The Dy. CIT, Vijayawada V. M/s. R.R. Constructions, Vijayawada

ITA 467/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8741 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P S MURTHY
• Keywords: Depreciation; Opportunity of being heard
• Section: 143(3); 32; 263

Judgement Text

ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.467/VIZAG/2016 ( / ASSESSMENT YEAR: 2009-10) DCIT, CIRCLE - 2(1), VIJAYAWADA M/S. R.R. CONSTRUCTIONS, VIJAYAWADA [PAN NO. AADFR5608L ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI P.S. MURTHY, DR / DATE OF HEARING : 20.02.2018 / DATE OF PRONOUNCEMENT : 28.02.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJA YAWADA VIDE ITA NO.66/CIT(A)/VJA/2015-16 DATED 24.8.2016 FOR THE AS SESSMENT YEAR 2009-10. ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 2 2. GROUND NOS.1, 4 & 5 ARE GENERAL IN NATURE, WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. GROUND NO.2 IS RELATED TO THE DEPRECIATION ON ESTI MATED INCOME. IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143( 3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') BY AN ORDER DATED 29.11.2011 ON TOTAL INCOME OF ` 41,35,830/-. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. REJECTED THE BOOKS OF ACCOUNT S AND ESTIMATED THE INCOME @ 8% ON GROSS CONTRACT RECEIPTS. THE LD. CI T TAKEN UP THE CASE FOR REVISION U/S 263 OF THE ACT AND SET ASIDE THE ORDER OF THE A.O. DATED 29.11.2011. SUBSEQUENTLY, THE A.O. COMPLETED THE ASSESSMENT CONSEQUENT TO THE ORDER PASSED U/S 263 OF THE ACT. IN THE RE- ASSESSMENT MADE U/S 143(3) R.W.S. 263 OF THE ACT, T HE A.O. ESTIMATED THE INCOME OF ` 91,11,388/- @ 8% ON CONTRACT RECEIPTS BUT NOT ALLO WED THE DEPRECIATION. ANOTHER ADDITION MADE BY THE A.O . WAS IN RESPECT OF THE UNSECURED LOANS ACCEPTED FROM MR. G. AJAY KUMAR & MR. G. SUDHEER KUMAR AMOUNTING TO ` 5,84,615/- AND ` 6,13,267/- RESPECTIVELY. 3. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) ALLOWED THE AP PEAL OF THE ASSESSEE. HENCE, THE REVENUE IS IN APPEAL BEFORE U S. DURING THE APPEAL HEARING, THE LD. D.R. ARGUED THAT THE A.O. HAS ESTI MATED THE INCOME @ 8% ON CONTRACT RECEIPTS AND THE CIT HAS TAKEN UP TH E ASSESSMENT ORDER ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 3 DATED 29.11.2011 FOR REVISION U/S 263 OF THE ACT AN D DIRECTED THE A.O. TO MAKE THE ADDITION OF ` 31,67,480/- RELATING TO THE DEPRECIATION. SINCE THE LD.CIT HAS GIVEN A SPECIFIC DIRECTION TO ADD TH E DEPRECIATION, THE CIT(A) HAS NO JURISDICTION TO INTERFERE WITH THE OR DER OF THE LD. CIT, HENCE, REQUESTED TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER OF THE AO. FURTHER, THE LD. A.R. SUBMITT ED THAT AS PER THE PROVISIONS OF SECTION 30 TO 38 OF THE ACT, ONCE THE INCOME IS ESTIMATED, IT IS DEEMED THAT THE EXPENSES RELATING TO SECTION 30 TO 38 OF THE ACT HAVE BEEN CONSIDERED AND NO FURTHER DEDUCTION REQUI RED TO BE ALLOWED TO THE ASSESSEE. THE DEPRECIATION IS AN EXPENDITUR E ALLOWABLE U/S 32 OF THE ACT WHICH IS COVERED IN THE ESTIMATION, HENCE, NO FURTHER DEDUCTION REQUIRED TO BE GIVEN. ACCORDINGLY, THE LD. D.R. SU BMITTED THAT ON BOTH COUNTS, THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D HENCE, REQUESTED TO SET ASIDE THE ORDER OF THE LD. CIT(A). 4. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT T HE AS PER THE LAST PARA OF THE LD. CITS ORDER U/S 263, THOUGH THE LD. CIT DIRECTED THE A.O. TO ADD THE DEPRECIATION, IT FOLLOWS WITH FURTHER DI RECTIONS OF THE CIT TO DETERMINE THE TOTAL INCOME IN ACCORDANCE WITH LAW A ND ESTABLISHED PROCEDURE AND AFTER AFFORDING A REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. THE LD. A.R. SUBMITTED THAT THOUG H THE LD.CIT DIRECTED THE A.O. TO MAKE THE ADDITION OF ` 31,67,480/-, AND GAVE FURTHER ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 4 INSTRUCTION TO REDETERMINE THE INCOME IN ACCORDANCE WITH LAW AND AS PER ESTABLISHED PROCEDURE AND IT IS A CLEAR INDICATION THAT THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE A.O. TO RECONSIDER THE ISSUE AS PER LAW, HENCE, ARGUED THAT THE CIT(A) HAS RIGHTLY INVOKED T HE JURISDICTION AND ALLOWED THE APPEAL OF THE ASSESSEE, HENCE THAT NO I NTERFERENCE IS CALLED FOR ON THIS ISSUE. ON MERITS, THE LD. A.R. SUBMITT ED THAT IT IS ESTABLISHED AS PER THE PRECEDENCES OF LAW THAT ONCE THE INCOME IS ESTIMATED ALLOWABLE DEDUCTIONS REQUIRED TO BE ALLOWED AS PER HONBLE JURISDICTIONAL HIGH COURTS ORDER IN THE CASE OF CIT VS Y. RAMACHA NDRA REDDY, [2014] 50 TAXMANN.COM 129 (ANDHRA PRADESH) , HENCE ARGUED THAT THERE IS NO ERROR IN THE ORDER OF THE LD.CIT(A), WHICH REQUIRES INTERFERENCE OF THIS TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE CIT(A) HAS TAKEN UP THE CASE FOR REVISION U/S 263 OF THE ACT AND SET ASIDE THE ORDER OF THE A.O. PASSED U/S 143( 3) OF THE ACT DATED 29.11.2011. IN THE REVISION ORDER, THE CIT THOUGH DIRECTED THE A.O. TO MAKE THE ADDITION OF ` 31,67,480/-, IT FOLLOWS WITH FURTHER DIRECTION OF CIT TO RE-DETERMINE THE TOTAL INCOME IN ACCORDANCE WITH LAW AND ESTABLISHED PROCEDURE AND AFTER AFFORDING REASONABL E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. FOR THE SAKE OF CONVE NIENCE AND CLARITY, ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 5 WE REPRODUCE RELEVANT PART OF THE ORDER PASSED U/S 263 OF THE ACT AS UNDER: THE A.O. IS DIRECTED TO ADD THE DEPRECIATION AT ` 31,67,480/-, WHICH WAS WRONGLY ALLOWED, TO THE TOTAL INCOME AND RE-DETERMI NE THE TOTAL INCOME IN ACCORDANCE WITH LAW & ESTABLISHED PROCEDURE AND AFT ER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 6. PLAIN READING OF THE CIT(A)S ORDER INDICATES TH AT THE AO SHOULD CONSIDER THE ISSUE AS PER LAW AND DECIDE THE ISSUE AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE AND TO RE-DE TERMINE THE INCOME IN ACCORDANCE WITH LAW AND ESTABLISHED PROCEDURE. SINCE THE LD. CITS DIRECTION IN 263 ORDER IS CLEAR TO AFFORD THE REA SONABLE OPPORTUNITY AND TO RE-DETERMINE THE TOTAL INCOME, WE ARE OF THE CON SIDERED OPINION THAT THE A.O. WAS GIVEN FREE HAND TO RE-DO THE ASSESSMEN T AS PER LAW AFTER GIVING OPPORTUNITY TO THE ASSESSEE. COMBINED READI NG OF THE SPECIFIC MANDATE FOLLOWED BY THE GENERAL INSTRUCTIONS SHOWS THAT THE LD. CIT INTENDED TO REMIT THE MATTER BACK TO THE FILE OF TH E A.O. TO RE-DO THE SAME AS PER LAW. HENCE, WE HOLD THAT THERE IS NO E RROR IN INVOKING THE JURISDICTION BY THE LD. CIT(A) IN THE CONSEQUENTIAL ORDER AND HENCE WE REJECT THE ARGUMENT OF THE LD. D.R. ON THIS ISSUE. 7. WITH REGARD TO THE MERITS OF THE CASE, IN THIS CA SE THE INCOME WAS COMPUTED ESTIMATING THE INCOME @ 8% ON TOTAL RECEIP TS. THE CIT(A) HAS DIRECTED THE A.O. TO MAKE THE ADDITION OF DEPRE CIATION AS PER LAW AFTER GIVING OPPORTUNITY TO THE ASSESSEE. THEREFOR E, THE CIT(A) HAS ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 6 FOLLOWED THE LAW LAID DOWN BY THE HIGHER JUDICIAL F ORUM ALLOWED THE APPEAL OF THE ASSESSEE. IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2008-09, THE JURISDICTIONAL TRIBUNAL HAS ALLOWED TH E DEPRECIATION FROM THE ESTIMATED INCOME. THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF Y. RAMACHANDRA REDDY (SUPRA) HELD THAT THE DEPRE CIATION IS REQUIRED TO BE ALLOWED FROM THE ESTIMATED INCOME. THEREFORE , THE CIT(A) HAS FOLLOWED THE ORDER OF THIS TRIBUNAL IN ASSESSEES O WN CASE, HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND THE SAME IS UPHELD. THE APPEAL OF THE REVENUE ON THIS GROUND IS DISMISSED. 8. GROUND NO.3 IS RELATED TO THE ADDITION TOWARDS U NPROVED LOAN CREDITORS. DURING THE RE-ASSESSMENT PROCEEDINGS PA SSED U/S 143(3) R.W.S. 263 OF THE ACT, THE A.O. MADE THE ADDITION I N RESPECT OF LOANS OF ` 5,84,615/- FROM G. AJAY KUMAR AND ` 6,13,267/- FROM G. SUDHEER KUMAR. THE REASON GIVEN BY THE A.O. TO HOLD THE LO ANS IN QUESTION ARE UNEXPLAINED WAS SINCE THE ASSESSEE HAD NOT FURNISHE D THE FUNDS FLOW STATEMENT AND SOURCE. THE A.O. ALSO HELD THAT THE LOANS APPEAR TO BE SQUARED UP AND SOURCED FROM UNACCOUNTED FUNDS. THE A.O. FURTHER HELD THAT THE ASSESSEE FAILED TO ESTABLISH IDENTITY, CRE DITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS, HENCE HELD THAT TH E LOANS ARE FROM UNEXPLAINED SOURCES, ACCORDINGLY, ADDED BACK TO THE INCOME. ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 7 9. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) AFTER THOROUGH VERIFICATION OF THE COMPLETE DETAILS ACCEPTED THAT THE LOANS ARE GENUIN E AND DELETED THE ADDITION. 10. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE IS IN APPEAL BEFORE THIS TRIBUNAL. 11. DURING THE APPEAL HEARING, THE LD. D.R. SUPPORT ED THE ORDER OF THE A.O., WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF T HE CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. DURING THE APPEAL HEARING, THE LD. A.R. SUBMITTED THAT CAS H FLOW STATEMENT WAS SUBMITTED TO THE A.O. EXPLAINING THE SOURCE AND THE A.O. HAS LANDED IN A WRONG CONCLUSION THAT THE LOANS WERE SQUARED UP. H OW AND WHY THE A.O. HAS ARRIVED AT SUCH CONCLUSION IS ONLY KNOWN T O THE A.O. FURTHER, LD. A.R. SUBMITTED THAT THE ENTIRE INFORMATION WITH REGARD TO THE LOAN CREDITS WAS SUBMITTED TO THE CIT(A) ALSO AND THE LD . CIT(A) AFTER THOROUGH VERIFICATION OF THE COMPLETE DETAILS ACCEP TED THE CREDITS. HENCE, NO INTERFERENCE WAS CALLED FOR. WE HAVE GONE THROUGH THE ORDER OF THE CIT(A), WHICH IS MADE AVAILABLE IN PARA 5.3 TO 5.3.2 WHICH IS REPRODUCED HEREUNDER: ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 8 5.3. ASSESSING OFFICER STATED THAT NO FUND FLOW STA TEMENT WAS FURNISHED BY APPELLANT IN RESPECT OF DISALLOWANCE O F UNPROVED LOAN CREDITORS. HOWEVER, ASSESSING OFFICER DID NOT LET I N ANY EVIDENCE AS TO HOW AND WHY HE ARRIVED AT THE CONCLUSION THAT LOAN CREDIT A PPEARED TO BE A SQUARED UP ONE SOURCED FROM OUT OF APPELLANT'S UN ACCOUNTED FUNDS. 