DCIT, Hyderabad V. Sri K.Prabhakar Reddy, Hyderabad

ITA 975/HYD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6085 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 12-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2010
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Keywords: Reopening of assessment; Rejection of books of accounts; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 97 5 /H YD /201 0 ASSESSMENT YEAR: 20 0 6 - 07 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 11(1), HY DERABAD VS SRI K. PRABHAKAR REDDY, HYDERABAD [PAN: A G S PK3 0 76 A ] (APPELLANT) (RESPONDENT) FOR REVENUE : S HRI M.H. NAIK , DR FOR ASSESSEE : SHRI K.C. DEVDAS, AR DATE OF HEARING : 12 - 0 1 - 201 6 DATE OF PRONOUNCEMENT : 20 - 0 1 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS REVENUE S APPEAL AGAINST THE ORDER OF THE COM MISSIONER OF INCOME TAX ( APPEALS ) - V I , HYDERABAD , DATED 16 - 0 4 - 201 0 . ORIGINALLY, THIS APPEAL WAS DISPOSED - OFF BY AN ORDER DT. 09 - 11 - 2012 ALONG WITH ANOTHER APPEAL OF SHRI S . VENKAT REDDY IN ITA NO. 97 4/HYD/2010. REVENUE HAS PREFERRED AN APPLICATION U/S 254(2) AS GROUND NO. 6 RAISED BY THEM WAS NOT DISPOSED OFF. ACCORDINGLY, VIDE ORDER DT. 28 - 08 - 2015, THE MISCELLANEOUS APPLICATION WAS ALLOWED AND TH E APPEAL WAS POSTED FOR LIMITED I.T.A. NO. 975 / HYD / 201 0 SRI K. PRABHAKAR REDDY : - 2 - : PURPOSE OF DECIDING GROUND NO. 6 RAISED BY THE DEPARTMENT IN THE APPEAL UNDER REFERENCE. 2. REVENUE HAS RAISED GROUND NO. 6 WHICH IS AS UNDER: 6. THE HON'BLE CIT(A) HAS ERRED IN ESTIMATING THE PROFIT @ 3% OF GROSS TRANS PORT RECEIPTS WHICH IS LOWER THAN THAT OF THE INCOME RETURNED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. 3. FACTS LEADING TO THE ISSUE ARE THAT ASSESSEE IS IN THE TRANSPORT BUSINESS PROVIDING CARS AND VEHICLES ON HIRE. ASSES SING OFFICER (AO) EXAMINED THE CASH BOOK AND BANK STATEMENTS AND OTHE R DETAILS AND FOUND THAT THERE WE RE DISCREPANCIES IN ACCOUNTING THE CASH WITHDRAWALS FROM THE BANK. ASSESSEE EXPLAI NED THAT THERE WERE MISTAKES IN ENTERING THE AMOUNTS, BUT IT DOES NOT R ESULT IN ANY CASH NEGATIVITY DURING THE PERIOD FOR THE YEAR. WHILE ACCEPTING THAT THERE IS NO NEGATIVE CASH BALANCE EVEN AFTER ADJUSTMENTS, AO WAS OF THE OPINION THAT MISTAKES OF THIS NATURE IN AUDITED BOOKS OF ACCOUNT CAST A DOUBT OF CORRECTNESS. THEREF ORE, HE CONC LUDED THAT BOOKS OF ACCOUNT DO NOT REFLECT THE CORRECT POSITION OF THE PROFIT AND HENCE, REJECTED. HE RESORTED TO ESTIMATION AT 6 % OF THE TOTAL RECEIPTS ON THE TOTAL HI RE CHARGES AT RS. 6,16,70,831 / - . CONSEQUENTLY , HE SUBSTITUTED THE INCOME O F RS. 41,74,838 AS AGAINST THE RETURNED BU SINESS INCOME OF 20,50,627 . A SSESSEE IS AGGRIEVED, AND AN APPEAL WAS PREFERRED TO THE CIT(A) AS ONE OF THE GROUNDS RAISED WITH OTHER ISSUES . 4 . LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS HAS DIRECTED THE AO TO ESTIMATE THE INCOME AT 3% AS UNDER: I.T.A. NO. 975 / HYD / 201 0 SRI K. PRABHAKAR REDDY : - 3 - : 5. 1 I HAVE CONSIDERED THE SUBMISSIONS . AS REGARDS THE REOPENING OF ASSESSMENT AND INCLUDING THE HIRE RECEIPTS ALSO IN THE REASSESSMENT SINCE I DO NOT AGREE WITH THE APPELLANTS SUBMISSIONS. ONCE THE ASSESSMENT IS REOPENED ALL INCOMES ESCAPING CAN BE REASSESSED. 5.2 HOWEVER, HAVING REGARD TO THE FACTS ON RECORD, I FEEL THAT THE ESTIMATION OF HIRE CHARGES RECEIPTS AT 6% IS ON THE HIGH SIDE. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD OR ANY COMPARABLE CASE TO JUSTIFY THE ESTIMATION OF PROFIT @ 6% OF THE HIRE CHARGES. FURTHER, IT IS SEEN FROM THE ASSESSMENT RECORD THAT FOR THE AY. 2003 - 04 THE NET PROFIT FROM THE HIRE CHARGES WAS ESTIMATED AT 3%. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO ESTIMATE THE PROFIT @ 3% OF THE HIRE CHARGES WHICH WORKS OUT TO RS. 6,16,70,831/ - AFTER RECONCILIATION FURNISHED BY THE APPELLANT. THIS WORKS OUT TO RS. 18,15,124/ - AS AGAINST RS. 41,74,838/ - ESTIMATED BY THE ASSESSING OFFICER. ACCORDINGLY T HE INCOME FROM HIRE CHARGES IS DETERMINED AT RS. 18,15,124/ - . THIS WOULD MEET THE NEDS OF THE JUSTICE. 5. AFTER CONSIDER ING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO UPHOLD THE REVENUES CONTENTIONS AS THE REASONS FOR REJECTION OF BOOKS OF ACCO UNTS ARE NOT PROPER. IF THERE ARE CERTAIN DISCREPANCIES, AT BEST AO COULD HAVE DISALLOWED EXPENDITURE U/S. 37(1), BUT HE CANNOT REJECT THE BOOKS OF ACCOUNTS AND RESORT TO ESTIMATION INVOKING SECTION 145. THE CONDITIONS TO REJECT THE BOOKS OF ACCOUNTS HAV E NOT BEEN SATISFIED IN THIS CASE. AT THE SAME TIME, WE ARE ALSO NOT IN A POSITION TO UPHOLD THE ORDER OF CIT(A) IN RESTRING THE ESTIMATION TO 3% OF THE TURNOVER. THERE IS NO BASIS EITHER FOR ESTIMATION AT 6% OR R EDUCTION TO 3%. THE ESTIMATION AT 3% IN FACT IS RESULTING IN ASSESSING THE INCOME AT LESS THAN THE RETURNED INCOME AS WELL. SINCE ASSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOKS OF ACCOUNTS AND HAS ACCEPTED THE 3% ESTIMATION BEFORE THE CIT(A) AND HAS NOT COME IN APPEAL ON THAT ISSUE, WE ARE OF THE OPINION THAT ISSUE OF REJE CTION OF BOOKS OF ACCOUNTS HAS ALREADY BEEN CRYSTA L LISED. BUT CONSIDERING THE FACT THAT 3% ESTIMATION IS RESULTING IN ARRIVING AT THE ESTIMATED INCOME LESS THAN THE PROFIT FROM THE BOOKS OF ACCOUNTS, WE CANNOT UPHOLD I.T.A. NO. 975 / HYD / 201 0 SRI K. PRABHAKAR REDDY : - 4 - : THE O RDER OF THE CIT(A) . THEREFORE, MODIFYING THE SAME, WE DIRECT THE AO TO CONSIDER THE INCOME AT 3% OF HIRE CHARGES OR INCOME DECLARED BY ASSESSEE FROM THE BUSINESS, WHICHEVER IS HIGHER. WITH THIS PARTIAL MODIFICATION, REVENUES GROUND IS CONSIDERED PARTLY ALLOWED. 6. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY , 201 6 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH JANUARY, 2016 TNMM COPY TO : 1. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 11(1) , D BLOCK, 5 TH FLOOR, I.T. TOWERS, HYDERABAD. 2 . SRI K. PRABHAKAR REDDY, 12 - 141, OPP: IDPL COLONY, ADARSH NAGAR, CHINTAL, HYDERABAD. 3 . CIT (APPEALS) - V I , HYDERABAD. 4. CIT - V , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.