M/s Tirumala Earth Movers, Hyderabad V. JCIT, Hyderabad

ITA 712/HYD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53711 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VENKATESWARA RAO
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Depreciation; TDS
• Section: 40(b); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I .T.A. NO. 712/HYD/2009 ASSESSMENT YEAR : 2006-07 M/S. TIRUMALA EARTH MOVERS GAJWEL, MEDAK DISTRICT. PAN: AACFT0631Q VS. JT. CIT RANGE 8 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI A.V. RAGHU RAM RESPONDENT BY: SHRI VENKATESWARA RAO DATE OF HEARING: 19.10.2011 DATE OF PRONOUNCEMENT: 19.10.2011 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III, HYDERABAD DATED 24.4.2009 FOR THE ASSES SMENT YEAR 2006-07. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOT H ON FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 3. THE LEARNED CIT(A) HAVING PROPOSED TO ESTIMATE T HE INCOME AT 8% OF RECEIPTS BY REJECTING THE BOOKS OF ACCOUNT AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT AND THE REMAND REPORT OF THE ASSESSING OFFICER ON SUCH SUBMISSIONS, ERRED IN NOT ONLY NOT CONSIDERING THE SUBMISSIONS ON SUCH PROPOSAL AND ERRED IN NOT MENTIONING ABOUT SUCH PROPOSALS AND TH E SUBMISSIONS THEREON IN THE APPELLATE ORDER. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 1,42,382 MADE AS UNEXPLAINED INVESTMENT IN PURCHASE OF CEMENT AND RS. 65,076 ON ACCOUNT OF UNACCOUNTED PURCHASE OF DIESEL, WITHOUT APPRECIATIN G THE FACT THAT THE ADDITION IS MADE MERELY ON THE BA SIS OF THE STATEMENT OF THE DEALER WITHOUT PROPER I.T.A. NO. 712/HYD/2009 M/S. TIRUMALA EARTH MOVERS ===================== 2 VERIFICATION WHETHER SUCH A PURCHASE IS MADE BY THE ASSESSEE OR NOT. 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 6,012,246 DISALLOWING 10% OF PURCHASE OF DIESEL WITHOUT APPRECIATING THE FACT THAT ALL THE PAYMENTS ARE THROUGH CHEQUES ONLY AND MERE RETURN OF NOTICE U/S. 133(6) CANNOT LEAD TO THE CONCLUSION THAT PURCHASES ARE NOT VERIFIABLE AND IT IS REQUIRED FOR THE DEPAR TMENT TO PROVE THAT THE CHEQUE PAYMENTS ARE RECEIVED BACK BY THE ASSESSEE. 6. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE FACT THAT EVEN THOUGH THE LETTERS ADDRESSED TO DEALERS O F DIESEL SUPPLIERS RETURNED IF 90% COULD BE ACCEPTED TO BE GENUINE THERE IS NO REASON WHY THE REMAINING 10% TO BE NOT GENUINE AND THEREBY ERRED IN CONFIRMING THE ADDITION OF RS. 6,01,246 DISALLOWED FROM PURCHASE OF DIESEL PARTICULARLY WHEN THEY ARE SUPPORTED BY BILLS AND PAYMENTS ARE THROUGH CHEQUE. 7. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,93,999 THE TOTAL EXPENDITURE INCURRED ON METAL WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE COULD NOT HAVE LAID THE ROAD WITHOUT PURCHASE OF ADDITIONAL METAL. 8. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 17,095 BEING RECOVERIES HOLDING THAT THE SAME ARE NOT RECONCILED THOUGH THEY ARE APPEARING IN THE TDS CERTIFICATES. 9. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 30,82,190 FROM OUT OF RS. 2,99,54,478 CLAIMED AS EXPENSES ON LABOUR WITHOUT APPRECIATING THE FACT THAT EVEN AS PER TENDER DOCUMENT THE LABOUR COMPONENT IS 60% OF THE WORK AND WHAT IS INCURRED IS ONLY 39% WHICH IS VERY REASONABLE. 10. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5,60,029 FROM OUT OF MACHINERY AND VEHICLE HIRE CHARGES WITHOUT APPRECIATING THE F ACT THAT FOR SUCH EXPENSES THERE CANNOT BE ANY BILLS FR OM THE PARTIES AND THEY CAN BE ONLY ON ASSESSEE'S VOUCHERS AND THEY CONTAINED THE VEHICLE NUMBER, ETC . 11. THE LEARNED CIT(A) ERRED IN CONFIRMING RS. 1,77 ,015 DISALLOWED FROM OUT OF EXPENDITURE ON ROLLER AND WA TER POURING CHARGES WITHOUT APPRECIATING THE FACT THAT FOR SUCH EXPENSES THERE CANNOT BE ANY BILLS FROM THE PARTIES AND THEY CAN BE ONLY ON ASSESSEE'S VOUCHERS . I.T.A. NO. 712/HYD/2009 M/S. TIRUMALA EARTH MOVERS ===================== 3 12. THE LEARNED CIT(A) ERRED IN CONFIRMING THE CRED IT OF RS. 1,00,000 APPEARING IN THE NAME OF SSR CONSTRUCTIONS, HYDERABAD WITHOUT APPRECIATING THE FACT THAT THE SAME IS THROUGH CHEQUE AS REQUIRED UNDER LAW AND THAT THE PARTY APPEARED IN RESPONSE T O NOTICE OF THE DEPARTMENT AND THAT THE ASSESSING OFFICER HAS NOT TAKEN UP FURTHER ENQUIRY IN THE MAT TER. 13. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOW ANCE OF RS. 25,000 U/S. 40(A)(IA). 14. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOW ANCE OF REMUNERATION TO PARTIERS SMT. DHANA LAKSHMI AND SMT. B. VEERAJA. 15. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS. 18,50,000 BEING CAPITAL INTRODUCED BY THE PARTNERS MADE PROTECTIVELY BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT ONCE THE INVESTM ENT IS CONFIRMED BY THE PARTNERS NO ADDITION COULD BE MADE IN THE HANDS OF THE FIRM. 3. GROUND NO. 13 IS NOT PRESSED BEFORE US. ACCORDING LY THIS GROUND IS DISMISSED BEING NOT PRESSED. 4. REGARDING THE OTHER GROUNDS OF APPEAL, THE LEARNED AR SUBMITTED THAT HE WILL HAVE NO GRIEVANCE IF THE INC OME IS ESTIMATED AT 8% EX SALE TAX AND SEIGNIORAGE CHARGES. THE AR PLACED RELIANCE ON THE ORDER OF THIS TRIBUNAL IN THE CASE OF M/S. C. ESWAR A REDDY & CO., IN ITA NOS. 668 AND 670/HYD/2009 FOR ASSESSMENT YEAR 2003-04 AN D 2004-05 WHEREIN THE TRIBUNAL VIDE ORDER DATED 31.1.2011 DECIDED THA T INCOME AT 8% ON MAIN CONTRACT RECEIPTS AND 5% ON SUB-CONTRACT RECEIPTS I S REASONABLE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COV ERED BY THE ORDER OF THIS TRIBUNAL CITED SUPRA. ACCORDINGLY, FOLLOWING THE S AME, WE DIRECT THE ASSESSING OFFICER TO DETERMINE THE INCOME AT 8% ON MAIN CONTRACT RECEIPTS AND AT 5% ON SUB-CONTRACT RECEIPTS, IF ANY, AFTER R EDUCING THE SEIGNIORAGE CHARGES AND SALES TAX SINCE THESE ITEMS HAVE NO ELE MENT OF PROFIT. FURTHER THE ASSESSEE IS ENTITLED FOR SALARY TO THE PARTNERS SUBJECT TO LIMITATION SPECIFIED IN SECTION 40(B) OF THE IT ACT AND ALSO I NTEREST TO PARTNERS. HOWEVER, THE ASSESSEE IS NOT ENTITLED FOR ANY FURTHER DEDUCT ION TOWARDS DEPRECIATION AS ALL OTHER DEDUCTIONS ALLOWABLE UNDER THE PROVISIONS OF SS. 30 TO 38 SHALL BE I.T.A. NO. 712/HYD/2009 M/S. TIRUMALA EARTH MOVERS ===================== 4 DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AN D NO FURTHER DEDUCTION SHALL BE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCTOBER, 2011. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 19 TH OCTOBER, 2011 TPRAO COPY FORWARDED TO: 1. M/S. TIRUMALA EARTH MOVERS, C/O. K. VASANTKUMAR, ADVOCATE, 403, MANISHA TOWERS, 10-1-18/31, SHYAM NAGAR, HYDERABAD-500 004. 2. THE JCIT, RANGE 8, HYDERABAD. 3. THE CIT(A)-III, HYDERABAD. 4. THE CIT-II, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD