Ch.Veeraju and B.Venkateswara Rao, Rajahmundry V. THE ACIT, CIRCLE - 1, Rajahmundry

ITA 90/VIZ/2014

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9671 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M NARAYANA RAO

Judgement Text

ITA NO.90/VIZAG/2014 & 157/VIZAG/2014 CH. VEERARAJU & B. VENKATESWARA RAO, RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.90/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) M/S. CH. VEERRAJU & B. VENKATESWAR RAO, RAJAHMUNDRY VS. ACIT, CIRCLE - 1, RAJAHMUNDRY [PAN: AAGFC0495B ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.157/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) ACIT, CIRCLE - 1, RAJAHMUNDRY VS. CH. VEERRAJU & B. VENKATESWAR RAO, RAJAHMUNDRY ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M. NARAYANA RAO, DR / DATE OF HEARING : 15.11.2016 / DATE OF PRONOUNCEMENT : 28.11.2016 ITA NO.90/VIZAG/2014 & 157/VIZAG/2014 CH. VEERARAJU & B. VENKATESWARA RAO, RAJAHMUNDRY 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 14.2.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A PARTNE RSHIP FIRM EXECUTING CIVIL CONTRACT WORKS FOR POLAVARAM IRRIGATION PROJE CT. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF ` 1,23,49,870/- ON A GROSS RECEIPT OF ` 22,17,82,376/-. THE PROFIT RATE WAS AT 5.56%. ON AN EXAMINATION OF THE BOOKS OF ACCOUNTS OF THE ASSESSE E, THE A.O. FOUND THAT CERTAIN EXPENSES HAD BEEN CLAIMED IN THE BOOKS WITHOUT RELEVANT SUPPORTIVE VOUCHERS. SOME OF THE VOUCHERS, ESPECIA LLY THOSE RELATED TO LABOUR CHARGES WERE SELF-MADE VOUCHERS. IT WAS ALS O NOTICED BY THE A.O. THAT THE BALANCE SHOWN IN THE LEDGER ACCOUNT O F THE ASSESSEE DID NOT MATCH WITH THE BALANCE AVAILABLE IN THE BOOKS O F THE MAIN CONTRACTOR TO THE ASSESSEE FIRM M/S. GAYATRI CONSTRUCTIONS, HY DERABAD. ON THESE FACTS, THE A.O. FOUND IT IS NECESSARY TO REJECT THE BOOKS OF ACCOUNTS AND ACCORDINGLY PROCEEDED TO ESTIMATE THE PROFIT RATE A T 9% OF THE GROSS CONTRACT RECEIPTS. ITA NO.90/VIZAG/2014 & 157/VIZAG/2014 CH. VEERARAJU & B. VENKATESWARA RAO, RAJAHMUNDRY 3 3. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THA T THE ASSESSEE FIRM IS NOT THE MAIN CONTRACTOR BUT WAS ONLY ACTING AS A SU B-CONTRACTOR TO M/S. GAYATRI CONSTRUCTIONS. TO THAT EXTENT, THE NET PRO FIT FROM THE SUB- CONTRACT WORK WOULD HAVE BEEN CURTAILED. IT IS ALS O SUBMITTED THAT THE POLAVARAM IRRIGATION PROJECT HAD SLOWED DOWN BECAUS E OF VARIOUS POLITICAL DISTURBANCES. THE INVESTMENTS IN PLANT A ND MACHINERY MADE BY THE ASSESSEE FIRM TO EXECUTE THE SUB-CONTRACT WORK COULD NOT BE UTILIZED BY IT AT THEIR OPTIMUM CAPACITY BECAUSE OF SUCH SLO W DOWN. THE LD. CIT(A), KEEPING IN VIEW OF THE SUBMISSIONS OF THE A SSESSEE, HE HAD ESTIMATED THE PROFIT OF THE ASSESSEE AT 7.5% OF THE GROSS RECEIPTS FROM THE SUB-CONTRACT WORKS AND DIRECTED THE A.O. TO RE- COMPUTE THE INCOME OF THE ASSESSEE. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LD. D.R. HAS SUBMITTED THAT REDUC TION OF THE PROFIT FROM 9 TO 7.5% IS VERY LOW AND FURTHER SUBMITTED TH AT THE A.O.S ORDER MAY BE UPHELD. ITA NO.90/VIZAG/2014 & 157/VIZAG/2014 CH. VEERARAJU & B. VENKATESWARA RAO, RAJAHMUNDRY 4 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE HAS SUBMITTED THAT PROFIT RATE AT 7.5% OF GROSS RECEIPTS ITSELF I S ON HIGHER SIDE AND THE SAME MAY BE REDUCED TO 5%. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS A PARTNERSHIP FIRM EXECUTING CIVIL CONT RACTS FOR THE POLAVARAM IRRIGATION PROJECT. THE A.O. HIMSELF HAS ACCEPTED THE ASSESSEE AS A SUB- CONTRACTOR TAKING WORKS FROM M/S. GAYATRI CONSTRUCT IONS. THE A.O. HAS ESTIMATED THE PROFIT OF THE ASSESSEE AT 9% ON THE G ROUND THAT VOUCHERS ARE SELF-MADE AND NO SUPPORTIVE EVIDENCE IS FILED. HOWEVER, THE LD. CIT(A) HAS SCALED DOWN THE RATE OF PROFIT FROM 9% T O 7.5% BY CONSIDERING THAT SUB-CONTRACT WORKS UNDERTAKEN BY T HE ASSESSEE HAD SLOWED DOWN BECAUSE OF VARIOUS REASONS. IN OUR OPI NION WHEN THE ASSESSEE IS CARRYING SUB-CONTRACT WORKS, RATE OF PR OFIT AT 7.5% IS ON HIGHER SIDE, THEREFORE, IT IS FURTHER SCALED DOWN T O 6% OF THE NET PROFIT AND DIRECTED THE A.O. TO RE-COMPUTE THE INCOME OF T HE ASSESSEE. ORDERED ACCORDINGLY. ITA NO.90/VIZAG/2014 & 157/VIZAG/2014 CH. VEERARAJU & B. VENKATESWARA RAO, RAJAHMUNDRY 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH NOV16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 28.11.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1, RAJAHMUNDRY 2. / THE RESPONDENT M/S. CH. VEERRAJU & B. VENKATES WARA RAO, 81-22-7/1, FLAT NO.102, VENKATESWARA NAGAR, RAJAHMUNDRY 3. ) / THE CIT, RAJAHMUNDRY 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM