ITO, Ward-8(1), Hyderabad V. Mamashi Constructions, Hyderabad

MA 132/HYD/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6954 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation
• Section: 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER M.A. NO. 132/HYD/2011 ARISING OUT OF I.T.A. NO. 813/HYD/2010 (ASSESSMENT YEAR 2004-05) THE INCOME-TAX OFFICER WARD 8(1), HYDERABAD V M/S. VAMSHI CONSTRUCTIONS, HYDERABAD PAN: AADPV 1285 A APPELLANT RESPONDENT APPELLANT BY: SMT. NIVEDITA BISWAS RESPONDENT BY: SHRI S. RAMA RAO DATE OF HEARING: 26.08.2011 DATE OF PRONOUNCEMENT: O R D E R PER AKBER BASHA, AM: THIS MISCELLANEOUS APPLICATION IS FILED BY THE REV ENUE AGAINST THE ORDER OF THIS TRIBUNAL IN I.T.A. NO. 81 3/HYD/2010 DATED 26.8.2010. 2. THE LEARNED DR SUBMITTED THAT THE ASSESSEE FIRM FILED ITS RETURN OF INCOME FOR A.Y. 2004-05 ON 10.11.2004 ADM ITTING AN INCOME OF RS. 1,65,000. THE CASE WAS CONVERTED INT O SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 144 OF THE AC T BY ESTIMATING THE INCOME @ 5% OF THE GROSS RECEIPTS OF RS. 2,22,34,653 I.E., RS. 11,11,730. THE ASSESSEE WEN T IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DISMISSED THE APPE AL FILED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE FILED APPEAL BEFORE ITAT AND THE ITAT VIDE ITS ORDER IN I.T.A. NO. 813/HYD/10 DATED 26.8.2010 DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME IN ACCORDANCE WITH TH E DIRECTION GIVEN IN ASSESSEE'S OWN CASE IN APPEAL NO. 771/HYD/ 2010 FOR THE ASSESSMENT YEAR 2005-06. M.A. NO. 132/HYD/2011 M/S. VAMSHI CONSTRUCTIONS ====================== 2 3. THE LEARNED DR SUBMITTED THAT FOR THE ASSESSMENT YEAR 2005-06, THE HONBLE ITAT VIDE ITS ORDER IN ITA NO. 771/HYD/2010 DATED 25.8.2010 DIRECTED THE ASSESSING OFFICER TO GRANT DEDUCTION TOWARDS REMUNERATION AND INTEREST P AID TO PARTNERS ON THE PROFIT SO ESTIMATED. WHILE GIVING ORDER, THE ITAT RELIED ON THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT REPORTED IN 23 2 ITR 776 (AP). 4. THE LEARNED DR FURTHER SUBMITTED THAT IN THE CAS E OF INDWELL CONSTRUCTIONS THE HIGH COURT HELD THAT : THE PATTERN OF ASSESSMENT UNDER THE INCOME-TAX ACT IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN THE SECTIONS 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE, THE INCOME-TAX OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGEMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. 5. ACCORDINGLY, THE LEARNED DR SUBMITTED THAT THERE IS MISTAKE APPARENT FROM THE ORDER OF THE TRIBUNAL AND PRAYED FOR RECTIFICATION OF THE SAME. 6. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SU PPORTED THE ORDER OF THE TRIBUNAL. M.A. NO. 132/HYD/2011 M/S. VAMSHI CONSTRUCTIONS ====================== 3 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL ON RECORD. THIS TRIBUNAL HAD CONSIDERED SIMILAR ISSUE IN ASSESSEES OWN CASE IN M.A. NO. 42 /HYD/2011 AND THE M.A. FILED BY THE REVENUE IS DISMISSED BY H OLDING AS UNDER: 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. IN THIS CASE THE ASSESSING OFFICER ESTIMATED THE INCOME AT 5% OF GROSS RECEIPTS AND THEREAFTER NOT ALLOWED ANY DEDUCTION SUCH AS DEPRECIATION, REMUNERATION AND INTEREST TO PARTNERS SINCE THE ASSESSEE HAD FAILED TO FURNISH BOOKS OF ACCOUNT, BANK ACCOUNT AS ALSO EVIDENCE IN SUPPORT OF ITS CLAIM. ON APPEAL THE CIT(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME AT 8% OF THE TURNOVER AFTER EXCLUDING SALES TAX AND SEIGNIORAGE CHARGES. THE CIT(A) ALSO DIRECTED THE ASSESSING OFFICER THAT THE INCOME SO ESTIMATED WOULD BE CLEARED OF ALL THE DEDUCTIONS INCLUDING REMUNERATION AND INTEREST TO PARTNERS. THE TRIBUNAL REJECTED THE OPINION OF THE CIT(A). THE TRIBUNAL HELD THAT EVEN ON BEST JUDGEMENT, ASSESSMENT ON REJECTION OF BOOKS OF ACCOUNT, THE ASSESSEE IS ENTITLED FOR DEDUCTION TOWARDS PARTNERS SALARY AND INTEREST. THE INCOME OF THE ASSESSEE IS TO BE ESTIMATED SUBJECT TO THE ALLOWANCES FOR DEPRECIATION, REMUNERATION AND INTEREST TO PARTNERS. THIS IS A CONSCIOUS DECISION OF THE TRIBUNAL WHICH IS SUPPORTED BY VARIOUS JUDGEMENTS OF THE HIGH COURTS LIKE CIT VS. JAIN CONSTRUCTION CO. & ORS., 245 ITR 527 (RAJ), CIT VS. HEERA LAL BHAT, 158 CTR 59 (RAJ), MALIYEKKAL CONSTRUCTION CO. VS. CIT, 260 ITR 333 (KER.), CIT VS. SURINDER PAL NAYAR, 327 ITR 236. IN VIEW OF THE ABOVE DISCUSSION, THE CLAIM OF THE ASSESSEE WITH REGARD TO INTEREST AND SALARY PAID TO PARTNERS AS PER THE PARTNERSHIP DEED SUBJECT TO THE PROVISIONS OF SECTION 40(B) OF THE ACT HAS TO BE ALLOWED. AS SUCH WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE LEARNED DR AND ACCORDINGLY, WE DO NOT FIND ANY MISTAKE APPARENT FROM THE ORDER OF THE TRIBUNAL.' 8. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-OR DINATE BENCH IN ASSESSEES OWN CASE, WE DO NOT FIND ANY MI STAKE M.A. NO. 132/HYD/2011 M/S. VAMSHI CONSTRUCTIONS ====================== 4 APPARENT FROM THE ORDER OF THIS TRIBUNAL DATED 26.8 .2010 IN I.T.A. NO. 813/HYD/2010. 9. IN THE RESULT, THE MA FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2011. SD/ - (G.C. GUPTA) VICE PRESIDENT SD/ - (AKBER BASHA) ACCOUNTANT MEMBER HYDERABAD, DATED 9 TH SEPTEMBER, 2011 TPRAO COPY FORWARDED TO: 1. I.T.O., WARD 8(1), HYDERABAD. 2. M/S. VAMSHI CONSTRUCTIONS, C/O. SHRI S. RAMA RAO , ADVOCATE, 102 SHRIYA'S ELEGANCE, DOOR NO. 3-6-43, S TREET NO. 9, HIMAYATNAGAR, HYDERABAD. 3. THE CIT(A), TIRUPATI 4 THE CIT-3, HYDERABAD 5. THE DR A BENCH, ITAT, HYDERABAD