THE DCIT, Vijayawada V. Sri Padmavathi Transport, Jaggaiahpet

ITA 592/VIZ/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1101 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: C SUBRAHMANYAMAR
• Keywords: Rejection of books of accounts; Depreciation; Assessment record
• Section: 144

Judgement Text

ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.592/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) DCIT, CIRCLE - 1(1), VIJAYAWADA VS. SRI PADMAVATHI TRANSPORT, JAGGAIAHPET [PAN: AALFS2811G ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SMT. KOMALI KRISHNA, DR / RESPONDENT BY : SHRI C. SUBRAHMANYAM,AR / DATE OF HEARING : 06.05.2016 / DATE OF PRONOUNCEMENT : 10.06.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VIJAYAWADA DATED 21.8.2014 AND IT PERTAINS TO THE ASSESSMENT YEAR 2010-11. ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRANSPORT BUSINESS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 26.9.2010 ADMITTING TOTAL INCOME OF ` 20,32,320/-. THE CASE HAS BEEN SELECTED FOR SCRUTINY UNDER CASS ACCORDINGLY, NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS ISS UED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. CALLED UPON THE ASSESSEE TO PRODUCE CERTAIN INFORMATION, HOWEVER, THE ASSESSEE NEITHER APPEARED BEFORE THE A.O. NOR SUBMITTED ANY INFORMATION. AS T HERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE, THE ASSESSI NG OFFICER COMPLETED THE ASSESSMENT U/S 144 OF THE ACT, EX-PARTE BY TAKI NG INTO CONSIDERATION THE INFORMATION AVAILABLE ON RECORD AND ESTIMATED T HE NET PROFIT @ 9% ON THE GROSS CONTRACT RECEIPTS. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS FILED WRITTEN SUBMISSION AND CONTENDED THAT THE A.O. WAS ERRED IN ESTIMATING NET PROFIT OF 9% OF A TOTAL TURNOVER OF ` 7,91,46,635/- AS AGAINST THE ADMITTED TURNOVER OF ` 10,38,29,376/-. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS DECLARED A NET PROFIT OF 20.04% OF THE TURNOVER BEFORE DEPRECIATION AND DEDUCTIONS TOWARDS INTEREST ON PAR TNERS CAPITAL ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 3 ACCOUNT AND REMUNERATION TO PARTNERS U/S 40(B) OF THE ACT. AFTER ALLOWING DEPRECIATION AND INTEREST ON CAPITAL AND R EMUNERATION TO PARTNERS, THE NET PROFIT HAS BEEN WORKED OUT TO 4.3 7% WHICH IS SLIGHTLY LESSER THAN PREVIOUS YEAR, BECAUSE OF HIGHER CLAIM OF DEPRECIATION FOR THE YEAR UNDER CONSIDERATION. THE CIT(A) AFTER CONS IDERING THE EXPLANATIONS FURNISHED BY THE ASSESSEE AND ALSO REL IED UPON THE DECISION OF ITAT, HYDERABAD B BENCH IN THE CASE OF M/S. SA I SWETA TRANSPORTERS IN ITA NO.1604/HYD/2012 DATED 10.5.2013, SCALED DOW N THE NET PROFIT TO 5% AND ALLOWED FURTHER DEDUCTION TOWARDS INTERES T AND REMUNERATION TO PARTNERS SUBJECT TO LIMITATION PROVIDED U/S 40(B ) OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. 4. THE LD. D.R. SUBMITTED THAT THE CIT(A) FAILED TO TAKE COGNIZANCE OF THE FACT THAT WHILE ESTIMATING THE NET PROFIT, T HE PROFIT EARNED BY THE ASSESSEE IN EARLIER YEARS AND THE PROFIT RATIO OF T HE SIMILAR PLACED TRADERS OF THE SAME LOCALITY HAS TO BE TAKEN INTO CONSIDERA TION. THE D.R. FURTHER SUBMITTED THAT THE CIT(A) HAS SCALED DOWN THE ESTIM ATION OF NET PROFIT TO 5% WITHOUT REFERRING TO ANY COMPARABLE CASES AND ALSO IGNORING THE FACT THAT THE ASSESSEE ITSELF HAS ADMITTED A NET PR OFIT OF 7 TO 8% IN THE PREVIOUS FINANCIAL YEARS. THE D.R. SUBMITTED THAT THE JURISDICTIONAL ITAT, HYDERABAD IN THE CASE OF M/S. K. S. R. AND COMPANY IN ITA ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 4 NO.107/HYD/1991 HAS UPHELD THE ESTIMATION OF NET PR OFIT OF 7% CLEAR OF DEPRECIATION AND ALLOWANCE U/S 40(B) OF THE ACT. TH E D.R. FURTHER ARGUED THAT SINCE THE ASSESSEE FAILED TO PRODUCE AN Y BOOKS OF ACCOUNTS AND SUBSTANTIATE THE BOOK RESULTS, THE A.O. WAS JUS TIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE NET PROFIT OF 9%, THEREFORE HIS ORDER SHOULD BE UPHELD. 5. THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE A.R. FURTHER SUBMITTED THAT THE A.O. WA S ERRED IN ESTIMATING THE NET PROFIT OF 9% WITHOUT CONSIDERING THE FACT T HAT DEPRECIATION CLAIMED FOR THE YEAR IS ALMOST DOUBLED WHEN COMPARE D TO THE PREVIOUS FINANCIAL YEAR. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS REPORTED A NET PROFIT OF 20.04% ON GROSS TURNOVER BEFORE DEP RECIATION AND DEDUCTION TOWARDS INTEREST ON CAPITAL AND REMUNERAT ION TO PARTNERS U/S 40(B) OF THE ACT. THE NET PROFIT FOR THE YEAR UNDE R CONSIDERATION IS COMPARATIVELY LESS WHEN COMPARED TO THE PREVIOUS FI NANCIAL YEAR, BECAUSE OF HIGHER CLAIM OF DEPRECIATION. THE ASSES SEE HAS PURCHASED NEW VEHICLES AND CLAIMED DEPRECIATION BECAUSE OF WH ICH THE NET PROFIT FOR THE YEAR HAS BEEN WORKED OUT TO 4.73%, OTHERWIS E ALL ALONG THE ASSESSEE HAS CONSISTENTLY DECLARING A NET PROFIT OF 7 TO 8% WHICH IS EVIDENT FROM THE PREVIOUS ASSESSMENT RECORDS. THE A .R. FURTHER ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 5 SUBMITTED THAT THE A.O. WAS ERRED IN RELIED UPON TH E DECISION OF ITAT, HYDERABAD BENCH IN THE CASE OF K.S.R. & COMPANY WHI CH WAS RENDERED IN THE YEAR 1991 WHICH IS ABOUT 25 YEARS BACK TO ES TIMATE THE NET PROFIT OF 9%, WHEREAS, THE CIT(A) HAS RELIED UPON THE DECI SION OF ITAT, HYDERABAD BENCH IN THE CASE OF M/S. SAI SWETA TRANS PORTERS, WHICH WAS RENDERED IN THE YEAR 2014, WHEREIN THE HONBLE ITAT HAS UPHELD THE ESTIMATION OF 3% NET PROFIT. THE A.O. WAS COMPLETE LY ERRED IN RELIED UPON THE JUDGEMENT WHICH WAS ALMOST RENDERED WAY BA CK IN 25 YEARS. THEREFORE, THE ORDER OF THE CIT(A) SHOULD BE UPHELD . 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. IN THIS CASE, ADMITTEDLY, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE NE T PROFIT OF 9% ON GROSS CONTRACT RECEIPTS IT IS THE CONTENTION OF TH E ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COM PARED TO THE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE. IT I S FURTHER SUBMITTED THAT IT HAS REPORTED A NET PROFIT OF 20.04% BEFORE ALLOW ING CLAIM FOR DEPRECIATION AND DEDUCTION TOWARDS INTEREST ON CAPI TAL AND REMUNERATION TO PARTNERS. THE NET PROFIT FOR THE YEAR UNDER CONS IDERATION IS COMPARATIVELY LESS BECAUSE OF HIGHER CLAIM OF DEPRE CIATION OTHERWISE, ALL ALONG IT HAS DECLARED A NET PROFIT OF 7 TO 8% WHICH IS EVIDENT FROM THE ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 6 PAST RECORDS. WE FIND FORCE IN THE ARGUMENTS OF TH E ASSESSEE FOR THE REASON THAT FOR THE YEAR UNDER CONSIDERATION, THE A SSESSEE HAS MADE A HIGHER CLAIM OF DEPRECIATION, BECAUSE OF WHICH THE NET PROFIT FOR THE YEAR IS LESS WHEN COMPARED TO THE PREVIOUS PERIOD. IT I S ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS REPORTED A NET PROFIT OF 20.04% BEFORE DEDUCTION TOWARDS DEPRECIATION AND INTEREST ON CAPI TAL AND REMUNERATION TO PARTNERS. THEREFORE, WE ARE OF THE VIEW THAT TH E NET PROFIT DECLARED BY THE ASSESSEE IS IN LINE WITH THE BUSINESS ACTIVI TY CARRIED ON BY THE ASSESSEE. THE CIT(A) AFTER CONSIDERING THE RELEVAN T DETAILS HAS SCALED DOWN THE ESTIMATION OF NET PROFIT TO 5%., SUBJECT T O FURTHER DEDUCTIONS TOWARDS INTEREST ON CAPITAL AND REMUNERATION TO PAR TNERS. AS REGARDS THE CASE LAW RELIED UPON BY THE A.O., WE FIND THAT THE A.O. RELIED UPON THE DECISION OF ITAT, HYDERABAD BENCH IN THE CASE O F K.S.R. & COMPANY (SUPRA) WHICH WAS RENDERED IN THE YEAR 1991, WHEREA S THE CIT(A) HAS CONSIDERED THE ITAT, DECISION IN THE CASE OF M/S. S AI SWETA TRANSPORTERS (SUPRA) WHICH WAS RENDERED IN THE YEAR 2014, AS PER WHICH THE ITAT HAS UPHELD ESTIMATION OF 3% NET PROFIT FROM THE CONTRAC T BUSINESS. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS R IGHTLY RELIED UPON THE RATIO OF THE ITAT, DECISION IN THE CASE OF SAI SWET A TRANSPORTERS AND SCALED DOWN THE ESTIMATION OF NET PROFIT TO 5%. WE DO NOT SEE ANY ITA NO.592/VIZAG/2014 SRI PADMAVATHI TRANSPORT, JAGGAIAHPET 7 ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A ). HENCE, WE INCLINED TO UPHELD THE CIT(A) ORDER AND DISMISS THE APPEAL F ILED BY THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10 TH JUN16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 10.06.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-1(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. SRI PADMAVATHI TRANSPORT, 13-52, PRABHAT MANSION, JAGGAIAHPET, KRISHNA DISTRICT. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM