M/s. Ramachandra Reddy, Hyd, Hyderabad v. JCIT Warangal Range, Warangal

ITA 1063/HYD/2011 | 2006-2007
Pronouncement Date: 16-09-2011 | Result: Allowed

Appeal Details

RSA Number 106322514 RSA 2011
Assessee PAN AABFN4277H
Bench Hyderabad
Appeal Number ITA 1063/HYD/2011
Duration Of Justice 3 month(s) 14 day(s)
Appellant M/s. Ramachandra Reddy, Hyd, Hyderabad
Respondent JCIT Warangal Range, Warangal
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 16-09-2011
Assessment Year 2006-2007
Appeal Filed On 02-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER ITA NO. 1063/HYD/2011 (ASSESSMENT YEAR 2006-07) M/S. N. RAMACHANDRA REDDY MAHUBABABAD PAN: AABFN4277H VS JCIT WARANGAL RANGE WARANGAL APPELLANT RESPONDENT APPELLANT BY: SHRI CHALAMAIAH RESPONDENT BY: SHRI V. SRINIVAS DATE OF HEARING: 12.09.2011 DATE OF PRONOUNCEMENT: ORDER PER ASHA VIJAYARAGHAVAN J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT-VI HYDERABAD DATED 31.03.2011 FOR ASSESSME NT YEAR 2006-07. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF EXECUTING GOVERNMENT CIVIL CONTR ACTS AND FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 31. 10.2006 DECLARING TOTAL INCOME OF RS. 37 61 940. THE ASSES SMENT WAS COMPLETED U/S. 143(3) OF THE INCOME-TAX ACT 1961 D ETERMINING THE INCOME OF RS. 63 03 799 BY MAKING ADDITION OF RS. 2 5 41 859 TOWARDS UN-VOUCHED/UNVERIFIABLE EXPENDITURE. 3. SUBSEQUENTLY BY ORDER DATED 31.3.2011 THE CIT-V I HYDERABAD ACTING U/S. 263 OF THE ACT ISSUED NOTICE TO THE ASSESSEE SETTING OUT THE GROUNDS OF ERROR AND PREJUDICE AND CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT SHO ULD NOT BE REVISED OR SET ASIDE. THE GROUND OF PROPOSED REVIS ION BY THE CIT IS AS UNDER: I.T.A. NO. 1063/HYD/2011 M/S. N. RAMACHANDRA REDDY ==================== 2 'DURING THE REVIEW OF THE ASSESSMENT IT WAS FOUND THAT THE CASE WAS CONVERTED INTO SCRUTINY FOR THE REASON THE TOTAL INCOME WAS OFFERED LESS THAN 5% O F THE GROSS RECEIPTS. THE AO COMPLETED THE ASSESSMENT BY MAKING ADDITION OF RS. 25 41 859 TOWARDS UNVOUCHED EXPENDITURE/UNVERIFIABLE EXPENDITURE WITHOUT PROPER VERIFICATION. AS SEEN F ROM THE RECORDS FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HAD GIVEN A LETTER TO THE CIT(A) FOR AGREE ING ESTIMATION @ 13% OF THE GROSS RECEIPTS. THE AO FAILED TO TAKE NOTE OF THIS LETTER AND COMPLETED TH E ASSESSMENT.' 4. IN RESPONSE TO THE SHOW-CAUSE NOTICE THE AR APP EARED AND FURNISHED INFORMATION CALLED FOR ALONG WITH THE WRI TTEN SUBMISSIONS WHICH ARE AS UNDER: 'THE ASSESSING OFFICER CATEGORICALLY STATED THAT HE HAD VERIFIED THE BOOKS OF ACCOUNT PRODUCED AND FOUN D CERTAIN EXPENDITURE CLAIMED UNDER DIFFERENT HEADS WAS NOT SUPPORTED WITH ANY VOUCHERS THE DETAILS OF WHICH HAVE DULY BEEN EXTRACTED IN THE ASSESSMENT ORDER. SINCE SUCH EXPENDITURE COULD NOT BE PROVED WITH ANY VERIFIABLE EVIDENCE THE SAME HAS BEEN ADDED BACK. THUS THERE WAS NO SCOPE TO HOLD SUCH AN ASSESSMENT AS ERRONEOUS BY ANY STRETCH OF IMAGINATION ESPECIALLY IN A PROCEEDING U/S. 263(1 ) OF THE IT ACT WITHOUT ANY SUBSTANTIVE MATERIAL. FURTHER REFERENCE TO THE AFFIDAVIT FILED BEFORE CIT(A) AGREEING FOR ESTIMATION OF PROFIT AT 13% OF GROSS RECEIPTS FOR ASSESSMENT YEAR 2005-06 AND ADOPTING THE SAME AS A BASE FOR ISSUE OF NOTICE U/S . 