ACIT, Guntur V. Mame Butchaiah, Guntur

ITA 33/VIZ/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0641 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: D L S V RAMANA BABU
• Keywords: Depreciation
• Section: 44AD; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO.33/VIZAG/2009 ASSESSMENT YEAR : 2005-06 ACIT, CIRCLE-2(1) GUNTUR VS. SRI MANNE BUTCHAIAH GUNTUR (APPELLANT) (RESPONDENT) PAN NO.AJCPM 8854H APPELLANT BY : SHRI G.S.S. GOPINATH, DR RESPONDENT BY : SHRI D.L.S.V. RAMANA BABU, CA O R D E R PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14.11.2008 PASSED BY LD CIT(A), GUNTUR AND IT RELATES TO THE A SSESSMENT YEAR 2005-06. 2. THE INCOME ESTIMATED BY THE AO AT 12.5% OF THE GROSS RECEIPTS, HAVING BEEN REDUCED TO 8% BY LD CIT(A), THE REVENUE IS AGG RIEVED AND FILED THIS APPEAL. 3. THE FACTS OF THE CASE ARE SET OUT IN BRIEF. THE ASSESSEE IS A CIVIL CONTRACTOR. SINCE THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF A CCOUNT AND VOUCHERS BEFORE THE AO, THE ASSESSMENT WAS COMPLETED TO THE BEST OF THE JUDGMENT OF THE AO U/S 144 OF THE ACT. THE AO ESTIMATED THE INCOME BEFORE ALLOWING DEPRECIATION AT 12.5% OF THE GROSS RECEIPTS. THE GROSS RECEIPTS ST OOD AT RS.1.98 CRORES. THE LD 2 CIT(A) REDUCED THE ESTIMATE AT 8% BEFORE ALLOWING D EPRECIATION, BY TAKING CUE FROM SECTION 44AD OF THE ACT. 4. WE HAVE HEARD THE PARTIES AND ALSO PERUSED T HE RECORD. FROM THE ORDER OF LD CIT(A) WE NOTICE THE FOLLOWING FACTS. (A) OUT OF THE GROSS RECEIPTS OF RS.1.98 CRORES, THE WORKS CARRIED ON BEHALF OF THE GOVERNMENT STOOD AT RS.1.81 CRORES. ACCORDING TO THE ASSESSEE, THE CONTRACT PRICE COULD NOT BE ESCALATED UP TO MAR CH 2006. (B) THE SUB-CONTRACT WORKS WORTH RS.15,92,708/- WAS ALS O CARRIED OUT. (C) THE GROSS RECEIPTS INCLUDED NON-PROFITABLE IT EMS LIKE SEIGNIORAGE, SALES TAX, CONTRIBUTION TO NATIONAL ACADEMY OF CONS TRUCTION ETC. WHICH WERE NOT DEDUCTED WHILE ESTIMATING THE INCOME. (D) THE ASSESSEE HAD DISCLOSED A MARGIN OF ONLY 4.17% IN HIS RETURN OF INCOME. CONSIDERING THESE FACTS, THE LD CIT(A) ESTIMATED TH E INCOME BEFORE DEPRECIATION AT 8% BY MAKING A SPECIFIC MENTION THAT THE PROFIT MARGIN OF 8% PRESCRIBED U/S 44AD IS TAKEN AS A GUIDE LINE. 5. THE CONTENTION OF THE REVENUE IS THAT SECTIO N 44AD DOES NOT APPLY TO THE FACTS OF THE CASE AND THE RATE OF 8% PRESCRIBED UND ER SECTION 44AD IS ALSO NET OF DEPRECIATION AND HENCE THE LD CIT(A) HAS COMMITTED ERROR IN ADOPTING THE PROVISION OF SECTION 44AD IN THE FACTS OF THE CASE. HOWEVER, AS STATED EARLIER, THE LD CIT(A) HAS NOT ADOPTED SECTION 44AD VERBATIM TO MAKE THE ESTIMATE OF INCOME; BUT ONLY TAKEN THE CUE FROM THAT SECTION. THE LD CIT(A) HAS ALSO CONSIDERED THE ARGUMENTS OF THE ASSESSEE SUPPORTING A LOWER ESTIMATE, WHICH ARE LISTED OUT IN THE EARLIER PART OF THIS ORDER. THE DEPARTMENT DID NOT PRODUCE ANY MATERIAL SUPPORTING THEIR CASE TO HAVE A HIGHER EST IMATE. WE FIND MERIT IN THE ARGUMENTS OF THE ASSESSEE. IN VIEW OF THE FOREGOIN G, WE DO NOT FIND ANY 3 INFIRMITY IN THE DECISION OF LD CIT(A) AND ACCORDIN GLY WE CONFIRM THE ORDER OF LD CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 22 ND JUNE, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 22-06-2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 ACIT, CIRCLE-2(1), GUNTUR 02 SRI MANNE BUTCHAIAH, S/O RAMA MURTHY, FLAT NO.50 5, YAGANTI COURT APARTMENTS, 2 ND LINE, RAJENDRA NAGAR, GUNTUR 03 THE CIT (A), GUNTUR 04 THE CIT, GUNTUR 05 THE DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH