ACIT, CIRCLE - 1, Rajahmundry V. Kothuri Subbaraju, Rajahmundry

MA 62/VIZ/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6966 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Rectification of order
• Section: 145; 28; 144

Judgement Text

M.A. NO.62 /VIZAG/2017 SRI KOTHURI SUBBA RAJU, RJY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER M.A. NO.62/VIZAG/2017 (ARISING OUT OF I.T.A.NO.198/VIZAG/2014) ( / ASSESSMENT YEAR: 2001-02) ACIT - 2(1) RAJAHMUNDRY SRI KOTHURI SUBBA RAJU RAJAHMUNDRY [PAN NO.AERPK2584G] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 06.07.2018 / DATE OF PRONOUNCEMENT : 13.07.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS MISCELLANEOUS PETITION FILED BY THE REVENUE R EQUESTING FOR RECTIFICATION OF ORDER PASSED BY THIS TRIBUNAL IN I TA NO.198/VIZAG/2014 DATED 28.04.2017 FOR THE ASSESSMENT YEAR 2001-02. 2. THE ASSESSEE IS A CIVIL CONTRACTOR FILED HIS RET URN OF INCOME ON 31.10.2001 DECLARING TOTAL INCOME OF ` 13,16,100/-. THE ASSESSMENT M.A. NO.62 /VIZAG/2017 SRI KOTHURI SUBBA RAJU, RJY 2 WAS COMPLETED ON TOTAL INCOME OF ` 82,97,944/-. THE A.O. COMPUTED THE INCOME ESTIMATING THE GROSS PROFIT @ 12.5% AND MADE THE SEPARATE ADDITION OF UNPROVED CREDITORS. HOWEVER, THE A.O. HAS NOT INVOKED ANY OF THE SECTIONS OF THE ACT TO MAKE THE ADDITION OF UNPROVED CREDITORS OF ` 51,18,262/-. THE DISPUTE TRAVELLED TO TRIBUNAL AN D THE ITAT, VISAKHAPATNAM VIDE ITA NO.198/VIZAG/2014 DATED 28.4 .2017 IN PARA NO.7, HAS OBSERVED THAT THE CREDITS HAVE ARISEN ON ACCOUNT OF OF PURCHASE AS WELL AS SERVICES RENDERED BY THE PARTIE S, WHICH WAS SETTLED IN THE NORMAL COURSE OF BUSINESS IN SUBSEQUENT FINA NCIAL YEARS. THE TRIBUNAL ALSO VIEWED THAT ONCE THE INCOME IS ESTIMA TED, NO OTHER ADDITIONS CAN BE MADE TOWARDS TRADE CREDITORS, WHIC H AROSE OUT OF TRADING TRANSACTIONS AND ACCORDINGLY DELETED THE AD DITION MADE TOWARDS UNPROVED CREDITS AND ALLOWED THE APPEAL OF THE ASSE SSEE. 3. AGGRIEVED BY THE ORDER OF THE ITAT, THE REVENU E HAS FILED A MISCELLANEOUS APPLICATION STATING THAT THE ITAT ERR ED IN ADJUDICATING THE ISSUE IN FAVOUR OF THE ASSESSEE, THOUGH THE ASSESSE E FAILED TO PROVIDE ANY EVIDENCES EITHER IN THE COURSE OF ASSESSMENT PR OCEEDINGS OR DURING THE COURSE OF REMAND PROCEEDINGS TO PROVE THAT THE SAID CREDITS WERE GENUINE. DURING THE APPEAL HEARING, THE LD. D.R. S TRONGLY SUPPORTED THE MISCELLANEOUS APPLICATION. M.A. NO.62 /VIZAG/2017 SRI KOTHURI SUBBA RAJU, RJY 3 4. ON THE OTHER HAND, THE LD. A.R. RELIED ON THE OR DER OF THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THIS TRIBUN AL. THE ITAT HAS EXAMINED ALL THE RELEVANT MATERIAL PLACED BEFORE IT AND FOUND THAT THE ASSESSEE HAS PROVED THE NATURE OF CREDITS WITH THE NECESSARY EVIDENCES AND AS PER WHICH THESE CREDITS AROSE OUT OF PURCHAS ES AS WELL AS THE RENDERING SERVICES. THERE IS NO DISPUTE WITH REGAR D TO THE FACT THAT THE CREDITORS WERE OUT OF PURCHASES AS WELL AS SERVICES RENDERED DURING THE ASSESSMENT YEAR. IT IS ALSO FACT THAT THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME. THOUGH SEPARATE ADDITION WAS MADE TOWARDS UNPROVED CREDITS, THE AO DID NOT MAKE OUT CASE FOR SEPARATE ADDITION. ONCE IT IS FOUND THAT THE CREDI TS AROSE OUT OF TRADING TRANSACTIONS NO SEPARATE ADDITION IS REQUIRED TO BE MADE IF THE BOOKS OF ACCOUNTS REJECTED AND THE INCOME IS ESTIMATED. THE INCOME HAS TO BE COMPUTED AS PER SECTION 28 TO 43D OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). ONCE THE INCOME IS ESTIMATED, IT IS DEEMED THAT THE EXPENDITURE AND THE DEDUCTIONS THAT ARE CONTAINED SECTION 30 TO 43D OF THE ACT DEEMED TO HAVE BEEN EF FECT. IN THIS CASE, THE A.O. DID NOT MAKE OUT A CASE THAT THE UNPROVED CREDITORS WERE BEYOND THE SCOPE OF SECTION 30 TO 43D OF THE ACT. THIS VIEW IS UPHELD BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS M.A. NO.62 /VIZAG/2017 SRI KOTHURI SUBBA RAJU, RJY 4 VS. CIT 232 ITR 776 (AP) AND THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GIAN CHAND LABOUR CONT RACTORS (2009) 316 ITR 127 WHERE HONBLE HIGH COURT HAS HELD AS UNDER: THIS VIEW IS ALSO UPHELD BY THE PUNJAB & HAXYAMA HI GH COURT IN THE CASE OF CIT V. GIAN CHAND LABOUR CONTRACTORS [2009] 316 TTR 127 /[2008] 167 TAXMAN 265 ,WHICH WAS ALSO DECIDED BY RELYING ON THE CASE OF I NDWELL CONSTRUCTION (SUPRA). THE HIGH COURT IN THIS CASE HELD THAT: 'SECTION 29 OF THE ACT PRESCRIBES THAT THE INCOME R EFERRED TO IN SECTION 28 WHICH IS ASSESSABLE WIDER THE HEAD 'PROFITS AND GAI NS OF BUSINESS OR PROFESSION' SHALL BE COMPUTED IN ACCORDANCE WITH TH E PROVISIONS CONTAINED IN SECTIONS 30 TO 43A OF THE ACT, SECTION 145 OF THE A CT PROVIDES FOR COMPUTATION OF INCOME UNDER SECTION 29 ON THE BASIS OF BOOKS OF ACCOUNT AND THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. HOWEVER, WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH T HE CORRECTNESS OR COMPLETENESS OF THE SAID BOOKS, HE MAY REJECT THE S AME AND ESTIMATE THE INCOME TO THE BEST OF ILLS JUDGMENT IN ACCORDANCE W ITH THE PROVISIONS OF SECTION 144 OF THE ACT. WHEN AN ESTIMATE IS MADE TO THE BEST JUDGMENT OF AN ASSESSING OFFICER, HE SUBSTITUTES THE INCOME THAT I S TO BE COMPUTED UNDER SECTION 29 OF THE ACT. ONCE THE BEST JUDGMENT ASSES SMENT IS MADE BY FIXING A RATE OF NET PROFIT, THE ASSESSEE'S CLAIM FOR DEDUCT ION ON ACCOUNT OF EXPENSES CANNOT BE DEEMED TO HAVE BEEN IGNORED. THE NET PROF IT RATE IS APPLIED AFTER TAKING INTO CONSIDERATION ALL FACTORS AND IT ACCOUN TS FOR ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECTION 29 AND ARE DEEM ED TO HAVE BEEN TAKEN INTO CONSIDERATION WHILE MAKING SUCH AN ESTIMATE AN D NO FURTHER DEDUCTION CAN BE ALLOWED. 6. DURING THE APPEAL HEARING, THE LD. D.R. DID NOT BRING ANY EVIDENCE TO CONTROVERT THE SAME. THEREFORE, WE DO NOT FIND ANY MISTAKE APPARENT FROM RECORD, WHICH REQUIRE RECTIFICATION. THEREFOR E, THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13 TH JUL18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER M.A. NO.62 /VIZAG/2017 SRI KOTHURI SUBBA RAJU, RJY 5 ! /VISAKHAPATNAM: % /DATED : 13.07.2018 VG/SPS )! *! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI KOTHURI SUBBA RAJU, D.NO.79- 7-4, OFFICIAL COLONY, D.NO.79-704, OFFICIAL COLONY, SYAMALA NAGAR, RAJAHM UNDRY. 2. / THE RESPONDENT THE ACIT, CIRCLE-1, RAJAHMUNDRY 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), RAJAHMUNDRY 5. ! . , . , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM