ITO, Ward-9(2), Hyderabad V. Shri Manohar Kumar Singh, Hyd, Hyderabad

ITA 405/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61904 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: M K R PUROHIT
• Keywords: Assessment record
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 405/HYD/2011 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, WARD 9(2), HYDERABAD V/S MANOHAR KUMAR SINGH, HYDERABAD (PAN AFVPS6618C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.V. PRASAD REDDY RESPONDENT BY : SHRI M.K.R. PUROHIT DATE OF HEARING 01/05/2012 DATE OF PRONOUNCEMENT 08/06/2012 O R D E R PER ASHA VIJAYARAGHAVAN, J.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-VI, HYDERABAD DATED 15/11/2010 FOR THE AS SESSMENT YEAR 2006-07. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED RETURN OF INCOME ON 31/10/2006 DECLARING AN INCOME OF RS. 3,45,770/- FOR THE ASSESSMENT YEAR 2006-07. SUBSEQU ENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY BY THE AO. UNDER THE GUIDELINES ISSUED BY THE CBDT, THE ASSESSEE HAD RETURNED INCOM E LESS THAN 5% OF THE GROSS RECEIPTS BEING RS. 2,95,31,77/-. T HE AO COMPLETED THE ASSESSMENT ESTIMATING INCOME AT 5% OF THE GROSS RECEIPTS, WHICH WAS WORKED OUT AT RS. 14,76,568/-. THE AO ALSO OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS OF RS. 75,500/- TOWARDS HIRE CHARGES WITHOUT DEDUCTING TDS AND DISA LLOWED THE ITA NO. 405/H/11 SRI MANOHAR KUMAR SINGH 2 SAME U/S 40(A)(IA) OF THE ACT. AGGRIEVED, THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 3. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ALLOWED THE APPEAL OF THE ASSESSEE BY OB SERVING AS UNDER:- 8. IT COULD BE SEEN FROM THE ASSESSMENT RECORD OF T HE APPELLANT THAT EXCEPT FOR SELECTING THE CASE AS PER SCRUTINY GUIDELINES ISSUED BY THE BOARD, THE AO HAD NOWHERE QUESTIONED THE LOW PROFIT RETURNED. INSTEAD IN THE ASSESSMENT ORDER IT WAS STATED BY THE AO THAT THE B OOKS OF ACCOUNT, VOUCHERS PRODUCED WERE VERIFIED. NO REASON S FOR ADOPTION OF GROSS PROFIT @5% WERE RECORDED IN THE ASSESSMENT RECORD OR THE ASSESSMENT ORDER. THE POIN T OF ADOPTION OF INCOME @5% OF GROSS RECEIPTS WAS NEVER MENTIONED IN THE SHOW CAUSE LETTER ISSUED OR IN THE ORDER SHEET ENTRIES. IT IS ALSO SEEN THAT THE DISALLOWANC E MADE U/S 40(A)(IA) IS ONLY OF A TECHNICAL NATURE FOR A DEFAU LT FOR NON DEDUCTION OF TDS ON THE PAYMENTS MADE. UNDER THE CIRCUMSTANCES, DRAWING INFERENCE FROM THE CASES OF PYARELAL MITTAL VS. ACIT [2007] 291 ITR 214 (GAU.) AND CIT V S. MASCOT (INDIA) TOOLS & FORGINGS (P) LTD. [2010] 320 ITR 116 (ALL.), THE GROUNDS RAISED BY THE APPELLANT FROM GR OUND NOS. 1 TO 4 ARE ALLOWED AND THE AO IS DIRECTED TO ACCEPT THE INCOME RETURNED. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL AGAINST DELETING THE ADDITIONS MADE BY THE A O ENHANCING THE GP FROM 1.37% TO 5% AND DISALLOWANCE OF FREIGHT CHARGES FOR NON DEDUCTION OF TAX. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS THE ORDERS OF THE AUT HORITIES BELOW. UNDER THE REQUIREMENTS OF SECTION 44AB, THE ASSESS EE WHOSE TURNOVER EXCEEDS RS. 40 LAKHS, HAS TO GET HIS ACCO UNTS AUDITED BY A CA AND FURNISH THE RETURN ALONG WITH THE AUDIT REPORT. IN THE PRESENT CASE, THE ASSESSEE HAS COMPLIED WITH THE SA ME. THE BOOKS OF ACCOUNT WERE ALSO PRODUCED ALONG WITH BILL S, VOUCHERS ITA NO. 405/H/11 SRI MANOHAR KUMAR SINGH 3 AND OTHER DOCUMENTS, WHICH WERE VERIFIED BY THE AO AND THE AO AFTER VERIFYING THE BOOKS OF ACCOUNT, NOT HAVING F OUND FAULT WITH THE SAME, CANNOT ADOPT AN ESTIMATED NET PROFIT. FU RTHER, THE NORM FIXED BY THE CBDT CIRCULAR DOES NOT ENTITLE TH E AO TO ENHANCE THE NET PROFIT @ 5% WHEN THE NET PROFIT CAN BE DETERMINED FROM THE BOOKS OF ACCOUNT. HENCE, WE CON FIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUND RAISED B Y THE REVENUE IN THIS REGARD. 6. AS REGARDS THE CLAIM OF FREIGHT CHARGES, THE AO DISALLOWED A SUM OF RS. 75,500/- U/S 40(A)(IA). THE CIT(A) HAS MERELY DIRECTED THE AO TO GIVE CREDIT TO THE TDS CERTIFICA TES BASED ON THE CERTIFICATES ENCLOSED ALONG WITH THE RETURN AFTER V ERIFICATION OF THE SAME. 7. WE FIND THAT SPECIAL BENCH OF ITAT, VIZAG IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS, VISAKHAPATNAM VS ADDL. CIT( 2012-TIO:-184-ITAT-VIZG-SB). HAS HELD THAT FOLLOWI NG THE MAJORITY VIEW OF THE SPECIAL BENCH, THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED WITH RESPECT TO THE AFO RESAID PAYMENTS WHICH WERE ACTUALLY PAID DURING THE FINANC IAL YEAR BUT IT CAN BE INVOKED WITH RESPECT TO THE AMOUNT WHICH REM AINED PAYABLE AS ON DATE. RESPECTFULLY FOLLOWING THE DEC ISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS, VISAKHAPATNAM VS ADDL.CIT (SUPRA) THE ASSESSING OFF ICER SHALL IN RESPECT OF AMOUNTS HE CONSIDERS AS DISALLOWABLE U/S 40(A)(IA), APPLY THE RATIO OF THE SPECIAL BENCH AND DISALLOW U /S 40(A)(IA) ONLY SUCH AMOUNTS WHICH HAVE NOT BEEN PAID AND IS O UTSTANDING AS ON THE LAST DAY OF THE PREVIOUS YEAR. THUS, THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOS ES. ITA NO. 405/H/11 SRI MANOHAR KUMAR SINGH 4 8. THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 08/06/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. HYDERABAD, DT.: 8 TH JUNE , 2012 KV COPY FORWARDED TO: 1. INCOME TAX OFFICER, WARD 9 (2), HYDERABAD 2. SHRI MANOHAR KUMAR SINGH, 22-7-270/B/1, 1 ST FLOOR, NIZAMABAD, DEWANDEVDI, HYDERABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS), HYDERABAD 4. COMMISSIONER OF INCOME-TAX-VI, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD