Mallampati Feroz Gandhi, V. The ITO, Eluru

ITA 307/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3680 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C DAS
• Keywords: Rejection of books of accounts; Depreciation; Business expenditure

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. 3 07 / VIZ /201 7 (ASST. YEAR : 2009 - 10 ) MALLAMPATI FEROZ GANDHI, D.NO. 9 - 47, APPANAVEEDU, HANUMAN JUNCTION, PEDAPADU MANDAL, WEST GODAVARI DISTRICT. V S . IT O , WARD - 2 , ELURU . PAN NO. AHZPM 7453 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI K.C. DAS SR. DR DATE OF HEARING : 07 / 0 8 /201 8 . DATE OF PRONOUNCEMENT : 10 / 08 /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 2009 - 10 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS A WORK CONTRACTOR, FILED HIS RETURN OF INCOME BY DECLARING INCOME OF RS.1,73,129/ - AND AGRICULTURAL INCOME OF RS. 74,500/ - . THE ASSESSEE H AS SHOWN NET INCOME OF RS. 1,59,830/ - AND TOTAL GROSS 2 ITA NO. 307/VIZ/2017 ( MALLAMPATI FEROZ GANDHI ) RECEIPTS OF RS. 1,37,39,084/ - AFTER CLAIMING EXPENDITURE OF RS. 1,35,79,254/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO PRODUCE ALL THE BILLS/VOUCHERS FOR THE EXPENSES INCURRED BY HIM. IN SPITE OF SEVERAL OPPORTUNITIES GIVEN BY THE ASSESSING OFFICER, THE ASSESSEE HAD NOT PRODUCED BILLS/VOUCHERS , THEREFORE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME OF THE ASSESSEE AT RS. 12,36,518/ - FROM CONTRACT WORKS , WHICH WAS AT 9% OF GROSS CONTRACT RECEIPTS OF RS. 1,37,39,084/ - . ACCORDINGLY, THE DIFFERENCE AMOUNT OF RS. 10,76,688/ - (RS. 12,36,518 RS.1,59,830) WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3 . 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.50,51 31 5/ - AND (II) PURCH ASE OF MATERIALS OF RS.59,52,91 5/ - . 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.1 , 62,860/ - WAS 1.2% OF GROSS RECEIPTS OF RS.1,37,39,0 84/ - 6.2. VARIOUS COURTS / TRIBUNALS HAVE ADOPTED DIFFERENT RATES OF ESTIMATES OF INCOME IN MANY CASES. DETAILS ARE AS FOLLOWS : - 3 ITA NO. 307/VIZ/2017 ( MALLAMPATI FEROZ GANDHI ) SL. NAME OF THE CASE TRIBUNAL / HIGH ESTIMATED NET NO. COURT INCOME 1) M/S.KNR CONSTRUCTIONS ITA NO. 1141/HYD/2005 & ITA NO.9/HYD/2007 ITAT, HYDERABAD ORDER DATED 12.10.2012 12.5% ON CONTRACT RECEIPTS 2) TEJA CONSTRUCTIONS ITA NO.308/HYD/2009 ORDER DATED 23.10.2009 ITAT, HYDERABAD 9% OF GROSS RECEIPTS 3) CIT VS. PARBHAT KUMAR [323 ITR 675 (P&H)] PUNJAB & HARYANA HIGH COURT ---- 12% OF CONTRACT RECEIPTS * 4) RAJA RAM CONTRACTORS V. CIT ITA NO.689 OF 2009 ORDER DATED 07.04.2010 PUNJAB & HARYANA HIGH COURT 10% OF CONTRACT RECEIPTS 5) M/S.KRISHNA MOHAN CONSTRUCTIONS I TA NO.380 & 381/HYD/94 ORDER DATED 20.03.1998 ITAT, HYDERABAD 12.5% ON ENTIRE CONTRACT RECEIPTS * 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 REMAINED UNVERIFIABLE DUE TO NON - PRODUCTION OF VOUCHERS / BILLS 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, APPELLANTS CLAIM OF ALLOWABILIT Y OF STATUTORY LIABILITY OF VAT PAYMENT OF RS.4,15,700/ - 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 DEPR ECIATION IN THE PROFIT & LOSS ACCOUNT. HENCE, THERE IS NO DEDUCTION POSSIBLE IN SUCH ESTIMATED INCOME . 4 . LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ESTIMATION OF INCOME BY THE ASSESSING OFFICER IS ON HIGHER SIDE AND REQUESTED TO REDUCE THE SAME TO 6% . 4 ITA NO. 307/VIZ/2017 ( MALLAMPATI FEROZ GANDHI ) 5. LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. 7 . IN THIS CASE, ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.1,35,79,254/ - . WHEN THE ASSESSING OFFICER ASKED TO PRODUCE THE BILLS/VOUCHERS, THE ASSESSEE FAILED TO DO SO, THEREFORE, THE ASSESSING OFFICER HAS ESTIMATED AT 9% OF THE GROSS RECEIPTS AS INCOME OF THE ASSESSEE. ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AFTER GONE THROUGH THE ASSESSMENT ORDER AND THE ORDER OF THE LD.CIT(A) , IN OUR OPINION, ESTIMATION OF INCOME AT 9% IS ON HIGHER SID E AND TO MEET THE ENDS OF JUSTICE , IT SHOULD BE REDUCE D TO 8% . ORDERED ACCORDINGLY. 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 0 T H DAY OF AUGUST , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 0 T H AUGUST , 201 8 . VR/ - COPY TO: 5 ITA NO. 307/VIZ/2017 ( MALLAMPATI FEROZ GANDHI ) 1. THE ASSESSEE MALLAMPATI FEROZ GANDHI, D.NO. 9 - 47, APPANAVEEDU, HANUMAN JUNCTION, PEDAPADU MANDAL, WEST GODAVARI DISTRICT. 2. THE REVENUE ITO, WARD - 2, ELURU. 3. THE PR. CIT , ELURU RANGE, ELURU. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.