M/s. Hycons Infrastructure (Inida) Ltd., Hyderabad V. DCIT, Circle-2(2), Hyderabad

MA 34/HYD/2014

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1837 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: SIDDARTHA TOSHNIWAL; K C RATHI
• Keywords: Business income; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER M.A.NO.34/HYD/2014 ARISING OUT OF ITA.NO.1787/HYD/2011 - ASSESSMENT YEAR 2007-08 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYDERABAD PAN AAACI-7064-D VS. DCIT, CIRCLE 2(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : S/SHRI K.C. RATHI & SIDDARTHA TOSHNIWAL FOR RESPONDENT : MR. B. YADAGIRI. DATE OF HEARING : 25.04.2014 DATE OF PRONOUNCEMENT : 25.04.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASSESSEE ON TWO ISSUES. 2. WE HAVE HEARD THE LD. COUNSEL AND LD. D.R. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IS AS UN DER : 1. THE HON'BLE TRIBUNAL VIDE ITS ABOVE ORDER DATED 23.10.2013 HAS PARTLY ALLOWED THE APPELLANT'S APPEA L. IN THIS APPEAL, THE ASSESSMENT WAS MADE U/SEC. 144. TH E ASSESSEE THEREFORE BROUGHT TO THE NOTICE OF THE HON 'BLE TRIBUNAL THAT WHEN AN EX-PARTE ASSESSMENT IN TERMS OF SEC.144 IS MADE, IT MUST BE BASED ON MATERIAL AVAIL ABLE ON THE RECORD AND THE HON'BLE TRIBUNAL WAS KIND ENOUGH TO MENTION THE 8 CASES WHICH INCLUDE 4 CASES OF JURISD ICTIONAL HIGH COURT AND 2 CASES OF SUPREME COURT. IN PARA 8, THE HON'BLE TRIBUNAL DID DEAL WITH THE CONTENTION OF TH E ASSESSEE THAT IN THE ASSESSMENT ORDER 2004-05 AND 2 005- 2 MA.NO.34/HYD/2014 IN ITA.1787/HYD/2011 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYD . 06 WHERE THE ASSESSMENT COMPLETED U/SEC.143(3), THE INCOME FROM CONTRACT TURNOVER WORKS OUT AT 4.4% AND 3.86% RESPECTIVELY. WHEREAS THE ASSESSING OFFICER HAS EST IMATED THE INCOME AT 8% ON THE CONTRACT TURNOVER AS AGAINST 5% ESTIMATED IN M/S. TEJA CONSTRUCTIONS CASE IN ITA NO.308/HYD/2009. THUS BASIC AND FUNDAMENTAL PRINCIP LE LAID DOWN BY COURTS INCLUDING APEX COURT IS WHILE M AKING AN ASSESSMENT U/SEC. 144, THE PAST PERFORMANCE AND RECORD OF THE ASSESSEE MUST BE TAKEN INTO CONSIDERATION AND WHICH THE HON'BLE TRIBUNAL DID MENTION IN PARA 8 OF ITS ORDER. THUS DESPITE THIS B EING THE BASIC AND FUNDAMENTAL ISSUE INVOLVED, THE HON'BLE T RIBUNAL VIDE PARA 11 OF ITS ORDER UPHELD THAT THE ESTIMATION OF INCOME AT 8% AND HAS NOT GIVEN ITS DECISION AS TO APPLICATION OF THE CASE LAWS [MENTIONED IN PARA 7 O F THE ORDER]. THUS THE DECISION ON THIS FUNDAMENTAL ISSUE REMAINS UNDECIDED AND IF A DECISION IS GIVEN AS TO APPLICABILITY OF THE ABOVE CASE LAWS TO THE ASSESSE E, THE QUESTION OF ESTIMATING THE GP ON SUB-CONTRACT TURNOVER AT 8% WOULD NOT ARISE. 2. THEREFORE THE ASSESSEE PRAYS THE HON'BLE TRIBUNAL TO DISPOSE THIS LEGAL ISSUE RAISED BY THE ASSESSEE AND ADMITTED BY HON'BLE TRIBUNAL, BUT BECA USE OF NO DECISION THE ASSESSEE HAS BEEN DEPRIVED OF BE NEFIT OF THE ABOVE CASE LAWS OF THE COURTS PARTICULARLY A PEX COURT AND JURISDICTIONAL HIGH COURT. 4. BRIEFLY STATED, ASSESSEES APPEAL WAS PARTLY AL LOWED VIDE ORDER IN ITA.NO.1787/HYD/2011 DATED 27.09.2009 . APART FROM VARIOUS ISSUES, ONE OF THE ISSUE CONSIDERED IN GROUND NO.2 IS ESTIMATION OF INCOME AT 8% OF TURNOVER OF R S.11.76 CRORES. IT WAS THE ASSESSEES CONTENTION THAT THE A .O. HAS NOT BASED HIS ESTIMATION ON THE PAST RECORD OF THE ASSE SSEE AND ESTIMATED THE INCOME AT 8%. ALL THE ARGUMENTS OF TH E ASSESSEE/LD. COUNSEL WERE RECORDED IN PARA-6 ONWARD S AND THE ISSUE WAS CONSIDERED VIDE PARAS 10 TO 14. IN DO ING SO, THE ITAT RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF TEJA CONSTRUCTIONS VS. ACIT IN ITA.NO.308/HYD/2009 RELIED UPON BY THE LD. COUNSEL AND ANALYSED THE SAID DECIS ION. 3 MA.NO.34/HYD/2014 IN ITA.1787/HYD/2011 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYD . ACCORDINGLY, THE INCOME WAS CONFIRMED AT 8% BY HOLD ING AS UNDER : 12. AS SEEN FROM THE ABOVE, IN THAT PARTICULAR CASE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND THE AO HAS NO OPTION THAN TO REJECT THE BOOKS O F ACCOUNT AND ESTIMATE THE INCOME AT 10%. ASSESSEE AGREED THAT HIS INCOME CAN BE ESTIMATED AT 9% OF GROSS RECEIPTS. THERE IS CONCESSION ON THE PART OF ASSESSEE AND THE ITAT WENT ON TO GIVE DIRECTIONS TO ESTIMATE INCOME AT 9% ON THE CONTRACTS EXECUTED BY ASSESSEE. IN CASE OF CONTRACTS TAKEN BY ASSESSEE ON SUB-CONTRACTS, INCOME TO BE ESTIMATED 8% ON THE GRO SS RECEIPTS. IN CASE OF CONTRACTS GIVEN BY ASSESSEE TO THE THIRD PARTIES ON SUB-CONTRACT, INCOME IS TO BE ESTIMATED AT 4%. THUS, ON A CONCESSION GIVEN BY ASSESSEE, THE COORDINATE BENCH HAS DECIDED THAT IN THREE KINDS OF CONTRACTS UNDERTAKEN BY THAT ASSESSE E, INCOME CAN BE ESTIMATED ON OWN CONTRACTS AT 9%, CONTRACTS TAKEN ON SUB-CONTRACT AT 8% AND CONTRACTS GIVEN TO OTHER PARTIES ON SUB-CONTRACT BASIS AT 4%. IN OUR VIEW, ESTIMATION OF INCOME BY THE AO AT 8% IS REASONABLE WHETHER IT IS OWN CONTRACT OR SUB-CONTRA CT. THERE CANNOT BE ANY ESTIMATION OF LESS THAN 8% ON THE GROSS RECEIPTS IN SUCH CONTRACTS EXECUTED BY ASSESSEE. IN FACT ON OWN CONTRACTS WHAT THE COORDINATE BENCH AGREED WAS AT 9% IN THAT PARTICULA R CASE. MAY BE IN THE CASE OF A PERSON, WHO ASSIGNS SUB-CONTRACT, ESTIMATION OF HIS INCOME AT 4% IS REASONABLE BECAUSE HE DOES NOT UNDERTAKE ANY RISK BUT IN THE CASE OF CONTRACTOR, WHO EXECUTES THE WOR KS TAKING RISK, THE ESTIMATION OF INCOME CANNOT BE AT 5%. GENERALLY, BUSINESS IS CONDUCTED TO EARN MORE PROFI TS. IT CAN NOT BE AT 5% WHICH IS LESS THAN THE BANK INTEREST, WHICH ANY PERSON CAN GET IF THE AMOUNTS A RE DEPOSITED IN THE BANK FOR A CONSIDERABLE PERIOD. TH E INCOMES EARNED ON CONTRACTS UNDERTAKEN BY ASSESSEE CANNOT BE CONSIDERED LESS THAN EVEN BANK INTEREST, UNLESS THERE ARE VALID REASONS FOR INCURRING LOSSES DUE TO VARIOUS OTHER FACTORS WHICH CAN BE CONSIDERE D. 13. IN THE CASE UNDER CONSIDERATION, EVEN THOUGH IT WAS STATED TO HAVE GOT THE BOOKS OF ACCOUNT AUDITED, IT DID NOT PRODUCE THE SAME BEFORE THE 4 MA.NO.34/HYD/2014 IN ITA.1787/HYD/2011 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYD . AUTHORITIES FOR VERIFICATION. IN FACT, WHILE FILING REVISED RETURN OF INCOME WITHDRAWING ORIGINALLY ADMITTED INCOME U/S 40(A)(IA), ASSESSEE CLAIMED THAT BY MISTAKE IN THE ORIGINAL RETURN THEY DISALLOWED THES E AMOUNTS U/S 40(A)(IA). THIS INDICATES THAT NO PROPE R AUDIT WAS CONDUCTED ON THE BOOKS OF ACCOUNT, IF SO SUCH MISTAKES CAN NOT HAPPEN. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF THE AO AND CIT(A) IN ESTIMATING T HE INCOME AT 8% AND ACCORDINGLY, THEIR ORDERS ARE UPHE LD ON THIS ISSUE. 14. ONE OF THE ARGUMENT RAISED BY ASSESSEE IS THAT ESTIMATION OF INCOME AT 8% IS PERMISSIBLE FOR THE CONTRACTS LESS THAN RS. 40 LAKHS AND THIS MAY BE A VALID CONTENTION PROVIDED THAT ASSESSEE SUPPORTS TH E PROFIT EARNED, BY WAY OF PROPER BOOKS OF ACCOUNT MAINTAINED BY IT. IN THE PRESENT CASE, AS ALREADY STATED, ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNT BEFORE THE AO AND IN THE ABSENCE OF BOOKS OF ACCOUN T, IT IS DIFFICULT TO VERIFY THE REASONS FOR EARNING L ESSER PROFIT AS CONTENDED BY ASSESSEE. THE SPECIAL BENCH OF THE ITAT IN THE CASE OF M/S ARIHANT BUILDERS VS. ACIT, 291 ITR 41 CONSIDERED THE ISSUE UNDER SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER TAKIN G CLUE FROM THE PROVISIONS OF SECTION 44AD, THOUGH NO T APPLICABLE, HELD THAT ESTIMATION OF INCOME AT 8% OF THE TURNOVER IS REASONABLE. IN OUR OPINION, IN THE CASE UNDER CONSIDERATION ESTIMATION AT 8% IS VERY REASONABLE BECAUSE THE COORDINATE BENCHES OF THE TRIBUNAL IS ACCEPTING THE ESTIMATION OF INCOME RANG ING FROM 8% TO 12.5% DEPENDING UPON THE FACTS OF THE CASE AND NATURE OF CONTRACTS UNDERTAKEN AND SOME OF THE CASES ARE FURNISHED BELOW: 1. KRISHNAMOHAN CONSTRUCTIONS VS. ACIT, ITA NO. 380/HYD/94, DTD. 10-03-1999. 2. ITO VS. K.C. REDDY ASSOCIATES, ITA NO. 1843/HYD/89, DTD. 29-08-1994. 3. SRI SRINIVASA CONSTRUCTION, ITA NOS. 804 & 805/HYD/93, DTD. 24-04-1996. 5 MA.NO.34/HYD/2014 IN ITA.1787/HYD/2011 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYD . 4. BHASKAR REDDY VS. ITO, ITA NO. 168/HYD/06, DTD. 09-10-2007. THEREFORE, IN THE ABSENCE OF PROPER REASONS FOR EARNING LESSER PROFIT, THE ORDER OF THE AO IS UPHEL D AND INCOME ESTIMATION AT 8% ON THE GROSS RECEIPTS MADE BY AO IS ACCORDINGLY CONFIRMED. 5. SINCE, VALID REASONS WERE GIVEN IN CONFIRMING T HE ESTIMATION AT 8%, THE CONTENTION OF THE ASSESSEE NO W THAT ITAT SHOULD HAVE TAKEN PAST PERFORMANCE OF RECORD OF THE ASSESSEE HAS NO BASIS AS NOT ONLY THE FACTS OF THE CASE BUT ALSO THE RELEVANT LAW WAS CONSIDERED AT THE TIME OF DECIDING THE APPEAL. THUS, WE FIND NO MERIT IN ASSESSEES CONTENTIONS AN D ACCORDINGLY, THE FIRST ISSUE IS REJECTED. 6. THE SECOND ISSUE, CONTESTED IN THE GARB OF M.A . IS WITH REFERENCE TO ADDITION OF RS.53,56,308/- AND TH E REASONS STATED ARE AS UNDER : 3. SO ALSO IN THE MATTER OF SUSTAINING THE ADDITIO N OF RS.53,56,308/- (PARA 26 OF THE ORDER), IT IS HUMBLY SUBMITTED THAT AT THE TIME OF HEARING IT WAS BROUGH T TO THE NOTICE OF THE HON'BLE TRIBUNAL THAT OUT OF THIS AMO UNT RS.52,63,308/- PERTAINS TO WAIVER OF INTEREST BY AN DHRA BANK WHICH THE BANK EARLIER CHARGED AN ADVANCE MADE FOR CONTRACT BUSINESS AND IN SUPPORT OF THIS CONTEN TION, WE ALSO FILED THE DETAILS OF THIS ACCOUNT AND HON'BLE TRIBUNAL FORWARDED THE COPY OF THIS ACCOUNT TO THE LEARNED O R (DEPARTMENTAL REPRESENTATIVE). HENCE IT IS A BUSINE SS INCOME & WHEN BUSINESS INCOME HAS BEEN ESTIMATED FURTHER INCLUSION OF 'INTEREST WAIVER' SHOULD NOT H AVE BEEN DONE. THUS THIS HAS ESCAPED THE NOTICE OF THE HON'B LE 6 MA.NO.34/HYD/2014 IN ITA.1787/HYD/2011 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYD . TRIBUNAL ELSE THE DECISION IN THE MATTER WOULD HAVE BEEN IN FAVOUR OF THE ASSESSEE. 7. WITH REFERENCE TO THIS ALSO, IN THE COURSE OF P RESENT ARGUMENTS, ASSESSEE FILED A STATEMENT OF ANDHRA BAN K LEDGER ACCOUNT COPY STATED TO HAVE BEEN FILED IN SEPTEMBER , 2013 IN THE COURSE OF ARGUMENTS. AS SEEN FROM THE RECORD, T HIS PARTICULAR DOCUMENT IS NOT ON THE PAPER BOOK NOR SP ECIFICALLY FILED. NOR THE NATURE OF INCOME WAS FORTH COMING FR OM THE ORDERS OF AUTHORITIES. THEREFORE, AT THE TIME OF DE CIDING THE ISSUE, IT WAS SPECIFICALLY STATED VIDE PARA 28 THAT WE FIND THAT ASSESSEE DID NOT PLACE ANY MATERIAL ON RECORD ABOUT THE NATURE OF INCOME NOR CONTENDED BEFORE US THAT THESE INCOME S HAS NEXUS WITH THE CONTRACT BUSINESS. SINCE THIS PARTI CULAR DOCUMENT STATED TO HAVE BEEN FILED IN THE COURSE OF ARGUMENT, IT IS NOT ON RECORD, THE CONTENTION OF THE ASSESSEE NOW THAT THIS AMOUNT WAS WRITTEN OFF BY BANK AND WAS CONSIDERED AS INCOME UNDER SECTION 41(1) CANNOT BE CONSIDERED IN THE COURSE OF PROCEEDINGS UNDER SECTION 254(2). BE THAT AS IT MAY, EVEN OTHERWISE, SINCE THIS AMOUNT WAS CLAIMED AS EXPENDI TURE IN EARLIER YEAR AND WAS ALLOWED AS SUCH, THE SAME CAN BE CONSIDERED AS INCOME OF THE YEAR, EVEN THOUGH THE E STIMATION WAS MADE ON THE CONTRACT WORK OF DURING THE YEAR. S INCE THIS INCOME DOES NOT PERTAIN TO CONTRACT WORK OF THIS YE AR, WE ARE OF THE OPINION THAT THERE IS NO ERROR IN THE ORDER OF THE ITAT CONFIRMING THE INCOME UNDER THE HEAD OTHER SOURCES . THEREFORE, THE CONTENTION OF THE ASSESSEE IS REJECT ED. 8. EVEN OTHERWISE, AS THE ABOVE CONTENTIONS ARE ARGUMENTS FOR REVIEW OF THE DECISION ALREADY TAKEN, THE ITAT DOES NOT HAVE POWER TO REVIEW ITS OWN ORDER EXCEPT, CORRECTING THE MISTAKES AS PROVIDED IN THE STATUTE BY SECTION 254(2). IN 7 MA.NO.34/HYD/2014 IN ITA.1787/HYD/2011 M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. HYD . VIEW OF THIS ALSO, ASSESSEES CONTENTIONS CANNOT BE ACCEPTED. FOR THESE REASONS, THE MISCELLANEOUS APPLICATION FI LED BY THE ASSESSEE DISMISSED. 9. IN THE RESULT, M.A. OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT O N 25.04.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 25TH APRIL, 2014 VBP/- COPY TO : 1. M/S. HYCONS INFRASTRUCTURE (INDIA) LTD. 8-2-293/82/A/406B, ROAD NO.18, JUBILEE HILLS, HYDERABAD 033. C/O. SRI K.L. RATHI, ADVOCATE, 3-5-144/5, EDEN GARDEN, HYDERABAD 560 001. 2. DCIT, CIRCLE 2(2), HYDERABAD 3. CIT(A)-III, HYDERABAD. 4. CIT-II, HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.