ITO, Ward-8(1), Hyderabad V. M/s Srinilaya Projects, Hyderabad

ITA 778/HYD/2014

• Counselvise Citation: 77822514 RSA 2014
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Opportunity of being heard
• Section: 40A(3); 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.777/HYD/2014 ASSESSMENT YEAR 2009-2010 THE INCOME TAX OFFICER, WARD 8(1) HYDERABAD. VS. M/S. SRINILAYA A.R. PROJECTS, HYDERABAD. PAN ABEFS2931D (APPELLANT) (RESPONDENT) ITA.NO.778/HYD/2014 ASSESSMENT YEAR 2009-2010 THE INCOME TAX OFFICER, WARD 8(1) HYDERABAD. VS. M/S. SRINILAYA PROJECTS, HYDERABAD. PAN ABEFS2931D (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MR. S. RAMA RAO DATE OF HEARING : 06.01.2015 DATE OF PRONOUNCEMENT : 09.01.2015 ORDER PER P.M. JAGTAP, A.M. THESE TWO APPEALS ARE PREFERRED BY REVENUE IN THE CASE OF TWO ASSESSEES FOR A.Y. 2009-2010 ON COMMON ISSUES AND THE SAME THEREFORE HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY SINGLE COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE-UP THE APPEAL FILED BY REVENUE I N THE CASE OF M/S. SRINILAYA A.R. PROJECTS BEING 2 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. ITA.NO.777/HYD/2014 WHICH IS DIRECTED AGAINST THE O RDER OF LD. CIT(A), VIJAYAWADA DATED 31.01.2014. 3. GROUNDS NO. 1 AND 7 RAISED BY THE REVENUE IN TH IS APPEAL ARE GENERAL IN NATURE WHICH DO NOT REQUIRE A NY ADJUDICATION. GROUNDS NO. 2 TO 4 INVOLVE AN ISSUE R ELATING TO ADDITION OF RS. 60 LAKHS MADE BY A.O. ON THE BASIS OF STATEMENT GIVEN BY ASSESSEE AT THE TIME OF SURVEY W HICH STANDS DELETED BY LD. CIT(A). 4. THE MATERIAL FACTS RELEVANT TO THIS ISSUE ARE THAT ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS AS A BUILDER. A SURVEY UNDER SECTION 133A WAS CARRIED OUT IN ITS CASE ON 25.08.2008. DURING THE C OURSE OF SURVEY, CERTAIN BOOKS OF ACCOUNTS, DOCUMENTS AND LO OSE SHEETS WERE IMPOUNDED. DURING THE COURSE OF SURVEY, A STAT EMENT OF THE ASSESSEE WAS RECORDED WHEREIN HE ADMITTED ADDIT IONAL INCOME OF RS. 60 LAKHS FOR A.Y. 2009-2010 TO COVER- UP THE DEFICIENCIES WITH REGARD TO THE EXPENDITURE INCURRE D UP TO THE DATE OF SURVEY. SUBSEQUENTLY, THE RETURN OF INCOME FOR A.Y. 2009-2010 WAS FILED BY ASSESSEE ON 30.09.2009 DECLA RING TOTAL INCOME OF RS.18,41,256. SINCE THE AMOUNT OF RS. 60 LAKHS ON ACCOUNT OF ADDITIONAL INCOME DECLARED DURING THE CO URSE OF SURVEY WAS NOT INCLUDED IN THE COMPUTATION OF INCOM E FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE WAS C ALLED UPON BY A.O. TO OFFER ITS EXPLANATION IN THE MATTER. IN REPLY, A LETTER DATED 20.12.2011 WAS FILED BY ASSESSEE OFFERING ITS EXPLANATION AS UNDER : AS MENTIONED WE HAVE ADMITTED AN INCOME OF RS.60,00,000 FOR THE F.Y. 2008-09 I.E., DURING THE YEAR IN WHICH THE SURVEY OPERATION WAS CONDUCTED. 3 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. THOUGH WE HAVE MENTIONED THAT TO COVER CERTAIN DEFICIENCIES IN CASE WE ARE NOT ABLE TO SUBMIT THE WORK ORDERS IN PROOF OF THE DIFFERENCE AMONG CONSIDERATI ON AS PER SALE DEED AND THE ACTUAL CONSIDERATION PASSED TO US . THE ESTIMATE OF RS.60,00,000/- WAS MADE BASED ON ANTICIPATED SALES FOR THE SAID FINANCIAL YEAR. WE W ISH TO BRING TO YOUR KIND NOTICE THAT AN AMOUNT OF RS.71,8 5,330/- ONLY INCURRED TOWARDS, EXPENDITURE AND REPORTED SAL ES OF RS.1,70,73,268/- UP TO THE DATE OF SURVEY I.E., 25. 