Smt K Subba Raju, Rajahmundry v. The ACIT, Circle-1, Rajahmundry

ITA 17/VIZ/2005 | 2001-2002
Pronouncement Date: 31-12-2010 | Result: Dismissed

Appeal Details

RSA Number 1725314 RSA 2005
Assessee PAN AERPK2584G
Bench Visakhapatnam
Appeal Number ITA 17/VIZ/2005
Duration Of Justice 5 year(s) 11 month(s) 28 day(s)
Appellant Smt K Subba Raju, Rajahmundry
Respondent The ACIT, Circle-1, Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 31-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 31-12-2010
Date Of Final Hearing 02-11-2010
Next Hearing Date 02-11-2010
Assessment Year 2001-2002
Appeal Filed On 03-01-2005
Judgment Text
ITA NOS 816 OF 04 AND 17 OF 05 K SUBBA RAJU RAJAHM UNDRY PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.816/VIZAG/2004 ASSESSMENT YEAR: 2001-02 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 RAJAHMUNDRY VS. K. SUBBA RAJU RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO:AERPK 2584 G ITA NO17/VIZAG/2005 ASSESSMENT YEAR: 2001-02 K. SUBBA RAJU RAJAHMUNDRY (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 RAJAHMUNDRY (RESPONDENT) PAN NO:AERPK 2584 G APPELLANT BY: SHRIT.L. PETER DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 25.10.2004 PASSED BY LD. CIT(A) RAJAHMUNDRY AND THEY RELATE T O THE ASSESSMENT YEAR 2001-02. 2. THE TOTAL INCOME COMPUTED BY THE ASSESSING OFFI CER HAVING BEEN PARTIALLY DELETED BY THE LEARNED CIT(A) BOTH THE P ARTIES IS IN APPEAL BEFORE US. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A CIVIL CONTRACTOR AND HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER ITA NOS 816 OF 04 AND 17 OF 05 K SUBBA RAJU RAJAHM UNDRY PAGE 2 OF 6 CONSIDERATION DECLARING A TOTAL INCOME OF RS.13 16 100/-. THE ASSESSEE DID NOT PROPERLY RESPOND TO THE VARIOUS QUERIES RAISED BY THE ASSESSING OFFICER AND EVEN DID NOT PRODUCE BOOKS OF ACCOUNT. HENCE T HE ASSESSING OFFICER REJECTED THE BOOKS RESULTS AND ESTIMATED THE INCOME AT 12.5% OF THE GROSS CONTRACT RECEIPTS BEFORE DEPRECIATION AND THEREAFTE R ALLOWED THE DEPRECIATION. THE GROSS CONTRACT RECEIPTS WERE RS. 3.66 CRORES AND DEPRECIATION CLAIMED BY THE ASSESSEE WAS RS.14 00 9 52/-. THUS THE INCOME FROM CIVIL CONTRACT BUSINESS WAS DETERMINED BY THE ASSESSING OFFICER AT RS.31 79 682/-. THE ASSESSING OFFICER ALSO ADDED A SUM OF RS.50 48 070/- AS AN UNPROVED CREDIT AS THERE WAS SUBSTANTIAL INCR EASE IN THE SUNDRY CREDITORS BALANCE. THE ASSESSING OFFICER ALSO SEPA RATELY ADDED HIRE CHARGES OF RS.70 140/- THAT HAD BEEN SHOWN BY THE ASSESSEE . AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LEARNE D CIT(A). BEFORE LEARNED CIT(A) THE ASSESSEE PRODUCED BOOKS OF ACCO UNT AND COPIES OF VOUCHERS. HENCE THE LEARNED CIT(A) CALLED FOR A RE MAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER SUBMITTED THAT THE INCOME WAS ESTIMATED AT 12.5% BASED UPON THE ORDER OF THE ITAT HYDERABAD IN THE CASE OF M/S K.C. REDDY ASSOCIATES NELLORE. WITH R EGARD TO THE ADDITION OF CREDITORS BALANCE THE ASSESSING OFFICER SAID THAT THE INFORMATION SUPPLIED BY THE ASSESSEE IN THE REMAND PROCEEDINGS WERE INCO MPLETE AND ACCORDINGLY SUPPORTED THE ADDITIONS MADE. 4. THE LEARNED CIT(A) APPRECIATED THE ARGUMENT OF THE ASSESSEE THE GROSS CONTRACT RECEIPTS OF RS.3.66 CRORES CONSISTED OF RECEIPTS TOWARDS EXECUTION OF SUB-CONTRACT WORKS TO THE TUNE OF 73.3 1% WHERE THE PROFIT MARGIN IS USUALLY LESS. ACCORDINGLY BY TAKING CUE FROM THE PROVISIONS OF SEC.44AD OF THE ACT THE