Income Tax Officer, Ward-1, Suryapet V. M/s Sai Sri Constructions, Kodad

ITA 455/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2361 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SUBBARAJU
• Assessee Lawyers: Y V BHANU NARAYAN RAO
• Keywords: Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Question of law
• Section: 40A(3); 133A; 194C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 455/HYD/2014 ASSESSMENT YEAR: 2010-11 INCOME-TAX OFFICER, WARD 1, SURYAPET VS. M/S SAI SRI CONSTRUCTIONS, KODAD. PAN ABRFS 8003P (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P.B. SUBBARAJU ASSESSEE BY : SHRI Y.V. BHANU NARAYAN RAO DATE OF HEARING : 13-06-2017 DATE OF PRONOUNCEMENT : 23-06-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (A) - VI, HY DERABAD, DATED 29-11-2013 FOR AY 2010-11. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FIRM BEING BUILDERS AND DEVELOPERS FILED ITS RETURN OF INCOME FOR THE AY 2010-11 ON 24/10/2010 THROUGH E-FILING ADMITTING THE TOTAL INCOME AT RS. 25,25,590/- AFTER CLAIMING THE EXPENSES OF RS. 4,20 ,000/-, TOWARDS REMUNERATION AND OF RS. 7,18,847 AS INTEREST TO PA RTNERS. A SURVEY U/S 133A OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE FIRM ON 08/03/2010 IN WHICH CERTAIN INFORMATION IN THE FORM OF EXPENSES 2 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD RECORDED IN DIARIES AND LOOSE SHEETS WERE FOUND AND IMPOUNDED. BASED ON THE SAID INFORMATION, THE AO MADE VARIOUS ADDITIONS DISREGARDING THE ENTRIES IN THE AUDITED BOOKS AND C OMPUTED THE TOTAL INCOME AT RS. 1,73,46,640/- AS AGAINST THE RETURNE D INCOME OF RS. 25,25,590/-. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A). 4. LD. CIT(A) OBSERVED THAT WHILE COMPUTING THE TOT AL INCOME, THE AO MADE AN ADDITION OF RS. 12,50,000/- TO THE ADMIT TED INCOME, TREATING THE TOTAL SALE CONSIDERATION OF FLAT NO. 4 10 AS UNDISCLOSED INCOME. AS PER THE AO, THE FLAT WAS REGISTERED DURI NG FY 2009-10 AND EVEN IF SOME AMOUNTS WERE NOT RECEIVED, THE SAID AM OUNTS SHOULD HAVE BEEN SHOWN AS AMOUNTS RECEIVABLE WHILE OFFERIN G THE ENTIRE SALES CONSIDERATION AS INCOME, AS PER MERCANTILE ME THOD OF ACCOUNTS. HOWEVER, AS PER THE ASSESSEE, THE FLAT WAS REGISTER ED FOR BANK LOAN WITH POSSESSION NOT GIVEN WITH THE AMOUNTS OF RS. 1 0,50,000/- RECEIVED UPTO 31.03.2010, INCLUDING THE AMOUNTS OF RS. 6,00,000/- RECEIVED DURING FY 2009-10, WERE SHOWN AS RECEIVABL ES, AS AGAINST THE TOTAL CONSIDERATION OF RS. 12,50,000/-. ALTERNA TIVELY, THE ASSESSEE PLEADED THAT ENTIRE SALES CANNOT BE TREATED AS PROF IT AND THE VALUE OF SAID FLAT SHOWN IN WIP, SHOULD HAVE BEEN REDUCED. 5. FURTHER, WHILE COMPUTING THE TOTAL INCOME, THE A O MADE A DISALLOWANCE OF RS. 4,50,000, U/S. 40(A)(IA), BEING THE AMOUNTS PAID TO MR. MADDINENI MAHESH, TOWARDS CENTRING CHARGES, WITHOUT DEDUCTING TAX ON SUCH AMOUNTS, SINCE THE PAYMENTS S HOWN TO HAVE BEEN GOVERNED BY A CONTRACT ENTERED BY ASSESSEE FIR M WITH MR. MAHESH. HOWEVER, AS PER THE ASSESSEE, THE SAID AMOU NTS REPRESENT LABOUR CHARGES PAID TO MR. MAHESH ON BEHALF OF OTHE R TEAM OF WORKERS, WHICH IS A COMMON PRACTICE IN CONSTRUCTION BUSINESS AND DO 3 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD NOT FALL UNDER THE AMBIT OF SEC. 194C AND THEREBY U /S. 40(A)(IA) AND THE ULTIMATE PAYMENTS TO THE LABOUR FALL WELL WITHI N THE PRESCRIBED LIMITS. 6. FURTHER, WHILE COMPLETING THE ASSESSMENT PROCEE DINGS OF THE ASSESSEE FIRM, THE AO MADE A FURTHER ADDITION OF RS . 28,80,000/-, AS UNEXPLAINED CREDITS, INVOKING THE PROVISIONS OF SEC . 68, BEING THE CAPITAL BROUGHT IN BY THE PARTNERS OF THE FIRM, DUR ING THE YEAR UNDER REFERENCE. THE ADDITION WAS MADE, ON THE GROUND THA T THE PARTNERS DID NOT MAINTAIN BOOKS AND THE ENTRIES WERE NOT SUPPORT ED BY SUCH ENTRIES IN BOOKS OR THROUGH THE BANK TRANSACTIONS O F THE PARTNERS AND MERE FILING OF IT RETURNS COPIES BY FEW OF THE PART NERS DO NOT PROVE THE CREDITS, WITHOUT THE NEEDED CORROBORATIVE EVIDE NCES. THE ASSESSEE'S CONTENTION AGAINST THE SAID ADDITION WAS THAT THE A.O COULD HAVE MADE ENQUIRIES AND VERIFIED THE SOURCES FOR THE ABOVE INVESTMENTS IN THE INDIVIDUAL HANDS OF PARTNERS, IN STEAD OF THE FIRM. 7. A FURTHER ADDITION OF RS. 1,02,41,050/- WAS MAD E BY THE A.O, BY INVOKING THE PROVISIONS OF SEC. 40A(3) AND 40(A) (IA), BASED ON THE ENTRIES FOUND IN THE IMPOUNDED MATERIAL, NOTWITHSTA NDING THE CONTENTION OF THE ASSESSEE THAT NO SUCH VIOLATIONS WERE OBSERVED IN THE AUDITED BOOKS. THE A.O MADE LIST OF THE PAYMENT S MADE ITEM- WISE, INSTEAD OF LIST OF RECIPIENTS WHERE THE TOTAL PAYMENTS/EXPENSES WERE QUANTIFIED AT RS. 1,02,41,049/- AND DISALLOWED THE SAME, HOLDING THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE SAID PAYMENTS WERE NOT CASH PAYMENTS, TO THE EFFECT THAT THE SAID EXPENSES DO NOT ATTRACT PROVISIONS OF SEC. 40A(3) OR 40(A)(IA). ON THIS ISS UE, THE CONTENTION OF THE ASSESSEE WAS THAT THE ACT OF THE DISALLOWANCES, BASED ON ENTRIES IN IMPOUNDED MATERIAL AMOUNTED TO REJECTION OF BOOK S OF ACCOUNT AND ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE AO HAS TO COMPLETE THE ASSESSMENT BY ADOPTING NET PROFIT RATE AS PERCENTAG E OF GROSS RECEIPTS AND OUGHT NOT TO HAVE MADE SPECIFIC ADDITI ONS U/S. 40A(3) OR 40(A)(IA). 4 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD 8. AFTER CONSIDERING THE OBSERVATIONS OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) OBSERVED TH AT AS COULD BE SEEN FROM THE FACTS OF THE CASE, THERE WAS A SURVEY IN THIS CASE DURING WHICH CERTAIN DIARIES / LOOSE SHEETS WERE IM POUNDED AND THE A.O MADE ADDITIONS BASED ON THE ENTRIES IN SUCH IMP OUNDED MATERIAL. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE TOT AL RECEIPTS OF THE BUSINESS WERE SHOWN AT RS. 1,95,35,000/-, ON WHICH A NET PROFIT OF RS. 25,25,590/- WAS ADMITTED AFTER CLAIMING DEDUCTI ON TOWARDS REMUNERATION (RS. 4,20,000) AND INTEREST (RS. 7,18, 847) TO THE PARTNERS. THE GROSS RECEIPTS SHOWN IN RETURN OF INC OME DOES NOT INCLUDE THE AMOUNT OF RS. 12,50,000/-, SHOWN TO BE THE SALE CONSIDERATION OF FLAT NO. 410, AS REFLECTED IN IMPO UNDED MATERIAL, AS PER WHICH THE FLAT WAS SHOWN TO HAVE BEEN REGISTERE D\DURING THE YEAR UNDER REFERENCE, BUT ONLY AN AMOUNT OF RS. 10.00 LA CS WAS SHOWN TO HAVE RECEIVED TILL 31.03.2010, INCLUDING RS. 6.00 L ACS RECEIVED DURING THE YEAR UNDER REFERENCE. THE CIT(A) OBSERVED THAT AS PER THE A.O, THE ENTIRE SALE CONSIDERATION WHICH WAS NOT SHOWN I N GROSS RECEIPTS/SALES, AMOUNTED TO UNEXPLAINED SALES AND U NEXPLAINED INCOME. HOWEVER, AS PER THE ASSESSEE, ENTIRE SALES CANNOT BECOME PROFIT AND THE VALUE OF THE SAID FLAT WAS REFLECTED IN WIP, WHICH FURTHER REFLECT THE PROFIT OF BUSINESS AND THE SALE TRANSAC TION REFLECTED IN THE SUBSEQUENT YEAR 2011-12. 8.1 THE CIT(A) OBSERVED THAT THE DISALLOWANCES OF RS. 1,02,41,050/-, WERE NOT BASED ON THE PAYMENTS TO TH E PERSONS FOR THE PURPOSE OF RESTRICTING/DISALLOWING U/S 40A(3) OR 40 (A)(IA), BUT THE PAYMENTS UNDER PARTICULAR HEADS EXCEEDING THE LIMIT S PRESCRIBED. THE SAID DISALLOWANCES WERE MADE BASED ON THE ENTRIES I N THE IMPOUNDED MATERIAL, BUT NOT THE REGULAR BOOKS, THEREBY AMOUNT ING TO REJECTION OF AUDITED BOOKS, IN THE CASE OF THE ASSESSEE. THE CIT (A) WAS OF THE VIEW THAT WHERE THE BOOKS ARE RENDERED UNRELIABLE O R AMOUNTED TO REJECTION, THE BEST ALTERNATIVE TO THE A.O IS TO ES TIMATE THE NET PROFIT, 5 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD ON THE GROSS RECEIPTS/ TURNOVERS. HE, THEREFORE, HE LD THAT THERE IS NO SCOPE FOR MAKING SPECIFIC AND SEPARATE DISALLOWANCE S U/S. 40A(3) AND 40(A)(IA) AND FOR MAKING ADDITIONS U/S. 68 OF IT AC T, UNLESS IT IS PROVED THAT THE CREDITS BROUGHT INTO BOOKS NOT REPR ESENTED BY THE UNACCOUNTED INCOMES OR THE INCOME ASSESSED ON ACCOU NT OF ESTIMATION OF PROFITS. HE FURTHER HELD AS HELD BY T HE CATENA OF JUDICIAL DECISION, IN CASE OF ESTIMATION, REASONABLENESS OF THE RATE OF PROFIT TO BE ADOPTED, DEPENDS ON FACTS OF EACH CASE SUCH AS T HE SIZE AND LOCATION OF PROJECT, AVAILABILITY OF VARIOUS SOURCE S SUCH AS LABOUR OR MATERIAL ETC. IN THIS CASE, THE ASSESSEE HAS ADMITT ED AN AMOUNT OF RS. 25,25,590/-, AFTER EXCLUSION OF REMUNERATION AN D INTEREST TO PARTNERS, WHICH AMOUNTED TO 12.93% ON A GROSS RECEI PTS OF RS. 1,95,35,000/- AND SUCH RATE OF PROFIT BEFORE REMUNE RATION AND INTEREST WORKED OUT TO 18.75%, AS AGAINST 88.80% WORKED OUT IN THE ASSESSMENT ORDER, BASED ON THE TOTAL ADDITION OF RS . 1,48,21,050/- ADMITTED INCOME OF RS. 25,25,590/-. THE CIT(A), THE REFORE, HELD THAT BASED ON THE FACTS OF THE CASE, THE NET PROFIT MAY BE ADOPTED AT THE RATE OF 20% BEFORE ALLOWING THE AMOUNTS OF REMUNERA TION AND INTEREST AS APPLICABLE, ON THE GROSS SALES OF RS.1,95,35,000 /- AND THE DEDUCTION U/S. 40(B) IS DIRECTED TO BE ALLOWED. THE CIT(A) CONCLUDED THAT NO SEPARATE ADDITION REQUIRED TO BE MADE ON AC COUNT OF CONSIDERING THE SALE VALUE OF FLAT NO. 410, SINCE T HE SAME WAS REFLECTED IN SUBSEQUENT YEAR AND THE VALUE OF THE S AME WAS REFLECTED IN WIP FOR THE YEAR ENDING ON 31.03.2010. THE CIT(A ) DIRECTED THE AO TO COMPUTE THE PROFIT @ 20% ON THE TURNOVER OF R S. 1,95,35,000/- AND ALLOW THE DEDUCTIONS U/S. 40(B) AFTER EXAMINING THE CLAIMS OF ASSESSEE AS PER THE LAW. 9. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1) THE LD. CIT(A) ERRED ON FACTS AND IN LAW. 6 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD 2) THE LEARNED CIT(A) ERRED IN CONCLUDING THAT VARI OUS ADDITIONS MADE BY THE ASSESSING OFFICER AMOUNTED TO REJECTION OF BOOKS OF ACCOUNT AND THEREBY DIRECTING TO ESTIMATE PROFIT 20% OF GROSS SALES, WHEN THE ASSESSING OFFICER HAS ACTUALLY NOT REJECTED THE BOOKS OF ACCOUNT. 3) THE LEARNED CIT (A) ERRED IN DELETING THE ADDITI ONS MADE U/S 40A(3), U/S 40(A)(IA) AND U/S 68 OF THE INCOME TAX ACT, ON WRONG PREMISE THAT NO SPECIFIC ADDITION CAN BE MADE WHEN BOOKS OF ACCOUNTS HAVE BEEN REJECTED, THOUGH ACTUALLY NOT RE JECTED BY THE ASSESSING OFFICER. 4) WHETHER THE LD. CIT(A) IS CORRECT IN TREATING TH E ASSESSEE'S BOOKS OF ACCOUNT AS UNRELIABLE WHEN (A) THE ASSESSE E HAS NEVER ACCEPTED ANY INACCURACY IN ITS BOOKS OF ACCOU NT AND (B) THE LD. ASSESSING OFFICER HAS NOT REJECTED THE BOOK S OF ACCOUNT (QUESTION OF LAW). 5) THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 12,50,000/- BEING THE SALE CONSIDERATION RECEIVABLE ON TRANSFER OF FLAT FOR WHICH REGISTRATION WAS COMPLETED DURING THE FINANCI AL YEAR 2009-10. 6) THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS . 1,02,41,050/- MADE UNDER SECTION 40A(3) AND 40(A)(I A) OF THE INCOME TAX ACT, 1961. 7) THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4.50 LAKHS MADE U/S 40A(3) AND U/S 40(A)(IA) ON ACCOUNT OF CENTRING WORK. 8 THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 28.8 LAKHS TOWARDS UNEXPLAINED CREDITS U/S 68 OF THE INCOME TA X ACT, 1961. 10. LD. DR SUBMITTED THAT A SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE AND THE ASSESSEE HAS FILED THE RETU RN OF INCOME SUBSEQUENT TO THE SURVEY. THE AO HAS CONSIDERED THI S ASPECT AND MADE THE ADDITION BASED ON THE INFORMATION OBTAINED DURING THE SURVEY. HE SUBMITTED THAT THE BOOKS WERE NEVER REJE CTED BY THE AO, BUT, THE CIT(A) HAS GONE BEYOND HIS AUTHORITY TO TR EAT THE BOOKS AS REJECTED AND ESTIMATED THE INCOME @ 20%. FURTHER, H E HAS ADJUDICATED THE OTHER ISSUES AS INAPPLICABLE DUE TO ESTIMATION. HE SUBMITTED THAT THE CIT(A) FAILED TO ADJUDICATE THE CASH CREDIT AS IT CAN 7 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD BE ADJUDICATED INDEPENDENTLY AS THIS ISSUE WILL NOT HAVE IMPACT ON THE ESTIMATION OF INCOME, IT CAN BE ASSESSED SEPARATELY . FURTHER, HE SUBMITTED THAT THE CASE LAWS SUBMITTED BY LD. AR WI TH APPEALS, WHICH RELATES TO ISSUES OF ESTIMATION BUT IN ALL THESE CA SES, THE BOOKS OF ACCOUNT WERE REJECTED BY THE AO AND, HENCE, THE SAM E CANNOT BE APPLIED IN THIS CASE. 11. LD. AR FILED WRITTEN SUBMISSION AND SUBMITTED T HAT LD. CIT(A) HAS VIDE POWERS UNDER HIS DISPOSAL AND HE HAS ACTED ACCORDING TO THE ISSUES IN HAND. HE SUBMITTED THAT EVEN THOUGH AT TH E OUTSET, BOOKS WERE REJECTED BUT THE ADDITIONS WERE MADE BASED ON THE MATERIALS FOUND IN THE SURVEY. THE BOOKS WERE EVEN THOUGH AUD ITED BUT THE AO CHOSE TO MAKE ADDITION BASED ONLY ON THE MATERIALS FOUND DURING SURVEY WITHOUT RELYING ON THE BOOKS OF ACCOUNT. IT AMOUNTS TO REJECTION OF BOOKS. 11.1 ON CASH CREDITS, HE SUBMITTED THAT THE AMOUNTS WERE CONTRIBUTED BY THE PARTNERS AND NOT BORROWED FROM O UTSIDERS TO PROVE THE IDENTITY AND GENUINENESS. HE SUBMITTED THAT THE AO COULD HAVE VERIFIED WITH THE PARTNERS AND ADDITION COULD HAVE MADE IN THEIR HANDS AND NOT IN THE HANDS OF THE ASSESSEE. 11.2 LD. AR FURTHER SUBMITTED THAT THE ADDITIONS WE RE MADE MAINLY RELYING ON THE ENTRIES IN THE DIARIES WHEREAS THIS CANNOT BE A PROPER EVIDENCE AS HELD IN THE CASE OF CIT VS. P. BALASUBR AMANIAN [2013] 354 ITR 116 (MAD.). THE AO HAS NOT VERIFIED THE ISS UES PROPERLY AS THE SECTION 40(A)(IA) AND TDS PROVISIONS ARE NOT AP PLICABLE TO THE PURCHASES BUT ONLY ON THE EXPENSES, EVEN THOUGH WHI CH ARE BEYOND THE APPLICABLE LIMITS PRESCRIBED IN THE STATUTE. TH E ADDITIONS WERE MADE ARBITRARILY. HENCE, ACCORDING TO HIM, THE ORDE R OF CIT(A) IS PROPER. 8 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD 12. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE AO MADE THE ADDITION OF SUPPRESSION OF SALE (RS. 12,50,000/-, UNEXPLAINED EXPENDITURE, UNEXPLAINED I NVESTMENTS BY PARTNERS AND IN LIEU OF SECTION 40(A)(IA) AND 40A(3 ). WITH REGARD TO SUPPRESSION OF SALES, ASSESSEE HAS RECEIVED ADVANCE S OF RS. 10.50 LAKHS UP TO 31/03/2010 AND BALANCE WAS RECEIVED IN THE SUBSEQUENT YEAR. IN THE CASE OF SALE OF FLATS, NORMALLY FLAT I S REGISTERED FOR THE PURPOSE OF BANK LOAN AND POSSESSION WILL BE HANDED OVER SUBSEQUENTLY. IN THE GIVEN CASE, ASSESSEE HAS RECEI VED RS. 10.50 LAKHS AND DECLARED IT AS ADVANCE. ONCE THE POSSESSI ON WAS HANDED OVER, THE SALE WAS DECLARED IN THE SUBSEQUENT YEAR. IN OUR VIEW, LD. CIT(A) HAS PROPERLY DEALT WITH THE ISSUE. 12.1 WITH REGARD TO THE ISSUE OF CASH CREDIT, THE F IRM HAS RECEIVED FUNDS FROM ITS PARTNERS. THE SOURCE IS CLEARLY ESTA BLISHED AS FAR AS THE FIRM IS CONCERNED. AO SHOULD HAVE ASSESSED IN THE HANDS OF PARTNERS IF THE SOURCE IS NOT EXPLAINED BY THE PARTNERS, NOT IN THE HANDS OF THE ASSESSEE. 12.2 COMING TO THE ISSUE OF ADDITION FOR VIOLATION OF SECTION 40A(3) AND SECTION 40(A)(IA), THE AO HAS MADE THE ADDITION MAINLY RELYING ON THE NOTINGS IN THE DIARIES WHICH WERE FOUND DURING THE SURVEY. THE BOOKS OF ACCOUNT WERE DULY AUDITED AND IN THE BOOKS OF ACCOUNT, AO HAS NOT FOUND ANY MISTAKE OR VIOLATION OF ANY PROVI SIONS OF SECTION 40A(3) OR TDS PROVISIONS. SINCE, THE AO HEAVILY REL IED ON THE NOTINGS IN THE DIARY, LD. CIT(A) HAS INFERRED THAT THE BOO KS WERE REJECTED. IN OUR VIEW ALSO, AO SHOULD HAVE BROUGHT ON RECORD THE VIOLATIONS AS PER BOOKS OF ACCOUNT BUT MERELY RELYING ON THE NOTINGS IN THE DIARY, WHICH SHOWS THAT AO HAS NO TRUST ON THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE VI EW THAT SINCE AO HAS NOT RELIED ON THE BOOKS AND MADE ADDITION BASED ON ENTRIES IN DIARY, IT CAN BE PRESUMED TO BE REJECTION OF BOOKS . HOWEVER, THE AO HAS MADE ADDITION ALMOST 88.8% OF THE REVENUE DECL ARED BY THE 9 ITA NO. 455/H/14 M/S SAI SRI CONSTRUCTIONS, KODAD ASSESSEE. LD. CIT(A) HAS GIVEN A PROPER SOLUTION IN THE GIVEN CASE BY ESTIMATING THE PROFIT AT 20% (BEFORE SECTION 40(B) WHEREAS THE ASSESSEE HAS DECLARED 12.93%. IN THE GIVEN SITUATIO N, THE RATE PROPOSED BY LD. CIT(A) IS REASONABLE AND IN OUR VIE W MEETS THE ENDS OF JUSTICE. ACCORDINGLY, GROUNDS RAISED BY THE REVE NUE ARE DISMISSED. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 23 RD JUNE, 2017. KV COPY TO:- 1) ITO, WARD 1, KRISHNA NAGAR COLONY, OPP. HI TEC H BUS STAND, SURYAPET 508 213 2) M/S SAI SRI CONSTRUCTIONS, D. NO. 12-1-1/10, SRI MANNARAYANA COLONY, KODAD 508 206 3) CIT(A) - VI, HYDERABAD 4 CIT - VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE