DCIT, Circle-9(1), Hyd, Hyderabad V. Narender Reddy Kallu, Hyd, Hyderabad

ITA 409/HYD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5981 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-05-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETENDER MANN
• Keywords: Unexplained cash credit; Depreciation; Business expenditure
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 409/HYD/2016 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME TAX, CIRCLE-9(1), HYDERABAD VS SRI NARENDER REDDY KALLU, HYDERABAD [PAN: AMQPK2115C] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. GEETENDER MANN, DR FOR ASSESSEE : SHRI A. SRINIVAS, AR DATE OF HEARING : 23-05-2018 DATE OF PRONOUNCEMENT : 25-05-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7, HYDERABAD, DATED 30-12-2015. THE REVENUE IS CONTESTING THE RATE OF 5% DETERMINED BY THE CIT(A) ON SUBCONTRACTS, WHEREAS AO ESTIMATED THE INCOME AT 12.5%. 2. BRIEFLY STATED, ASSESSEE A CONTRACTOR FILED HIS RETUR N OF INCOME FOR THE AY. 2011-12 ON 14-02-2012 DECLARING T OTAL INCOME OF RS. 28,58,900/-. THE SAME WAS TAKEN UP FOR ITA NO. 409/HYD/2016 :- 2 -: SCRUTINY. AS ASSESSEE COULD NOT SUBMIT THE RELEVANT DE TAILS CALLED FOR, THE INCOME WAS ESTIMATED @12.5% OF CONTRAC T RECEIPTS AND FURTHER ADDITION OF RS. 49,76,500/- AS UNEXPLAINED CASH CREDITS ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNT. AO COMPLETED THE ASSESSMENT U/S. 144 OF THE A CT, DETERMINED THE TOTAL INCOME OF RS. 1,58,78,290/-. 3. BEFORE THE LD.CIT(A) IT WAS SUBMITTED THAT HE IS NOT T HE MAIN CONTRACTOR, BUT A SUB-CONTRACTOR AND INCOME SHOW N BY ASSESSEE IS TRUE AND CORRECT AND THE SAME SHOULD BE AD OPTED. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION, IF ESTIMATE H AS TO BE MADE, IT CANNOT BE MORE THAN 5% AS THE ASSESSEE IS A SUB- CONTRACTOR. THE CO-ORDINATE BENCH, HYDERABAD HAS HELD 5% FOR SUB-CONTRACTOR TO BE A REASONABLE FIGURE. THEREFO RE, 5% OF RS. 6,34,01,925/- WOULD WORK OUT TO RS. 31,70,096/-. IN THE WORST SCENARIO THIS FIGURE MAY BE ADOPTED. 4. LD.CIT(A) DECIDED THE ISSUE IN FAVOUR OF ASSESSE E, STATING AS UNDER: 4.2. THE ASSESSMENT ORDER, SUBMISSIONS OF THE ASSE SSEE AND THE MATERIAL PLACED ON RECORD ARE CONSIDERED. THE ASSESSEES CLAIM THAT THEY ARE SUB-CONTRACTORS AND NOT A MAIN CONTRA CTOR IS BORNE BY THE RECORD ALSO. THE TDS IS MADE @1% BY THE PAYER, WHICH SHOWS THAT THE ASSESSEE IS A SUB-CONTRACTOR. FURTHER, TH E ASSESSEES CLAIM THAT THE ESTIMATION OF INCOME @12.5% IS ON HIGHER S IDE ALSO IS REASONABLE. IN CASE OF SUB-CONTRACTOR, THE INCOME @4% TO 6% IS BEING ESTIMATED AS PER THE ORDERS OF HON'BLE ITAT IN VARI OUS CASES. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, IN COME @5% OF GROSS RECEIPTS IS HELD TO BE REASONABLE AND IT IS DIRECTE D TO ESTIMATE INCOME ACCORDINGLY. ALL THE EXPENSES INCLUDING THE DEPREC IATION IS DEEMED TO HAVE BEEN ALLOWED. ITA NO. 409/HYD/2016 :- 3 -: 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE IN AGREEMENT WITH THE ORDER OF LD.CIT(A). THERE IS NO DI SPUTE WITH REFERENCE TO THE FACT THAT ASSESSEE IS ONLY A SUB-CONTRAC TOR. EVEN THOUGH LD.DR RELIED ON THE CO-ORDINATE BENCH DEC ISION IN THE CASE OF M/S. BALAJI CONSTRUCTIONS, KADAPA WHEREIN THE DECISION IN THE CASE OF M/S. TEJA CONSTRUCTIONS WAS RE LIED FOR ESTIMATING INCOME ON SUB-CONTRACT BASIS AT 8%, THERE ARE MANY OTHER CO-ORDINATE BENCH DECISIONS ESTIMATING INCOME AT 5% NET OF ALL DEDUCTIONS LIKE DEPRECIATION AND REMUNERATION ETC. IN THE RECENT DECISION IN THE BATCH OF APPEALS IN SREE NAG ENDRA CONSTRUCTIONS AND OTHERS, DT. 10-11-2017 (WHERE ONE OF US, JM IS A PARTY) IT WAS HELD AS UNDER: 7. THE LEARNED DR HAD PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SURENDRA GULABCHAND MODI FOR KEEPING THE MATTER PENDING TILL THE APPEALS OF THE MADHUCON PROJECTS LTD ARE D ISPOSED OF BY THE CIT (A). WE FIND THAT THE SAID DECISION WAS FOR THE A.YS 1956-57 AND 1957-58 AND IN THE SAID CASES, THE ISSU E WAS PENDING BEFORE THE HON'BLE SUPREME COURT AND NOT BE FORE THE CIT (A). THE JUDGMENT OF THE HON'BLE SUPREME COURT WILL BE BINDING ON ALL THE COURTS IN INDIA INCLUDING THE TR IBUNAL WHEREAS THE ORDER OF THE ITAT WILL BE BINDING ON TH E CIT (A). THEREFORE, THE SAID DECISION IS NOT APPLICABLE TO T HE FACTS OF THE CASE BEFORE US. IN THE CASE OF MAA HIGHWAYS (CITED SUPRA), WE HAVE ALREADY HELD THAT WHERE THE INCOME IS ESTIMATE D AFTER REJECTION OF BOOKS OF ACCOUNT, NO FURTHER DISALLOWA NCE OF BUSINESS EXPENDITURE CAN BE MADE. IN THE CASE BEFOR E US ALSO, THE AO HAS MADE THE ESTIMATION ON THE GROUND THAT T HE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE AND THE A MOUNTS WERE NEVER USED FOR ITS BUSINESS ACTIVITIES AND WER E RETURNED BACK TO THE MAIN CONTRACTOR. SINCE THE FACTS AND CI RCUMSTANCES ARE THE SAME BEFORE US AS IN THE CASE OF MAA HIGHWA YS AND SINCE WE HAVE CONFIRMED THE ESTIMATION OF INCOME BY THE AO AT 8% IN THE CASE OF MAIN CONTRACTOR AND 5% IN THE CAS E OF A SUB- CONTRACTOR, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). ITA NO. 409/HYD/2016 :- 4 -: 6. SINCE THE DECISION OF LD.CIT(A) IS IN ACCORDANCE WITH THE PRINCIPLES ON THE SUBJECT, WE DO NOT FIND ANY REASON TO INTERFERE. THERE CAN BE NO FIXED RATE IN ESTIMATION O F INCOME WHICH MAY VARY FROM CASE TO CASE ON FACTS BUT GIVEN TH E FACTS OF ASSESSEE BEING A SUB-CONTRACTOR, BEING AN INDIVID UAL, ESTIMATION OF INCOME AT 5% NET OF ALL DEDUCTION IS REASO NABLE. WE THEREFORE UPHOLD THE ORDER OF LD. CIT(A). 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2018 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH MAY, 2018 TNMM ITA NO. 409/HYD/2016 :- 5 -: COPY TO : 1. DY. COMMISSIONER OF INCOME TAX, CIRCLE-9(1), HYD ERABAD. 2. SRI NARENDER REDDY KALLU, D.NO. 17-1-388/2/A/7, FLAT NO. 201, SAI TEJASWANI ENCLAVE, LAXMI NAGAR, SAIDAB AD, HYDERABAD. 3. CIT(APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.