Vijaya Bhavani Constructions Private Limited, Hyderabad, Hyderabad V. ITO, Ward-17(4), Hyderabad, Hyderabad

ITA 457/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2484 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 457/HYD/2017 ASSESSMENT YEAR: 2012-13 M/S. VIJAYA BHAVANI CONSTRUCTIONS PVT. LTD., HYDERABAD [PAN: AABCV6770A] VS INCOME TAX OFFICER, WARD-17(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR FOR REVENUE : SMT N. SWAPNA, DR DATE OF HEARING : 16-10-2017 DATE OF PRONOUNCEMENT : 27-10-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD, DATED 30-01-2017. ASSESSEE HAS RAISED VARIOUS GROUNDS ON THE DISALLOWANCES MADE IN THE ASSESSMENT ORDER. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS CARRYING OUT BU SINESS OF CIVIL WORK CONTRACTS. IN THE COURSE OF ASSESSMENT PROC EEDINGS, ASSESSING OFFICER (AO) MADE DISALLOWANCE OF 15% OUT OF BANK WITHDRAWALS AT RS. 9,52,650/-, 5% ON UN-VERIFIED EXP ENDITURE AMOUNTING TO RS. 9,07,471/-, DEPRECIATION ON CERTAIN ASSETS AT RS. 2,32,461/- AND ALSO BROUGHT TO TAX INTEREST ON REFUND A T RS. 70,756/-. ASSESSEE HAS RAISED THE GROUNDS BEFORE THE CIT(A), WHO HAS CONFIRMED THE EXPENDITURES AND DIRECTED THE AO TO VERIFY AS FAR AS THE INTEREST ON REFUND IS CONCERNED. ASSESSEE HAS RAISED THE GROUNDS ACCORDINGLY. I.T.A. NO. 457/HYD/2017 :- 2 - : 3. I HAVE HEARD THE LD. COUNSEL AND THE LD.DR. THE LD.DR POINTED OUT THAT MOST OF THE ADDITIONS ARE AGREED ADDITIONS AND ACCORDINGLY NO RELIEF SHOULD BE GIVEN. LD. COUNSEL, HOWEVER, COUNTERED THAT THE COUNSEL HAS NO RIGHT OVER THE ORDER SH EET ENTRIES AND THE LD.CIT(A) HAS GIVEN RELIEF ON INTEREST AMOUNT WHICH IS ALSO SUPPOSED TO HAVE BEEN AN AGREED ADDITION. HE HAS DISPUTED THE AGREED NATURE OF THE ADDITIONS. 4. GROUND NOS. 2 & 3: DISALLOWANCE OF 15% OF CASH WITHDRAWALS: DURING THE COURSE OF SCRUTINY PROCEEDINGS, AO FOUND OUT THAT ASSESSEE WITHDREW VARIOUS AMOUNTS TO THE TUNE OF RS. 63 ,51,000/- AND STATED TO HAVE SPENT FOR WORK EXPENDITURE. EVEN THOU GH ASSESSEE OBJECTED THAT SUB-CONTRACT BUSINESS WAS TO THE TUNE OF RS. 30.63 CRORES AND CASH EXPENDITURE IS INEVITABLE IN THIS NATURE OF BUSINESS, AO DISALLOWED 15% OF THE EXPENDITURES AS IN EARLIER YEAR. 5. I FIND THAT THE DIVISION BENCH IN ASSESSEES OWN C ASE FOR AYS. 2010-11 AND 2011-12 HAS RESTRICTED THE DISALLOWANCE TO 10% BY STATING AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE DETAILS PLACED ON RECORD. THE REVENUE HAS NOT COME IN APPEAL ON THE ORDER WHERE THE AO HAS DISALLOWED 100% OF THE EXPEN DITURE ON THE REASON THAT THE SAID EXPENDITURE IS BOGUS. LD. CIT(A), HO WEVER, HELD THAT THAT EXPENDITURE IS ALLOWABLE, SUBJECT TO DISALLOWANCE O F EXPENDITURE UPTO 15%. CONSIDERING THE PAST RECORD OF ASSESSEE, NATURE OF EXPENDITURE AND UN- VERIFIABLE NATURE OF THE SAME, WE ARE OF THE OPINIO N THAT DISALLOWANCE OF EXPENDITURE AT 10% OF THE SAID AMOUNT WOULD MEET TH E ENDS OF JUSTICE. ACCORDINGLY, WE RESTRICT THE DISALLOWANCE TO 10% OF THE CASH EXPENDITURE DISALLOWED BY THE AO I.E., 10% OF RS. 4,73,63,748/- . AO IS DIRECTED TO RE- COMPUTE THE DISALLOWANCE ACCORDINGLY. GROUNDS ARE P ARTLY ALLOWED. I.T.A. NO. 457/HYD/2017 :- 3 - : 5.1. SINCE THE FACTS ARE SAME, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, I DIRECT THE AO TO RE-COMPUTE THE DISALLOWANCE ACCORDINGLY. THESE GROUNDS ARE PARTLY A LLOWED. 6. GROUND NO. 4 : ADDITION TOWARDS SELF-MADE VOUCHERS AT 5%: AO NOTICED THAT THERE ARE CERTAIN EXPENDITURES WHICH ARE EVIDENCED BY SELF-MADE VOUCHERS WHICH COULD NOT BE VERIFIED. HE HAS QUANTIFIED THE AMOUNT OF DISALLOWANCE AT RS. 9,07,471/ - ON AGREED BASIS, BEING 5% OF STONE PITCHING EXPENSES, ROB EXPEN SES AND OTHER EXPENSES TOTALING ABOUT RS. 1.8 CRORES. LD.CIT(A ) CONFIRMED THE SAME HOLDING THAT THIS IS AN AGREED ADDITION. LD. COUNSEL RELIED ON THE CO-ORDINATE BENCH DECISION IN THE CASE OF DCIT VS. M/S. VINAYAKA PAPER AND BOARDS LTD., IN ITA NO. 1294 /HYD/2016, DT. 09-05-2017, WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE WITHOUT THERE BEING ANY DEFECT BEING POINTED OUT EXCEPT VOUCHERS BEING SELF-MADE. 7. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT THE DISALLOWANCE MADE IS APPROPRIATE CONSIDERING TH E NATURE OF BUSINESS UNDERTAKEN BY THE ASSESSEE. IN FACT, AO M ADE ONLY 5% DISALLOWANCE WHEREAS HE HAS MADE 15% DISALLOWANCE O N OTHER EXPENSES WHICH WAS CONFIRMED AT 10% BY THE CO-ORDINA TE BENCH ORDER, AS DISCUSSED IN EARLIER ISSUE. KEEPING THAT O NLY 5% IS DISALLOWED, I AM OF THE OPINION THAT THE DISALLOWANCE IS REASONABLE. THE FACTS IN THE CO-ORDINATE BENCH DECISION RELIED UPO N DOES NOT APPLY TO THE PRESENT FACTS OF THE CASE. ACCORDINGLY, TH E GROUNDS RAISED ARE REJECTED. I.T.A. NO. 457/HYD/2017 :- 4 - : 8. GROUND NO.5 PERTAINS TO CLAIM OF DEPRECIATION OF RS. 2,32,461/-: AO DISALLOWED AN AMOUNT OF RS. 2,32, 461/- TOWARDS DEPRECIATION. OBSERVING THAT THE BILLS OF PURC HASE OF ASSETS ARE NOT IN THE NAME OF ASSESSEE-COMPANY, DEPRE CIATION WAS DISALLOWED ORIGINALLY IN AY. 2010-11. THE CORRESPON DING DEPRECIATION ON WDV WAS DISALLOWED IN THIS YEAR. IT W AS SUBMITTED THAT FOR AY. 2010-11, THE MATTER WAS CARRIED UP TO THE IT AT AND ITAT IN ASSESSEES OWN CASE IN ITA NO. 1313/HYD/201 5 HAS DIRECTED THE AO TO EXAMINE THE OWNERSHIP OF ASSESSEE. SINCE THIS ISSUE IS CONSEQUENTIAL TO THE EARLIER YEAR, AO IS DIR ECTED TO ALLOW CONSEQUENTIAL DEPRECIATION IF DEPRECIATION WAS ALLOWED IN AY. 2010- 11 AFTER VERIFICATION. THE DIRECTIONS OF ITAT IN AY. 2010-11 ARE AS UNDER: 14. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE OPINION THAT THIS ISSUE REQUIRES RE-EXAMINATION BY THE AO. JUST BECAUSE THE BILLS ARE IN THE NAME OF THE PRINCIPAL CONTRACTOR, IT DOE S NOT MEAN THAT OWNERSHIP LIES WITH SUCH COMPANY. WHAT IS TO BE REQ UIRED TO BE EXAMINED IS THE SOURCE OF PAYMENTS MADE FOR ACQUIRING THE AS SETS AND USE THEREOF. AO HAS NOT DISPUTED THAT SUCH ASSETS ARE NOT USED B Y THE COMPANY. THE ONLY ISSUE IS ABOUT THE OWNERSHIP OF THE ASSETS. AS SESSEE IS DIRECTED TO FURNISH NECESSARY PAYMENTS OF THE AMOUNTS TOWARDS P URCHASE OF ABOVE SAID MACHINERY AND ON FURNISHING NECESSARY DETAILS, AO IS DIRECTED TO EXAMINE THE SAME AND ALLOW IF ASSESSEE-COMPANY PAID THE AMOUNTS FOR PURCHASE OF MACHINERY, EVEN THOUGH THE BILLS ARE IN THE NAME OF PRINCIPAL CONTRACTOR. WITH THESE DIRECTIONS, THE GROUND NOS. 6 & 7 ARE RESTORED TO THE FILE OF THE AO. 8.1. AO IS DIRECTED TO ALLOW THE CONSEQUENTIAL DEPREC IATION AS PER THE DECISION TAKEN IN AY. 2010-11, ON THE WDV IN THIS Y EAR. 9. GROUND NOS. 6 & 7 : AO MADE AN ADDITION OF RS. 70 ,756/- TOWARDS INTEREST ON REFUND OBSERVING THAT DURING THE YEA R UNDER CONSIDERATION, ASSESSEE RECEIVED INTEREST ON REFUND TO THE TUNE OF I.T.A. NO. 457/HYD/2017 :- 5 - : RS. 1,75,406/- BUT HAS ADMITTED ONLY RS. 1,04,650/- HE NCE THE DIFFERENCE OF RS. 70,756/- WAS BROUGHT TO TAX. IT WAS TH E CONTENTION BEFORE THE LD.CIT(A) THAT THE ENTIRE INTEREST OF REFUND H AS BEEN CREDITED TO P&L A/C AND WITHOUT VERIFICATION, AO MADE THE ADDITION. IT WAS ALSO FURTHER CONTENDED THAT AS PER THE CONSEQUENTIAL ORDER PASSED, THE INTEREST ON REFUND AMOU NTED TO RS. 98,085/-. THEREFORE, NO ADDITION IS WARRANTED. LD .CIT(A) DIRECTED THE AO TO VERIFY THIS ASPECT AND MAKE MODIFIC ATIONS ACCORDINGLY. I REITERATE THE DIRECTIONS GIVEN BY THE C IT(A) AND DIRECT THE AO TO BRING TO TAX ONLY THAT MUCH AMOUNT, WHICH WAS ULTIMATELY GRANTED TO ASSESSEE, AFTER CONSIDERING THE A MOUNT THAT WAS ALREADY ACCOUNTED IN THE BOOKS OF ACCOUNT. WITH TH ESE DIRECTIONS, THE GROUNDS ARE SET ASIDE TO THE FILE OF AO TO DO ACCORDINGLY. 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 27 TH OCTOBER, 2017 TNMM I.T.A. NO. 457/HYD/2017 :- 6 - : COPY TO : 1. M/S. VIJAYA BHAVANI CONSTRUCTIONS PVT. LTD., C/O . P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3 , I FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-17(4), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-5, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.