M/s. Parijatha Homes & Developers P. Ltd, Hyderabad V. The DCIT, Circle 1(3), Hyderabad

ITA 743/HYD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6093 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 18-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: A V RAGHURAM
• Section: 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.660/HYD/2010 : A SSTT. YEAR 2004-05 DY. COMMISSIONER OF INCOME- TAX CIRCLE 16(3), HYDERABAD. V/S. M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SECUNDERABAD. ( PAN - AACCP 8348 R ) (APPELLANT) (RESPONDENT) AND ITA NO.743/HYD/2010 : A SSTT. YEAR 2004-05 ITA NO.744/HYD/2010 : A SSTT. YEAR 2006-07 M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SECUNDERABAD. ( PAN - AACCP 8348 R ) V/S. DY. COMMISSIONER OF INCOME-TAX CIRCLE 16(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V.RAGHURAM DEPARTMENT BY : SHRI K.E. SUNIL BABU O R D E R PER G.C.GUPTA, VICE PRESIDENT: THESE CROSS-APPEALS BY THE REVENUE AS WELL AS THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05 AND THE APPEAL OF THE ASSESSEE ALON E FOR THE ASSESSMENT YEAR 2006-07 ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS). SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS CONSOLIDATED ORDER. ITA NO.660, 743 & 744/HYD// 10 M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SEC'BA D. 2 2. LET US TAKE UP THE CROSS-APPEALS FOR THE ASSESSMENT YEA R 2004- 05 FOR CONSIDERATION. REVENUE'S APPEAL: ITA NO.660/HYD/2010 : ASSESSMENT YEAR 2004-05 3. GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDER- '1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN HOLDING THAT NET PROFIT HAS TO BE ESTIMATED AT 8% AS AGAINST 12. 5% RELYING ON THE DECISION OF HON'BLE ITAT IN THE CASE OF M/S. BHAGYA NAGAR CONSTRUCTIONS PVT. LTD. WHICH DISTINGUISHABLE AS T HE ASSESSEE IS ENGAGED IN THE DEVELOPMENT AND SALE OF PLOTS AND NO T ENGAGED IN THE CONSTRUCTION ACTIVITY. 2. THE LD. COMMISSIONER OF INCOME-TAX(APPEALS) OUGH T TO HAVE UPHELD THE ESTIMATION OF PROFIT @ 12.5% IN VIEW OF THE FAC T THAT PROFIT MARGINS WILL BE MORE IN THE ACTIVITY OF DEVELOPMENT AND SALE OF PLOTS WHEN COMPARED TO THE PROFITS IN CONSTRUCTION CONTRA CTS.' 4. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT THE ASSESSING OFFICER HAS GIVEN COGENT REASONS WHILE APPLYING THE RATE OF 12.5% ON THE RECEIPTS OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE IS ENGAGED I N THE DEVELOPMENT AND SALE OF PLOTS AND NOT ENGAGED IN THE CONSTRUCTION AC TIVITY AND THEREFORE THE RATE OF PROFIT OF 12.5% SHOULD BE APPLIED. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS RIGHTLY ESTIMATED THE NET PROFIT OF THE ASSESSEE AT 8% O N THE TOTAL RECEIPTS OF THE ASSESSEE. HE HAS IN FACT FOLLOWED THE DECISION OF HIS PREDECE SSOR IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2005-06 DATED 26.2.2009, WHEREIN THE NET PROFIT RATE HAS BEEN ESTIMATED AT 8% ON THE TURNOVER OF THE ASSESSEE AS AGAINST 12.5% ADOPTED BY THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND T HAT THE CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR DATED 26.6.2 009IN ASSESSEE'S OWN CASE FOR THE SUBSEQUENT ASSESSMENT YEAR 2005-06, WHEREIN HE HAS ESTIMATED ITA NO.660, 743 & 744/HYD// 10 M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SEC'BA D. 3 THE NET PROFIT OF THE ASSESSEE APPLYING A RATE OF 8% OF THE TOTAL RECEIPTS. FACTS OF THE CASE FOR THE RELEVANT ASSESSMENT YEAR, VIZ. 2004-05 A RE IDENTICAL WITH THE FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2005-06. REVENUE COULD NOT SHOW THAT IT HAS PREFERRED ANY APPEAL AGAINST THE ORDER OF THE CIT(A) FOR THE SUCCEEDING ASSESSMENT YEAR VIZ. 2005-0O6. IN THESE FACTS, WE HOLD TH AT THERE IS NO VALID REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN ESTIMATING THE PROFIT OF THE ASSESSEE AT 8% OF THE TOTAL RECEIPTS AND ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE REJECTED. ASSESSEE'S APPEAL: ITA NO.743/HYD/2010 : ASSESSMENT YEAR 2004-05 7. GROUNDS OF APPEAL OF THE ASSESSEE ARE AS UNDER:- '1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS B OTH ON FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN CONFORMING THE ADDITIO N OF RS.13,55,395 ALLEGED TO BE UNACCOUNTED RECEIPTS INSTEAD OF DIREC TING TO ESTIMATE ONLY PROFIT ON THE SAME. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ENTIR E UNACCOUNTED RECEIPT IS INCOME AND INCOME CANNOT BE ESTIMATED ON THE SAME IGNORING THE FACT EVEN ASSUMING THAT THERE ARE UNAC COUNTED SALES ONLY PROFIT SHOULD BE ESTIMATED ON THE SAME.' 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DUE TO SOME COMPUTER MISTAKE, ASSESSEE COULD NOT ACCOUNT FOR THE CORRECT RECEIPTS IN ITS STATEMENT OF ACCOUNT. HE SUBMITTED THAT THE ASSESSEE WAS NO T HAVING THE COMPLETE RELEVANT RECORDS, AND THEREFORE EACH AND EVERY ENTRY COULD NOT BE ACCOUNTED FOR BY THE ASSESSEE. HE SUBMITTED THAT EVEN ASSUM ING THAT THERE WERE UNRECORDED RECEIPTS, THE WHOLE SUM OF SUCH RECEIPTS COULD N OT BE TREATED AS INCOME AND ONLY A PART OF THE SAME COULD BE TREATED AS INCOME ASSESSABLE IN THE HANDS OF THE ASSESSEE. HE SUBMITTED THAT 8% RATE OF PROF IT WOULD BE REASONABLE WHILE ESTIMATING INCOME OUT OF SUCH RECEIPTS TO THE ASSESSE E. ITA NO.660, 743 & 744/HYD// 10 M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SEC'BA D. 4 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELI ED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). HE SUBMITTED THA T THE ASSESSEE HAS NOT RECORDED ITS RECEIPTS FULLY AND DUE TO SURVEY OPERATION S UNDER S.133A ON 17.3.2006, CERTAIN BOOKS OF ACCOUNT WERE FOUND AND WERE LATER IMPOUNDED AND UPON VERIFICATION OF THE IMPOUNDED BOOKS, DIFFERENCES I N THE AMOUNTS RECEIVED BY THE ASSESSEE AND AS ENTERED IN THE IMPOUNDED LEDGERS WER E FOUND, AND THEREFORE, THE WHOLE SUM OF UNRECORDED AMOUNTS WAS ADDED AS INCOME I N THE HANDS OF THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND HAVE PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). WE FIND THAT T HE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DEVELOPING AND SELLING OF FA RM LANDS AND CONSTRUCTION. THERE WAS SURVEY OPERATION UNDER S.133A OF THE ACT, ON THE BUSINESS PREMISES OF THE ASSESSEE ON 17.3.2006. DURING THE COURSE OF SURVEY, CE RTAIN BOOKS OF ACCOUNT WERE FOUND, WHICH WERE LATER IMPOUNDED BY THE DEPART MENT. THE ASSESSING OFFICER, UPON VERIFICATION OF THE IMPOUNDED BOOKS FOUN D DIFFERENCES IN THE AMOUNTS RECEIVED AS PER THE IMPOUNDED LEDGER AND THE A MOUNT AS HAS BEEN DISCLOSED BY THE ASSESSEE. WE FIND THAT THE EXPLANATION O F THE ASSESSEE WAS NOT SATISFACTORY. THE ASSESSEE IN FACT HAS CONCEDED THAT IT COLD N OT ACCOUNT FOR EACH AND VERY ENTRY, AS IT DID NOT HAVE THE RELEVANT RECOR DS. THE ASSESSEE HAS TRIED TO EXPLAIN THAT IT WAS DUE TO SOME COMPUTER MISTAKE. WE FIND THAT THE MISTAKE OF NOT RECORDING THE CORRECT RECEIPTS MAY BE DUE TO ANY REA SON, BUT THE ASSESSEE COULD NOT CONTROVERT THE CASE OF THE REVENUE THAT IT H AD NOT WHOLLY RECORDED THE AMOUNTS OF RECEIPTS DURING THE COURSE OF ITS BUSINESS IN ITS LEDGER ACCOUNT, AND THE DIFFERENCE OF RS.13,55,395 REPRESENTED THE UNRECOR DED RECEIPTS IN THE HANDS OF THE ASSESSEE. ON A SPECIFIC QUERY FROM THE BENCH AS TO W HETHER ON DETECTION OF THE MISTAKE, THE ASSESSEE HAS ACCOUNTED FOR THE UNRECORD ED RECEIPTS IN ANY OF THE SUBSEQUENT YEARS, THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY SATISFACTORY REPLY. IN THESE FACTS OF THE CASE, WE HAVE N O HESITATION IN HOLDING THAT THE ENTIRE AMOUNT OF DIFFERENCE BETWEEN THE REC EIPTS AS PER THE LEDGER ACCOUNT IMPOUNDED BY THE DEPARTMENT AND THE RECEIPTS AS DISCLOSED BY THE ITA NO.660, 743 & 744/HYD// 10 M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SEC'BA D. 5 ASSESSEE WAS ASSESSABLE AS INCOME IN THE HANDS OF THE ASSESSEE, A ND ACCORDINGLY THE ADDITION OF RS.13,55,395 WAS RIGHTLY MADE BY THE ASSESSING OFFICER. THERE IS NO MERIT IN THE GROUNDS OF APPEAL OF THE ASSESSEE, WHICH ARE ACCORDINGLY REJECTED. 11. NOW WE MAY TAKE UP FOR CONSIDERATION, THE ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2006-07. ASSESSEE'S APPEAL: ITA NO.744/HYD/2010 : ASSESSMENT YEAR 2006-07 12. GROUNDS OF APPEAL OF THE ASSESSEE ARE AS UNDER- '1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE E STIMATION OF INCOM E AT 12.5% INSTEAD OF THE RATE THAT IS DIRECTED T O BE ADOPTED BY THE CIT(A) FOR THE ALTER YEARS AS CONFIRM ED BY THE I.T.A.T. HOLDING THAT FACTS OF THIS WARRANT ESTIMATION AT HIGHER RATE, THOUGH TH E LINE OF BUSINESS AND FACTS FOR ALL THE YEARS ARE ONE AND THE SAME. 13. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN IDENTICAL FACTS, NET PROFIT RATE OF 8% WAS APPLIED BY THE CIT(A) WHILE D ECIDING THE APPEAL OF THE ASSESSEE FOR THE PRECEDING YEAR, VIZ. ASSESSMENT YEAR 2005-0 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDERS O F THE ASSESSING OFFICER AND THE CIT(A). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSION. FOR THE REASONS RECORDED, WHILE DISPOSING OFF THE REVENUE'S APPEAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.660/HYD/10, IN PARA-6 HEREINABOVE, WE HOLD THAT NET PROFIT OF THE ASSESSEE SHOULD BE ESTIMATED BY AP PLYING A RATE OF 8% ON THE TOTAL RECEIPTS OF THE ASSESSEE. THE ASSESSING OFFICER IS T HEREFORE, DIRECTED TO RECOMPUTE THE INCOME OF THE ASSESSEE BY ESTIMATING THE NET PROFIT OF THE ASSESSEE AT 8% AS AGAINST 12.5% ON THE TOTAL RECEIPTS OF THE A SSESSEE, AND TO WORK OUT THE ASSESSABLE INCOME ACCORDINGLY. ITA NO.660, 743 & 744/HYD// 10 M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., SEC'BA D. 6 15. IN THE RESULT, CROSS-APPEALS OF THE REVENUE AS WELL AS THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 ARE DISMISSED AND THE ASSESSEE'S A PPEAL FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 3.12.2010 SD/- SD/- (CHANDRA POOJARI) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 3RD DECEMBER, 2010 COPY FORWARDED TO: 1. M/S. PARIJATHA HOMES & DEVELOPERS PVT. LTD., C/O. SHRI K.VASANTHKUAMR, ADVOCATE, 403, MANISHA TO WERS, 10-1- 18/31, SHYAMNAGAR, HYDERABAD 500 004. 2. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 16(3), HYDER ABAD 3. COMMISSIONER OF INCOME-TAX(APPEALS) V HYDERABAD. 4. COMMISSIONER OF INCOME-TAX IV HYDERABAD . 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.