ITO, Ward-6(1), Hyderabad V. M/s. Sai Vikram Builders, Hyderabad

ITA 871/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53834 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO.871/HYD/2011 ASSESSMENT YEAR 2006-07 THE ITO WARD 6(1), HYDERABAD VS M/S SAI VIKRAM BUILDERS HYDERABAD. (PAN AAUFS3839H) APPELLANT RESPONDENT APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI MOHD. AFZAL DATE OF HEARING : 13.12.2011 DATE OF PRONOUNCEMENT : 27.12.2011 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER PASSED BY THE CIT(A) GUNTUR DATED 12.11.2010 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP CONCERN DOING CONSTRUCTION BUSINESS. THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.8,05,086/- FROM M/S CHAITANYA EDUCATIO NAL COMMITTEE, HYDERABAD TOWARDS BUILDING MAINTENANCE CHARGES. THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO PROD UCE EVIDENCE IN SUPPORT OF THIS EXPENDITURE DEBITED AGAINST THE MAI NTENANCE CHARGES RECEIVED. THE ASSESSING OFFICER HELD THAT IN SPITE OF SEVERAL OPPORTUNITIES GIVEN, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE EXPENDITURE INCURRED AND THEREFORE H E ESTIMATED THE INCOME AT 18% OF GROSS CONTRACT BY APPLYING THE PRO VISIONS OF SECTION ITA NO.871/H/2011 M/S SAI VIKRAM BUILDERS 2 145 OF THE IT ACT. ACCORDINGLY, THE INCOME FROM TH IS MAINTENANCE WAS ADOPTED AT RS.1,20,763/-. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) ON THIS ISSUE AMONG OTHERS. THE CIT(A) NOTED THAT THE TOTAL RECEIPTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AMOUN TED TO RS.1,15,05,086/- AND WHILE COMPLETING THE ASSESSMEN T THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: I) ADDED THE DIFFERENCE IN CLAIMING DEDUCTION U/S 24(A) TO THE TUNE OF RS.3,84,625/- ON PRORATE BASIS. II) BY APPLYING THE PROVISIONS OF SECTION 145 OF TH E ACT, ADDED RS.66,24,090/- BEING THE DIFFERENCE IN SALE CONSIDE RATION AND COST OF THE BUILDING, WHICH IS SHOWN AS OPENING WOR K IN PROGRESS. III) ADDED BUILDING MAINTENANCE CHARGES @ 15% ON GR OSS CONTRACT RECEIPTS OF RS.8,05,086/- WHICH WORKED OUT TO RS.1,20,763/-. IV) ADDED INCOME FROM CIVIL CONTRACT WORK CARRIED O UT BY THE ASSESSEE ON CONTRACT RECEIPT OF RS.25,00,000/- @ 8% WHICH COMES TO RS.2 LAKHS. V) ADDED UNEXPLAINED CASH OF RS.3 LAKHS RECEIVED FR OM SMT. A. BINDU PALLAVI. 4. THE FACTS OF THE CASE, AS NOTED BY THE CIT(A), ARE THAT THE ASSESSEE IS A BUILDER AND HAS ACQUIRED TWO OPEN PLO TS ADMEASURING 910 AND 850 SQ. YARDS TOTALLING TO 1760 SQ. YARDS A ND SOLD THE CONSTRUCTED PLOTS ON 21.11.2005 FOR A CONSIDERATION OF RS.1,04,00,000/-. IN THE P&L A/C AS ON 31.3.2006, THE ASSESSEE HAD SHOWN AN AMOUNT OF RS.25 LAKHS AS CONTRACT RECEIPT AND RS.107 LAKHS AS ADVANCE IN THE BALANCE SHEET. THE ASSESSE E HAD RECEIVED RENTAL INCOME OF RS.19,23,214/- FOR LETTING OUT THE FLOOR AREA. ITA NO.871/H/2011 M/S SAI VIKRAM BUILDERS 3 5. IN RESPECT OF THE FIRST GROUND BEFORE THE CIT (A), IT WAS SUBMITTED BY THE ASSESSEE THAT THEY RECEIVED RENTAL INCOME OF RS.19,23,124/-. BUT AS SEEN FROM THE TDS CERTIFICA TES ISSUED BY THE LESSEE, AN AMOUNT OF RS.18,29,986/- WAS PAID TO THE ASSESSEE TOWARDS RENT FOR THE PERIOD FROM 1.4.2005 TO 31.3.2006, AGA INST WHICH AN AMOUNT OF RS.4,24,786/- WAS DEDUCTED TOWARDS TDS. THE ASSESSEE CLAIMED AN AMOUNT OF RS.5,76,937/- AS DEDUCTION U/S 24(A). THE ASSESSING OFFICER RESTRICTED THE DEDUCTION CLAIMED U/S 24(A) PROPORTIONATE TO THE PERIOD OF HOLDING THE PROPERT Y AS OWNER TO THE EXTENT OF RS.3,84,625/- ON THE GROUND THAT THE ASSE SSEE HAS DISPOSED OFF THE PROPERTY ON 21.11.2005 AND HAS CEASED TO BE THE OWNER OF THE PROPERTY FROM THAT DATE ONWARDS. 6. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ARGUED BEFORE THE CIT(A), THAT SECTION 24 OF THE AC T HAS NO RESTRICTIVE CLAUSE AND DOES NOT STIPULATE ANY PROPORTIONATE DIS ALLOWANCE, AND ACCORDINGLY, HE REQUESTED THE CIT(A) TO DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE CIT(A), FINDING MERI T IN THE CONTENTION OF THE ASSESSEE, DIRECTED THE ASSESSING OFFICER NOT TO RESTRICT THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER S.24 OF THE ACT. 7. WITH RESPECT TO GROUNDS NO. 3 & 5 OF THE ASSE SSEE BEFORE THE CIT(A), IT WAS SUBMITTED BY THE AUTHORISED REP RESENTATIVE FOR THE ASSESSEE BEFORE THE CIT(A), AS FOLLOWS: IT WAS SUBMITTED BY THE ASSESSEE THAT HE STARTED A PROJECT, DURING THE PERIOD 2001-02 RELEVANT TO THE ASSESSMEN T YEAR 2002- 03 AND THE PROJECT WAS COMPLETED DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2007-08. DURING THE RELEVANT P ERIOD TO THE ASSESSMENT YEAR 2006-07, THE ASSESSEE TRANSFERRED T HE PROPERTY WHICH WAS NOT TOTALLY DEVELOPED, FOR A CONSIDERATIO N OF RS.1,07,00,000/- WITH AN ORAL UNDERSTANDING THAT TH E PROPERTY ITA NO.871/H/2011 M/S SAI VIKRAM BUILDERS 4 WILL BE DEVELOPED ON PART WITH THE PROPERTY DEVELOP ED AND HANDED OVER TO THE OWNER OF THE LAND. THEREFORE, T HE INCOME WAS NOT DECLARED FOR THE ASSESSMENT YEAR 2006-07 FROM T HE RECEIPTS OF RS.1,07,00,000/-. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2007-08, AS PROMISED TO THE PURCHAS ERS, THE PROPERTY WAS DEVELOPED ON PART WITH THE PROPERTY HA NDED OVER TO THE LANDLORD AND ALSO AFTER COMPLETING CERTAIN MISC ELLANEOUS WORKS INCOME WAS DECLARED AT RS.9,02,133/-. THE GR OSS RECEIPTS FROM THE ENTIRE PROJECT ARE AT RS.1,70,87,500/- AND THE TOTAL INCOME DECLARED FROM THE PROJECT IS AT RS.14,13,133 /-. IT WAS FURTHER SUBMITTED THAT THE BUSINESS INCOME DECLARED BY THE ASSESSEE FROM THE GROSS RECEIPTS OF RS.1,70,87,500/ - WILL BE AT 8.27%. THERE IS NO DISPUTE IN RESPECT OF THE GROSS RECEIPTS OF THE ENTIRE PROJECT FROM THE ASSESSMENT YEAR 2003-04 TO 2007-08 WHICH AT RS.1,70,87,500/-. THE INCOME DECLARED FOR THE EARLY YEARS I.E. FROM THE ASSESSMENT YEAR 2003-04 TO 2005 -06 AND FOR THE ASSESSMENT YEAR 2007-08 WERE ACCEPTED BY THE RE VENUE AND REQUESTED TO DELETE THE ADDITION. 8. WITH RESPECT TO REIMBURSEMENT OF EXPENDITURE IT WAS SUBMITTED BY THE ASSESSEE, BEFORE THE CIT(A), AS UNDER: AS PER THE DOCUMENTS, IT IS SEEN THAT THE ASSESSEE HAS DISPOSED OFF THE PROPERTIES IN FAVOUR OF SRI P.V RAMAKRISHNA RAO & 4 OTHERS FOR A CONSIDERATION OF RS.99,00,000 AND RS.5 ,00,000/- IN FAVOUR OF SMT. A. BINDU PALLAVI. THE ASSESSEE HAS RECEIVED RS.5 LAKHS TOWARDS SALE CONSIDERATION FROM BINDU PALLAVI AS AGAINST THE AMOUNT OF RS.8 LAKHS SHOWN BY THE ASSESSEE AS A DVANCE FROM HER AS THE ASSESSEE HAS NOT SHOWN ANY EVIDENCE FOR BALANCE AMOUNT OF RS.3 LAKHS, THE SAME IS ADDED BY THE ASSESSING OFFICER. FOR THIS THE ASSESSEE HAD SUBMI TTED THAT THE PROPERTY WAS SOLD VIDE DOCUMENTS NO.8805/05 DATED ITA NO.871/H/2011 M/S SAI VIKRAM BUILDERS 5 21.11.2005 FOR A CONSIDERATION OF RS.8 LAKHS. HOWE VER, IT WAS REGISTERED FOR RS.5 LAKHS. THE PURCHASER WANTED TH E PROPERTY TO BE IMPROVED WITH CERTAIN SPECIFICATION, THEREFORE, AN EXTRA AMOUNT OF RS.3 LAKHS WAS CHARGED AND INCURRED, THE SAME IS RECORDED IN THE BOOKS OF ACCOUNTS AND THE EXPENDITU RE IS INCURRED AS AGREED DURING THE PERIOD RELEVANT TO TH E ASSESSMENT YEAR 2007-08 AND THIS AMOUNT WAS DECLARED FOR THE A SSESSMENT YEAR 2007-08. 9. THE CIT(A), CONSIDERING THE ABOVE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, DETERMINED THE ISSUE BEFORE HIM IN THE FOLLOWING MANNER- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASSES SEE AND ALSO THE MANNER IN WHICH THE ASSESSING OFFICER HAS COMPUTED THE INCOME. IN AS MUCH AS THE FINDING OF THE ASSES SING OFFICER THAT THE TOTAL SALE CONSIDERATION TO TWO PARTIES AT RS.1,04,00,000/- IS CONCERNED, THERE IS NO MERIT I N THE SUBMISSIONS MADE BY THE AR AND HENCE THE SAME HAS T O BE REJECTED. IN ADDITION THE CHART OF RECEIPT OF RS.1 ,04,00,000/- IT IS NOT DENIED THAT THE ASSESSEE HAS RECEIVED RS.8,0 5,086/- WHICH SHOULD FORM PART OF TOTAL RECEIPTS FOR THE YE AR UNDER CONSIDERATION. THE ASSESSEE HAS NOT SHOWN THE EXTR A RECEIPTS OF RS.3 LAKHS WHICH SHOULD FORM PART OF TOTAL RECEIPTS FOR THE PERIOD UNDER CONSIDERATION. THUS, TOTAL RECEIPTS F OR THE YEAR UNDER CONSIDERATION AMOUNTS TO RS.1,15,05,086/-. T HE TOTAL RECEIPTS SHOULD NOT BE CONSIDERED AS INCOME FOR THE YEAR, BUT INCOME HAS TO BE CURBED OUT. THE BENCH MARK FOR IN COME IS 8% IN A CIVIL CONSTRUCTION; IN CASE OF SMALL ENTREPREN EUR WHOSE TOTAL RECEIPTS FOR A YEAR ARE LESS THAN 40 LAKHS. SINCE, THE ASSESSEE IS A BIG PERSON IN TERMS OF THE VOLUME OF BUSINESS IS CONCERNED, TAKING INTO ACCOUNT THE VARIOUS PARAMETERS OF OPERA TIONS OF THE ITA NO.871/H/2011 M/S SAI VIKRAM BUILDERS 6 ASSESSEE AND THE SHORTCOMINGS OF THE BOOKS AS POINT ED OUT BY THE ASSESSING OFFICER, THE BOOK RESULTS HAVE TO BE REJECTED AND THIS IS A CASE WHERE A FAIR ESTIMATE HAS TO BE MADE . TAKING ALL THE RELEVANT FACTORS INTO ACCOUNT, IT IS FAIR AND J USTIFIABLE TO ESTIMATE THE INCOME AT 10% OF THE TOTAL RECEIPTS OF RS.1,15,05,086 AND THE ASSESSING OFFICER IS DIRECTE D ACCORDINGLY. 10. AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), AS SESSEE PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 11. WE HEARD BOTH PARTIES. WE FIND NO INFIRMITY I N THE ORDERS OF THE CIT(A), AS THE CIT(A) HAS ADOPTED THE RATE OF 10% ON THE BASIS THAT THE BENCH MARK FOR INCOME IN CIVIL CONSTRUCTIONS IS AT 8% IN THE CASES OF SMALL ENTREPRENEUR WHOSE TOTAL RECEIPT IS LESS T HAN 40 LAKHS, WHEREAS IN THE CASE OF THE ASSESSEE BEFORE US, HAVI NG VOLUMINOUS OF BUSINESS, THE ESTIMATION ADOPTING A RATE OF 10% IS REASONABLE. IN THE ABSENCE OF RELIABLE BOOK RESULTS, TAKING INTO CONSI DERATION VARIOUS FACTORS IN THE CASE OF THE ASSESSEE, WE FEEL THAT T HE CIT(A) HAS BEEN FAIR AND JUST IN ESTIMATING THE INCOME AT 10% OF TH E RECEIPTS. HENCE WE CONFIRM THE ORDER OF THE CIT(A). 12. 1IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.12. 2011 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 DECEMBER, 2011 ITA NO.871/H/2011 M/S SAI VIKRAM BUILDERS 7 COPY FORWARDED TO: 1. M/S SAI VIKRAM BUILDERS, 6-3-667/4, 104, SIRIMALLE TOWERS, PANJAGUTTA, HYDERABAD 2. THE ITO, WARD 6(1), HYDERABAD 3. THE CIT(A)-VI, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/