263(1) FOR ASSESSMENT YEAR 2006-07 WITHOUT CONSIDERING THE ATTENDANT FACTS AND CIRCUMSTANCES PREVAILING IN THAT ASSESSMENT IS PREPOSTEROUS. IN THIS CONNECTION IT IS HUMBLY SUBMITTED THAT WHILE DISPOSING OF THE DEPARTMENTAL APPEAL IN ITA NO. 1372/HYD/2008 THE HONBLE TRIBUNAL VIDE THEIR ORDE R DATED 6 TH MARCH 2009 IN OUR CASE FOR THE ASSESSMENT YEAR 2005-06 OBSERVED THUS .....' IN THE LIGHT OF TRIBUNAL ORDER CITED ABOVE THE UTILITY OF AFFIDAVIT FILED BEFORE CIT(A) FOR ASSESS MENT YEAR 2005-06 IS STRICTLY CONFINED FOR ASSESSMENT YE AR 2005-06 AND IT CANNOT BE READ BEYOND. IN THE CIRCUMSTANCE IT IS HUMBLY PRAYED THAT THE PROCEEDINGS INITIATED U/S. 263 OF THE IT ACT 1 961 I.T.A. NO. 1063/HYD/2011 M/S. N. RAMACHANDRA REDDY ==================== 3 IN OUR CASE FOR ASSESSMENT YEAR 2006-07 MAY PLEASE BE DROPPED.' 5. THE CIT HOWEVER HELD THAT THE ASSESSEE HAS HIM SELF VOLUNTARILY FILED AN AFFIDAVIT OFFERING 13% OF THE GROSS RECEIPTS AS INCOME BEFORE THE FIRST APPELLATE AUTHORITY (IN THE EARLIER YEAR) AFTER GOING THROUGH THE ITAT ORDER FOR THE EARLIER YEAR. FURTHER THE CIT HELD THAT THE NATURE OF BUSINESS OF THE ASSESSEE HA S NOT BEEN CHANGED AND THEREFORE THE CIT OPINED THAT WHEN TH E ASSESSEE HIMSELF AGREED FOR 13% IN ONE YEAR AND IS CONTINUIN G THE SAME BUSINESS AND IN ALMOST THE SAME CIRCUMSTANCES THE ASSESSING OFFICER HAD ERRONEOUSLY COMPLETED THE ASSESSMENT FO R SUBSEQUENT ASSESSMENT YEAR ADOPTING A LESSER PERCENTAGE OF ADD ITION WITHOUT PROPER VERIFICATION. FURTHER THE CIT OBSERVED THAT DURING THE PRESENT CASE ALSO THE ASSESSEE DID NOT PINPOINT THE CONDITIONS THAT LED TO DECLARATION OF 13% IN THE PREVIOUS YEAR AND WHY HE IS NOT ACCEPTING THE SAME IN THE PRESENT YEAR. HENCE THE CIT DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSMENT AFTER VERIFYING ALL THE ASPECTS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE US WITH THE FOLLOWING GROUNDS: 1. THE LD. CIT ERRED IN LAW AND ON FACTS WHILE PASS ING THE IMPUGNED ORDER U/S. 263 DATED 31.3.2011. 2. THE IMPUGNED ORDER PASSED BY LD. CIT SUFFERS FROM LACK OF JURISDICTION SINCE THE LD. CIT HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO SHOW THAT ASSESSMENT ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IN ANY MANNER. 3. THE LD. CIT ERRED IN LAW WHILE INVOKING PROVISIO NS OF SECTION 263(1) OF INCOME-TAX ACT 1961 FOR ESTIMATION OF PROFIT ON MERE SUSPICION AND PRESUMPTIONS WITHOUT THERE BEING ANY SUBSTANTIVE MATERIAL ON RECORD. 6. THE LEARNED DR RELIED ON THE ORDER OF THE CIT. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI CHALA MAIAH POINTED OUT THAT THE ASSESSING OFFICER HAD VERIFIED THE BOOKS OF I.T.A. NO. 1063/HYD/2011 M/S. N. RAMACHANDRA REDDY ==================== 4 ACCOUNT PRODUCED BEFORE HIM AND HAVING FOUND THAT C ERTAIN EXPENDITURE WERE NOT SUPPORTED WITH ANY VOUCHERS AN D COULD NOT BE PROVED WITH VERIFIABLE EVIDENCE ADDED BACK THE SAME. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT I N ITA NO. 1372/HYD/208 FOR THE ASSESSMENT YEAR 2005-06 IN ASS ESSEES OWN CASE THE TRIBUNAL HAS GIVEN A FINDING THAT THE UTIL ITY OF THE AFFIDAVIT FILED BEFORE THE CIT(A) FOR A.Y. 2005-06 IS STRICTL Y CONFINED FOR ASSESSMENT YEAR 2005-06 AND IT CANNOT BE READ BEYON D. HENCE IT WAS SUBMITTED THAT THE ASSESSEE HAD AGREED FOR ESTI MATION OF PROFIT AT 13% OF GROSS RECEIPTS FOR A.Y. 2005-06 ONLY AND THAT CANNOT BE EXTENDED TO THE PRESENT ASSESSMENT YEAR VIZ. 2006- 07. 8. WE HAVE HEARD BOTH THE PARTIES. IN THE CASE OF CIT VS. VALLIAMMAL [230 ITR 695 (MAD.)] IT HAS BEEN HELD TH AT: 'AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT I S NOT IN ACCORDANCE WITH LAW. IF THE ASSESSING OFFIC ER MAKES ASSESSMENT IN ACCORDANCE WITH LAW THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUT ION OF THE JUDGEMENT OF THE COMMISSIONER FOR THAT OF TH E ASSESSING OFFICER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE ASSESSING OFFICER EXAMINES THE ACCOUNTS MAKES ENQUIRIES APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER ON PERUSAL OF THE RECORDS MAY BE OF THE OPINION THAT THE ESTIMAT E MADE BY THE OFFICER WAS ON LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE ASSESSING OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE . ...' 9. IN CIT VS. GABRIEL (INDIA) LTD. [203 ITR 108 (BO M.)] SIMILAR OBSERVATION HAS BEEN MADE AS THAT OF IN THE CASE OF VALLIAMMAL. THIS IS BECAUSE THE ASSESSING OFFICER HAS EXERCISED QUASI JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRI VED AT A I.T.A. NO. 1063/HYD/2011 M/S. N. RAMACHANDRA REDDY ==================== 5 CONCLUSION AND SUCH A CONCLUSION CANNOT BE CONSIDER ED AS ERRONEOUS SIMPLY BECAUSE THE CIT IS NOT FULLY SATIS FIED WITH THE CONCLUSION. IT MAY BE THAT IN THE OPINION OF THE C OMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTEREST OF REVENUE BUT THAT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTO REVISION BECAUSE THE FIRST REQUIREMENT VIZ. THAT THE ORDER IS ERRONEOUS IS LACKING. IN THE PRESENT CASE THE CIT'S OBSERVATION THAT THE ASSESSING OFFICER WITHOUT VERI FYING THE FACT THAT THE ASSESSEE HIMSELF HAS OFFERED 13% IN EARLIER YEA R HAS ADOPTED A LESSER FIGURE FOR ADDITION IN THE SUBSEQUENT YEAR I S NOT CORRECT INASMUCH AS THE ASSESSEE HAS VOLUNTARILY ACCEPTED F OR ESTIMATION OF PROFIT AT 13% OF GROSS RECEIPTS FOR THE ASSESSME NT YEAR 2005-06 ONLY. THE ASSESSING OFFICER HAS AFTER EXAMINING TH E ACCOUNTS ARRIVED AT THE ADDITION IN THIS YEAR. THEREFORE R ELYING ON THE RATIO OF THE ABOVE SAID DECISIONS IN THE CASE OF VALLIAMMAL AND GABRIEL INDIA LTD. (SUPRA) WE ALLOW THE ASSESSEE'S APPEAL. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER 2011. SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD DATED THE 16 TH SEPTEMBER 2011 TPRAO COPY FORWARDED TO: 1. M/S. N. RAMACHANDRA REDDY C/O. M/S. SATYAM & VEERABHADRA CHARTERED ACCOUNTANTS FLAT NO. 107 VENKATARAMA TOWERS OPP. SKYLINE THEATRE BASHEERBA GH HYDERABAD-29. 2. THE JT. COMMISSIONER OF INCOME-TAX WARANGAL RAN GE WARANGAL. 3. THE CIT-VI HYDERABAD. 4. THE DR A-BENCH ITAT HYDERABAD.