The Dy. CIT, Vijayawada V. Sri Velagapudi Rama Rao., Vijayawada

ITA 468/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8695 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDAM
• Keywords: Unexplained expenditure; Business income
• Section: 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 468 / VIZ /201 6 (ASST. YEAR : 20 12 - 13 ) DCIT, CIRCLE - 2(1), VIJAYAWADA. V S . VELAGAPUDI RAMA RAO, D.NO. 59 - 10 - 2, GAYAT H RI NAGAR, VIJAYAWADA. PAN NO. AAYPV 7403 Q (APPELLANT) (RESPONDENT) ITA NO. 475 / VIZ /201 6 (ASST. YEAR : 20 12 - 13 ) VELAGAPUDI RAMA RAO, D.NO. 59 - 10 - 2, GAYATHRI NAGAR, VIJAYAWADA. VS. DCIT, CIRCLE - 2(1), VIJAYAWADA. PAN NO. AAYPV 7403 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI T. SATYANANDAM SR. DR DATE OF HEARING : 06 / 0 3 /201 8 . DATE OF PRONOUNCEMENT : 14 / 03 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THESE CROSS APPEAL S BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX 2 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) (APPEALS) , VIJAYAWADA , DATED 25 /0 8 /201 6 FOR THE ASSESSMENT YEAR 20 12 - 13 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN EXECUTION OF CIVIL CONTRACT WORKS, HAS FILED HIS RETURN OF INCOME BY ADMITTING TOTAL INCOME OF RS. 5,20, 400/ - . THE ASSESSING OFFICER , DURING THE COU R SE OF ASSESSMENT PROCEEDINGS , ON VERIFICATION OF LEDGER ACCOUNT ALONG WI T H BANK BOOK, CASH BOOK AND THE MATERIAL ON RECORD FOUND CERTAIN DISCREPANCIES. IN THE CASH BOOK, THE A SSESSING OFFICER NOT ED THAT THERE WERE CASH PAYMENTS ON VARIOUS DATES TO CERTAIN PERSONS. HOWEVER, IN THE LEDGER ACCOUNT, NONE OF THE PERSONS TO WHOM CASH PAYMENTS MADE , WERE REFLECTED. LIKEWISE, AS PER THE BANK STATEMENT, AN AMOUNT OF RS.1,65,000/ - WAS PAID TO P RABHU ENTERPRISES. HOWEVER, THE SAME DID NOT GET REFLECT IN THE LEDGER ACCOUNTS PRODUCED B Y THE ASSESSEE. THE ASSESSING OFFICER ALSO NOTED SOME DISCREPANCIES IN THE SUB - CONTRACT WORK ORDERS , WHEREIN THE DATE OF SUB - CONTRACT WORK ORDER WAS NOT MATCHING WI TH THE DATE OF REFERENCE MADE IN THE WORK ORDER TO ORIGINAL WORK RECEIVED BY THE ASSESSEE FROM VARIOUS GOVERNMENT DEPARTMENTS. IN VIEW OF THE ABOVE DISCREPANCIES, THE ASSESSING OFFICER HAD PROPOSED TO R E JECT THE BOOKS OF ACCOUNT AND TO ARRIVE INCOME ON ESTIMATE BASIS. THE ASSESSING OFFICER HAS GIVEN AN OPPORTUNITY TO FILE A REPLY. THE 3 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) ASSESSEE HAS NOT FILED ANY OBJECTION WITH REGARD TO REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME. HENCE, THE A SSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE BUSINESS INCOME OF THE ASSESSEE AS UNDER: - 1 . 12.5% ON GROSS CONTRACT RECEIPTS OF RS.15,06,42,211/ - (INCLUDING INSURANCE PREMIUM OF RS. 31,06,350/ - ) FOR WORKS UNDERTAKEN BY THE APPELLANT ON HIS OWN RS. 1,88,30,276 / - 2. 8% ON THE WORKS DONE OF RS. 1,70,00,000/ - RS. 13,60,000/ - 3 5% ON WORKS OF RS. 34,79,89,404/ - GIVEN ON SUB - CONTRACT RS. 1,73,99,470/ - 3 . ON APPEAL, LD. CIT(A) HAS SCALED DOWN THE ESTIMATION MADE BY THE ASSESSING OFFICER IN RESPECT OF CONTRACTS EXECUTED BY THE ASSESSEE FROM 12.5% TO 9% OF GROSS RECEIPTS ; IN CASE OF SUB - CONTRACTS LD. CIT(A) HAS ACCEPTED THE ESTIMATION MADE BY THE ASSESSING OFFICER; IN CASE OF CONTRACT GIVEN BY THE ASSESSEE TO THE THIRD PARTY SUB - CONTRACT, THE LD. CIT(A) HAS SCALED DOWN THE ESTIMATION FROM 5% TO 4% OF GROSS RECEIPTS. 4 . ON APPEAL BEFORE US, LD . DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER , WHEREAS LD. CO UNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. 4 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) 6 . WE FIND THAT THE ASSESSEE HAS NOT MAINTAIN ED PROPER BOOKS OF ACCOUNT, THEREFORE THE ASSESSING OFFICER INTIMATED THE SAME TO THE ASSESSEE BY ISSUING NOTICE FOR REJECTION OF BOOKS OF ACCOUNT , BUT THE ASSESSEE HAS NO T FILED ANY REPLY. THEREFORE, HE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOM E OF THE ASSESSEE . THE ASSESSEE CARRIED HIS BUSINESS BY EXECUTING CONTRACTS DIRECTLY. THE ASSESSING OFFICER HAS CONSIDERED THIS WORK CARRIED BY THE ASSESSEE DIRECTLY , AND ESTIMATED THE INCOME AT 12.5% OF GROSS RECEIPTS. ON APPEAL, LD. CIT(A) SCALED DOWN TO 9%. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). 7 . SO FAR AS SUB - CONTRACT WORKS IS CONCERNED, THE ASSESSING OFFICER HAS ESTIMATED 8% OF SUB - CONTRACT WORKS DONE BY THE ASSESSEE, THE SAME IS APPROVED BY THE LD. CIT(A). WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). 8 . SO FAR AS WORKS GIVEN BY THE ASSESSEE TO THIRD PARTY ON SUB - CONTRACT S IS CONCERNED, THE ASSESSING OFFICER HAS ESTIMATED 5% OF THE WORKS GIVEN TO SUB - CONTRACT , WHICH WAS SCALED DOWN BY THE LD.CIT(A) TO 4%. WE FIND THA T THE ESTIMATION SCALED DOWN BY THE LD.CIT(A) IS A REASONABLE, HENCE, NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE DEPARTMENT IS DISMISSED. 5 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) 9. SO FAR AS ADDITION OF RS. 1,65,000/ - IS CONCERNED, IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT DURING THE PREVIOUS YEAR 2011 - 12 , IT WAS FOUND THAT AN AMOUNT OF RS. 1,65,000/ - WAS MADE TO PRABHU ENTERPRISES VIDE ING VYSYA BANK ACCOUNT NO. 761010346364 ON 09 /04/2011 . HOWEVER, THE SAID PAYMENT WAS NOT REFLECTED IN THE LEDGER ACCOUNT OF PRABHU ENTERPRISES IN THE BOOKS OF ACCOUNT PRODUCED BEFORE THE ASSESSING OFFICER. WHEN THIS DISCREPANCY WAS POINTED OUT TO THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 13/03/2015 AND WHEN IT WAS PROPOSED THAT IT WOULD BE TREATED AS UNEXPLAINED EXPENDITURE SINCE THE PAYMENT WAS NOT RECORDED IN THE BOOKS, THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD ONLY STATED VIDE HIS SUBMISSIONS DATED 16/03/2015 THAT THIS PA YMENT WAS RECORDED IN THE CASH BOOK , BUT WAS NOT REFLECTED IN THE LEDGER ACCOUNT. THEREFORE, THE ASSESSING OFFICER HAS TREATED THE SAID PAYMENT OF RS. 1,65,000/ - AS UNEXPLAINED EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 10 . ON APPEAL, LD. CIT(A) GAVE A CATEGORICAL FINDING THAT ON 09/04/2011 A SUM OF RS. 1,65,000/ - WAS PAID THROUGH CHEQUE NO. 012556 TO PRABHU ENTERPRISES , THEREFORE , DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. WE FIND THAT WHEN THE ASSESSEE PAID THE ABOVE SAID PA YMENT BY WAY OF CHEQUE, THE GENUINENESS 6 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) OF THE PAYMENT IS NOT DOUBTED AND SIMPLY BECAUSE NOT REFLECTED IN THE LEDGER ACCOUNT , IT CANNOT BE TREATED AS UNEXPLAINED EXPENDITURE PARTICULAR L Y WHEN, IT IS RECORDED IN THE CASH BOOK AND THE RELEVANT DETAILS ARE FILED BEFORE THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, WE FIND NO INFIRM I TY IN THE ORDER PASSED BY THE LD.CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 11 . SO FAR AS ADDITION OF RS. 5,00,00/ - IN RESPECT OF UNEXPLAINED CASH DEPOSIT IS CONCERNED, IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT DURING THE PREVIOUS YEAR 2011 - 12 , ON VERIFICATION OF THE BANK ACCOUNTS , IT WAS FOUND THAT AN AMOUNT OF RS. 5,00,000/ - WAS DEPOSITED AS CASH IN THE BANK ACCOUNT ING VYSYS ON 22/10/2011 . TH E SAID DEPOSIT WAS REFLECTED IN THE LEDGER ACCOUNT OF V. ABHIGNA AS A PAYMENT RECEIVED AGAINST LOANS EXTENDED TO HER. WHEN THE ASSESSING OFFICER ASKED , IT WAS SUBMITTED THAT V. ABHIGNA IS DAUGHTER OF THE ASSESSEE AND IS A RESIDENT OF USA. WHEN THIS WAS POINTED OUT TO THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 09/03/2015 , THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE COULD NOT GIVE ANY PROPER EXPLANATION . THEREFORE, THE ASSESSING OFFI CER HAS TREATED THE SAME AS UNEXPLAINED SOURCE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 7 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) 12 . ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 5,00,000/ - FROM HER DAUGHTER TOWARDS AMOUNT DUE IN BUSINESS BOOKS AND WRONGLY DEPOSITED IN PERSONAL SAVINGS BANK ACCOUNT AND LATER , INTRODUCED AS CASH IN THE BOOKS OF ACCOUNT. THE LD. CIT(A) HAS EXAMINED THE BANK COPY OF ING VYSYA BANK LTD. PRODUCED BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO D ELETE THE ADDITION OF RS.5,00,000/ - . WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE AND ALSO EXAMINING THE BANK COPY FILED BY THE ASSESSEE , DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. ITA NO. 475/VIZ/2016 13 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - 2. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE REDUCED THE SUM OF RS. 1,31,90,699/ - BEING THE DEPARTMENTAL RECOVERIES FROM THE GRO SS RECEIPTS OF RS. 15,06,42,211 / - BEING THE CONTRACT WORK UNDERTAKEN BY THE APPELLANT ON HIS OWN. 14 . THE LD. CIT(A) HAS CONSIDERED THE ISSUE AND DISMISSED THE SAME BY OBSERVING AS UNDER: - 5.2.3. AS REGARDS THE CLAIM OF APPELLANT, THAT ASSESSING OFFICER DID NOT DEDUCT THE DEPARTMENTAL RECOVERIES FROM THE GROSS CONTRACT RECEIPTS, RELEVANT DETAILS WERE CALLED FOR AND EXAMINED. APPELLANT CLAIMED A SUM OF RS. 1,31, 90,699/ - AS DEPARTMENTAL 8 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) RECO VERIES IN PROFIT & LOSS ACCOUNT (SCHEDULE - E). SCHEDULE E DETAILS ARE AS FOLLOWS: - DEPARTMENTAL RECOVERIES CMRF RS. 7,23,113/ - LABOUR CESS RS. 42,53,193/ - N AC RS. 10,26,983 - OTHER RECOVERIES RS. 70,97,182/ - Q.C. CHARGES RS. 90,228 / - RS. 1,31,90,699/ - 5.2.4. ON VERIFICATION, THESE EXPENSES DID NOT RELATE TO ANY MATERIAL SUPPLIED BY GOVERNMENT. THEY ARE LABOUR CESS AND OTHER FEES. HENCE, NO MATERIAL SUPPLY IS INVOLVED. UNDER SUCH CIRCUMSTANCES , APPELLANTS CLAIM IS NOT A CCEPTABLE. IN MY VIEW, THE APEX COURT DECISION IN THE CASE OF BRIJ BHUSHAN LAL PADIMAN KUMAR ETC. VS. CIT (115 ITR 524) (SC) IS NOT APPLICABLE TO FACTS OF APPELLANTS CASE. HENCE, GROUND OF APPEAL NO.3 IS DISMISSED. 15 . IN VIEW OF THE ABOVE SPECIFIC FINDING GIVEN BY THE LD. CIT(A) , THE EXPENSES INCURRED BY THE ASSESSEE ARE NOT RELATING TO ANY MATERIAL SUPPLIED BY THE GOVERNMENT . THEREFORE, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED AND THE SAME IS HEREBY DISMISSED. 16 . INSOFAR AS ADDITION IN RESPECT OF INSURANCE RECEIPT OF RS. 31,06,350/ - , THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS WITH REGARD TO INSURANCE RECEIPTS , HOWEVER, LD. CIT(A) HAS HELD THAT THE INSURANCE RECEIPTS SHOULD NOT BE CLUBBED WITH THE GROSS CONTRACT RECEIPTS AND D IRECTED THE ASSESSING OFFICER NOT TO INCLUDE THE SAME IN THE GROSS RECEIPTS . 17 . LD. C OUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE INSURANCE CLAIM IS RELATING TO EXPENDITURE INCURRED FOR THE CONTRACT 9 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) WORK , WHICH WAS DAMAGED DUE TO FLOODS , THEREFORE, IT CANNOT BE ADDED SEPARATELY. 18 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 19 . WE FIND THAT THE CLAIM OF INSURANCE OF RS. 31,06,350/ - , THE ASSESSEE HAS NEITHER FILED THE DETAILS BEFORE THE ASSESSING OFFICER NOR BEFORE THE LD. CIT(A). EVEN BEFORE US ALSO, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE WHAT IS THE CLAIM EXACTLY OF RS. 31,06,350/ - . UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT THE AS SESSING OFFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN RESPECT OF INSURANCE RECEIPT OF RS. 31,06,350/ - DENOVO IN ACCO R D ANCE WITH LAW. THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 20 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 4 T H DAY OF MARCH , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 4 T H MARCH , 201 8 . VR/ - 10 ITA NO S . 468 & 475/VIZ/2016 ( VELAGAPUDI RAMA RAO ) COPY TO: 1. THE ASSESSEE - VELAGAPUDI RAMA RAO, D.NO. 59 - 10 - 2, GAYATHRI NAGAR, VIJAYAWADA. 2. THE REVENUE DCIT, CIRCLE - 2(1), VIJAYAWADA. 3. THE PR.CIT, VIJAYAWADA. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.