The ITO, Ward-1(4), Visakhapatnam v. M/s Nagaja Constructions, Visakhapatnam

ITA NO 460 OF 2010 NAGAJA CONSTRUCTIONS VISAKHAPATN AM PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.460/VIZAG/2010 ASSESSMENT YEAR:2005-06 ITO WARD-1(4) VISAKHAPATNAM VS. M/S NAGAJA CONSTRUCTIONS VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO:AAEFN 8978 Q C.O. NO.38/VIZAG/2010 (ARISING OUT OF ITA NO.460/VIZAG/2010) ASSESSMENT YEAR:2010-11 M/S NAGAJA CONSTRUCTIONS VISAKHAPATNAM VS. ITO WARD-1(4) VISAKHAPATNAM (RESPONDENT) (APPELLANT) PAN NO:AAEFN 8978 Q DEPARTMENT BY: SHRI D.S. SUNDER SINGH SR.DR ASSESSEE BY: SHRI C.V.S. MURTHY CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 14.6.2010 PASS ED BY LEARNED CIT(A) VISAKHAPATNAM AND THEY RELATE TO THE ASSESSMENT YEA R 2005-06. 2. THE REVENUE IS ASSAILING THE DECISION OF THE LEA RNED CIT (A) IN DELETING THE ADDITION OF RS.27 09 223/- MADE BY THE ASSESSING OFFICER BY DISALLOWING THE EXPENDITURE CLAIM OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. I T ORIGINALLY FILED ITS RETURN ITA NO 460 OF 2010 NAGAJA CONSTRUCTIONS VISAKHAPATN AM PAGE 2 OF 4 OF INCOME ON 1.11.2005 DECLARING A TOTAL INCOME OF RS.1 96 470/-. THE DEPARTMENT CARRIED OUT A SURVEY OPERATION UNDER SEC TION 133A OF THE ACT AND DURING THE COURSE OF SURVEY THE ASSESSEE FIRM ADMITTED AN ADDITIONAL INCOME OF RS. 40.00 LAKHS AND ACCORDINGLY IT FILED A REVISED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.41 96 470/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDE R SECTION 143(3) ON 8.5.2006 BY ACCEPTING THE INCOME DECLARED IN THE RE VISED RETURN. THEREAFTER THE ASSESSING OFFICER REOPENED THE ASSE SSMENT UNDER SECTION 147 OF THE ACT IN ORDER TO EXAMINE THE EXCESS CLAIM OF EXPENDITURE AMOUNTING TO RS.27 09 223/- WHICH CONSISTED OF EXP ENDITURE TOWARDS LABOUR CHARGES RS.17 15 639/- AND FABRICATION CHA RGES RS.9 93 584/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY A DDING THE ABOVE SAID AMOUNT. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LEARNED CIT (A) DELETED BOTH THE ADDITIONS. HENCE THE REVENUE IS IN APPEAL BEFORE US. THE ASSESSEE HAS FILED THE CROSS OBJECTION SUPPORTING T HE DECISION OF LEARNED CIT(A). 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THE LEARNED CIT (A) HAS DELE TED THE IMPUGNED ADDITION WITH THE FOLLOWING OBSERVATIONS: 3. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS OF T HE CASE APPELLANTS SUBMISSION AS WELL AS A.OS CONTENTION. IT IS OBSERVED THAT ORIGINALLY THE ASSESSMENT WAS COMPLET ED UNDER SECTION 143(3) VIDE ORDER DT.8-5-06 DETERMINING THE TOTAL INCOME AT RS.41 96 470/- WHICH IS INCLUSIVE OF THE ADDITIONAL INCOME OF RS.40 LAKHS OFFERED AT THE TIME OF SURVEY OPERATION CONDUCTED IN THE BUSINESS PREMISES OF THE APPELLANT UNDER SECTION 133A OF THE INCOME TAX ACT 1961 ON 06-01-0 6. FROM THE ASSESSMENT ORDER IT IS EVIDENT THAT THE ASSESS MENT WAS REOPENED IN ORDER TO EXAMINE THE ISSUE OF EXCESS AL LOWANCE OF EXPENDITURE BUT NOT ON ACCOUNT OF ANY CONCEALED INC OME OR FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME. 3.1 ON MERITS ALSO I AM INCLINED TO AGREE WITH THE CONTENTIONS OF THE APPELLANT THAT SINCE THE ADDITIONAL INCOME O F RS.40 LAKHS ITA NO 460 OF 2010 NAGAJA CONSTRUCTIONS VISAKHAPATN AM PAGE 3 OF 4 WAS OFFERED BY THE APPELLANT DURING THE COURSE OF S URVEY OPERATIONS TO COVER UP ALL THE DEFECTS AND DEFICIEN CIES IN THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT HENCE THERE WAS NO JUSTIFICATION TO MAKE ANY SEPARATE ADDITION OVER AND ABOVE THE ADDITIONAL INCOME THAT WAS ADMITTED IN TH E REVISED RETURN OF INCOME WHICH WAS CONSIDERED BY THE ASSESS ING OFFICER AS BUSINESS INCOME. EVEN IN THE REASSESSM ENT PROCEEDINGS THE EXPENDITURE DISALLOWED BY THE ASSE SSING OFFICER IS LESS THAN THE ADDITIONAL INCOME THAT WAS DECLARED BY THE APPELLANT FIRM THEREFORE I AM OF THE OPINION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SEPAR ATE ADDITION ONCE AGAIN WITHOUT GIVING ADJUSTMENT WITH THE ADDIT IONAL INCOME OFFERED. THE ADDITIONAL INCOME OFFERED BY TH E APPELLANT FIRM IS MUCH MORE THAN THE EXPENDITURE DISALLOWED B Y THE ASSESSING OFFICER IN THERE ASSESSMENT PROCEEDINGS. IT MAY BE NOTED HERE THAT THE ASSESSING OFFICER HAS DISALLOWE D FABRICATION CHARGES OF RS.9 93 584/- BUT ACTUALLY T HE FABRICATION CHARGES WERE RS.3 10 400/- AND THIS AMOUNT OF RS.9 93 584/- REPRESENTS EXPENDITURE TOWARDS MATERIAL BUT NOT FAB RICATION CHARGES DEBITED TO PROFIT & LOSS ACCOUNT. FURTHER THERE WAS NO SPECIFIC FINDING OF THE ASSESSING OFFICER THAT THER E WAS CONCEALMENT OF INCOME IN DECLARING TOTAL RECEIPT BY THE APPELLANT FIRM IN WHICH CASE THE NORMAL RATE OF PRO FIT GENERALLY AVAILABLE IN THIS LINE OF BUSINESS IS MUCH LESS THA N THE ADDITIONAL INCOME DECLARED BY THE APPELLANT. UNDER THE CIRCUMSTANCES AND FACTS OF THE CASE AND ALSO KEEPIN G IN VIEW THAT AFTER INCLUSION OF ADDITIONAL INCOME OFFERED D URING THE COURSE OF SURVEY OPERATION THE PROFIT RATE HAS GON E UP TO 35.49% ON THE TOTAL RECEIPT OF RS.1 17 25 050/- I H OLD THAT THERE WAS NO JUSTIFICATION IN MAKING SEPARATE ADDIT ION OVER AND ABOVE THE ADDITIONAL INCOME THAT WAS ADMITTED IN TH E REVISED RETURN OF INCOME WHICH COVERS UP ALL THE DISCREPANC IES AND DEFICIENCIES IN THE BOOKS OF ACCOUNT. THE ADDITION IS THEREFORE DELETED . 5. WE NOTICE THAT THE ASSESSEE HAD OFFERED ADDITION AL INCOME OF RS.40.00 LAKHS DURING THE COURSE OF SURVEY ON ACCOU NT OF DEFICIENCIES AND DEFECTS IN THE BOOKS OF ACCOUNT IN WHICH CASE THE IMPUGNED ADDITION OF RS.27 09 923/- SHOULD NORMALLY BE CONSIDERED TO HAV E BEEN INCLUDED IN THE SAID ADDITIONAL INCOME. WE ALSO NOTICE THAT THE LEA RNED CIT (A) HAS DEALT WITH THE ISSUE IN A PROPER MANNER AND HENCE WE DO N OT FIND ANY INFIRMITY IN ITA NO 460 OF 2010 NAGAJA CONSTRUCTIONS VISAKHAPATN AM PAGE 4 OF 4 HER DECISION. IN VIEW OF THE ABOVE WE UPHOLD THE DE CISION OF THE LEARNED CIT (A). 6. IN THE RESULT THE APPEAL OF THE REVENUE AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 04-02-2011 COPY TO 1 THE ITO WARD-1(4) VISAKHAPATNAM 2 M/S NAGAJA CONSTRUCTIONS PLOT NO.19 SRINILAYA A PARTMENTS FACOR LAYOUT RAMNAGAR VISAKHAPATNAM 530 003 3 4. THE CIT 1 VISAKHAPATNAM THE CIT(A) VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM