Ankam Srinivasa Subba Rao, Eluru V. The ITO, Eluru

ITA 306/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5172 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D J P ANAND
• Keywords: Rejection of books of accounts; Depreciation; Business expenditure
• Section: 44AD; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 306 / VIZ /201 7 (ASST. YEAR : 20 09 - 1 0 ) ANKAM SRINIVASA SUBBA RAO, D.NO. 1 - 61, BALAJI NAGAR, TANGELLAMUDI, NEAR V ENUGOPALA SWAMY TEMPLE, ELURU V S . IT O , WARD - 2 , ELURU . PAN NO. ADKPA 7997 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI D.J.P. ANAND SR. DR DATE OF HEARING : 11 / 0 4 7 201 8 . DATE OF PRONOUNCEMENT : 31 / 0 7 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 21 /0 2 /201 7 FOR ASSESSMENT YEAR 200 9 - 1 0 . 2 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO ESTIMATION OF PROFIT . 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A WORKS CONTRACTOR FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10 BY DECLARING TOTAL INCOME OF RS. 1,78,067/ - . THE RETURN FILED BY 2 ITA NO. 306 /VIZ/2017 ( ANKAM SRINIVASA SUBBA RAO ) THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT, THE ACT) AND AFTER FOLLOWING DUE PROCEDURE, ASSESSMENT IS COMPLETED UNDER SECTION 143(3) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT ASSESSEE RECEIVED GROSS RECEIPTS OF RS. 91,54,380/ - DURING THE YEAR, ON WHICH THE ASSESSEE HAD SHOWN NET INCOME OF RS. 2,78,067/ - AFTER CLAIMING TOTAL EXPENDITURE OF RS. 88,76,313/ - UNDER VARIOUS HEADS. THE ASSESSEE PRODUCED BOOKS OF ACCOUNT AND BANK ACCOUNT COPIES. HOWEVER, THE ASSE SSEE COULD NOT PRODUCE THE BILLS/VOUCHERS FOR VERIFICATION , STATING THAT BILLS / VOUCHERS W E RE MAINTAINED , BUT ARE NOT READILY AVAILABLE WITH HIM . THEREFORE, THE ASSESSEE WAS ASKED TO PRODUCE ALL THE BILLS /VOUCHERS FOR VERIFICATION BY 27/12/2011 VIDE ORDER SHEET NOTING DATED 15/12/2011, WHICH WAS DULY NOTED BY THE ASSESSEES AR . FURTHER, TH E ASSESSEES AR WAS INFORMED THA T THIS WOULD BE THE LOST OPPORTUNITY FOR PRODUCING THE BILLS /VOUCHERS. BUT, THE BILLS /VOUCHERS WERE NOT SUBMITTED FOR VERIFICATION DESPITE THE FACT THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITIES. THEREFORE, THE BOO KS OF ACCOUNT OF THE ASSESSEE ARE REJECTED AND T HE INCOME FROM THE CONTRACT WORKS IS ESTIMATED @9% OF THE GROSS CONTRACT RECEIPTS OF RS. 88,76,313/ - , WHICH WORK ED OUT TO RS. 7,98,868/ - . 3 ITA NO. 306 /VIZ/2017 ( ANKAM SRINIVASA SUBBA RAO ) HE NCE, THE DIFFERENCE AMOUNT OF RS. 5,20,801/ - (RS. 7,98,868 RS. 2, 78,067) IS ADDED TO THE INCOME RETURNED BY THE ASSESSEE. 4 . ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 6.1. I HAVE PERUSED THE COPY OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF APPELLANT AS ON 31.03.2009. APPELLANT HAD NOT CLAIMED ANY DEPRECIATION IN PROFIT AND LOSS ACCOUNT. THERE IS NO FIXED ASSET REFLECTED IN BALANCE SHEET ALSO. APPELLANT CLAIMED THE FOLLOWING MAJOR EXPENDITURE : (I) LABOUR CHARGES OF RS.33,94,312/ - AND (II) PURCHASE OF MATERIALS OF RS.47,08,620 / - . IN THE ABSENCE OF ANY DETAILS LIKE BILLS / INVOICES ETC, FOR THIS SUBSTANTIAL EXPENDITURE, A.O. ESTIMATED NET PROFIT @ 9% OF GROSS RECEIPTS AS NET PROFIT ADMITTED BY APPELLANT AT RS.2,78,067 / - WAS 3.04% OF GROSS RECEIPTS OF RS.91 54,380/ - . 6.2. VARIOUS C OURTS I TRIBUNALS HAVE ADOPTED DIFFERENT RATES OF ESTIMATES OF INCOME IN MANY CASES. DETAILS ARE AS FOLLOWS : SI. NAME OF THE CASE TRIBUNAL / HIGH ESTIMATED NET] NO COURT INCOME 1) M/S. KNR CONSTRUCTIONS ITAT, HYDERABAD 12.5% ON CONTRACT TA NO. 1141/ HYD/2005 & ITA O RDER DATED RECEIPTS NO.9 / HYD/2007 12.10.2012 2) TEJA CONSTRUCTIONS ITAT, HYDERABAD 9% OF GROSS ITA NO.308/HYD/2009 ORDER DATED RECEIPTS 23/10/2009 3) CIT VS. PARBHAT KUMAR PUNJAB & HARYANA 12% OF CONTRACT [323 ITR 675 (P&H)] HIGH COURT RECEIPTS * 4) RAJA RAM CONTRACTORS V. CIT PUNJAB & HARY ANA 10% OF CONTRACT TA NO.689 OF 2009 ORDER DATED HIGH COURT RECEIPTS 07.04.2010 5) M / S. KRISHNA MOHAN CONSTRUCTIONS ITAT, HYDERABAD 12.5% ON ENTIRE ITA NO.380 & 381/HYD/94 ORDER CONTRACT RECEIPTS DATED 20.03.1998 * THE REASON FOR APPLICATION OF THE SAID RATE IN THE CASE OF CIT VS. PARBHAT KUMAR CONTRACTOR BY THE HON'BLE PUNJAB & HARYANA HIGH COURT WAS THE UN - VERIFIABILITY OF THE WAGES CLAIMED AS EXPENDITURE. IN APPELLANT'S CASE ALSO, THE CLAIM OF WAGES REMAINED UNVERIFIABLE DUE TO NON - PRODUCTION OF VOUCHERS / BILLS 4 ITA NO. 306 /VIZ/2017 ( ANKAM SRINIVASA SUBBA RAO ) ETC. HENCE, IN MY VIEW, A.O. IS JUSTIFIED IN RESORTING TO ESTIMATE OF INCOME. 6.3. ONCE INCOME IS ESTIMATED, THEN ALL DEDUCTIONS ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING ESTIMATE. THIS VIEW WAS UPHELD BY HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (AP) 232 ITR 776. HENCE, APPELLANT'S CLAIM OF ALLOWABILITY OF STATUTORY LIABILITY OF VAT PAYMENT OF RS.2,735 / - AS BUSINESS EXPENDITURE IS NOT TENABLE AS NO SEPARATE DEDUCTIONS CAN BE CONSIDERED IN THE EVENT OF REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME. FURTHER, APPELLANT HAD NOT CLAIMED ANY DEPRECIATION IN THE PROFIT & LOSS ACCOUNT. HENCE, THERE IS NO DEDUCTION POSSIBLE IN SUCH ESTIMATED INCOME. 6.4. U/S .44AD OF THE ACT, THE BENCH MARK FOR CALCULATING THE ESTIMATED INCOME IS 8% OF GROSS RECEIPTS SUBJECT TO THE SATISFACTION OF CONDITIONS SPECIFIED IN THAT SECTION. HOWEVER, APPELLANT'S CASE IS NOT COVERED BY SECTI ON 44AD OF THE ACT AS THE TURNOVER (GROSS RECEIPT) WAS RS.91 54,380/ - . 6.5. UNDER SUCH CIRCUMSTANCES, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ADDITION MADE BY A.O. IN ESTIMATING THE NET PROFIT @ 9% OF GROSS RECEIPTS. THE ESTIMATE OF 9% IS IN TUNE W ITH THE RATE OF ESTIMATE UPHELD BY HON'BLE I TAT, HYDERABAD IN THE CASE OF M/ S.TEJA CONSTRUCTIONS. 5 . BEFORE US, LD COUNSEL FOR THE ASSESSEE HAS SU BMITTED THAT ESTIMATION OF NET PROFIT AT 9% OF GROSS RECEIPTS IS ON HIGHER SIDE AND PRAYED THAT SAME MAY BE REDUCED TO 6%. 6 . ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 7 . THE ASSESSEE IS A WORKS CONTRACTOR AND IS NOT MAINTAINING PROPER BOOKS OF ACCOUNT, THEREFORE, THE ASSESSING OFFICER E STIMATED THE NET PROFIT AT 9% OF THE GROSS RECEIPTS. ON APPEAL, 5 ITA NO. 306 /VIZ/2017 ( ANKAM SRINIVASA SUBBA RAO ) LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ESTIMATION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) I S ON HIGHER SIDE, THEREFORE PRAYED THAT SAME MAY BE REDUCED TO 6%. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE SUBMISSIONS MADE BY BOTH THE PARTIES , WE DEEM IT APPROPRIATE TO REDUCE THE NET PROFIT TO 8%. ACCORDINGLY, WE RESTRIC T THE ESTIMATION MADE BY THE ASSESSING OFFICER AT 9% TO 8%. THUS, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 3 1 S T DAY OF JULY , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 1 S T JULY , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE ANKAM SRINIVASA SUBBA RAO, D.NO. 1 - 61, BALAJI NAGAR, TANGELLAMUDI, NEAR VENUGOPALA SWAMY TEMPLE, ELURU. 2. THE REVENUE ITO, WARD - 2, ELURU. 3. THE PR. CIT , RAJAHMUNDRY. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.