Sri Krishna Shelters Pvt. Ltd., Bangalore V. Deputy Commissioner of Income Tax, Circle - 1(2), Bangalore

ITA 810/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5651 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 07-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B K BIJU J
• Assessee Lawyers: S RAMASUBRAMANIAM
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B E NGAL U R U BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI LALIT KUMAR, JUDICIAL MEMBER ITA NO. 810 / BANG/ 201 7 (ASSESSMENT YEAR : 201 1 - 12 ) SRI KRISHNA SHELTERS PVT. LTD. NO.59, SRI KRISHNA S UDHA, WEST ANJANEYA TEMPLE STREET, OFF: BASAVANGUDI MAIN ROAD, GANDHIBAZAR, B ENGALURU - 560 004. PAN:AAKCS 2734 G VS. APPELLANT DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), BENGALURU. RESPONDENT APPELLANT BY : SHRI S.RAMASUB RAMANIAM, CA. RESPONDENT BY : SHRI B.K.BIJU, JCIT(DR) DATE OF HEARING : 06/11/2017 DATE OF PRONOUNCEMENT : 17 /01/2018 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) , BENGALURU - 6, BENGALURU [CIT(A)] DATED 04/07/2016 FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL AND ADDITIONAL GROUNDS OF APPEAL : ITA NO . 810 /BANG/201 7 PAGE 2 OF 5 ITA NO . 810 /BANG/201 7 PAGE 3 OF 5 3. BRIEF FACTS OF THE CASE ARE T HAT THAT ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PROVISIO NS OF THE COMPANIES ACT 1956. I T IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. T H E RETURN OF INCOME FOR ASSESSMENT YEAR 2011 - 12 WAS FILED ON 11/11/2012 DECLARING INCOME OF RS.2 ,27 ,61,870/ - . AGAINST THE SAID RETURN OF INCOME , THE ASSESSM ENT WAS COMPLETED BY THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(3), BANGALORE VIDE ORDER DATED 14/03/2014 U/S 143 ( 3 ) OF THE INCOME TAX ACT 1961 ][ HEREINAFTER REFERRED TO AS THE ACT ] AT TOTAL INCOME OF RS.2 , 31 , 95 , 039. WHILE DOING SO THE A SSESSING O FFICER ESTIMATED THE PROFIT AT 8% OF THE GROSS RECEIPTS AND ALSO ASS ESSED INTEREST INCOME OF RS.4,33, 169 / - UNDER THE HEAD INCOME FROM OTHER SOURCES . THE REASONS GIVEN BY THE A SSESSING OFFICER FOR ESTIMATING THE PROFIT ARE AS UNDER: I. R ETURNED PROFIT IS LOW AS COMPARED TO ASSESSMENT YEAR 2010 - 11. II. THE ASSESSEE HAD NOT PRODUCED ANY BOOKS OF ACCOUNT AND VOUCHERS AND BILLS. III. CONFIRMATION FROM SUNDRY CREDI TORS AND LOANS HAS NOT BEEN PRODUCED. 4. BEIN G AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEAL WAS PREFERRED BEFORE THE LEARNT LD CIT(A) WHO , VIDE IMPUGNED ORDER , CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN ESTIMATION OF BOOKS OF ACCOUNT. D URING THE COURSE OF PROCEEDINGS BEFORE THE LD. CIT(A), THE A PPELLANT HAD CHOSEN NOT TO CAUSE ANY APPEARANCE. HOWEVER, FILED AN EXPLANATION AND LETTER STATING THAT BOOKS OF ACCOUNT ARE AVAILABLE FOR VERIFICATION AND T HE PERCENTAGE OF PROFITS IN THE SAME LINE OF BUSINESS DOES NOT EXCEED 4 TO 5%. THE S E SUBMISSIONS WE RE REJECTED BY THE LD. CIT(A). 5. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY CONTENDED THAT THE BASIS FOR THE ASSESSING OFFICER TO ESTIMATE PROFIT IS INVALID BOTH ON FA CTS AND LAW AS IN THE IMMEDIATE LY PR ECE DING ITA NO . 810 /BANG/201 7 PAGE 4 OF 5 ASSESSMENT YEAR , PROFIT DECLARED WAS 5.3% AND FOR THE ASSESSMENT YEAR S 2008 - 09 TO 2009 - 10 THE DECLARED PROFIT WAS RANGING FROM 4 TO 6% OF THE GROSS RECEIPTS. HE FURTHER SUBMITTED THAT LOW PROFIT CANNOT BE THE RE ASON FOR ESTIMATION OF PROFIT. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PARADISE HOLIDAYS ( 325 ITR 113 ) . HE FURTHER SUBMITTED THAT EVEN IF ESTIMATION OF PROFIT IS REQUIRED, PERCENTAGE OF PR OFIT DECLARED BY THE ASSESSEE IN THE EARLIER YEARS SHOULD BE TAKEN AS GUIDANCE FOR ESTIMATION OF PROFITS FOR THE YEAR. HE FURTHER CONTENDED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN CONCLUDING THAT NO BOOKS OF ACCOUNT WERE AVAILABLE FOR VERIFICATION AS THE BOOKS OF ACCOUNT WE RE AUDITED BOTH UNDER THE COMPANIES ACT AND UNDER THE PROVISIONS OF SECTION 44 AB OF THE ACT. HE FURTHER CONTENDED THAT INTEREST INCOME FROM BANKS IS INEXTRICABLY CONNECTED WITH THE BUSINESS CARRIED ON BY THE ASSESSEE AS INTEREST WAS EARNED ON FIXED DEPOSITS MADE FOR OBTAINING BANK GUARANTEES. THEREFORE , IT SHOULD FORM PART OF THE BUSINESS INCOME. THE LD.AR FURTH E R CONTENDED THAT THE A SSESSING OFFICER OUGHT TO HAVE GIVEN CREDIT FOR TDS OF RS.42,96,363/ - . 7. ON THE OTHER HAND, THE LEARNED DR PLACED RELIANCE ON THE ORDERS OF THE LOWE R AUTHORITIES. 8. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN ESTIMATING PROFITS OF THE BUSINESS OF THE ASSESSEE. T H E ONLY REASON GIVEN BY THE A SSESSING OFFICER FOR ESTIMATION OF GP WAS THAT THE ASSESSEE HAD FAILED TO PRODUCE CONFIRMATION LETTER FROM TH E SUNDRY CREDITORS, BILLS AND VO UCHERS AND BOOKS OF ACCOUNT FOR VERIFICATION. THIS FINDING OF THE A S SESSING OFFICER REMAINS UNCONTROVERTED. HOWEVER IT IS SET TLED POSITI ON OF LAW THAT EVEN WHILE ESTIMATING PROFITS, THERE SHOULD BE A VALID BASIS FOR ADOPTION OF PARTICULAR RATE OF PROFIT. IN THIS CONNECTION , PROFITS DECLARED IN EARLIER YEAR CAN BE V ALUABLE GUIDANCE OR BASIS FOR ESTIMATING THE PRO FITS OF THE SUBSEQUENT YEAR AS HELD BY THE HON BLE MYSORE HIGH COURT IN THE CASE OF P.VENKANNA VS. CIT (72 ITR 328) . IT WAS CONTENDED BEFORE THE AO AS WELL AS THE ITA NO . 810 /BANG/201 7 PAGE 5 OF 5 LD.CIT(A) THAT PRO FIT DECLARED IN EARLIE R Y EARS WAS ALSO 5% ONLY WHERE AS THE A SSESSING OFFICER PRESUMED THAT PROFITS RETURN E D WERE 8% OF THE GROSS RECEIPTS. THEREFORE , WE REMIT THIS ISSUE BACK TO THE FILE OF THE A SSESSING OFFICER TO ESTIMATE PROFIT AT THE SAME RATE AS SHOWN IN THE EARLIER TWO YEAR S AFTER VERIFICATION OF THE RECORDS. 9. THE NEXT GROUND OF APPEAL IS WHETHER INTEREST INCOME EARNED ON FIXED DEPOSITS WITH BANKS SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . THIS ISSUE ALSO REQUIRES VERIFICATION FROM THE ASSESSING OFF ICER TO VERIFY WHETHER THIS INTEREST INCOME WAS ON THE FIXED DEPOSITS MADE FOR THE PURPOSE OF SECURING BANK GUARANTEE FOR THIS PURPOSE AND IF SO , TO TREAT IT AS PART OF BUSINESS INCOME. 10. THE OTHER GROUNDS OF APPEAL RELATES TO CREDIT FOR TDS. THIS IS SUE IS ALSO REMANDED TO THE A SSESSING O FFICER FOR VERIFICATION WITH CREDIT AVAILABLE IN THE FORM 26AS. 11. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES . OR DER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2018 . SD/ - SD/ - ( LALI T KUMAR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : B EN GAL URU D A T E : 17 /0 1 /2018 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE