ITO, Ward-11(3), Hyderabad V. M/s Sri Sai Bhgawan Constructions, Hyderabad

ITA 997/HYD/2013

• Counselvise Citation: 99722514 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-06-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 997/HYD/2013 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER, WARD-11(3), HYDERABAD VS M/ S. SRI SAI BHAG A V AN CONSTRUCTIONS, KUKATPALLY, HYDERABAD [PAN: ABGFS6417G] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RA JAT MITRA , DR FOR ASSESSEE : S HRI MOHD. AFZAL AR DATE OF HEARING : 14 - 0 5 - 201 5 DATE OF PRONOUNCEMENT : 20 - 0 5 - 2015 O R D E R PER SAKTIJIT DEY, J.M. : DEPARTMENT HAS PREFERRED THIS APPEAL AGAINST ORDER DATED 21-03-2013 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, HYDERABAD FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. THE SOLITARY ISSUE ARISING FOR CONSIDERATION IN THE AFORESAID APPEAL IS WHETHER CIT(A) WAS JUSTIFIED IN APPLYING NET PRO FIT RATE OF 8% ON THE GROSS RECEIPTS AS AGAINST 11.7% ADOPTED BY THE ASSE SSING OFFICER (AO). 3. BRIEFLY THE FACTS RELATING TO THE ISSUE ARE, ASS ESSEE, A PARTNERSHIP FIRM IS ENGAGED IN THE BUSINESS OF DEVELOPER AND BU ILDER AND EXECUTION OF CIVIL CONTRACTS. FOR THE ASSESSMENT YEAR UNDER CON SIDERATION, ASSESSEE I.T.A. NO. 997/HYD/2013 :- 2 -: FILED ITS RETURN OF INCOME ON 27-09-2009 DECLARING TOTAL INCOME OF RS. 50,66,460/-. IN THE COURSE OF ASSESSMENT PROCEEDIN GS, AO NOTICED THAT DURING SURVEY OPERATIONS CONDUCTED IN THE BUSINESS PREMISES OF ASSESSEE U/S. 133A OF THE INCOME TAX ACT [ACT], ON 22-01-2009, ON THE BASIS OF DISCREPANCIES AND DEFICIENCIES FOUND/NOTIC ED, ASSESSEE CAME FORWARD TO ADMIT PROFIT AT 11.7% AND ACCORDINGLY PR OMISED TO OFFER INCOME OF RS. 1,55,43,887/- IN THE AY. 2008-09 AND RS. 1,54,65,116/- IN THE AY. 2009-10. THE AO FURTHER OBSERVED WHILE IN AY. 2008-09 IN PURSUANCE TO THE NOTICE ISSUED U/S. 148, ASSESSEE F ILED A REVISED RETURN ON 15-06-2009 DECLARING INCOME OF RS. 1,55,79,020/- KEEPING IN TUNE WITH THE DECLARATION MADE AT THE TIME OF SURVEY BUT AS FAR AS THE IMPUGNED ASSESSMENT YEAR IS CONCERNED, ASSESSEE RET RACTED FROM THE OFFER MADE AT THE TIME OF SURVEY AND DECLARED INCOM E OF RS. 50,66,460/-. THE AO THEREFORE CONSIDERING THE FACT THAT THE ASSE SSEE HAS DECLARED PROFIT @ 11.7% ON THE GROSS RECEIPTS IN AY. 2008-09 WHICH WAS ALSO OFFERED TO BE DECLARED FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION, AT THE TIME OF SURVEY, PROCEEDED TO ESTIMATE THE NET P ROFIT BY ADOPTING THE RATE OF 11.7% ON THE GROSS RECEIPTS AND ACCORDINGLY , DETERMINED THE TAXABLE INCOME AT RS. 1,62,26,380/-. BEING AGGRIEV ED OF THE INCOME SO ASSESSED, ASSESSEE PREFERRED AN APPEAL BEFORE THE L D.CIT(A). IN THE COURSE OF HEARING OF APPEAL BEFORE FIRST APPELLATE AUTHORITY, IT WAS SUBMITTED BY THE ASSESSEE THAT THOUGH AT THE TIME O F SURVEY OPERATIONS, THE ASSESSEE DID OFFER TO DECLARE PROFIT AT 12% ON GROSS RECEIPTS BUT AFTER THE SURVEY OPERATIONS, THERE WAS HUGE SLUMP IN THE REAL ESTATE MARKET IN HYDERABAD. AS A RESULT OF WHICH, SALE PRICES CAME DOWN DRASTICALLY AND COST OF CONSTRUCTION INCREASED. THIS HAS RESULTED IN REDUCTION OF PROFIT OF THE ASSESSEE. EXPLAINING THE FACTS FURTHER, ASSESS EE SUBMITTED THAT IT HAS UNDERTAKEN TWO PROJECTS VIZ., 'SAI AHLADAM' AND 'SAI SIGNATURE'. WHILE 'SAI AHLADAM' WHICH WAS COMPLETED EARLIER YI ELDED GOOD PROFITS TO THE APPELLANT AS A RESULT OF WHICH ASSESSEE DECLARE D PROFIT @ 11.7% IN I.T.A. NO. 997/HYD/2013 :- 3 -: AY. 2008-09. WHEREAS 'SAI SIGNATURE' DID NOT YIELD GOOD PROFIT. THAT IS WHY DUE TO SLUMP IN REAL ESTATE BUSINESS AND LOCATI ONAL DISADVANTAGE, THE PROFIT ON THE PROJECT ALSO WAS DRASTICALLY REDU CED. THEREFORE, THE ASSESSEE RETRACTED FROM THE OFFER OF DECLARING PROF IT AT 12%. LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE V IZ-A-VIZ THE FACTS AND MATERIAL BROUGHT ON RECORD FOUND THAT, THOUGH THE A SSESSEE HAS TAKEN THE STAND THAT WHEN ALL THE INFORMATION AND BOOKS I MPOUNDED BY THE AO AND ARE AVAILABLE WITH HIM AND THE RETURN OF INCOME WAS FILED ON THE BASIS OF SUCH MATERIAL AND BOOKS OF ACCOUNT, ONLY B ECAUSE THE ASSESSEE HAS MADE DECLARATION TO OFFER INCOME AT 12% OF THE GROSS RECEIPTS, THE AO CANNOT SOLELY ON THAT BASIS ESTIMATE THE INCOME OF THE ASSESSEE @ 11.7% WHEN THE AO DOES NOT DISPUTE THE FACT THAT TH ERE IS SLUMP IN SALE PRICE AND ESCALATION OF COST OF CONSTRUCTION NOR HE HAS REJECTED THE BOOKS OF ACCOUNT. THE LD.CIT(A) OBSERVED THAT SOLE LY ON THE BASIS OF STATEMENT GIVEN AT THE TIME OF SURVEY AND IN ABSENC E OF ANY OTHER ADVERSE INFORMATION, ADDITIONS CANNOT BE MADE. THE LD.CIT(A) FURTHER ON THE BASIS OF INFORMATIONS SUBMITTED BY ASSESSEE ON THE QUANTITATIVE PARTICULARS OF FLATS SOLD AND AREA UNDER WORK IN PR OGRESS ALONG WITH THE VALUE OF WORK IN PROGRESS WITH THE METHOD OF VALUAT ION ADOPTED WORKED OUT THE COST INCURRED FOR THE YEAR AT RS. 510/- PER SQ. FT., AS AGAINST COST OF CONSTRUCTION OF RS. 262/- PER SQ. FT. SHOWN BY ASSESSEE. WHEN THIS WAS POINTED OUT TO THE ASSESSEE, AS OBSERVED BY THE LD.CIT(A), THE ASSESSEE COULD NOT EXPLAIN THE DEFICIENCY AND THE A R OF THE ASSESSEE OFFERED TO ESTIMATE THE NET PROFIT AT 8% ON THE GRO SS RECEIPTS. THE LD.CIT(A) HAVING FOUND THAT THERE ARE DISCREPANCIES IN THE COST OF CONSTRUCTION DONE BY THE ASSESSEE HELD THAT BOOKS O F ACCOUNT CANNOT BE RELIED UPON. HOWEVER, THE LD.CIT(A) ON THE BASIS O F MATERIAL FOUND THAT THE PROFITS OF THE ASSESSEE ON ALL PROJECTS PUT TOG ETHER IS 4.38% ON A COMBINED GROSS RECEIPTS OF RS. 13,86,87,011/- WHICH CONSTITUTED PROFIT DECLARED AT 11% ON 'SAI AHLADAM' PROJECT AND 0.95% ON 'SAI SIGNATURE' I.T.A. NO. 997/HYD/2013 :- 4 -: PROJECT. LD.CIT(A) AGREEING TO THE FACT THAT EVERY PROJECT IN EVERY YEAR WILL NOT FETCH THE SAME PROFIT AS EACH PROJECT HAS UNIQUE ADVANTAGES AND DISADVANTAGES OPINED THAT PROFIT HAS TO BE ESTIMATE D ON A REASONABLE BASIS ON THE GROSS RECEIPTS OF THE ASSESSEE AS A WH OLE. ACCORDINGLY, HOLDING 8% AS A REASONABLE RATE TO BE APPLIED, THE LD.CIT(A) DIRECTED THE AO TO ESTIMATE NET PROFIT @ 8% ON THE COMBINED GROS S RECEIPTS FROM ALL PROJECTS AT RS. 13,86,87,011/-. BEING AGGRIEVED, T HE DEPARTMENT IS BEFORE US. 4. THE LD. DR SUPPORTING THE REASONING OF THE AO SU BMITTED BEFORE US THAT THE ASSESSEE HAVING DECLARED PROFIT @ 12% A T THE TIME OF SURVEY FOR AYS. 2008-09 AND 2009-10 WAS NOT JUSTIFIED IN R ETRACTING FROM SUCH DECLARATION WHILE FURNISHING HIS RETURN FOR AY. 200 9-10. WHEREAS HE DECLARED PROFIT @ 12% FOR AY. 2008-09 KEEPING WITH THE OFFER MADE AT THE TIME OF SURVEY. LD. DR SUBMITTED, THERE BEING NO V ALID REASON FOR ESTIMATING THE PROFIT AT 8%. THE RATE OF PROFIT AD OPTED BY AO SHOULD BE RESTORED. THE LD. AR ON THE OTHER HAND STRONGLY SU PPORTING THE ORDER OF LD.CIT(A) SUBMITTED THAT ONLY BECAUSE THE ASSESSEE DECLARED A PROFIT RATE OF 12% AT THE TIME OF SURVEY, SOLELY RELYING UPON T HAT STATEMENT, INCOME CANNOT BE ESTIMATED AT 12% OF THE GROSS RECEIPTS WH EN THERE ARE NO OTHER MATERIAL BROUGHT ON RECORD BY THE AO TO SUPPORT THE ESTIMATION OF PROFIT @ 11.7%. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT SOLELY ON THE BASIS OF THE DECLARATION MADE BY THE ASSESSEE AT THE TIME OF SUR VEY, THE AO HAS ESTIMATED THE PROFIT BY ADOPTING @ 11.7%. HOWEVER, IT IS SEEN FROM RECORD THAT THE BOOKS OF ACCOUNT AND OTHER INFORMAT IONS ON THE BASIS OF WHICH ASSESSEE FILED ITS RETURN OF INCOME FOR THE I MPUGNED ASSESSMENT I.T.A. NO. 997/HYD/2013 :- 5 -: YEAR WERE AVAILABLE BEFORE THE AO. IT IS NOT CLEAR FROM THE ASSESSMENT ORDER WHETHER AO HAS MADE ANY EFFORT TO EXAMINE ASS ESSEE'S CONTENTIONS AS WELL AS THE INCOME DECLARED BY VERIFYING THE BOO KS OF ACCOUNT AND INFORMATIONS SUBMITTED BY THE ASSESSEE. ON THE OTH ER HAND, IT IS MANIFEST FROM THE ORDER OF LD.CIT(A), ON CONSIDERIN G MATERIAL AVAILABLE ON RECORD HE FOUND THAT THE OVERALL PROFIT FROM THE TWO PROJECTS SHOWN BY ASSESSEE IS 4.38%. SINCE THE BOOKS OF ACCOUNT MAIN TAINED BY THE ASSESSEE WERE NOT TOTALLY RELIABLE, THE LD.CIT(A), DID NOT ACCEPT THE PROFIT DECLARED BY ASSESSEE AND PROCEEDED TO ESTIMATE THE PROFIT BY APPLYING THE RATE OF 8%. CONSIDERING THE FACT THAT THE ASSE SSEE IS BASICALLY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND I N SIMILAR LINE OF BUSINESS, A NET PROFIT RATE OF 8% IS GENERALLY CONS IDERED TO BE REASONABLE FOR ESTIMATION OF INCOME, WE DO NOT SEE ANY REASON TO DISTURB THE FINDING OF LD.CIT(A). IN VIEW OF THE AFORESAID, WE UPHOLD THE ORDER OF LD.CIT(A) BY DISMISSING THE GROUND RAISED. 6. IN THE RESULT, DEPARTMENT'S APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20 TH MAY, 2015 SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 20 TH MAY, 2015 TNMM I.T.A. NO. 997/HYD/2013 :- 6 -: COPY TO : 1. INCOME TAX OFFICER, WARD-11(3), 'D' BLOCK, 5 TH FLOOR, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2. M/S. SRI SAI BHAGAV AN CONSTRUCTIONS, FLAT NO. 81, H. NO. 2-22-142/B, MADHAVI NAGAR, KUKATPALLY, HYDERABAD. 3. CIT(APPEALS)-VI, HYDERABAD. 4. CIT-V, HYDERABAD. 5. D.R. ITAT, HYDERABAD