Sri Vallabhaneni Venkateswara Rao, Visakhapatnam V. The Addl. CIT, Range-2, Vijayawada, Vijayawada

ITA 393/VIZ/2012

• Counselvise Citation: 39325314 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: I SARISH KUMAR
• Keywords: Rejection of books of accounts; Depreciation

Judgement Text

1 I.T.A. NO.393/VIZ/2012 ASSESSMENT YEAR:2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNA M BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY (A M) I.T.A. NO.393/VIZ/2012 ASSESSMENT YEAR:2008-09 VALLABHANENI VENKATESWARA RAO, C/O. C. SUBRAHAMNAYAM, CA, LAKSHMI APTS, FACOR LAYOUT, WALTAIR UPLANDS, SIRIPURAM, VISAKHAPATNAM VS. ADDL. CIT, RANGE - 2, VIJAYAWADA. PAN/GIR NO. : AAYPV 7501 M ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI C.SUBRAHMANYAM RESPONDENT BY : SHRI I. SARISH KUMAR DATE OF HEARING : 02/12/2014 DATE OF PRONOUNCEMENT : 5 /12/2014 O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), VIJAYAWADA, DATED 20.6.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THOUGH THE ASSESSEE HAS RAISED SEVEN GROUNDS OF APPEAL, HE PRESSED GROUND NOS.1.2 & 1.3 ONLY. HENCE, ALL OTHER GROUNDS RAISED BY THE A SSESSEE ARE DISMISSED AS NOT PRESSED. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN I NDIVIDUAL AND CARRIES ON BUSINESS OF A CIVIL CONTRACTOR AND IS ALSO A PARTNER IN NUMBER OF FIRMS DEALING IN STONE CRUSHING. HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.9.2 008 DECLARING TOTAL INCOME OF RS.1,38,83,920/-. THE ASSESSING OFFICER REJECTED T HE BOOKS OF ACCOUNT FOR VARIOUS REASONS AND ESTIMATED THE INCOME ON CONTRACT AT 12.5% OF THE TU RNOVER AND ALLOWED THE DEPRECIATION THEREFROM. THE AO DETERMINED THE INCOME AT RS.4,01 ,80,950/-. THE ASSESSEE CARRIED THE 2 I.T.A. NO.393/VIZ/2012 ASSESSMENT YEAR:2008-09 MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORI TY. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. LD COUNSEL FOR THE ASSESSEE, SHRI C.SUBRAMANYAM SUBMITTED THAT THE LD CIT(A) WAS IN ERROR IN UPHOLDING THE ORDER OF THE ASSESSING OFFIC ER, WHEREIN, THE INCOME OF THE ASSESSEE WAS ESTIMATED AT 12.5% OF THE MAIN CONTRACT RECEIPTS AN D 8% ON SUB-CONTRACT RECEIPT. HE SUBMITTED THAT THE AO WRONGLY FOLLOWED THE DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF M/S. KNR CONSTRUCTIONS VS DCIT, CIRCLE -2(2) (ITA N O.1141/HYD/2005) THOUGH THE NATURE OF WORK OF KNR CONSTRUCTION (SUPRA) IS DIFFERENT FROM THE NATURE OF WORK OF THE ASSESSEE. HE RELIED ON THE DECISION OF ITAT HYDERABAD A BENCH IN THE CASE OF TEJA CONSTRUCTIONS VS ACIT(2010) 36 DTR 220 (HYD) AND STATED THAT THE AO COULD HAVE BEEN DIRECTED TO ESTIMATE THE INCOME AT 9% OF THE MAIN CONTRACT RECEIPTS. HE FUR THER RELIED ON THE DECISION OF ITAT PUNE A BENCH IN THE CASE OF SHRI NISHIKANT T PATNE VS ACIT (ITA NO.55/PN/2012 AND OTHERS) ORDER DATED 15.7.2013 FOR THE PROPOSITION THAT THE INCOME ON CONTRACT RECEIPTS SHOULD BE ESTIMATED AT 8%. HE FURTHER SUBMITTED THAT THE AO HAS, IN THE A SSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, ESTIMATED THE INCOME AT 8% AND FOR ASSESSM ENT YEAR 2011-2012, ESTIMATED THE INCOME AT 10% ON CONTRACT WORKS. HE PLEADED THAT R ELIEF BE GRANTED. 