Appeal details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 7007 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-04-2021
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB-B
Assessment Year
2010-2011
Appeal Filed On
28-03-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES : BENCH B HYDERABAD (THROUGH VIDEO CONFERENCE ) BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO. 431 /HYD./201 9 ASSESSMENT YEAR : 201 0 - 11 SRI GANGA REDDY ALLOORI VS. ITO, WARD 1, NIRMAL HYDERABAD [PAN: ADNPA8930D] & I.T.A. NO. 626 /HYD./201 9 ASSESSMENT YEAR : 201 0 - 11 I T O, WARD 1, NIRMAL VS. SRI ALL OORI GANGA REDDY HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE: SRI MURALI MOHANA RAO, A.R. FOR REVENUE: SRI ROHIT MUZUMDAR, D.R. DATE OF HEARING : 15 /02/2021 DATE OF PRONOUNCEMENT : 09 /04/2021 O R D E R PER S.S. GODARA, J.M. THESE ASSESSEES AND REVENUES CROSS APPEALS FOR AY 201 0 - 11 ARISE FROM CIT(A) - 1, HYDERABADS ORDER DATED 08.02. 201 9 IN CASE NO. 0289 /201 7 - 18 U/ S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). HEARD BOTH THE PARTIES. CASE FILES PERUSED. 2. COMING TO THE ASSESSEES APPEAL ITA 431/HYD/2019, WE NOTICE THAT THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS. 1. THE ORDER OF THE LD. CIT (A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. ITA NOS. 431/H/19 AND 626/H/19 SRI GANGA REDDY ALLOORI, HYD. 2 2. AS PER THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION LIMITED V. CIT (1998) 229 ITR 383 (SC), THE HON1BLE IT AT HAS J URISDICTION TO EXAMIN E THE QUESTION OF LAW WHICH HAS BEEN TAKEN BEFORE THE ITA T FOR THE FIRST TIME THOUGH NOT T AKEN BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSMENT COMPLETED U / S 143(3) R.W.S 147 OF THE ACT DATED 29.12.2017 IS INVALID AB INITIO. 4. THE LD.CIT O UGHT TO HAVE APPRECIATED THAT THERE IS NO BELIEF OF ESCAPEMENT OF INCOME EXISTING IN THE REASONS F OR THE ISSUE OF NOTICE U / S 148 OF THE ACT. 5. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT WHAT HAS BEEN RE CORDED BY THE ASSESSING OFFICER AS HIS REASON TO BELIEVE IS NOTHING MORE THAN A REPORT 6. WITHOUT PREJUDICE TO GROUND NO. 3, 4 AND 5 THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TA X SUB - CONTRACT RECEIPTS @ 5% ON GROSS CONTRACT RS.5,03,68,55 4 / - . 7. WITHOUT PREJUDICE TO GROUND NO. 3, 4 AND 5 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSE IS A SUB - CONTRACTOR AND THAT THE RATE OF PROFIT OF 5% IS MUCH HIGHER IN THE ASSESSEE'S CASE . RS. 6,79,314/ - 8. WITHOUT PREJUDICE TO GROUND NO. 3, 4 AND 5 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE ASSESSEE'S LINE OF BUSINESS, THE PROFIT WOULD NOT BE MORE THAN 3 % OF THE SUB - CONTRACT RECEIPTS. RS. 3,68,036/ - 9. THE APPELLANT MAY ADD', ALTER OR MODIFY ANY OTHER POINTS TO THE GROUNDS OF APPE AL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2.1. THE REVENUES CROSS APPEAL ITA 626/HYD/2019 ON THE OTHER HAND PLEAD S THE FOLLOWING SUBSTANTIVE GROUNDS . 1. WHETHER IN THE FACTS AND CIRCUMSTANCES, THE ORDER OF THE LEARNED CIT(A) IN ALLOWING THE CONTRACT EXPENSES OF RS.4,19,97,440 / - IS NOT PERVERSE, ILLEGAL AND LIKELY TO BE SET ASIDE. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES, THE LEARNED CIT(A) ERRED IN ALLOWING THE CONTRACT EXPENSES IN THE ABSENCE OF DETAILS OF SUB - CONTR ACTORS I . E., NAME, PAN, ADDRESS, AGREEMENT BETWEEN THE ASSESSEE AND SUB - CONTRACTORS. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES, THE LEARNED CIT(A) ERRED IN ALLOWING THE CONTRACT EXPENSES IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE FOR THE SAME. ITA NOS. 431/H/19 AND 626/H/19 SRI GANGA REDDY ALLOORI, HYD. 3 4. WHETHER IN THE FACTS AND CIRCUMSTANCES, THE LEARNED CIT(A) ERRED IN ALLOWING THE CONTRACT EXPENSES WHEN THE ASSESSEE DID NOT DEDUCT ANY TDS ON SUCH EXPENSES WHICH OTHERWISE CLEARLY ATTRACT TDS AS PER PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1961, THEREBY ESTABLISHING NON - GENUINENESS OF SUCH EXPENSES . 5. ANY OTHER GROUND(S) THAT MAY BE RAISED AT THE TIME OF HEARING. 3. LEARNED COUNSEL REPRESENTING ASSESSEE IS FAIR ENOUGH IN NOT PRESSING FOR THE ASSESSEES FORMER ISSUE OF VALIDITY OF REOPENING. COMING TO ITS LATTER SUBSTANTIVE GROUND THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO TAX ITS SUB - CONTRACT RECEIPTS @ 5% OF GROSS CONTRACT AMOUNT OF RS. 5,03,68,554/ - , CASE FILE SUGGEST S THAT IT HAD IT SELF DECLARED 5.5% PROFIT RATE AS PER THE REVISED RETURN. THIS CLINCHING FACT HAS GONE UNREBUTTED FROM BOTH THE PARTIES. WE NOTICE IN THIS FACTUAL BACKDROP THAT CIT(A)S DETAILED DISCUSSION MAKING THE IMPUGNED ADDITION OF ESTIMATION OF INCOME READS AS F OLLOWS. 6.1 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT; 'AS VERIFIED FROM 26AS, THE GROSS RECEIPTS AT RS. 53, 68,554/ - IN THE ORIGINAL RETURN FILED ON 21.03.2013, THE ASSESSEE ADMITTED GROSS RECEIPTS OF RS.38,20,697/ - WITH A NET PROFIT OF RS.4,26,645/ - . NOW THE ASSESSEE ADMITTED DIFFERENCE OF GROSS RECEIPTS RS.15,47,857/ - IN THE ABSENCE OF BOOKS OF ACCOUNT AND BILL/VOUCHERS, INCOME IS ESTIMATED AT 12% ON RS.53,68,554/WHICH WORKS OUT AT RS. 6,44,226/ - . HENCE THE ADDITION OF R S.2,17,581/ - IS ADDED TO THE INCOME RETURNED (RS.6,44,226RS. 4,26, 645). IT IS SEEN THAT THE ASSESSEE DEBITED IN P&L ACCOUNT RS.4,78,45,320/ - , RS.4,19,97,440/ - IS SHOWN AS 'CONTRACT EXPENSES '. THIS EXPENSES PERTAINS TO THE WORKS EXECUTED FOR ALLETI SHRUN ITHA EDN. SOCIETY & SS EDUCATION SOCIETY ONLY. THE ASSESSEE ASKED TO PRODUCE BREAKUP FIGURES FOR CONTRACT EXPENSES WITH EVIDENCES AND IT IS FURNISHED AS UNDER: 1. LABOUR CHARGES 1,72,62,590 2 CEMENT EXPENSES 1,26,34,180 3 PURCHASE OF BRICKS 68,57,150 4. PURCHASE OF SAND 42,45,600 5. TRANSPORTATION 7,85,160 6. OTHER EXPENSES 2,10,341 TOTAL 4,19,95,021 ITA NOS. 431/H/19 AND 626/H/19 SRI GANGA REDDY ALLOORI, HYD. 4 THE ASSESSEE STATED THAT IN ORDER TO MAKE BANKING CONVENIENCE FROM SBH NIRMAL A/C TO HYDERABAD, THE CONTRACT RECEIPTS OF RS.450 CRORES RECEIVED FROM 1) SS EDUCATIONAL SOCIETY, 2) ALLETI SHRUNITHA EDN SOCIETY. SINCE THE ASSESSEES ACCOUNT IS IN SBH, NIRMAL FOR CONVENIENCE SAKE RS.4,19,97, 440/ - TRANSFERRED TO MAHESHWARA EDUCATIONAL SOCIETY, HYDERABAD BY THE ASSESSEE TO EXECUTE CIVIL WORKS AT HYDERABAD. IT IS EXPLAINED THAT THE SAID CONTRACT EXPENSES ARE PAID THROUGH CHEQUES ONLY AN D THEY WERE ISSUED FROM HIS SBH, NIRMAL TO MAHESHWARA EDUCATIONAL SOCIETY, HYDERABAD. FROM MAHESHWARA EDUCATIONAL SOCIETY THE AMOUNT IS EXPENDED FOR CONTRACT PURPOSE. ON VERIFICATION IT IS SEEN THAT THE CONTRACT RECEIPTS AND PAYMENTS ARE NOT ROUTED THROUGH THE BOOKS OF ACCOUNT I.E., NO CASH BOOKS, LEDGER IS PRODUCED OR MAINTAINED. IN ABSENCE OF SUPPORTING DOCUMENTS, IT IS CONFIRMED THAT THERE ARE NO BOOKS MAINTAINED AND NO BILLS/ VOUCHERS FOR EXPENSES DEBITED IN P&L A/C. ACCORDINGLY, A SHOW CAUSE LETTER ISS UED AS TO WHY EXPENSES RS.4,19,97,440/ - SHALL NOT BE TREATED AS UNEXPLAINED EXPENDITURE AND SHALL NOT BE ADDED TO INCOME. THE ASSESSEE EXPLAINED THAT CONTRACT EXPENSES ARE TRANSFERRED TO MAHESHWARA EDUCATIONAL SOCIETY ON A NEED BASIS FROM ASSESSEE'S SAVIN GS A/C. THEREFORE, AMOUNTS FROM MAHESHWARA EDUCATIONAL SOCIETY WERE EXPENDED FOR CONTRACT EXPENSES. THE ASSESSING OFFICER DISALLOWED CONTRACT EXPENSES O F RS.4,19,97,040/ - TREATING IT AS UNEXPLAINED EXPENDITURE. 6.2 DURING THE COURSE OF APPEAL PROCEEDI NGS, WITH REGARD TO THE ABOVE GROUND, THE APPELLANT SUBMITS AS UNDER: 'FOR THAT THE ASSESSING OFFICER ERRED IN ADDING A SUM OF RS.2,17,581/ - BEING DIFFERENCE BETWEEN PROFIT ADMITTED AS PER ORIGINAL RETURN AND ESTIMATED INCOME AT 12 PER CENT ON GROSS RECE IPTS AS PER FORM 26AS. HE HAS RECEIVED RS.3,00,00,000/ - AND RS.1,50,00, 000 / - FROM ALLETI SHRUNITHA EDN. SOCIETY AND SS EDUCATIONAL SOCIETY TOWARDS CONSTRUCTION OF COLLEGE BUILDING. THE ABOVE PAYMENTS W ERE MADE AFTER DEDUCTION OF TDS U/S 194C O F RS.30,00,000/ - AND RS.1,50,000 / - RESPECTIVELY WHICH CAN BE OBSERVED FROM FORM 26AS. HE NCE THE ABOVE RECEIPTS W ERE IN THE NATURE OF CONTRACT RECEIPTS AND W ERE ALSO S UBJECT TO TDS. HE HAS SUB - CONTRACTED THE ABOVE CONSTRUCTION OF CO LLEGE BUILDING TO MAHESHWARA EDUCATIONAL SOCIETY AND FUNDS W ERE TRANSFERRED TO THE ABOVE SOCIETY AS AND WH EN REQUIRED BY IT. THE APPELLANT INCURRED RS.4, 19,97, 440/ . TOWARDS CONTRACT EXPENSES WHICH DEBITED TO P&L A/C. THE ASSESSING OFFICER DISALLOWED EVEN THOUGH THE SAID EXPENDITURE WAS INCURRED FROM SOURCED INCOME. HENCE THE ABOVE DISALLOWANCE MAY BE DELETE D. ITA NOS. 431/H/19 AND 626/H/19 SRI GANGA REDDY ALLOORI, HYD. 5 THE APPELLANT DECLARED INCOME OF RS.25,23,234/ - IN HIS REVISED RETURN OF INCOME AFTER CONSIDERING ALL THE GROSS RECEIPTS FOR THE YEAR UNDER CONSIDERATION.. EVEN THOUGH THE ASSESSEE SUBMITTED THE DETAILS OF TRANSACTIONS TIU1DE DURING THE YEAR UNDER CONSIDERATION, THE AO WITHOUT CONSIDERING THE DETAILS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT. HE IS IN LINE OF CIVIL CONTRACTS AND ESTIMATING THE INCOME @12% IS ON THE HIGHER SIDE. NO CO MPARABLE RESULTS W ERE TAKEN BUT UNILATERALLY ADAPTED AN ADHOC RATE @12% WHICH IS FAR HIGHER THAN THE NET PROFIT DERIVED IN THE LINE OF BUSINESS. THE APPELLANT SU BMITTED THE SAME SHOULD BE RESTRICTED @3% ON RECEIPTS O F RS.5,03, 68, 554/ - FOR THE YEAR. 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND THE SUB M I SSIONS OF THE APPELLANT. ON VERIFICATION, IT IS FOUND THAT THE APPELLANT HALF DISCLOSED THOSE RECEIPTS AND AGAIN PAID TO THE SUB - CON TRACTORS. THEREFORE, THE DISALLOWANCE OF THE EXPENSES IS NOT FAIR. THEREFORE, TH E SUB MISSIONS OF THE APPELLANT IS ACCEPTED THAT IT IS S UB - CONTRACT GIVEN TO THE PARTY AND KEEPING IN V IEW OF THE CASE LAWS AS S UBMITTED BY THE APPELLANT, THE ASSESSING OFFICER DIRECTED TO TAX SU B - CONTRACT RECEIPTS @5% O N GROSS CONTRACT AMOUNT OF RS.5,03,68 ,554 / - . 3.1. W E THEREFORE GO BY THE ASSESSEES INCOME DECLARATION IN ITS REVISED RETURN TO ADOPT TO THE CIT(A)S FINDINGS AND DIRECT THE AO TO TAX THE ASSESSEES SUB - CONTRACT RECEIPTS AT 5% ONLY. IT'S APPEAL ITA 431/HYD/19 FAILS THERE FORE . 4. NEXT COMES THE R EVENUES CROSS APPEAL. WE REFER TO OUR DISCUSSION ON THE VERY ISSUE OF ASSESSEES GROSS RECEIPTS HELD TAXABLE AFTER ADOPTING 5% INCOME RATE AFTER REJECTING BOOKS TO CONCLUDE THAT THE IMPUGNED DISALLOWANCE WOULD NOT SURVIVE ONCE TH E BOOKS THEMSELVES HAVE BEEN REJECTED GOING BY HONORABLE JURISDICTIONAL HIGH COURTS DECISION IN IND WELL CONSTRUCTION S VS. CIT 232 ITR 776 (AP) . THIS R EVENUES INSTANT CROSS APPEAL ALSO FAILS THERE FORE . BOTH THESE ASSESSEES AND R EVENUES CROSS APPEA LS ARE DISMISSED. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. PRONOUNCED IN OPEN COURT ON 09 TH APRIL, 2021. SD/ - SD/ - (L.P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 09 TH APRIL, 2021. * GMV ITA NOS. 431/H/19 AND 626/H/19 SRI GANGA REDDY ALLOORI, HYD. 6 COPY OF THE ORDER FORWARDED TO: 1. SRI GANGA REDDY ALLOORI, C/O P. MURALI & CO., CHARTERED ACCOUNTANTS, 6 - 3 - 655/2/3, SOMAJIGUDA, HYDERABAD 500 082 , TELANGANA. 2. ITO, WARD 1, NIRMAL 3. A CIT, NIZAMABAD RANGE, NIZAMABAD, T ELANGANA. 4 . CIT(A) - 1, HYDERABAD 5 . PR.CIT - 1, HYDERABAD. 6 . DR, ITAT, HYDERABAD. 7. GUARD FILE.
