SHYAM SUNDER RAVINUTHALA,HYDERABAD V. ITO., WARD-10(1), HYDERABAD

ITA 1232/HYD/2024

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The case involves an appeal by Shyam Sundar Ravinuthala against the order of the Commissioner of Income Tax (Appeals), which sustained the additions made by the Assessing Officer regarding the estimation of profit on total contract receipts and disallowances on expenses and deductions under Chapter VIA. The Tribunal found that the Assessing Officer had incorrectly aggregated the contract receipts and advances, leading to a double addition. The Tribunal also noted that while the Assessing Officer estimated a profit on gross receipts, he additionally disallowed expenses, which was inconsistent. The Tribunal directed a re-assessment considering these factors and allowed a reasonable profit margin of 10% on the declared contract receipts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472530 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SM-B
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRIKANTH REDDY Y
• Assessee Lawyers: MOHD AFZAL
• Keywords: FORM 26AS
• Section: 142(1)

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad Before Shri Manjunatha G., Accountant Member and Shri K.Narasimha Chary, Judicial Member आ.अपी.सं /ITA No.1232/Hyd/2024 (निर्धारण वर्ा/Assessment Year: 2016-17) Shyam Sundar Ravinuthala Hyderabad [PAN :AMVPR6998K] Vs. Income Tax Officer Ward-10(1) Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Mohd Afzal, AR रधजस् व द्वधरध/Revenue by: Shri Srikanth Reddy Y, DR सुिवधई की तधरीख/Date of Hearing: 22/01/2025 घोर्णध की तधरीख/Date of Pronouncement: 28/01/2025 आदेश / ORDER PER. MANJUNATHA G., A.M: This appeal filed by the assessee is directed against the order dated 30.09.2024 of the learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, pertaining to A.Y.2016-17. 2. The brief facts of the case are that the assessee, a salaried employee filed his return of income for the A.Y.2016-17 on 31.03.2017, declaring total income of Rs.8,33,600/-. The case was selected for scrutiny under CASS to verify ‘whether contract 2 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala receipts / fees have been correctly offered to tax’. Notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”) dated 18.09.2017 and notice u/s 142(1) dated 22.05.2018 were issued in ITBA and duly served on the assessee. In response to the above notices, the assessee has uploaded the information as called for in ITBA portal. The Assessing Officer, after verification of the details submitted by the assessee, observed that the assessee has admitted gross receipts of Rs.92,87,502/- and claimed expenses of Rs.85,44,504/- and declared net profit at Rs.7,43,000/-. Further, as per information available on record, it is found that the assessee has received contract receipts of Rs.1,46,13,636/- as per Form 26AS and bank account details. Further, the assessee claimed advance of Rs.98,42,433/-. The Assessing Officer taking note of total contract receipts as per Form 26AS of Rs.1,46,13,636/- plus advances shown at Rs.98,42,433/-, determined total contract receipts at Rs.2,44,56,069/- and estimated 8% net profit, to determine income from business at Rs.19,56,485/-. Since the assessee has already offered net profit of Rs.7,43,000/-, the difference amount of Rs.12,13,485/- has been added back to total income. The Assessing Officer, further noted that the assessee has claimed expenses at Rs.85,44,500/- and since the assessee has failed to file bills and vouchers in respect of expenses, made adhoc disallowance of 30% of expenses and added back sum of Rs.25,63,350/- to the total income. Similarly, the Assessing Officer has made addition of Rs.1,50,000/- towards deduction under Chapter VI-A in the absence of evidences. 3 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala 3. On appeal before the CIT(A), the Ld.CIT(A) rejected the explanation furnished by the assessee and sustained the additions made by the Assessing Officer, towards estimation of profit on total contract receipts, including advances and further, upheld adhoc disallowance of expenses and also additions towards deduction claimed under Chapter VIA. 4. Aggrieved by the Ld.CIT(A) order, the assessee is now in appeal before the Tribunal. 5. The learned counsel for the assessee submitted that the assessee is not disputing total contract receipts as per From 26AS at Rs.1,46,13,636/-. However, the Assessing Officer added advances shown by the assessee at Rs.98,42,433/- and offered to tax in the subsequent assessment year, which amounts to double addition. Further, when the Assessing Officer has estimated 8% net profit on total turnover, he cannot make adhoc disallowance of expenditure @30%, on the ground that no bills and vouchers have been furnished. Therefore, he submitted that the additions made by the Assessing Officer should be deleted. The learned counsel for the assessee further submitted that the assessee has claimed deduction under Chapter VIA towards various investments, but the Assessing Officer disallowed the claim without any basis. Therefore, he submitted that the additions made by the Assessing Officer should be deleted. 4 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala 6. The learned DR on the other hand, supporting the order of the Ld.CIT(A) submitted that the assessee could not explain the inconsistencies in the turnover declared in his books of accounts and the turnover reported in Form 26AS. Further, the assessee could not furnish any evidences towards various expenses debited into Profit & Loss account. Similarly, the assessee could not furnish relevant evidences in support of Chapter VIA deductions. Therefore, the Ld.CIT(A), after considering relevant facts has rightly sustained the additions made by the Assessing Officer, and therefore, their order should be upheld. 7. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The assessee has admitted gross contract receipts of Rs.92,87,502/- and after expenses, declared net profit of Rs.7,43,000/-. The Assessing Officer estimated net profit of 8% on total contract receipts of Rs.2,44,56,069/-, which includes contract receipts of Rs.1,46,13,636/- as per Form 26AS and advances shown by the assessee at Rs.98,42,433/-. According to the Assessing Officer, the assessee has not considered the total contract receipts as per Form 26AS and also not proved advances shown at Rs.98,42,433/-. The assessee has furnished copy of ITR filed for the year under consideration along with Form 26AS and ledger account copies of the assessee in the books of accounts of NEC-KPCL for the financial year 2015-16. The assessee has admitted gross receipts of Rs.92,87,502/- and 5 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala the balance amount of advances received from NEC-KPCL has been accounted in the subsequent year as contract receipts and offered to tax for the assessment year 2017-18. The Assessing Officer, without considering the books of accounts and explanation offered by the assessee, aggregated total contract receipts as per Form 26AS and added advances shown by the assessee to arrive at gross contracts of Rs.2,44,56,069/, even though as per Form 26AS, the assessee has received only Rs.1,46,06,600/- for the financial year 2015-16. From the workings of the Assessing Officer, we find that the Assessing Officer has considered the advances as per Form 26AS and also as per books of accounts of the assessee, which amounts to considering one amount, three times. That is one as per Form 26AS, ignoring the advances claimed by the assessee as per ledger account of the payer itself, one as per advances shown by the assessee. In other words, when the assessee has received total contract receipts of Rs.1,46,06,600/-, the Assessing Officer has arrived at Rs.2,44,56,069/- without any basis. Therefore, we are of the considered view that the Assessing Officer has erred in aggregating contract receipts as per Form 26AS plus advances shown by the assessee, even though the books of accounts maintained by the assessee clearly shows that for the year under consideration, his contract receipts were only at Rs.92,87,502/-. Thus, we direct the Assessing Officer to consider the contract receipts at Rs.92,87,502/- as per books of accounts of the assessee, because, the balance amount contract receipts as per From 26AS amounting to Rs.98,42,433/- has 6 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala been shown as advances and offered to tax in the subsequent assessment year, which is evident from ITR filed for the A.Y.2017-18 and Form 26AS for the F.Y.2016-17, where, the gross contract receipts of the assessee was only at Rs.1,03,535/- and if we add advances of F.Y.2015-16, relevant to A.Y.2016-17 plus contract receipts of F.Y.2016-17, total contract receipts admitted for the A.Y.2017-18 is matching with the contract receipts declared by the assessee in the ITR filed for the A.Y.2017-18. 8. Coming back to estimation of profit and disallowance of 30% of expenditure. Admittedly, the Assessing Officer estimated 8% profit on contract receipts, on the ground that the assessee could not produce relevant books of accounts and bills and vouchers in support of various expenses. In other words, the Assessing Officer ignored the books of accounts and financial results declared by the assessee and estimated 8% net profit. In addition to estimation of profit, the Assessing Officer made 30% adhoc disallowance of expenses for want of bills and vouchers. Once, profit is estimated on gross contract receipts, then it is presumed that the said profit is after all expenditure incurred, wholly and exclusively for the purpose of business. Therefore, in general sense, no further disallowance can be made towards expenditure. Therefore, we are of the considered view that, to this extent, the Assessing Officer has blown hot and cold, which is evident from estimation of profit on gross receipts and disallowance of expenditure, which is not permissible. 7 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala Therefore, we cannot uphold the adhoc disallowance of expenses made by the Assessing Officer. Therefore, we direct the Assessing Officer to delete 30% adhoc disallowance of expenditure. At the same time, the assessee also not proved financial results declared for the year under consideration. Therefore, considering the facts and circumstances of the case and also taking into account, various reasons given by the Assessing Officer, we are of the considered view that a reasonable profit of 10% on gross contract receipts declared by the assessee. Therefore, we direct the Assessing Officer to estimate 10% net profit on total contract receipts declared by the assessee as reasonable, considering the nature of business of the assessee. Therefore, we direct the Assessing Officer to estimate 10% net profit on total contract receipts declared by the assessee and delete additions made towards net profit estimated on total contract receipts 2,44,56,069/- and also additions towards adhoc disallowance of expenditure. In other words, out of total additions made by the Assessing Officer towards income from business at Rs.37,76,385/-, the Assessing Officer is directed to sustain additions of Rs.1,88,750/- and the balance addition of Rs.35,87,635/- is hereby deleted. 9. In so far as addition of Rs.1,50,000/- towards Chapter VIA deduction, the assessee could not file any evidences, therefore, in the absence of any evidences, additions made by the Assessing Officer is confirmed. 8 ITA No.1232/Hyd/2024 Shyam Sunder Ravinuthala 10. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the Open Court on 28th January, 2025. Sd/- Sd/- (K.NARASIMHA CHARY) JUDICIAL MEMBER (MANJUNATHA G.) ACCOUNTANT MEMBER Hyderabad, Dated 28th January, 2025 L.Rama, SPS Copy to: S.No Addresses 1 Shri Shyam Sunder Ravinuthala, H.No.12-10-587/C, Medi Bavi, Road No.4, Seethaphal Mandi, Hyderabad 2 The Income Tax Officer, Ward-10(1), Hyderabad 3 The Pr.CIT, Hyderabad 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order "