M/s SVEC Constructions Limited, Hyderabad V. DCIT., Circle-3(3), Hyderabad, Hyderabad

ITA 40/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6570 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAGADISH BABU
• Assessee Lawyers: V RAGHAVEDRA RAO
• Keywords: Rejection of books of accounts; Depreciation; Search and seizure
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.40/HYD/2015 : ASSESSMENT YEARS 2010-11 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD (PAN AADCS 2215 B) V/S DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.RAGHAVEDRA RAO RESPONDENT BY : SHRI JAGADISH BABU CIT-DR DATE OF HEARING 23 . 3 .201 6 DATE OF PRONOUNCEMENT 13.5.2016 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER O F LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IV, HYDERABAD DATED 22.10.2014. THE ISSUE INVOLVED IN THIS APPEAL IS WH ETHER ASSESSING OFFICER IS CORRECT IN REJECTING THE BOOKS OF ACCOUN T AND RESORTING TO ESTIMATION OF INCOME. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUS INESS OF CIVIL WORKS AND FILED ITS RETURN OF INCOME ON 29.10.2010 ADMITTING A TOTAL INCOME OF RS.8,33,92,911. A SURVEY UNDER S.133A HAD BEEN CONDUCTED IN THE CASE OF THE ASSESSEE ON 23.3.2011 DURING WHI CH THE INTERNAL AUDIT FILES OF THE ASSESSEE WERE IMPOUNDED. THE AUD IT FILES RECORDED CERTAIN DEFICIENCIES IN THE ACCOUNTS OF THE ASSESSE E. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THESE D EFECTS FORMED A MINISCULE PORTION OF THE VOUCHERS RELATING TO THE T OTAL EXPENDITURE OF THE ASSESSEE, THAT THE BILLS AND INVOICES WERE HUGE IN NUMBER AND COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER . HOWEVER, THE ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 2 ASSESSING OFFICER NOTED THAT THE ASSESSEE FAILED TO PRODUCE THE BILLS AND VOUCHERS TILL THE DATE OF PASSING THE ASSESSMEN T ORDER. THE ASSESSING OFFICER ALSO NOTED THAT FOR THE ASSESSMEN T YEAR 2009-10, THE ASSESSEE HAD FAILED TO PROVIDE AN EXPLANATION FOR T HE DEFECTS NOTED DURING THE SURVEY UNDER S.133A, THAT AS A RESULT, T HE ASSESSEE AGREED TO REJECTION OF THE BOOKS AND ESTIMATION OF PROFIT UNDER SIMILAR CIRCUMSTANCES (THOUGH THE ASSESSEE DID NOT FILE ANY FORMAL ACCEPTANCE OF SUCH ASSESSMENT). THE ASSESSING OFFICER REJECTE D THE BOOKS OF ACCOUNT FOR ASSESSMENT YEAR 2010-11 AND ESTIMATED T HE INCOME AS FOLLOWS-: I. FOR WORKS AWARDED DIRECTLY AND EXECUTED DIRECTLY, @ 8% OF THE TURNOVER OF RS.161,98,09,913 II. FOR WORKS AWARDED DIRECTLY AND SUB-CONTRACTED, @ 5% OF THE TURNOVER OF RS.22,42,76,044 III. FRO WORKS SUB-CONTRACTED FROM L&T AND EXECUTED DIRECTLY, @ 3% OF THE TURNOVER