5.3.1. APPELLANT SUBMITTED COPIES OF PAN CARD, BANK ACCOUNT AND IT RETURN OF CREDITORS. LOAN CREDITORS ARE SONS OF MAN AGING PARTNER OF THE APPELLANT FIRM IS EVIDENT FROM PAN CARD. THEY H AD FILED THEIR INCOME TAX RETURNS WITHIN DUE DATES FOR THE RELEVAN T ASST. YEAR. A SUM OF RS.5,84,615/- AND RS.6,13,267/- WERE SHOWN A S OUTSTANDING RECEIVABLE IN THE ASSET SIDE OF BALANCE SHEET AS ON 31.03.2009 IN THE RESPECTIVE BALANCE SHEET OF MR.G.AJAY KUMAR AND MR.SUDHEER KUMAR (LOAN CREDITORS). FURTHER, PAYMENT OF RS.4 LA KH EACH TO APPELLANT FIRM IS THROUGH BANKING CHANNEL BY WAY OF CHEQUES (NO.390714 OF ANDHRA BANK, RING ROAD, VIJAYAWADA, I N THE CASE OF MR.G.AJAY KUMAR AND NO.422371 OF ANDHRA BANK, RING ROAD, VIJAYAWADA IN THE CASE OF MR.G.SUDHEER KUMAR). THEI R BANK ACCOUNT COPIES CONFIRMED ADEQUATE BANK BALANCE AVAI LABILITY ON THE DATE OF ADVANCE, I.E. ON 18.10.2008 (IN BOTH CASES) . SRI G.SUDHEER KUMAR PAID ANOTHER SUM OF R.75,000!-BY CHEQUE NO.43 6165 TO APPEL[A4IN ON 01 .09.2008 WHICH IS ALSO EVIDENCED B Y BANK ACCOUNT COPY. LEDGER ACCOUNT COPIES OF BOTH LOAN CREDITORS AS APPEARING IN THE BOOKS OF APPELLANT FIRM WERE ALSO SUBMITTED. TH US, ALL THE THREE INGREDIENTS OF LOAN CREDITOR VIZ. (1) IDENTITY OF C REDITORS (2) CAPACITY OF CREDITORS AND (3) GENUINENESS OF LOAN TRANSACTIO N ARE PROVED BY APPELLANT. 5.3.2 HENCE, I FAIL TO AGREE WITH ASSESSING OFFICER THAT THE LOAN CREDITS ARE SQUARED UP ONES THAT WERE OUTSOURCED FR OM OUT OF THE APPELLANTS UNACCOUNTED FUNDS. BOTH LOANS ARE OUTS TANDING AS ON 31.3.2009. I, THEREFORE, DIRECT THE ASSESSING OFFI CER TO DELETE ADDITION OF ` 11,97,882/-. GROUND OF APPEAL 4 IS ALLOWED. 13. AS PER THE INFORMATION AVAILABLE FROM THE CIT(A )S ORDER, THE ASSESSEE HAS SUBMITTED THE COMPLETE INFORMATION TO THE A.O. WITH REGARD TO BOTH THE CREDITS. COPIES ALSO SUBMITTED TO THE CIT(A). THE LD. CIT(A) AFTER VERIFYING THE PAN CARD, BANK ACCOUNT, IT RETURN AND ALL THE RELEVANT DETAILS HELD THAT THE LOANS WERE NOT SQUAR ED UP AND THE ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 9 ASSESSEE HAS ESTABLISHED THE IDENTITY OF CREDITORS, CAPACITY AND THE GENUINENESS OF THE TRANSACTIONS. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE DETAILED AND WELL REASONED OR DER OF THE LD. CIT(A). ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 28 TH FEB18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 28.02.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. R.R. CONSTRUCTIONS, PLOT N O.63, ROAD NO.4, KANAKADURGA OFFICERS COLONY, RING ROAD, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM ITA NO.467/VIZAG/2016 M/S. R.R. CONSTRUCTIONS, VIJAYAWADA 10 SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR 21.02.2018 SR.P S 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 22.02.2 018 SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS