M/s Aditya Prakash Constructions Pvt Ltd, Visakhapatnam v. The DCIT Circle-3(1), Visakhapatnam

CO 2/VIZ/2011 | 2007-2008
Pronouncement Date: 17-03-2011 | Result: Dismissed

Appeal Details

RSA Number 225323 RSA 2011
Assessee PAN AADCA0252E
Bench Visakhapatnam
Appeal Number CO 2/VIZ/2011
Duration Of Justice 1 month(s) 1 day(s)
Appellant M/s Aditya Prakash Constructions Pvt Ltd, Visakhapatnam
Respondent The DCIT Circle-3(1), Visakhapatnam
Appeal Type Cross Objection
Pronouncement Date 17-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 17-03-2011
Assessment Year 2007-2008
Appeal Filed On 15-02-2011
Judgment Text
ITA 20&CO2/V/11 ADITYA PRAKASH CONSTN.P LTD VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 20 /VIZAG/ 20 11 ASSESSMENT YEAR : 2007 - 08 DCIT CIRCLE - 3(1) VISAKHAPATNAM VS. M/S. ADITYA PRAKASH CONSTRUCTIONS PVT. LTD VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AADCA 0252E CO NO.2/VIZAG/2011 ASSESSMENT YEAR : 2007 - 08 DCIT CIRCLE - 3(1) VISAKHAPATNAM VS. M/S. ADITYA PRAKASH CONSTRUCTIONS PVT. LTD VISAKHAPATNAM (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI TH.L. PETER CIT(DR) RESPONDENT BY: SHRI C. SUBRAHMANYAM CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) MAINLY ON FOLLOWING TWO GROUNDS: 1. THE HONBLE CIT(A) IS NOT JUSTIFIED IN DIRECTING TH E ASSESSING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEE @ 8% INSTEAD OF 12.5% ON GROSS RECEIPTS. 2. THE HONBLE CIT(A) SHOULD HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER WHEREIN ADDITION WAS MADE U/S 41(1) ON ACCO UNT OF CEASED LIABILITY FOR RS.44 32 682/- EVEN THOUGH THE ASSES SEE WAS GIVEN OPPORTUNITY TO SUBSTANTIATE HIS VERSION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE ASSESSEE HAS ALSO FILED THE CROSS OBJECTION ASSAILING ESTIMATION OF PROFIT AT 8% OF THE TOTAL TURNOVER. 3. THE REVENUES APPEAL AND THE C.O. OF THE ASSESSE E WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CON SOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA 20&CO2/V/11 ADITYA PRAKASH CONSTN.P LTD VSKP 2 4. SINCE THE COMMON ISSUES ARE INVOLVED IN THIS APP EAL AND THE C.O. WE ADJUDICATE THEM SIMULTANEOUSLY. THE MAIN ISSUE REL ATE TO THE ESTIMATION OF NET PROFIT OF THE ASSESSEES. THE ASSESSEE COMPANY IS ENGAGED IN THE CONSTRUCTION ACTIVITY AND DURING THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER HAS NOTICED THE VARIOUS DEFECTS I N THE BOOKS OF ACCOUNTS AS VARIOUS EXPENSES WERE NOT SUPPORTED BY PROPER VOUCH ERS AND AS SUCH THEY ARE NOT OPEN FOR VERIFICATION. THE ASSESSING OFFIC ER INVOKED THE PROVISIONS OF SECTION 145 OF THE ACT AND AFTER REJECTING THE BOOK S OF ACCOUNTS HE ESTIMATED THE NET INCOME AT 12.5% OF THE GROSS CONTRACT RECEI PTS AND DETERMINED THE INCOME AT RS.36 05 444/- AND ALLOWED DEPRECIATION O F RS.8 618/-. 5. BESIDES THE ABOVE ADDITION THE ASSESSING OFFICE R HAS MADE AN ADDITION OF RS.44 32 682/- BEING THE AGGREGATE OF CREDIT BAL ANCE OF THE SUNDRY CREDITORS AS CESSATION OF LIABILITIES U/S 41(1) OF THE ACT. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSIONS THAT HE HAS MAINTAINED THE PROPER BOOKS OF ACCOUNTS AND THE A.O. WAS NOT JUSTIFIED IN ESTIMATING THE NET PROFIT AT 12.5%. WITH REGARD TO THE ADDITION U/S 41(1) OF THE ACT IT WAS CONTENDED BEFORE THE CIT(A) THAT THE CREDITORS IN QUESTION BEING AGARWAL GLOBAL STEELS BEEKAY STEEL ASSOCIATES NEXO INDUSTRIES LTD. PALURI NARAYANA MURTHY STEEL EXCHANGE INDIA LTD. SUJANA METAL PRODUCTS LTD. AND VISAKHA ELECTRODES P VT. LTD. ARE EXISTING PARTIES WITH WHOM BUSINESS TRANSACTIONS WERE CARRIE D NOT ONLY DURING THE RELEVANT ACCOUNTING YEAR BUT ALSO DURING THE SUBSEQ UENT YEARS AND THE PAYMENTS TO SOME OF THE PARTIES HAVE BEEN MADE IN S UBSEQUENT YEARS WITH REFERENCE TO OUTSTANDING CREDIT BALANCE AS ON 31.3. 2007. THE DETAILS OF SUCH TRANSACTIONS HAVE BEEN REFLECTED IN THE COPIES OF T HE LEDGER ACCOUNTS OF SUCH PARTIES AS APPEARED IN THE BOOKS OF ASSESSEE COMPAN Y AND MOST IMPORTANTLY THE STATEMENT OF BANK ACCOUNT OF THE ASSESSEE WITH THE UTI BANK TARNAKA BRANCH HYDERABAD AND AUTONAGAR BRANCH VISAKHAPATN AM REFLECTS PAYMENT TO SOME OF SUCH PARTIES BY ACCOUNT PAYEE CHEQUES. IN THAT VIEW OF THE MATTER IT CANNOT BE INFERRED THAT SUNDRY TRADE LIA BILITIES WERE CARRIED FORWARD ACCOUNTS FROM EARLIER YEARS WITHOUT ANY TRANSACTION S IN BETWEEN AND SO AS TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE CIT(A) RE-EXAMINED ITA 20&CO2/V/11 ADITYA PRAKASH CONSTN.P LTD VSKP 3 THE ISSUE IN THE LIGHT OF THE ASSESSEES CONTENTION AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES HE REDUCED THE E STIMATED NET PROFIT FROM 12.5% TO 8% OF THE GROSS CONTRACT RECEIPT. 7. WITH REGARD TO THE ADDITION U/S 41(1) OF THE ACT THE CIT(A) HAS DELETED THE ADDITIONS AFTER HAVING OBSERVED THAT EV EN ASSUMING THAT SUCH CREDIT BALANCE PRIMA FACIE DO NOT APPEAR TO BE GENU INE THE PROVISIONS OF SECTION 41(1) WOULD NOT HAVE BEEN INVOKED ON THE RE ASONING THAT SUCH CREDITS WERE NOT OLD BALANCES CARRIED FORWARD FROM EARLIER YEARS AND THAT ANY REMISSION COULD NOT TAKE EFFECT WITHOUT THE CONSENT OF SUCH CREDITORS. 8. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE T HE TRIBUNAL WITH THE SUBMISSIONS THAT CIT(A) WHILE ESTIMATING THE NET PR OFIT AT 8% HAS PLACED A RELIANCE UPON THE PROVISIONS OF SECTION 44AD OF THE ACT WHEREAS SECTION 44AD IS NOT APPLICABLE IN THE CASE OF THE ASSESSEES BECAUSE ITS TURNOVER IS MORE THAN THE PRESCRIBED LIMIT. SINCE THE ASSESSEE DID NOT MAINTAIN THE PROPER BOOKS OF ACCOUNTS THE A.O. WAS JUSTIFIED IN ESTIMATING THE NET PROFIT AT 12.5%. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT EVEN THE ESTIMATION MADE BY THE CIT(A) IS ALSO ON THE HIGHER SIDE AND IN EARLIER YEARS AND IN SUCCEEDING YEARS THE NET PROFIT AFTER DEPRE CIATION WAS BETWEEN 1.61% TO 2.61% AND THE SAME WAS ACCEPTED BY THE A.O. 10. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LOW ER AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS AND WE FIND THAT UNDISPU TEDLY EXPENDITURE INCURRED BY THE ASSESSEES WERE NOT SUPPORTED BY THE PROPER V OUCHERS AS OBSERVED BY THE LOWER AUTHORITIES. THEREFORE THE REJECTION OF BOOKS OF ACCOUNTS IS PROPER BY INVOKING THE PROVISIONS OF SECTION 145 OF THE AC T. NOW THE QUESTION ARISE UNDER THESE CIRCUMSTANCES WHAT SHOULD BE THE NET PR OFIT OF THE ASSESSEE? THE ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT AT 12.5% WHEREAS THE CIT(A) REDUCED IT TO 8% FOLLOWING THE ANALOGY ADOPT ED FOR ESTIMATING THE PROFIT U/S 44AD OF THE ACT AND WE FIND NO INFIRMITY IN THE ESTIMATION MADE BY THE CIT(A). WE ACCORDINGLY CONFIRM HIS ORDER. SO FAR AS ADDITION ON ACCOUNT ITA 20&CO2/V/11 ADITYA PRAKASH CONSTN.P LTD VSKP 4 OF CESSATION OF LIABILITY U/S 41(1) ARE CONCERNED WE HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT(A) AND WE FIND THAT THE LIABIL ITIES WERE NOT VERY OLD LIABILITIES AND THE ASSESSEES WERE IN REGULAR BUSIN ESS WITH THOSE PARTIES THEREFORE IT IS NOT PROPER TO SAY THAT THESE LIABI LITIES WERE CEASED DURING THE IMPUGNED ASSESSMENT YEAR. THE CIT(A) HAS PROPERLY ADJUDICATED THE ISSUE AND WE FIND NO INFIRMITY THEREIN AND WE ACCORDINGLY CONFIRM HIS ORDER. 11. SINCE WE HAVE CONFIRMED THE ORDER OF THE CIT(A) ON THE ISSUE OF ESTIMATION OF NET PROFIT THE C.O. OF THE ASSESSEE IS ALSO DISPOSED OF. ACCORDINGLY THE SAME IS DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENUE AND TH E C.O. OF THE ASSESSEES ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17.3.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 17 TH MARCH 2011 COPY TO 1 DCIT CIRCLE - 3(1) VISAKHAPATNAM 2 M/S. ADITYA PRAKASH CONSTRUCTIONS P. LTD. PLOT NO. 85 - 16 D - BLOCK AUTO NAGAR VISAKHAPATNAM 3 THE CI T VISAKHAPATNAM 4 THE CIT (A) VISAKHAPATNAM 5 THE DR ITAT VISAKHAPA TNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM