Gubbala Satyanarayana, Hyderabad V. ITO, Ward-1, Warangal

ITA 782/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69792 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: T CHAITANYA KUMAR

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.782/HYD/13 : ASSESSMENT YEAR 2009 - 10 SHRI GUBBALA SATYANARAYANA, WARANGAL ( PAN A C A PG 3554 B) V/S. INCOME - TAX OFFICER, WARD - 1. WARANGAL (APP ELLANT ) (RESPONDENT) ITA NO.788/HYD/13 : ASSESSMENT YEAR 2009 - 10 INCOME - TAX OFFICER, WARD - 1. WARANGAL V/S. SHRI GUBBALA SATYANARAYANA, WARANGAL ( PAN A C A PG 3554 B) (APP ELLANT ) (RESPONDENT) ASSESSEE BY : SHRI T.CHAITANYAKUMAR DEPARTMENT BY : SHRI K.E.SUNIL BABU DR DATE OF HEARING 26.08.2013 DATE OF PRONOUNCEMENT 05.09.2013 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THESE CROSS APPEALS BY THE ASSESSEE AS WELL AS REVENUE ARE DIRECT E D AGAINST THE O R DER OF THE CIT(A) VI HYDERABAD DATED 15.2.2013 FOR THE ASSESSMENT YEAR 2009 - 10. SINCE A COMMON ISSUE IS INVOLVED, TH E SE APPEALS ARE BEIN G DISPOSED OF WIT H THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE, AN IN D IVI D U A L ENGAGED MAINLY IN THE BU S IN E SS OF LABOUR CONTRACTS, EXECUTING CONTRACTS FOR M/S. BILT GRAPHIC PAPER PRODU C TS LTD., A UNIT OF M/S. A.P. RAYONS LTD., LOCATED AT KAMALAPUAM, WA RANGAL DISTRICT, FILED RETURN FOR THE ASSESSMENT YEAR 2009 - 10, DECL A RING AN ITA NO. 782 - 78 3 / HYD/201 3 SHRI GUBBALA SATYANARAYANA, WARANGAL 2 INCOME OF R S .4,80,122. AS AGAINST THIS, THE ASSESSING OFFICER, WHILE COMPLETING TH E ASSESSMENT UNDER S.144 OF THE ACT, HAS ESTIMATED THE PROFIT OF THE ASSESSEE AT 12.5% ON TH E G ROSS RECEIPTS AND COMPLETED THE ASSESSMENT, BY COMPUTING THE TOTAL INCOME AT R S .47,88,030. ON APPEAL, THE CIT(A), ESTIMATING THE PROFIT AT 8% OF THE TOTAL CONTRACT RECEIPTS OF RS.1,74,79,244, WORKED OUT THE PROFIT AT RS .13,98,340 , AND THUS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 3. WHIL E ASSESSEE PREFERRED APPEAL AGGRIEVED BY THE ADDITION SUSTAINED BY THE CIT(A), REVENUE PREFERRED ITS APPEAL AGGRI E VED BY THE RELI E F GRANTED BY THE CIT(A). 4. LEARNED COUN S EL FOR THE ASSESSEE SUBMI TT ED THAT THE CIT( A) OUGHT NOT TO HAVE UPH E L D TH E D E CIS I ON OF THE ASSESSING OFFICER FOR C OMPLETION OF ASSESSMENT UNDER S.144 OF T H E ACT, WITHOUT ALLO W IN G PROPER OPPO R T U NITY TO TH E ASSESSEE . HE SUBMITTED THAT THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE WERE ON THE BASIS OF AUDITED ACCOUNT BOOKS, AND THE RE FORE, THE SAME CANNOT B E REJECT E D BY THE ASSESSING OFFICER, WITHOUT BRINGING ON RECORD ANY MATERIAL TO DISPROVE THE SAME. HE FURTHER SUBMITT E D THAT THE ASSESSEE INCURRED EXPENDITURE OF RS.1,39,02,902 UN D ER VARIOUS HEADS UNDER DIRECT SUPERVISION OF THE COMPANY AUTHO R ITI E S, AS CERTIFIED BY THEM, AND TH E R E FORE, THE SAME SHOULD BE DEDUCTED FROM GROSS RECEIPTS, AS THE ASSESSEE I S NO T L E FT WITH ANY MARGIN OF PROFIT IN RESPECT OF RECEIP T S TO THAT EXTENT. HE FURTHER SUBMITTED THAT THE LABOU R SUPPLY CONTRACT WOULD NOT YIELD AS MUCH AS 8% PROFIT, AS ESTIMATED BY TH E CIT(A) , AND TH E R E FORE, THE DIRECTION OF THE CIT(A) TO ADOPT A RATE OF 8% IS ARBITRARY, AND VERY HIGH IN THE LINE OF THE ASSESS EES BUSINESS. HE ALSO SUBMITTED THAT PROFIT GENERALLY IN ASSESSEES LINE OF BUSINESS IS A MAXIMUM OF 2% AND THEREFORE, THE ESTIMATION MADE BY THE CIT(A) AT 8% IS ABNORMAL AND HIGHLY UNREASONABLE AND SHOULD BE DRASTICALLY REDUCED. IN SUPPORT OF THESE CO NTENTIONS, HE PLACED RELIANCE ON THE DECISION OF THIS ITA NO. 782 - 78 3 / HYD/201 3 SHRI GUBBALA SATYANARAYANA, WARANGAL 3 T RIBUNAL IN THE CASE OF M/S. RENU SINGH & CO.(ITA NO.1031/HYD/02) DATED 20.11.2006. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE WAS INDIFFERENT TO THE NOTICES ISSUED BY THE ASSESSING OFFICER, AND HE DID NOT COOPERATE WITH TH E ASSESSING OFFICER DURING TH E ASSESSMENT PROCEEDINGS, WHICH COMPELLED HIM TO INVOKE THE P R O V I S IONS OF S.144 OF THE ACT. HE A LSO SUBMITTED THAT THE PROFIT ESTIMATED BY TH E ASSESSING OFFICER IS QUITE REASONABLE, AND THE CIT(A) WAS NOT JUSTIFIED IN REDUCING THE SAME. 6. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSMENT HAS BEE N FRAMED EX - PARTE UNDER S.144 OF THE ACT, ON ACCOUNT OF NON - COMPLIANCES ON THE PART OF THE ASSESSEE TO THE NOTICES SENT BY THE ASSESSING OFFICER. WHILE DOING SO, THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE AT 12.5% OF THE GROSS CONTRACT REC EIPTS AND MADE SUBSTANTIAL ADDITION TO THE INCOME RETURNED BY THE ASSESSEE. SINCE THE ASSESSEE IS ENGAGED IN EXECUTION OF LABOUR CONTRACTS, MOSTLY FOR M/S. BILT GRAPHIC PAPER PRODU C TS LTD., KAMALAPURAM UNIT, ESTIMATION OF INCOME ADOPTING A RATE OF 12.5% O F THE GROSS RECEIPTS CLEARLY APPEARS TO BE ABNORMAL AND ON HIGH SIDE. CONSIDERING THIS ASPECT ONLY, THE CIT(A) HAS REDUCED THE RATE ADOPTED BY THE ASSESSING OFFICER TO 8% AND GRANTED PARTIAL RELIEF TO THE ASSESSEE. HOWEVER, THE ASSESSEE, IN VIEW OF ITS TURNOVER, IS GOVERNED BY THE PROVISIONS OF S.44AB, AND THE STATUTORY AUDIT PRESCRIBED THEREUNDER. ASSESSEE ALSO CLAIMED TO HAVE BEEN INCURRING EXPENDITURE UNDER VARIOUS HEADS UNDER DIRECT SUPERVISION TO THE COMPANY AUTHORITIES, AND T HE SAME SHOULD ALSO BE DEDUCTED FROM GROSS RECEIPTS. IT IS THE CLAIM OF THE ASSESSEE THAT PROFIT IN ASSESSEES LINE OF BUSINESS IS HARDLY 2%, AND RELIANCE IN THIS BEHALF IS ALSO PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. R E NU SINGH& CO., KARIMNAGAR (SUPRA). W E ARE NOT IN ITA NO. 782 - 78 3 / HYD/201 3 SHRI GUBBALA SATYANARAYANA, WARANGAL 4 AGREEMENT WITH THE PLEA OF THE ASSESSEE THAT PROFIT IN ASSESSEES LINE OF BUSINESS IS BARELY 2% . T HE DECISION RELIED UPON BY THE ASSESSEE , IN OUR OPINION, IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, SINCE IN THE CITED CA S E , T HE ASSESSEE WAS A LOADING CONTRACTO R FOR ORIENT CEMENT WORKS. W E FIND THAT THE RATE ADOPTED BY THE CIT(A), I.E. 8% IS ALSO ON HIGHER SIDE. CON S IDERING TOTALITY OF FACTS AND CIRCUM S TANCES OF THE CASE , WE ARE OF THE VIEW THAT ESTIMATION OF PROFIT ADOPTING A RATE OF 5% ON THE CONTRACT RECEIPTS OF RS.1,74,79,244, WOULD MEET THE ENDS OF JUSTICE. WE MODIFY THE O R DER OF THE CIT(A) ACCORDINGLY, AND DIRECT THE ASSESSING OFFICER TO RECOMPUT E THE INCOME O F THE ASSESSEE BY ESTIMATING THE INCOME APPLYING A RATE OF 5% ON THE CONTRACT RECEIPTS DISCLOSED BY THE ASSESSEE. THE CONTENTION OF THE DEPARTMENT THAT THE CIT(A) HAS CONSIDERED ADDITIONAL INFORMATION FURNISHED BY THE ASSESSEE WITHOUT GIVING OPPORTUNITY T O THE ASSESSING OFFICER IS FOUND TO BE WITHOUT ANY SUBSTANCE. IT IS VERY MUCH EVIDENT FROM THE ORDER OF THE CIT(A) THAT THE ASSESSING OFFICER WAS GIVEN DUE OPPORTUNITY TO COMMENT UPON THE CONTENTIONS RAISED BY THE ASSESSEE, AND ONLY AFTER CONSIDERING ASSE SS ING OFFICER S REPLY, THE CIT(A) HAS DECIDED THE APPEAL. ACCORDINGLY, GROUNDS OF THE ASSESSEE IN HIS APPEAL ARE PARTLY ALLOWED, AND THE GROUNDS OF THE REVENUE IN ITS APPEAL ARE REJECTED. 7. IN THE RESULT, WHILE THE ASSESSEES APPEAL I S PARTLY ALLOWED. REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 5.9.2013 SD/ - SD/ - (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/ - 5 TH S E PTEM B E R, 2013 ITA NO. 782 - 78 3 / HYD/201 3 SHRI GUBBALA SATYANARAYANA, WARANGAL 5 COPY FORWARDED TO: 1 SHRI GUBBALA SATYANARAYANA (WARANGAL) C/O. SHRI B.NARSING RAO & CO., CHARTERED ACCOUNTANTS, ,PLOT NO.554, ROAD NO.92, JUBILEE HILLS, HYDERABAD 96 2 I NCOME - TAX OFFICER, WARD 1 , WARANGAL 3 COMMISSIONER OF INCOME - TAX(APPEALS) V I, HYDERABAD 4 COMMISSIONER OF INCOME - TAX V , HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S