5. ON THE OTHER HAND, LD D.R. SUBMITTED THAT THE FA CTS OF THE ASSESSEES CASE ARE DIFFERENT FROM THE FACTS IN THE CASE OF TEJA CONSTRUCTIONS (S UPRA) RELIED UPON BY LD COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS NOT P LACED ANY EVIDENCE TO DEMONSTRATE THAT THE FACTS OF THE ASSESSEES CASE ARE NOT IDENTICAL WITH THE FACTS OF THE CASE IN KNR CONSTRUCTIONS (SUPRA). HE POINTED OUT THAT THE ASSESSEE HAS ACCE PTED THE REJECTION OF BOOKS OF ACCOUNT AND UNDER THOSE CIRCUMSTANCES, UNLESS A VALID REASON IS SHOWN, ESTIMATION OF INCOME BY THE AO, AS CONFIRMED BY THE FIRST APPELLATE AUTHORITY, SHOULD NOT BE DISTURBED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT IS WELL SETTLED THAT IN THE ABSENCE OF PROPER MAINTENANCE OF BOOKS OF ACCOU NTS, WHICH ARE NOT SUSCEPTIBLE FOR VERIFICATION, THE AO WILL HAVE NO OTHER ALTERNATIVE EXCEPT TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE THE INCOME WHICH IN HIS OPINION IS FAIR AN D REASONABLE IN THE CIRCUMSTANCES OF THE CASE. VIS-A-VIS BEST JUDGEMENT ASSESSMENTS THE COU RTS HAVE TIME AND AGAIN HELD THAT SOME ELEMENT OF GUESS WORK IS INVOLVED AND UNLESS A VALI D REASON IS SHOWN, THE METHOD ADOPTED BY THE ASSESSING OFFICER CANNOT BE CHALLENGED. AT THE SAME TIME, WE CANNOT IGNORE THE FACTUAL 3 I.T.A. NO.393/VIZ/2012 ASSESSMENT YEAR:2008-09 MATRIX OF THE CASE. IN THE INSTANT CASE, EVEN AFTE R THE ORDER PASSED BY THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION, AO CHOSE TO ESTIMATE THE NET INCOME @ 10% OF CONTRACT WORKS FOR THE ASSESSMENT YEAR 2011-12 AND, FOR THE ASSESS MENT YEAR 2006-07 NET INCOME WAS ESTIMATED AT 8% CLEAR OF DEPRECIATION. IT IS NO DO UBT TRUE REJECTION OF BOOKS OF ACCOUNTS WAS NOT CHALLENGED BEFORE US AND THE ASSESSEE COULD NOT DEMONSTRATE THAT THE ASSESSING OFFICERS ACTION IN ESTIMATING THE INCOME IS HIGHLY ARBITRARY AND EXCESSIVE, EXCEPT TO THE EXTENT OF SHOWING THAT IF THE SUBSEQUENT SCRUTINY ASSESSMENTS ARE TAKEN AS A GUIDE, THE GROSS PROFIT ESTIMATED BY THE ASSESSEE IS SLIGHTLY ON THE HIGHER SIDE. ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT ESTIMATE OF INCOME AT 12% OF THE G ROSS RECEIPTS WOULD MEET THE ENDS OF JUSTICE IN THE PECULIAR FACTS OF THIS CASE AND WE DIRECT TH E ASSESSING OFFICER ACCORDINGLY. IN THE LIGHT OF ABOVE OBSERVATIONS, APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 /12/ 2014 SD/- SD/- (D.MANMOHAN ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER VISHAKHAPATNAM DATED 5 / 12/2014 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE: VALLABHANENI VENKATESWARA RAO, C/O. C. SUBRAHAMNAYAM, CA, LAKSHMI APTS, FACOR LAYOUT, WALT AIR UPLANDS, SIRIPURAM, VISAKHAPATNAM 2. THE RESPONDENT. : ADDL. CIT, RANGE - 2, VIJAYAWADA 3. THE CIT(A) - VIJAYAWADA 4. CIT , VIJAYAWADA 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM