS APPEAL IS MAINTAINA BLE ON ORDER U/S 263, THE DECISION IN THAT APPEAL IS EFFECTIVE FOR CONSEQUENTIAL ORDER AS WELL. MANY A TIME , THE CIT DIRECTIONS INVOLVE VERIFICATION OF THE AMOUNTS, THEREFORE, THE ASSESSEE HAS TO PREFER THE APPEAL TO THE CIT(A) FIRST , THEN ONLY CAN COME I N APPEAL TO ITAT. THE CONSEQUENTIAL ORDER IS NOT IN ORDER MENTIONED IN THE ORDERS TO BE APPEALED BEFORE THE ITAT IN SECTION 253(1) OF THE ACT . FOR THESE REASONS , APPEAL FILED BY THE ASSESSEE ON THE CONSEQUENTIAL ORDER GIVEN BY THE AO IS DISMISSED AS NOT MAINTAINABLE. CONSEQUENTLY, THE STAY ITA NO.3/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA ITA NO.160/VIZAG/2012 M/S. VIJAYALAKSHMI ENTERPRISES, VSKP SP NO.7/VIZAG/2013 M/S. VIJAYALAKSHMI ENTERPRISES, VIJAYAWADA 5 APPLICATION FILED IN 07/VIZAG/2013 ON APPEAL ITA NO.160/VIZAG/2012 IS ALSO NOT MAINTAINABLE. ACCORDINGLY, THE STAY APPLICATION ALSO IS DISMISSED. 7. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO MODIFY THE ORDERS AS PER THE DIRECTIONS GIVEN I N ITA NO.3/VIZAG/2012 ABOVE. 8. IN THE RESULT, ITA NO.3/VIZAG/2012 IS PARTLY ALLOWED AND ITA NO.160/VIZAG/2012 AND SP NO.7/VIZAG/2013 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13 TH DEC13 SD/ - SD/ - ( SA KTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH DECEMBER , 20 1 3 COPY TO 1 M/S. VIJAYALAKSHMI ENTERPRISES, C/O SRI C. SUBRAHMANYAM, CA, 102, LAKSHMI APARTMENTS, FACOR LAYOUT, WALTAIR UPLANDS, VIS AKHAPATNAM - 3 2 ACIT CENTRAL CIRCLE - 2(1), VIJAYAWADA 3 THE CI T, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRI BUNAL VISAKHAPATNAM