LEARNED CIT(A) DIRECTED TH E ASSESSING OFFICER TO COMPUTE THE INCOME FROM CONTRACT WORKS AT 8% OF THE GROSS CONTRACT RECEIPTS NET OF DEPRECIATION. WITH REGARD TO THE A DDITION OF SUNDRY CREDITORS BALANCE THE LEARNED CIT(A) HELD THAT NO SEPARATE A DDITION IS NECESSARY SINCE THE INCOME IS ESTIMATED. THE LEARNED CIT(A) A LSO HELD THAT THE ITA NOS 816 OF 04 AND 17 OF 05 K SUBBA RAJU RAJAHM UNDRY PAGE 3 OF 6 ADDITION OF SUNDRY CREDITORS BALANCE IS NOT CALLED FOR EVEN OTHER WISE SINCE THE ASSESSEE HAS FILED CONFIRMATION LETTERS FROM 7 OUT OF 9 CREDITORS AND ALSO FURNISHED REASONS FOR NOT GETTING THE CONFIRMATION LETTERS FROM THE REMAINING TWO CREDITORS. AGGRIEVED BY THE ORDER OF LEARNED CIT(A) BOTH THE PARTIES ARE IN APPEAL BEFORE US. 5. THE ASSESSEE HAS PLEADED IN HIS APPEAL THAT THE INCOME RETURNED BY HIM SHOULD HAVE BEEN ACCEPTED AND NO SEPARATE ADDIT ION TOWARDS HIRE CHARGES SHOULD HAVE BEEN MADE BY THE ASSESSING OFFI CER. 6. IN THE APPEAL OF THE REVENUE IT IS PLEADED T HAT INCOME FROM CIVIL CONTRACT WORKS THAT WAS ESTIMATED BY THE ASSESSING OFFICER AS WELL AS THE ADDITION MADE TOWARDS UNPROVED CREDITS SHOULD BE RE STORED. 7. THE LEARNED AUTHORISED REPRESENTATIVE PLACED A COPY OF ORDER DATED 16.6.2009 PASSED BY THIS BENCH IN THE ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2003-04 WHEREIN THIS BENCH HAD UPH ELD THE ORDER OF LEARNED CIT(A) IN ESTIMATING THE INCOME AT 5% OF TH E GROSS CONTRACT RECEIPTS. WITH REGARD TO THE ADDITION OF UNPROVED CREDITS THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE IMPUGN ED CREDITORS ARE TRADE CREDITORS AND HENCE NO SEPARATE ADDITION IS CALLED FOR WHEN THE RELEVANT EXPENDITURE IS ALLOWED. IN THIS REGARD THE LEARNE D AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE FOLLOWING ORD ERS OF THIS BENCH. A) R.SUBBA RAJU (ITA NO.235/VIZAG/2008) DT. 18-11 -2010 B) SURYA EARTH MOVING (ITA NO.316/VIZAG/2009) DT. 25.10.2010 8. ON THE CONTRARY THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE ASSESSEE DID NOT SUPPLY PROPER INFORMATION EVEN DURING THE COURSE OF REMAND PROCEEDINGS AND ACCORDINGLY PLEADED THAT THE ORDER OF ASSESSING OFFICER SHOULD BE RESTORED BACK. ITA NOS 816 OF 04 AND 17 OF 05 K SUBBA RAJU RAJAHM UNDRY PAGE 4 OF 6 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE ESTIMATION OF INCOME FROM CIVIL CONTRACT WORKS. THE FACT WHICH IS NOT DISPUTED IS THAT THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT AND VOUCHERS DURING THE COURSE OF ASSESSMEN T PROCEEDINGS AND THEY WERE PRODUCED ONLY BEFORE LEARNED CIT(A). THE FIRST APPELLATE AUTHORITY CALLED FOR REMAND REPORT FROM THE ASSESSI NG OFFICER AND AFTER CONSIDERING THE REMAND REPORT AND BOOKS OF ACCOUNT HE HAS ESTIMATED THE INCOME FROM CIVIL CONTRACT WORKS AT 8% OF THE TOTAL CONTRACT RECEIPTS NET OF DEPRECIATION. THE LEARNED CIT(A) HAS APPRECIATED T HE FACT THAT THE SUB CONTRACT RECEIPTS CONSISTED OF 73% OF THE TOTAL CON TRACT RECEIPTS WHILE DETERMINING THE ABOVE SAID ESTIMATE. THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THIS BENCH IN THE ASSESSEES OWN CA SE FOR THE ASSESSMENT YEAR 2003-04 WHEREIN THE INCOME FROM CIVIL CONTRAC T WORKS WAS ESTIMATED AT 5% OF THE GROSS CONTRACT RECEIPTS. HOWEVER IN THAT CASE THE SUB CONTRACT RECEIPTS CONSISTED OF 81% OF THE TOTAL CON TRACT RECEIPTS WHERE AS IN THE INSTANT YEAR IT HAS COME DOWN TO 73% WHICH MEANS THAT THERE IS CORRESPONDING INCREASE IN THE MAIN CONTRACT RECEIPT S. ANOTHER DISTINGUISHING FACTOR IS THAT IN THE ASSESSMENT YEA R 2003-04 THE ASSESSING OFFICER HAD ESTIMATED THE INCOME AT 8% NET OF DEPRE CIATION WHEREAS IN THE YEAR UNDER CONSIDERATION THE INCOME HAS BEEN ESTIM ATED AT 12.5% OF THE TOTAL CONTRACT RECEIPTS BEFORE ALLOWING DEPRECIATIO N. THUS THERE IS NO PARITY OF FACTS IN BOTH THE YEARS AND HENCE IN THE INSTANT CASE THE ASSESSEE CANNOT RELY UPON THE EARLIER DECISION OF THE TRIBUN AL. THE ASSESSEE HAS NOT PLACED ANY OTHER MATERIAL TO COMPEL US TO INTERFERE WITH THE DECISION OF LEARNED CIT(A). AT THE SAME TIME WE HAVE TO TAKE INTO ACCOUNT THE FACT THAT THE ASSESSEE HAS RECEIVED MAJORITY OF CONTRACT RECEIPTS FROM THE EXECUTION OF SUB CONTRACT WORKS. HENCE ON A CONSP ECTUS OF THE MATTER WE ARE OF THE VIEW THAT THE ESTIMATE OF INCOME FROM CI VIL CONTRACT WORKS MADE BY LEARNED CIT(A) AT 8% OF THE TOTAL CONTRACT RECEI PTS IS QUIET REASONABLE AND ACCORDINGLY WE UPHOLD HIS ORDER ON THIS ISSUE. ITA NOS 816 OF 04 AND 17 OF 05 K SUBBA RAJU RAJAHM UNDRY PAGE 5 OF 6 10. THE ASSESSEE HAS ALSO RAISED A PLEA THAT THE ASSESSING OFFICER SHOULD NOT HAVE ADDED SEPARATELY THE INCOME FROM HIRE CHAR GES. WE FIND THAT THIS ISSUE WAS NOT RAISED BEFORE LEARNED CIT(A) AND HENC E WE DECLINE TO ADDRESS THE SAME. 11. THE NEXT ISSUE RELATES TO THE ADDITION OF U NPROVED SUNDRY CREDITORS. AS STATED EARLIER THE ASSESSEE DID NOT FURNISH ANY INFORMATION BEFORE THE ASSESSING OFFICER AND HENCE THE ASSESSING OFFICER W AS CONSTRAINED TO MAKE THE IMPUGNED ADDITION. SINCE THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT BEFORE THE LEARNED CIT(A) HE CALLED FOR A REMAND R EPORT FROM THE ASSESSING OFFICER. IN THE REMAND PROCEEDINGS THE ASSESSING OFFICER CALLED FOR EVIDENCES TO SUPPORT THE CLAIM OF THE ASSESSEE THAT THE IMPUGNED CREDITORS ARE TRADE CREDITORS WHO HAVE SUPPLIED MET AL CEMENT SAND ETC BUT THE ASSESSEE HAS FAILED TO FURNISH THE NECESSAR Y EVIDENCES. THE ASSESSING OFFICER HAS FURTHER STATED THAT THE EVIDE NCES FILED BY THE ASSESSEE WERE INCOMPLETE AND ACCORDINGLY SUPPORTED THE ADDIT ION OF IMPUGNED UNPROVED CREDIT BALANCES. THUS WE NOTICE THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE IMPUGNED CREDITORS ARE TRADE CREDITO RS. IN THE CASE OF R.SUBBA RAJU AND M/S SURYA EARTH MOVING RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE THERE WAS NO DISPUTE THA T THE CREDITORS THEREIN WERE TRADE CREDITORS. HOWEVER IN THE INSTANT CASE THERE IS DISPUTE ON THIS POINT SINCE THE ASSESSEE HAS FAILED TO PRODUCE NEC ESSARY EVIDENCES IN THIS REGARD EVEN DURING REMAND PROCEEDINGS. HENCE WE A RE OF THE VIEW THAT THE ISSUE CAN BE DECIDED ONLY IF THE NATURE OF CRED ITORS IS CORRECT KNOWN AND HENCE THE SAME REQUIRES RE-EXAMINATION. ACCORDINGL Y WE SET ASIDE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND RESTORE T HE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE N ATURE OF CREDITORS AND IF IT IS PROVED THAT THE IMPUGNED CREDITORS ARE TRADE CRE DITORS AND DELETE THE IMPUGNED ADDITION. ITA NOS 816 OF 04 AND 17 OF 05 K SUBBA RAJU RAJAHM UNDRY PAGE 6 OF 6 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED AND THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 31-12-2010 COPY TO 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 RAJAHMUNDRY 2 SHRI K. SUBBA RAJU CONTRACTOR PLOT NO.4 SRI AM RUTHA RESIDENCY 76- 5-31 GANDHIPURAM-II RAJAHMUNDRY 3 4. THE CIT RAJAHUNDRY THE CIT(A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM