ACIT, Cir-10(1), Hyderabad V. M/s. Gopala Krishna Builders, Secunderabad

ITA 601/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1459 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Depreciation; Opportunity of being heard
• Section: 44AD; 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 601/H/2011 . ASST. YEAR 2008-09 ACIT, CIR-10(1), HYDERABAD. V/S. M/S GOPALA KRISHNA BUILDERS, SECUNDERABAD. PAN: AAGFG0706P (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : SRI K.A. SAI PRASAD DATE OF HEARING 27-11-2012. DATE OF PRONOUNCEMENT 24-01-2013 . O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGA INST ORDER OF CIT (A)-VI, HYDERABAD IN APPEAL NO.0215/09-10/CIT (A)-VI/2010-11 PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. GROUND NOS. 1 AND 4 GENERAL IN NATURE, HENCE NEE DS NO ADJUDICATION. IN GROUND NO.2 THE DEPARTMENT HAS CHAL LENGED ALLOWANCE OF FURTHER DEDUCTION TOWARDS DEPRECIATION, REMUNERATIO N AND INTEREST PAYMENT TO PARTNERS FROM THE PROFIT ESTIMATED AFTER R EJECTION OF BOOKS OF ACCOUNTS. ITA NO. 601 OF 2011 GOPALAKRISHNA BUILDERS, SECBAD. 2 3. BRIEFLY THE FACTS ARE THE ASSESSEE A PARTNERSHIP FIRM CA RRYING ON BUSINESS OF RESIDENTIAL AND COMMERCIAL STRUCTURES. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.61,79,430/-. 4. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT BY ESTIMATING PROFIT AT 10% OF THE RECEIPTS NE T OF ALL DEDUCTIONS AFTER REJECTING THE BOOKS OF ACCOUNTS. 5. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BY PREFERRIN G AN APPEAL BEFORE THE CIT (A). THE CIT (A) WHILE DISPOS ING OF THE APPEAL WHILE UPHOLDING THE ESTIMATION OF PROFIT AT 10% HOWE VER DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION TOWARDS DEPRECIATION, INTEREST AND REMUNERATION PAYMENT TO PARTNERS FROM PROFIT SO ESTIMA TED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED BEFORE US THAT ONCE BOOKS OF ACCOUNTS ARE REJECTED AND PROFIT IS EST IMATED AT A FIXED RATE THEN ALL OTHER STATUTORY DEDUCTIONS WOULD B E DEEMED TO HAVE BEEN ALLOWED AND NO FURTHER DEDUCTIONS CAN BE ALLOWED FROM THE ESTIMATED PROFIT. IN SUPPORT OF SUCH CONTENTION, THE LE ARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF THE HONBLE AP HIGH COURT IN CASE OF M/S INDWELL CONSTRUCTIONS LTD. V/S . CIT (232 ITR 776). 7. THE LEARNED AR SUPPORTING THE ORDER OF THE CIT (A ) SUBMITTED THAT EVEN IN A CASE OF ESTIMATION OF PROFIT DEDUCTIONS T OWARDS DEPRECIATION, INTEREST AND REMUNERATION PAYMENT TO PA RTNERS ARE ALLOWABLE. THE LEARNED AR RELIED UPON THE FOLLOWIN G DECISIONS. I) RAM JANWARLAL V/S. ITO (321 ITR 400) II) BHARAT CONSTRUCTION CO. V/S. CIT 258 ITR 140 ITA NO. 601 OF 2011 GOPALAKRISHNA BUILDERS, SECBAD. 3 III) CIT V/S. JAIN CONSTRUCTIONS CO. (245 ITR 527) 8. WE HAVE HEARD SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD. WE HAVE ALSO EXAMINED THE DECISIO NS CITED AT THE BAR. IN CASE OF M/S INDWELL CONSTRUCTION (SUPRA) IT WA S HELD BY THE HONBLE HIGH COURT THAT ONCE BOOKS OF ACCOUNTS ARE REJECTED AND PROFIT IS ESTIMATED THEN IT WOULD BE DEEMED TO HAVE BEEN COMP UTED IN TERMS WITH SECTION 29 OF THE ACT. AND ALL OTHER DEDUCTIONS CON TEMPLATED U/S 30 TO 43D DEEMED TO HAVE BEEN CONSIDERED. HOWEVER, TH E INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH IN CASE OF M/S C. ESW AR REDDY AND CO. (ITA NOS. 668/HYD/2009 AND ITA NO.670/HYD/2009 DATED 31- 1-2011 AFTER TAKING INTO CONSIDERATION THE DECISION IN CASE OF M/S INDWELL CONSTRUCTIONS LIMITED (SUPRA) AND THE PROVISIO N CONTAINED U/S 44AD OF THE ACT WERE OF THE VIEW THAT DEDUCTION TOWAR DS REMUNERATION AND INTEREST PAYMENT TO PARTNERS IS TO BE ALLOWED FRO M THE PROFIT ESTIMATED AFTER REJECTING THE BOOKS OF ACCOUNTS. HOWEVER D EDUCTIONS TOWARDS DEPRECIATION ARE NOT ALLOWABLE. THE TRIBUNAL IN ITS SUBSEQUENT DECISION IN CASE OF M/S TEJA CONSTRUCTIONS (ITA NO.1191/HYD/ 3011 DATED 17-2-2012 ALSO HELD THAT IN CASE OF ESTIMATION O F PROFIT, NO FURTHER DEDUCTION IS TO BE ALLOWED THERE FROM TOWARDS DEPRECIATION. KEEPING IN VIEW THE AFORESAID ORDER OF THE CO-ORDINAT E BENCH, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION TOWARDS INTEREST A ND REMUNERATION PAYMENT TO PARTNERS AFTER VERIFYING THE PARTNERSHIP DEED AND IN ACCORDANCE WITH SEC. 40(B) OF THE ACT. HOWEVER, NO DEDUCTION SHOULD BE ALLOWED TOWARDS DEPRECIATION. THE ORDER OF THE CIT (A) IS MODIFIED TO THE EXTENT AS INDICATED ABOVE. THE GROUN D IS PARTLY ALLOWED. 9. GROUND NO.3 RELATES TO DELETION BY THE CIT (A) OF THE AMOUNT OF RS.1,66,284/-. AS REVEALED FROM THE ASSESSMENT ORDER THE ASSESSING ITA NO. 601 OF 2011 GOPALAKRISHNA BUILDERS, SECBAD. 4 OFFICER ADDED THE AMOUNT OF RS.1,66,284/- AS INCOME FRO M OTHER SOURCES BY CONSIDERING IT TO BE THE INTEREST EARNED ON T HE DEPOSITS WITH BANK OF BARODA. THE CIT (A) DELETED THE ADDITION WH ILE DECIDING THE APPEAL. 10. WE HAVE HEARD SUBMISSIONS OF THE PARTIES AND PERUSE D THE MATERIALS ON RECORD. IT IS SEEN FROM THE WRITTEN SUBMI SSION OF THE ASSESSEE FILED BEFORE THE CIT (A), A COPY OF WHICH IS ALSO PLACED BEFORE US, THE ASSESSEE HAS TOTALLY DENIED THE FACT OF EARNING AN Y INTEREST ON DEPOSITS WITH BANK OF BARODA. IT IS THE CASE OF THE ASSESSE E THAT THE AMOUNT OF RS.1,66,284/- REPRESENTS INDIRECT INCOMES, DETA ILS OF WHICH WERE ALSO MENTIONED IN THE WRITTEN SUBMISSION. IT AP PEARS FROM THE ORDER OF THE CIT (A) THAT SHE HAS DELETED THE ADDITIO N ON A TOTALLY DIFFERENT REASONING WITHOUT AT ALL CONSIDERING THE FACT S AS AVAILABLE BEFORE HER. SINCE ACTUAL FACTS RELATING TO THE AMOUNT OF RS.1.66,284/-, HAVE NOT BEEN PROPERLY DEALT WITH BY THE LOWER AUTH ORITIES, WE DEEM IT PROPER TO REMIT THE ISSUE BACK TO THE ASSESSING OFFICER WH O SHALL PROPERLY VERIFY THE FACTS AND THEREAFTER CONSIDER TAXAB ILITY OR OTHERWISE OF THE AMOUNT. THE ASSESSING OFFICER SHALL AFFORD A REASO NABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED IN PART AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 24 -01-2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/- 24 TH JANUARY, 2013. ITA NO. 601 OF 2011 GOPALAKRISHNA BUILDERS, SECBAD. 5 COPY FORWARDED TO: 1. ACIT, CIR-10(1), ROOM NO. 515, AC GUARDS, IT TOWERS, HYDERABAD. 2. 3. 4. M/S. GOPALA KRISHNA BUILDERS, PLOT NO.5, GK COLONY, PRASHANTHI NILAYAM, SAINIKIPURI, SECUNDERABAD. COMMISSIONER OF INCOME-TAX (APPEALS)-VI, HYDERABAD. CIT CONCERNED, HYDERABAD. 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. JMR *