M/s Ganga Industrial Corporation Ltd., Hyderabad V. ACIT, Circle 2(3), Hyderabad

ITA 402/HYD/2014

• Counselvise Citation: 40222514 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SRINIVASA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Opportunity of being heard; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 402/HYD/2014 ASSESSMENT YEAR: 2009-10 M/S GANGA INDUSTRIAL CORPORATION LTD., HYDERABAD PAN - AAACG7474K VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 2(3), HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 547/HYD/2014 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(3), HYDERABAD. VS. M/S GANGA INDUSTRIAL CORPORATION LTD., HYDERABAD PAN - AAACG7474K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : SHRI D. SRINIVASA DATE OF HEARING : 30-07-2015 DATE OF PRONOUNCEMENT : 12-08-2015 O R D E R PER SAKTIJIT DEY, J.M.: THESE CROSS APPEALS BY ASSESSEE AND THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER DATED 15/01/2014 OF LD. CIT(A) III, HYDERABAD FOR THE AY 2009-10. 2. ASSESSEE HAS RAISED SEVEN GROUNDS IN TOTAL. GROU ND NOS. 1 & 7 BEING GENERAL IN NATURE ARE NOT REQUIRED TO BE ADJU DICATED UPON. 2 ITA NOS. 402 & 547 /HYD/2014 M/S GANGA INDUSTRIAL CORPORATION LTD. 3. IN GROUND NOS. 2 TO 4, ASSESSEE HAS OBJECTED TO REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME AT 1% OF THE TURNOVER. 4. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN BUSINESS OF TRADING IN STEEL PRODUCTS. FOR THE AY UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 02/08/09 DECLARING TOTAL LOSS OF RS. 21,10,49,320. SUBSEQUEN TLY, ASSESSEE ALSO FILED REVISED RETURN ON 05/08/2010 AND AGAIN ON 25/ 08/2010. AO OBSERVED THAT AS ASSESSEE HAS FILED ORIGINAL RETURN OF INCOME BELATEDLY REVISED RETURNS FILED BY ASSESSEE ARE INV ALID, HENCE, CANNOT BE CONSIDERED. HAVING HELD SO, AO NOTED THAT ON VER IFICATION OF BILLS AND VOUCHERS PRODUCED BY ASSESSEE, CERTAIN DISCREPA NCIES WERE FOUND. HE FURTHER NOTED ASSESSEE FAILED TO PROVIDE DETAILS OF EXPENDITURE PERTAINING TO PURCHASES. HE, THEREFORE, PROPOSED TO REJECT BOOKS OF ACCOUNT AND DETERMINE THE INCOME OF ASSESS EE BY ESTIMATING THE PROFIT. THOUGH, ASSESSEE OBJECTED TO SUCH ACTION OF AO, BUT, AO HAVING NOT FOUND MERIT IN THE SUBMISSIO NS OF ASSESSEE PROCEEDED TO REJECT BOOKS OF ACCOUNT OF ASSESSEE AN D ESTIMATED THE PROFIT AT 2% OF THE GROSS SALES. HAVING DONE SO, AO OBSERVED THAT ASSESSEE DURING THE RELEVANT PY HAS RECEIVED RS. 56 ,25,000 TOWARDS INTEREST FROM M/S KARNATAKA BANK LTD. SIMILARLY, AS SESSEE ALSO RECEIVED AN AMOUNT OF RS. 3,00,000 FROM M/S VASUDHA ORGANICS LTD. TOWARDS RENT. HE OBSERVED THAT THESE TWO AMOUNTS WE RE NOT OFFERED BY ASSESSEE IN ITS P&L A/C. WHEN THIS WAS POINTED O UT TO ASSESSEE, AS NOTED BY AO, ASSESSEE DID NOT FURNISH ANY INFORM ATION. ACCORDINGLY, AO HOLDING THAT INCOME AMOUNTING TO RS . 59,25,000 HAS NOT BEEN OFFERED TO TAX BY ASSESSEE, ADDED BACK THE SAME TO ASSESSEES INCOME FOR THE YEAR UNDER CONSIDERATION. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 5. AS FAR AS REJECTION OF BOOKS OF ACCOUNT AND ESTI MATION OF INCOME BY AO IS CONCERNED, LD. CIT(A) ALSO APPROVED THE SAME. 3 ITA NOS. 402 & 547 /HYD/2014 M/S GANGA INDUSTRIAL CORPORATION LTD. HOWEVER, HE WAS OF THE VIEW THAT THE PERCENTAGE OF PROFIT ADOPTED BY AO IS ON THE HIGHER SIDE, AND ACCORDINGLY REDUCED T O 1%. AS FAR AS ADDITION OF INTEREST INCOME AND RENTAL INCOME IS CO NCERNED, AS OBSERVED BY LD. CIT(A), DURING THE PROCEEDING BEFOR E HIM, IT WAS SUBMITTED BY ASSESSEE THAT THE SAID INCOME WAS INCL UDED UNDER THE HEAD SALES AND HAS BEEN DULY DISCLOSED IN THE BOO KS OF ACCOUNT. HOWEVER, LD. CIT(A) NOT BEING CONVINCED WITH THE SU BMISSIONS OF ASSESSEE, DIRECTED AO TO VERIFY ASSESSEES CLAIM AN D IF ON SUCH VERIFICATION IT IS FOUND THAT ENTRIES RELATING TO I NTEREST INCOME AND RENTAL INCOME HAVE BEEN MADE IN THE BOOKS OF ACCOUN T, NO ADDITION BE MADE. 6. LD. AR SUBMITTED BEFORE US, IDENTICAL NATURE OF DISPUTE AROSE IN ASSESSEES OWN CASE FOR AY 2007-08 WHEREIN LD. CIT( A) UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT, HAS REDUCED PERCENTA GE OF ESTIMATION FROM 2% TO 1%. HOWEVER, ACCEPTING ASSESSEES PLEA T HAT BOOKS OF ACCOUNT MAINTAINED BY IT ARE COMPLETE AND EXPENDITU RE CLAIMED IS FULLY VOUCHED, ITAT REMITTED THE MATTER BACK TO THE FILE OF AO TO FRAME DENOVO ASSESSMENT. HE, THEREFORE, SUBMITTED, FACTS IN THE AY UNDER CONSIDERATION BEING MATERIALLY SAME, ISSUE MAY BE R EMITTED TO THE FILE OF AO FOR DECIDING AFRESH AFTER EXAMINING ASSESSEE S BOOKS OF ACCOUNT. 7. LD. DR, THOUGH, AGREED THAT ISSUE IN DISPUTE IS COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN CASE, HOWEVER, H E SUPPORTED THE VIEW EXPRESSED BY AO. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI ALS ON RECORD. AS COULD BE SEEN, THE ONLY DISPUTE IS WITH REGARD T O REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT. IT IS THE CLAI M OF ASSESSEE THAT BOOKS OF ACCOUNT MAINTAINED BY IT ARE COMPLETE AND THE EXPENDITURE ARE FULLY VOUCHED. IT HAS BEEN SUBMITTED BY LD. AR BEFORE US, NEITHER AO NOR LD. CIT(A) HAVE CORRECTLY APPRECIATED ASSESS EES CONTENTION. 4 ITA NOS. 402 & 547 /HYD/2014 M/S GANGA INDUSTRIAL CORPORATION LTD. HE HAS SUBMITTED THAT GIVEN AN OPPORTUNITY, ASSESSE E IS READY TO EXPLAIN ALL THE ENTRIES IN THE BOOKS OF ACCOUNT AND ALSO PROPERLY EXPLAIN THE EXPENDITURE CLAIMED WITH SUPPORTING EVI DENCE. IN VIEW OF THE AFORESAID SUBMISSIONS OF ASSESSEE AND ALSO CONS IDERING THE FACT THAT ON SIMILAR FACTS AND SITUATION, ITAT IN ASSESS EES OWN CASE FOR AY 2007-08 IN ITA NO. 89/HYD/2011 DATED 08/07/2011, REMITTED