OF RS.62,94,5190 IV. FOR OTHER INCOMES FROM SALE OF CHIPS, @ 8% OF THE TURNOVER OF RS.1,04,47,063 V. FOR REFUND OF SALES TAX OF RS.4,25,250, INSURANCE AMOUNT RECEIVED BACK OF RS.1,74,080 AND COMMISSION FROM SUB-CONTRACTS OF RS.75,774, THESE AMOUNTS WERE ADDED IN FULL TO THE TOTAL INCOME SINC E THE RELEVANT EXPENSE HAD ALREADY BEEN TAKEN INTO ACCOUNT WHILE ESTIMATING THE INCOME FROM CIVIL WORKS, OR DID NOT INVOLVE ANY EXPENDITURE. THE TOTAL INCOME OF THE ASSESSEE WAS ACCORDINGLY ES TIMATED AT RS.14,86,03,983. ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 3 3. AGGRIEVED, ASSESSEE CHALLENGED THE ESTIMATION OF INCOME BEFORE THE LEARNED CIT(A). IT WAS SUBMITTED THAT I N RESPONSE TO DEFICIENCIES POINTED OUT BY THE ASSESSING OFFICER D URING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THAT ALL THE VOUCHERS WERE AVAILABLE WITH THE ASSESSING OFFICER HERSELF AND THEREFORE IT WAS NOT POSSIBLE TO ACCEPT THE PROPOSA L FOR REJECTION OF THE BOOKS OF ACCOUNT, THAT HE IMPOUNDED VOUCHERS FORMED A SMALL PORTION OF THE EXPENDITURE AND COULD NOT FORM THE BASIS OF A GENERALISATION ABOUT THE BOOKS, AND THAT VOUCHERS COULD BE PRODUCE D BEFORE THE ASSESSING OFFICER BUT THEY WOULD FORM CARTLOADS. T HE AUTHORISED REPRESENTATIVE FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAD NOT DISPUTED THE REJECTION OF BOOKS AND ESTIMAT ION OF INCOME FOR ASSESSMENT YEAR 2009-10 SINCE THE ADDITION TO T HE TOTAL INCOME WAS FOR AN INSIGNIFICANT SUM OF RS.2 CRORES APPROX, WHILE FOR THE AY 2010-11, THE ASSESSING OFFICER HAD MADE A HUGE ADDITION OF RS.6-CRORES. HE ALSO SUBMITTED THAT IN THE PRECEDING YEARS, ADDITIONS HAD BEEN MADE TOWARDS UNVERIFIABLE CASH VOUCHERS BUT SUCH ADDITIONS WERE MADE AS A PERCENTA GE OF THE EXPENSES (AND NOT AS AN ESTIMATE OF THE PROFIT) AND RANGED FROM RS.5,00,OOO IN ASSESSMENT YEAR 2006-07 (OUT OF EXPE NSES OF RS.50,25,51,OOO) TO RS.10,00,OOO IN ASSESSMENT YEAR 2003-04 (OUT OF EXPENSES OF RS.46,24,OOO) AND THAT THE MERE FACT THAT A SURVEY HAD BEEN CONDUCTED IN THE CASE OF THE ASSESS EE DID NOT JUSTIFY SUCH HUGE ADDITIONS, PARTICULARLY WHEN NO I NCRIMINATING MATERIAL HAD BEEN FOUND DURING THE SURVEY. THE AUTH ORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED T HAT THE CASH VOUCHERS IMPOUNDED DURING THE SURVEY WERE FOR AN IN SIGNIFICANT SUM OF RS.18,OO,OOO, THAT CASH VOUCHERS WERE UNAVOI DABLE IN THE APPELLANT'S BUSINESS AND THAT THE MERE FACT THA T EXPENSES HAD BEEN INCURRED IN CASH COULD NOT LEAD TO THE CONCLUS ION THAT THE BOOKS OF ACCOUNT WERE INCORRECT AND INCOMPLETE. HE ALSO ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 4 SUBMITTED THAT PAYMENTS HAD BEEN MADE ON THE BASIS OF CASH VOUCHERS AFTER THEY WERE DULY CHECKED UNDER SIGNATU RE BY THE STAFF ON SITE, THAT THE ASSESSEE HAD SET UP AN INTE RNAL AUDIT SYSTEM TO KEEP A CHECK ON THE FINANCIAL AND ACCOUNT ING PROCEDURES AND CORRECTNESS AND THAT THE APPELLANT D ID NOT BENEFIT FROM INCURRING EXPENDITURES DULY VOUCHED. HE ALSO S UBMITTED WHAT WHILE THE PRIMARY PLEA OF THE ASSESSEE WAS THA T THE REJECTION OF BOOKS WAS NOT JUSTIFIED, THE ESTIMATIO N OF INCOME AT 8% OF THE TURNOVER WAS HIGH AND ARBITRARY AND THAT THE ASSESSING OFFICER SHOULD HAVE ALLOWED DEPRECIATION (OF RS.4,1 8,41,000) AND FINANCIAL EXPENSE (RS.1.46 CRORES) AS A DEDUCTION F ROM THE ESTIMATED PROFITS. 4. LEARNED CIT(A) HOWEVER, HAS REJECTED THE CONTEN TIONS STATING AS UNDER- 12. I HAVE CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR. THERE IS NO DISPUTE THAT THE INTERNAL AU DIT OF THE APPELLANT HAD POINTED OUT CERTAIN DEFICIENCIES IN T HE BOOKS OF THE APPELLANT. WHETHER OR NOT THE APPELLANT STOOD T O GAIN FROM THESE DEFICIENCIES WAS FOR THE APPELLANT TO ESTABLI SH; OTHER THAN STATING THAT THE AP P ELLANT DID NOT STAND TO GAIN FROM THEM, NO EVIDENCE HAS BEEN FILED BY ' THE APPELLANT TO ESTABLISH THIS CLAIM. 13. IT HAS BEEN SUBMITTED ON THE ONE HAND BEFORE ME THAT THE BILLS AND VOUCHERS WERE ALL IMPOUNDED BY THE ASSESSING OFFICER AND WERE THEREFORE, AVAILABLE WITH THE ASSESSING OFFICER HERSEL F , AND ON THE OTHER HAND, THAT THE BILLS WOULD HAVE HA D TO BE PRODUCED BY THE CART LOAD FROM THIRTY ODD SITES OF THE APPELLANT . THESE TWO ASSERTIONS ARE CONTRADICTORY AND THE FACT REMAINS THAT THE APPELLANT FAILED TO SA T I S FY THE ASSESSING OFFICER ABOUT THE GENUINENESS OF THE EXPENSES BY PRO D UCING THE BILLS AND VOUCHERS FOR HER EXAMINATION. 14. THE MERE FACT THAT IN PRECEDING YEARS, TH E A SSESSING OFFI C ER HAD MADE MUCH SMALLER DISALLOWANCES OF EXPEN S E : RANG I NG FROM RS.5, OO,OOO TO RS.10,00, OOO IS NOT OF MUCH SIGNIFICANCE . ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 5 IF T HE PRACTICE IN THE EARLIER YEARS IS TO BE ACCEPTED AS A PRECEDENCE, I DO NOT SEE WHY THE IMMEDIATELY PRECED ING YEAR, WHERE THE ASSESSING OFFICER MADE AN ADDITION OF OVE R RS.2- CRORE TO THE TOTAL INCOME OF THE APPELLANT UNDER SI MILAR CONDITIONS, AN ADDITION WHICH THE APPELLANT DID NOT DISPUTE AT ALL, SHOULD NOT SERVE AS THE BEST PRECEDENT . 15. IT IS APPARENT FROM THE FACTS AS NARRATED I N THE ASSESSMENT ORDER THAT THE APPELLANT HAD FAILED TO ESTABLISH TH E C O RRECTNESS OF THE BOOKS AND UNDER THE CIRCUMSTANCES, THE REJEC TION OF THE BOOKS W AS JUSTIFIED. 16. THAT BEING SO, THE NEXT ISSUE THAT REQUIRES CONSID E RATION I S WHETHER THE ESTIMATION OF PROFITS MADE BY THE ASSES SI NG OF F ICER WAS JUSTIFIED. THE RATE AT WHICH PROFITS SHOUL D BE ESTIMATED HAS BEEN ADJUDICATED UPON BY THE JURISDICTIONAL ITAT IN A NUMBER OF CASES, IN THE CASE OF SHRI K RAMKRISHNA CONTRACTORS (P) LTD (ITA 461/HYD/2006, DATED 4.12.2009), THE ITAT UPHELD THE ESTIMATION OF PROFITS AT 8% FOR MAIN CONTRACT AND 5% FOR SUB-CONTRACTS. THIS DECISION WAS ALSO FOLLOWED IN SHIVA BALAJI CONSTRUCTIONS ([TA 368/H/2011, DATED 14.10.2011). IN THE CASE OF TEJA CONSTRUCTIONS 129 TTJ (HYD) (UO) 57, THE ITAT HELD THAT PROFITS BE ESTIMATED AT 9% ON OWN CONTRACTS, 8% ON CONTRACTS TAKEN BY THE ASSESSEE ON SUBCONTRACTS AND 5% ON CONTRACTS GIVEN BY ASSESSEE TO THIRD PARTY ON SUB- CONTRACT, 17. INDEED, THE ITAT HAS UPHELD THE ESTIMATION OF P ROFITS AT RATES MUCH HIGHER THAN THAT DONE BY THE ASSESSING O FFICER IN SEVERAL DECISIONS. SOME OF THESE DECISIONS ARE AS FOLLOWS: I. SRI SRINIVASA CONSTRUCTIONS (ITA 804 AND 805/H/93, DT.24.4.1996)- INCOME ESTIMATED AT 12.5% II. KC REDDY ASSOCIATES (ITA 1843/H/89, 29.8.94) INCOME ESTIMATED AT 12.5% III. KRISHNA MOHAN CONSTRUCTIONS (ITA 601-602/H/94 20.3.99) INCOME ESTIMATED AT 12.5% IV. ITA 91/H/89, 30.6.03 INCOME ESTIMATED AT 9%, NET OF ALL ALLOWANCES AND EXPENSES. ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 6 V. CITIZEN ESTATES (ITA 484/H/805, DT.31.10.07) INCOME ESTIMATED AT 8% WITHOUT ALLOWANCE OF INTEREST OR ANY OTHER ALLOWANCE VI. KNR CONSTRUCTIONS (ITA 9/H/07, 30.11.09) INCOME ESTIMATED AT 12.5% FOR MAIN CONTRACTOR AND 8% FOR SUB-CONTRACTOR VII. SHRI K.RAMKRISHNA CONTRACTORS (P) (ITA 461/HYD/206, 4.12.2009 ) INCOME ESTIMATED AT 8%. VIII. SAI VIKRAM BUILDERS (ITA 871/H/11, 27.12.11) INCOME ESTIMATED AT 10%. UNDER THE CIRCUMSTANCES, THE RATES AT WHICH THE ASS ESSING OFFICER HAS ESTIMATED THE PROFITS ARE EMINENTLY AND DO NOT WARRANT ANY INTERVENTION. 18. THE AR HAS ALSO MADE THE ALTERNATE PLEA THAT DEPRECIATION AND FINANCIAL CHARGES SHOULD BE ALLOWE D AS A DEDUCTION FROM THE ESTIMATED PROFITS. HOWEVER, REFE RENCE MAY BE MADE IN THIS REGARD TO THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF SRINIVASA LAXMI CONSTRUCTIONS (ITA 1347/HYD/2010, 21.1.2011) WHERE IT WAS HELD THAT THE DECISION IN THE CASE OF TEJA CONSTRUCTIONS HAD NOT TAKEN SEC . 44AD INTO ACCOUNT AND THAT WHILE MAKING AN ESTIMATE OF T HE PROFIT, DEP R ECIATION IS DEEMED TO HAVE BEEN ALLOWED AS PART OF THE DEDUCTIONS U/S 30 TO 33. THE PLEA OF THE AR FOR ALLOWANCE OF THE DEPRECIATION AND FINANCIAL CHARGES FROM THE ESTIMATED INCOME IS, THEREFORE, REJECTED. 5. BEFORE US, THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS- 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - IV HYDERABAD [CIT(A)] HAS ERRED ON FACTS AND IN LAW. 2(A) LEARNED CIT(A) IS NOT JUSTIFIED IN IGNORING T HE COMPARABLE CASES DECIDED BY THE HON'BLE ITAT RELIED UPON BY THE ASSE SSEE. (B) LEARNED CIT(A) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE JURISDICTIONAL BENCHES OF THE HON 'BLE TRIBUNAL HEL D THAT A PERCENTAGE OF 5 ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 7 POINTS SHOULD BE DISALLOWED WHERE THE POINT IN ISSU E IS ONE OF UNVERIFIABILITY OF THE VOUCHERS FOR LABOUR EXPENSES . (C) LEARNED CIT(A) IS NOT CORRECT IN UPHOLDING RESU LT TO ESTIMATE OF PROFIT WITH REFERENCE TO TOTAL CONTRACT RECEIPTS WHERE IT IS ONLY THE EXPENDITURE ON LABOUR EXPENSES THAT WAS HELD NOT SUPPORTED BY VERI FIABLE VOUCHERS FOR EXPENSES. 3(A) WITHOUT PREJUDICE TO GROUND NO. 2(A), (B) & (CL LEARNED CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING DEPRECIATION AND EXPENDIT URE ON INTEREST WHICH AFFECT THE PERCENTAGE OF PROFIT. (B) LEARNED CIT(A) HAS GROSSLY ERRED IN HOLDING THA T WHENEVER AN ESTIMATE IS MADE IN CASES OF CONTRACTS BUSINESS, DE EMING PROVISION U/S. 44AD APPLIES. SEC.44AD PROVIDES FOR ASSESSMENT ON T HE BASIS OF PRESUMPTION IN CASES FOR SMALLER TURNOVERS. 5.1 ASSESSEE ALSO RAISED FOLLOWING ADDITIONAL GROU ND WHICH IS LEGAL IN CHARACTER AND WAS ADMITTED- 1. .. 2. ON THE FACTS AND CIRCUMSTANCES ADVERTED TO BY TH E CIT(A), IT DOES TO LEAD TO A FINDING THAT THE BOOKS OF ACCOUNT ARE NOT CORRECT AD COMPLETE. 3. THE LOWER AUTHORITIES HAVE FAILED TO SPECIFY THE VOUCHERS OR THE INTERNAL AUDIT FILES ON THE BASIS O F WHICH THE ACCOUNTS COULD BE TERMED INCORRECT AND INCOMPLETE. 6. LEARNED COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND CONTENDED THAT THERE IS NO N EED TO REJECTING THE BOOKS OF ACCOUNT AND IN THE ALTERNATE, ONLY A P ORTION OF UNVOUCHED EXPENDITURE COULD HAVE BEEN DISALLOWED. HE HAS FIL ED RECONCILIATION OF LABOUR EXPENSES AT RS.1,44,51,130 WHICH COULD HAVE BEEN BASIS FOR DISALLOWANCE. HE RELIED ON VARIOUS CASE-LAWS PARTI CULARLY OF THE ITAT DECISION IN THE CASE OF K.RAMAKRISHNA CONTRACTOR P. LTD. (IN ITA NO.461/HYD/2006 DATED 4.12.2009). ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 8 7. LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, R EFERRED TO THE ORDER OF THE ASSESSING OFFICER AND MORE PART ICULARLY THE FACT THAT ON SIMILAR CIRCUMSTANCES ASSESSEE HAS ACCEPTED THE REJECTION OF BOOKS OF ACCOUNT IN ASSESSMENT YEAR 2009-10 AND ASSESSING OFFICER ESTIMATED INCOMES ON THE SAME BASIS WHICH WAS ACCEP TED BY THE ASSESSEE. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE PAPER-BOOKS PLACED ON RECORD AND CASE LAW ON THE SU BJECT RELIED ON BY THE PARTIES. THERE IS NO DISPUTE TO THE FACT THAT O N SIMILAR REASONS ASSESSEE HAS ACCEPTED THE REJECTION OF BOOKS OF ACC OUNT IN ASSESSMENT YEAR 2009-10 AND ASSESSING OFFICER HAS ESTIMATED IN COME ON SIMILAR BASIS. ONLY GRIEVANCE OF ASSESSEE IS THAT THE RESU LTANT ADDITION IS MORE IN THIS YEAR, THEREFORE THE DISPUTE. 8.1 ON A TURNOVER OF RS.226.14 CRORES IN ASSESSME NT YEAR 2009-10, ASSESSEE ADMITTED A PROFIT OF RS.12.91 CRO RES (5.7%). DURING THE YEAR UNDER CONSIDERATION, THE TURNOVER W AS RS.205.39 CRORES AND THE PROFIT ADMITTED IN PROFIT & LOSS ACC OUNT WAS RS.9.63 CRORES (4.68%). THE REASONS GIVEN BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2009-10 FOR REJECTION OF BOOKS AFTE R SURVEY ARE NOTED IN THE ORDER AS UNDER- 3. REJECTION OF BOOKS OF ACCOUNTS U/S. 145:- A SUR VEY WAS CONDUCTED ON THE ASSESSEE COMPANY ON 23/03/2011, IN CURS OF WHICH CERTAIN MATERIAL WAS IMPOUNDED INCLUDING THE INTERNAL AUDIT FILES OF THE COMPANY. IN VIEW OF THE DEFICIE NCIES NOTED IN THESE AUDIT FILES, A SHOW CAUSE NOTICE WAS ISSUED T O THE COMPANY AS TO WHY THE BOOKS SHOULD NOT BE REJECTED, AS BOOK S ARE DEFECTIVE. IN RESPONSE, THE ASSESSEE VIDE LETTER D T: 14/11/2011, EXPLAINED SOME OF THE POINTS RAISED THEREIN. HOWEVE R, SINCE IN CASE OF THE REMAINING ASPECTS, SINCE THE EXPENDITUR E WAS STATED TO HAVE BEEN INCURRED IN CASH, THE ASSESSEE COULD N OT PROVIDE FOR ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 9 SATISFACTORY PROOF OF THE SAME. THUS, SINCE THE BOO KS ON WHICH THE ASSESSEE HAD FILED RETURN OF INCOME NOT BEING F ULLY EXPLAINED AND CASH EXPENDITURE NOT SUBSTANTIATED, IT WAS PROP OSED TO REJECT THE BOOKS AS PER THE PROVISIONS OF SECTION14 5 OF THE I.T. ACT AND ESTIMATE THE PROFIT. IN THIS RESPECT, THE ASSESSEE VIDE LETTER FILED IN HEARING DT:8/12/2011, AGREE TO THE SAME. 8.2 SIMILAR REASONS WERE STATED BY THE ASSESSING O FFICER IN THIS YEAR. ASSESSEE FOR THE REASONS BEST KNOWN TO IT, HA S ACCEPTED REJECTION OF BOOKS OF ACCOUNT IN THAT YEAR AND CONS ENTED IN WRITING WHEREAS IN THE IMPUGNED YEAR DISPUTING THE SAME. WE DO NOT SEE ANY REASON TO DIFFER IN THIS YEAR. FACTS BEING SAME, AN D REASONS BEING SAME, THE REJECTION OF BOOKS ARE TO BE ACCEPTED. 8.3 ASSESSEE CONTENDS THAT THE NON-AVAILABILITY OF VOUCHERS AND INTERNAL AUDIT REPORTS DO NOT LEAD TO REJECTION OF BOOKS OF ACCOUNT WHICH ARE AUDITED. THERE IS MERIT IN ASSESSEE CONTE NTIONS, CONSIDERING THE LEGAL PRINCIPLES ON THE ISSUE DECIDED BY VARIOU S JUDICIAL FORUMS, BUT IN THE FACT SITUATION, WE ARE UNABLE TO ACCEPT THE SAME. IN EARLIER YEARS, ASSESSING OFFICER HAVE ACCEPTED THE BOOKS OF ACCOUNT AND DISALLOWED CERTAIN PORTION OF EXPENDITURES UPTO ASS ESSMENT YEAR 2008- 09. THEREFORE, THERE IS NO PROBLEM IN ACCEPTING TH E OPENING FIGURES ETC. IN THE LATER YEARS. BUT ASSESSEE HAS ACCEPTED REJECTION OF BOOKS OF ACCOUNT, SIMILARLY AUDITED, IN THE IMMEDIATELY PREC EDING YEAR, WHOSE ENTRIES ARE CARRIED OVER TO THIS YEAR, LIKE CERTAIN WORK IN PROGRESS, ETC. ONCE BOOKS OF ACCOUNT IN THAT YEAR WAS REJECTED, CO NSEQUENTLY ON SAME REASONS THIS YEAR ALSO, BOOKS ARE TO BE REJECT ED AS THE SAME CANNOT BE RELIED ON. ASSESSEE CANNOT APPROBATE AND REPROBATE ON THE SAME FACTS SITUATION. 8.4 COMING TO THE ESTIMATION OF INCOME, AS EXTRACT ED IN THE BRIEF FACTS ABOVE, ASSESSING OFFICER COMPLETED ASSE SSMENT IN BOTH THE YEARS ESTIMATING ON SAME BASIS I.E. 8% ON OWN WORK S AND 5% ON SUB- ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 10 CONTRACT WORKS ASSIGNED, 3% ON SUB-CONTRACT WORKS U NDERTAKEN. THESE RATES ARE GENERALLY APPROVED BY ITAT IN VARIOUS OR DERS A STATED BY LEARNED CIT(A) IN THE ORDER. 8.5 LEARNED COUNSEL RELIED ON VARIOUS CASE-LAW PA RTICULARLY IN THE CASE OF K.RAMAKRISHNA CONTRACTOR P. LTD. IN ITA NO.461/HYD/2006 DATED 4.12.2009. THE QUESTION IN THAT CASE WAS AS U NDER- 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN UPHOLDING THE ESTIMATE OF INCOME AT 12.5% OF THE GROSS CONTRACT RECEIPTS. THE CONTENTION OF T HE ASSESSEE COUNSEL IS THAT THE ASSESSING OFFICER ESTI MATED THE PROFIT OF THE ASSESSEE AT 12.5% AND GRANTED DEPRECI ATION WHICH IS AT HIGHER SIDE AND THE ASSESSEE DECLARED T HE INCOME AT 9% BEFORE ALLOWING THE DEPRECIATION THE S AME TO BE ACCEPTED OR THE ORDER OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 TO BE FOLLOWED WHEREIN THE TRIBUNAL IN ITS ORDER DATED 23.10.2008 IN ITA NO.1112/HYD/2007 HELD THAT INCOME TO BE ESTIMATED A T 8% IN RESPECT OF WORK EXECUTED BY THE ASSESSEE AND AT 5% IN THE CASE OF SUB CONTRACT. THE FINDING OF ITAT THEREIN IS AS UNDER- 5. IN THE PRESENT CASE, THE CONTENTION OF THE ASSE SSEE COUNSEL IS THAT, THAT RATIO OF ORDER IN THE CASE M/S KRISHN A MOHAN CONSTRUCTION COMPANY CANNOT BE APPLIED. HE ALSO CON TENDED THAT THE ASSESSEE'S OWN CASE TO BE FOLLOWED INSTEAD OF T HE CASE OF M/S KRISHNA MOHAN CONSTRUCTION COMPANY CITED SUPRA. WE ARE AFRAID. IN THE PRESENT CASE, THE ASSESSEE IS CLAIMING A DEP RECIATION AFTER ESTIMATED THE PROFIT AT FIXED RATE. HOWEVER, IN THE ASSESSMENT YEAR 2003-04 AS GATHERED FROM THE ASSESSEES COUNSEL, TH E TRIBUNAL ESTIMATED THE AT PROFIT 8% IN CASE OF OWN CONTRACTS AND 5% IN CASE OF SUB CONTRACTS AFTER ALLOWING THE DEPRECIATION. H ENCE, THE RATIO OF ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003- 04 CANNOT BE APPLIED DIRECTLY BECAUSE THE ASSESSEE CLAIMED DEPRE CIATION ALSO IN THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, I F THE ASSESSEE GIVE UP THE CLAIM OF DEPRECIATION IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THEN THE RATIO LAID DOWN BY THE TRIB UNAL IN ITS OWN CASE FOR THE AY 2003-04 COULD BE APPLIED. ALTERNATI VELY, THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S KRISHNA MOHAN C ONSTRUCTION COMPANY CITED SUPRA TO BE FOLLOWED. NOW, THE ASSESS EE GOT TWO OPTIONS TO DETERMINE HIS TAXABLE INCOME FOR THE YEA R UNDER ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 11 CONSIDERATION. HENCE, WE HOLD THAT THE ASSESSEE CAN OPT EITHER ONE OF THE ABOVE. IN THE CASE OF SUB CONTRACTS, THE ASS ESSEE CANNOT EXPECT THE SAME RATIO OF PROFIT, AS IN THE CONTRACT CARRIED OUT BY THE ASSESSEE BY HIMSELF. ACCORDINGLY, IN THE CASE OF SU B CONTRACT, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE NET PR OFIT AT 5%. ACCORDING THIS GROUND OF THE ASSESSEE IS PARTLY ALL OWED. 8.6 AS CAN BE SEEN FROM THE ABOVE, THE ESTIMATION CAN BE DONE AT 12.5% AND THEREAFTER DEPRECIATION AND INTER EST CAN BE ALLOWED DEPENDING ON FACTS OR THE NET PROFIT CAN BE ESTIMAT ED AT 8% ON THE WORKS UNDERTAKEN. ON SUB-CONTRACT WORKS, IT IS GENE RALLY AT 5% WHICH WAS NOT DISPUTED IN MANY CASES. 8.7 AS ALREADY STATED, ASSESSING OFFICER HAS ESTIM ATED THE INCOMES AT THE SAME RATE NOT ONLY GENERALLY ACCEPTE D IN VARIOUS CASES RELIED ON, BUT ALSO IN THE IMMEDIATELY PRECEDING YE AR WHICH ASSESSEE HAS ACCEPTED. KEEPING THESE IN MIND, WE DO NOT FIN D ANY REASON TO DIFFER FROM THE ORDER OF LD. CIT(A), WHICH IS IN TU NE WITH THE VARIOUS ORDERS OF THIS FORUM. 8.8 ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE G ROUNDS AND ADDITIONAL GROUNDS RAISED BY THE ASSESSEE. THEREFOR E, THEY ARE REJECTED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. PRONOUNCED IN THE COURT ON 13 TH MAY, 2016 SD/- SD/- ( P.MADHAVI DEVI ) ( B.RAMAKOTAIAH ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 13 TH MAY, 2016 ITA NO.40/HYD/2015 M/S. SVEC CONSTRUCTIONS LIMITED, HYDERABAD 12 COPY FORWARDED TO: 1. M/S. SVEC CONSTRUCTIONS LIMITED, 1014 RAGHAVA RATNA TOWERS, CHIRAG ALI LANE, ABIDS, HYDERABAD 1 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE 3(3), HYD ERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) IV , HYDERABAD COMMISSIONER OF INCOME-TAX III, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.