08.2008. BY CONSIDERING THE SAID NUMBERS THE ADMISSION OF RS.60,00,000/- CANNOT BE APPROPRIATED TO THE DEFICI ENCIES ASSUMED DURING THE PERIOD FROM 1 ST APRIL, 2008 TO 25 TH AUGUST, 2008. AS EVIDENT FROM THE ROI FILED THE SALES WERE ONLY T O AN EXTENT OF RS.2,31,25,068/- AND AN AMOUNT OF RS.20,81,256/- REPORTED AS PROFIT WHICH WORKS OUT T O 9% OF THE SALES. IN THE LIGHT THESE FACTS AND EVEN AFTER CONSIDERING THE INFORMATION AVAILABLE FROM IMPOUNDED MATERIALS, BOOKS OF ACCOUNTS AND OTHER RELEVANT DOCUMENTS PRODUCED F ROM TIME TO TIME DURING THE COURSE OF ASSESSMENT PROCEE DINGS THERE IS NO NEED IN FACT NO SCOPE TO REPORT/ADMIT S UCH A HUGE AMOUNT OF RS.60,00,000/- IN OUR RETURN OF INCO ME AS ADDITIONAL INCOME. AS WE HAVE REALIZED THE STATUS OF SALES BY THE LAST MONTH OF THE F.Y. 2008-09, THE SAME WAS INTIMATED TO THE ASSESSING OFFICER AND REQUESTED NOT TO CONSIDER THE SAID ADMISSION AND THERE BY NOT TO DEPOSIT THE POST DATE D CHEQUES ISSUED FOR DISCHARGING THE TAX LIABILITY ON THE SAID INCOME OFFERED. 4.1. THE EXPLANATION OFFERED BY ASSESSEE WAS NOT F OUND ACCEPTABLE BY A.O. AND RELYING ON THE ADMISSION MAD E BY THE ASSESSEE DURING THE COURSE OF SURVEY, ADDITIONAL IN COME OF RS.60 LAKHS WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 23.12.2011. 4.2. THE ADDITION OF RS. 60 LAKHS MADE BY A.O. ON ACCOUNT OF DECLARATION MADE DURING THE COURSE OF SU RVEY WAS DISPUTED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. 4 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE B Y THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECOR D, THE LD. CIT(A) DELETED THE SAID ADDITION MADE BY THE A.O. F OR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5.2 OF THE IMPUGNED ORDER. 5.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ORDER O F THE ASSESSING OFFICER. I FIND THAT THE APPELLANT DURING THE COURSE OF SURVEY HAD ADMITTED RS.60,00,000/- TO COV ER UP THE DEFICIENCIES IN THE EXPENDITURE INCURRED UPTO T HE DATE OF SURVEY, BUT THE SAME WAS NOT ADMITTED IN THE RETURN OF INCOME FILED FOR THE ASST. YEAR 2009-10. THE APPELL ANT CONTENDED THAT IT HAS PRESUMED THAT THE SALES WOULD BE PROPORTIONATE TO THE SALES FROM 01.4.2008 TO 25.8.2 008, BUT THERE WAS STEEP DOWN FALL IN THE SALES IN THE LATER PART OF THE FINANCIAL YEAR. AS SEEN FROM THE P & L A/C. FIL ED BY THE APPELLANT, IT IS NOTICED THAT SALES FROM 01.4.2008 TO 25.8.2008 I.E., UPTO THE DATE OF SURVEY IS RS.1,70, 73,268/- WHEREAS FROM 26.08.2008 TO 31.3.2009 IS 60,51,800/- . THUS, THERE IS A CLEAR DOWNFALL IN THE SALES FROM 26.08.2008 TO 31.3.2009. IT IS ALSO NOTICED THAT TH E APPELLANT ADMITTED THE NET PROFIT AS PER THE P & L A/C. OF RS.20,81,256/- WHICH IS 9%. IF THE AMOUNT OF RS.60, 00,000 IS ADDED TO RS.20,81,256/- THE PROFIT WOULD BE RS.80,81,256/- AGAINST THE SALE OF FLATS OF RS.2,31,25,068/- WHICH WOULD GIVE A RATE OF 34% WHI CH IS UNUSUALLY HIGHER. I FIND THAT 9% NET PROFIT ADMITTE D BY THE APPELLANT IS REASONABLE AND CONSIDERING THE CASE OF THE APPELLANT, I FEEL THAT THE ADDITION OF RS.60,00,000 /- IS NOT JUSTIFIED AND ACCORDINGLY DELETED. THIS GROUND OF A PPEAL IS DECIDED IN FAVOUR OF THE APPELLANT. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED RELEVANT MATERIAL ON RE CORD. IT IS OBSERVED THAT ALTHOUGH ADDITIONAL INCOME OF RS.60 L AKHS WAS SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SU RVEY, THE REASON FOR NOT OFFERING SUCH ADDITIONAL INCOME IN T HE RETURN FILED FOR THE YEAR UNDER CONSIDERATION WAS DULY EXP LAINED BY THE ASSESSEE ON THE BASIS OF THE ACTUAL FACTS AND F IGURES OF THE 5 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. POST SURVEY PERIOD. THIS EXPLANATION OFFERED BY THE ASSESSEE, HOWEVER, WAS NOT ACCEPTED BY THE A.O. WITHOUT GIVIN G ANY REASON WHATSOEVER AND ADDITION OF RS. 60 LAKHS WAS MADE BY HIM MERELY ON THE BASIS OF STATEMENT MADE BY THE AS SESSEE DURING THE COURSE OF SURVEY WITHOUT GIVING ANY BASI S TO CORROBORATE THE SAME. AS RIGHTLY POINTED-OUT BY THE ASSESSEE AND TAKEN NOTE BY THE LD. CIT(A), THERE WAS A CLEAR DOWN-FALL IN THE SALES OF THE ASSESSEE DURING THE COURSE OF POST SURVEY PERIOD. MOREOVER, NET PROFIT OF 9% WAS DECLARED BY THE ASSESSEE ON THE ENTIRE SALES FOR THE YEAR UNDER CONSIDERATIO N IN THE RETURN OF INCOME FILED AND THE SAME BEING FAIR AND REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HELD THAT THERE WAS NO JUSTIFICATION IN MAKING A FURTHER ADDITION OF RS. 60 LAKHS WHICH WOULD HAVE GIVEN AN UNUSUAL HIGH ER NET PROFIT RATE OF 34%. HAVING REGARD TO ALL THE FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A), DELETING THE ADDITION OF RS. 60 LAKHS MADE BY THE A .O. MERELY ON THE BASIS OF STATEMENT MADE BY THE ASSESSEE DURI NG THE COURSE OF SURVEY AND SINCE THE LEARNED D.R. HAS ALS O NOT RAISED ANY MATERIAL CONTENTION TO DISPUTE THE RELIEF ALLOW ED BY THE LD. CIT(A) TO THE ASSESSEE ON THIS ISSUE, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUNDS NO. 2 TO 4 OF THE REVENUE ARE ACCORDINGLY DISMISSED. 6. GROUNDS NO. 5 AND 6 INVOLVE AN ISSUE RELATING T O THE ADDITION OF RS.13,49,252 MADE BY THE A.O. UNDER SECTION 40A(3) ON ACCOUNT OF CASH PAYMENTS EXCEEDING RS.20, 000 MADE BY THE ASSESSEE, WHICH STANDS DELETED BY THE L D. CIT(A). 6.1. ON VERIFICATION OF THE BOOKS OF ACCOUNTS OF T HE ASSESSEE, THE A.O. FOUND THAT EXPENDITURE AGGREGATI NG TO RS.13,49,252 WAS INCURRED BY THE ASSESSEE INVOLVING ITEMS FOR 6 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. WHICH PAYMENTS WERE MADE IN CASH EXCEEDING RS.20,00 0. HE, THEREFORE, INVOKED THE PROVISIONS OF SECTION 40A(3) AND MADE DISALLOWANCE OF RS.13,49,252. 6.2. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLO WANCE MADE BY THE A.O. UNDER SECTION 40A(3) OBSERVING THA T THE AMOUNT TO THE EXTENT OF RS.7,99,400 WAS PAID IN CAS H TO THE HEAD OF LABOURERS BY THE ASSESSEE IN ORDER TO MAKE INDIVIDUAL PAYMENTS TO THE LABOURERS COMPRISING PAYMENTS OF LE SSER THAN RS.20,000 EACH. AS REGARDS THE BALANCE AMOUNT, HE H ELD THAT THE SAME REPRESENTED AGGREGATE AMOUNTS PAID IN SING LE DAY BUT INVOLVING PAYMENTS OF LESS THAN RS.20,000. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED RELEVANT MATERIAL ON RE CORD. THE LD. D.R. HAS INVITED OUR ATTENTION TO THE RELEVANT DETAILS OF CASH PAYMENTS FURNISHED BY THE ASSESSEE BEFORE THE A.O. AS PLACED AT PAGE NO.66 OF THE ASSESSEES PAPER BOOK T O POINT OUT THAT ALL THE PAYMENTS MADE BY THE ASSESSEE ON ACCOU NT OF MATERIAL AND LABOUR EXCEEDED RS.20,000. HE SUBMITTE D THAT THE A.O. THEREFORE, WAS FULLY JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40A(3) TO MAKE A DISALLOWANCE OF THESE P AYMENTS AND ALTHOUGH THE LD. CIT(A) HAS DELETED THE SAID DI SALLOWANCE MADE BY THE A.O. ON THE GROUND THAT INDIVIDUAL PAYM ENTS DID NOT EXCEED RS.20,000, THERE IS NOTHING EITHER IN HI S IMPUGNED ORDER OR EVEN IN THE DETAILS FURNISHED BY THE ASSES SEE IN THE PAPER BOOK TO ESTABLISH THE SAME. HE HAS CONTENDED THAT AN OPPORTUNITY MAY BE AFFORDED TO THE A.O. TO VERIFY T HIS ASPECT. SINCE THE LD. COUNSEL FOR THE ASSESSEE HAS NO OBJEC TION IN THIS REGARD, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF A.O. FOR DECI DING THE SAME AFRESH, AFTER VERIFYING THE STAND OF THE ASSESSEE T HAT THE 7 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. INDIVIDUAL PAYMENTS MADE IN CASH DID NOT EXCEED RS. 20,000 AT A TIME. GROUNDS NO. 5 AND 6 OF THE REVENUES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED. 8. IN THE RESULT, ITA.NO.777/HYD/2014 OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE BEING ITA.NO.778/HYD/2014 FILED IN THE CASE OF M/S. SRINI LAYA PROJECTS WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), VIJAYAWADA DATED 31.01.2014. 10. GROUNDS NO. 1 AND 7 ARE GENERAL IN NATURE AND THEREFORE, DO NOT REQUIRE ADJUDICATION. 11. GROUNDS NO. 2 TO 4 INVOLVE A COMMON ISSUE RELATING THE ADDITION OF RS.20 LAKHS MADE BY A.O. O N ACCOUNT OF DECLARATION GIVEN BY THE ASSESSEE DURING THE COU RSE OF SURVEY WHICH STANDS DELETED BY THE LD. CIT(A). 11.1. AS AGREED BY BOTH THE PARTIES, THIS ISSUE IS SIMILAR TO THE ONE INVOLVED IN THE CASE OF M/S. SRINILAYA A .R. PROJECTS IN ITA.NO.777/HYD/2014 WHICH HAS ALREADY BEEN DECID ED BY US IN THE FOREGOING PARAS OF THIS ORDER. ACCORDINGL Y, FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ORDER OF THE LD. C IT(A) ON THIS ISSUE. GROUNDS NO. 2 TO 4 OF THE REVENUES APP EAL ARE DISMISSED. 12. GROUNDS NO. 5 AND 6 INVOLVE AN ISSUE RELATING TO THE ADDITION MADE BY THE A.O. UNDER SECTION 40A(3) ON ACCOUNT OF CASH PAYMENTS EXCEEDING RS.20,000 MADE BY THE AS SESSEE AGGREGATING TO RS.9,98,400, WHICH STANDS DELETED BY THE LD. CIT(A). 8 ITA.NO.777 & 778/HYD/2014 M/S. SRINILAYA A R PROJECTS, HYDERABAD. 13. AS AGREED BY BOTH THE PARTIES, THIS ISSUE IS S IMILAR TO THE ONE INVOLVED IN THE CASE OF M/S. SRINILAYA A .R. PROJECTS IN ITA.NO.777/HYD/2014 WHICH HAS ALREADY BEEN DECID ED BY US IN THE FOREGOING PARAS OF THIS ORDER EXCEPT THE FACT THAT ONE PAYMENT OF RS.1,55,250 MADE BY ASSESSEE TO SURYA TI MBER WAS FOUND TO BE MADE BY CROSS CHEQUE AND NOT IN CAS H. ACCORDINGLY, FOLLOWING THE SAME, WE SET ASIDE THE O RDER OF THE LD. CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE A.O. FOR VERIFICATION, EXCEPT THE PAYMENT MADE TO SURYA TIMB ER, AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE. GROUNDS NO. 5 AND 6 OF THE REVENUES APPEAL ARE ACC ORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, ITA.NO.778/HYD/2014 OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICA L PURPOSES. 15. IN THE RESULT, APPEALS OF THE REVENUE ARE TREA TED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09.01.2015. SD/- SD/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 09 TH JANUARY, 2015 VBP/- COPY TO 1. THE INCOME TAX OFFICER, WARD 8(1), 8 TH FLOOR, D-BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2. M/S. SRINILAYA A.R. PROJECTS, FLAT NO.411, MY HOME MADHUBAN APARTMENTS, NAGARJUNANAGAR, AMEERPET, HYDERABAD. 3. M/S. SRINILAYA PROJECTS, FLAT NO.411, MY HOME MADHU BAN APARTMENTS, NAGARJUNANAGAR, AMEERPET, HYDERABAD. 4. CIT(A), VIJAYAWADA. 5. CIT-II, HYDERABAD. 6. D.R. I.T.A.T. B BENCH, HYDERABAD.