THE MATTER BACK TO THE FILE OF AO FOR FRAMING DENOVO AS SESSMENT, WE ARE INCLINED TO SET ASIDE THE IMPUGNED ORDER OF LD. CIT (A) AND REMIT THE MATTER BACK TO THE FILE OF AO FOR CONSIDERING THE I SSUE AFRESH AFTER PROPERLY EXAMINING THE BOOKS OF ACCOUNT AND BILLS & VOUCHERS MAINTAINED BY IT IN SUPPORT OF EXPENDITURE CLAIMED. AO MUST AFFORD REASONABLE OPPORTUNITY TO ASSESSEE TO EXPLAIN THE B OOKS OF ACCOUNT. THE GROUNDS RAISED ON THIS ISSUE ARE ALLOWED FOR ST ATISTICAL PURPOSES. 9. IN GROUND NOS. 5 & 6, ASSESSEE HAS CHALLENGED AD DITION OF RS. 56,25,000 AS INTEREST INCOME AND RS. 3 LAKHS AS REN TAL INCOME. 10. AS FAR AS THIS ISSUE IS CONCERNED, ASSESSEES A RGUMENT IS TWO FOLD. FIRSTLY, THESE AMOUNTS HAVE BEEN SHOWN AS PAR T OF SALE IN P&L A/C AND SECONDLY, ONCE INCOME IS ESTIMATED, NO OTHE R ADDITIONS CAN BE MADE SEPARATELY. 11. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AND ALSO THE FACT THAT LD. CIT(A) HAS DIRECTED AO TO VERIFY THIS ASPECT BY EXAMINING THE BOOKS OF ACCOUNT, WE ARE INCLINED TO REMIT THIS ISSUE ALSO TO THE FILE OF AO TO VERIFY AND DECIDE IN ACCORDANCE WITH LAW AFTER DUE OPPORTUNITY OF HEA RING TO ASSESSEE. 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 13. THE ONLY ISSUE IN DISPUTE IN DEPARTMENTS APPEA L BEING ITA NO. 547/HYD/2014 IS LD. CIT(A) SHOULD NOT HAVE REDUCED RATE OF PROFIT FROM 2% TO 1% OF THE GROSS SALES. 5 ITA NOS. 402 & 547 /HYD/2014 M/S GANGA INDUSTRIAL CORPORATION LTD. 14. WHILE DECIDING ASSESSEES APPEAL IN ITA NO. 402 /HYD/2014 , WE HAVE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORED THE MATTER TO THE FILE OF AO FOR DECIDING AFRESH AFTER EXAMINING THE BOOKS OF ACCOUNT AND OTHER EVIDENCES. IN CASE, AFTER EXAMINING THE B OOKS OF ACCOUNT AND EVIDENCES, AO IS NOT SATISFIED WITH THEM OR HE FINDS THAT EXPENDITURES CLAIMED ARE NOT SUPPORTED BY BILLS AND VOUCHERS, HENCE, PROFIT OF THE ASSESSEE HAS TO BE ESTIMATED AT A PAR TICULAR PERCENTAGE AFTER REJECTING THE BOOKS OF ACCOUNT, HE MAY DO SO AFTER ASSIGNING PROPER REASONS. FURTHER, AO MUST GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE ON THE ISSUE OF PERCENTAGE OF PROFIT TO BE ADOPTED. 15. IN THE RESULT, DEPARTMENTS APPEAL IS CONSIDER ED TO BE ALLOWED FOR STATISTICAL PURPOSES. 16. TO SUM UP, APPEAL OF ASSESSEE IN ITA NO. 402/HY D/14 AND APPEAL OF REVENUE IN ITA NO. 547/H/14 ARE ALLOWED F OR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 12 TH AUGUST, 2015 KV COPY TO:- 1) M/S GANGA INDUSTRIAL CORPORATION LTD., C/O P. MU RALI & CO., CAS., 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500 082 2) ACIT, CIRCLE 2(3), HYDERABAD. 3) CIT(A) III, HYDERABAD 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6 ITA NOS. 402 & 547 /HYD/2014 M/S GANGA INDUSTRIAL CORPORATION LTD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER