The DCIT, Circle-1, Rajahmundry v. Shri M Rama Rao, Rajahmundry

ITA 184/VIZ/2010 | 2007-2008
Pronouncement Date: 27-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 18425314 RSA 2010
Assessee PAN ABWPM3743M
Bench Visakhapatnam
Appeal Number ITA 184/VIZ/2010
Duration Of Justice 9 month(s) 11 day(s)
Appellant The DCIT, Circle-1, Rajahmundry
Respondent Shri M Rama Rao, Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 27-12-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 27-12-2010
Date Of Final Hearing 27-10-2010
Next Hearing Date 27-10-2010
Assessment Year 2007-2008
Appeal Filed On 17-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI B.R.BASKARAN ACCOUNTANT MEMBER ITA NO.18 4 /VIZAG/20 10 ASSESSMENT YEAR : 200 7 - 08 DCIT CIRCLE - 1 SRI M RAMA RAO RAJAHMUNDRY . VS. RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO. : ABWPM 3743M APPELLANT BY : SHRI D S SUNDAR SINGH DR RESPONDENT BY : SHRI GVN HARI CA ORDER PER SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS RELATING TO ESTIMATION OF INCOME. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORDS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE BOOKS OF ACCO UNTS CASH BOOK LEDGER S ETC. PRODUCED BY THE ASSESSEE WERE VERIFIED BY THE ASSESSING OFFICER AND HE POINTED OUT CERTAIN DISCREPANCIES THEREIN. THE AUTHORISED REPRESENTATIVE HAS AGREED THAT SOME OF THE VOUCHERS FOR EXPENDITURE LIKE LABOUR PAYMENTS FLYA SH BRICKS ETC WERE NOT PROPERLY MAINTAINED AND HE HAS AGREED FOR ESTIMATING THE INCOME FROM THE BUSINESS OF THE ASSESSEE. ON THE BASIS OF THE AGREEMENT THE AO HAS ESTIMATED THE TOTAL INCOME OF THE ASSESSEE AT 12.5 % ON THE MAIN CONTRACT RECEIPTS OF RS.6 71 58 735/ - AND ALLOWED THE DEPRECIATION THEREOF. BESIDES THE AO HAS ALSO MADE AN ADDITION AT 25 % OF RS.3 82 950/ - REPRESENTING THE EXPENDITURE OF WHICH SELF MADE VOUCHERS WERE PRODUCED. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND CIT(A) A CCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSEE HAS NEVER AGREED FOR AN ESTIMATION OF INCOME AT 12.5% AND THE AR WAS UNDER THE HONEST IMPRESSION THAT THE AO WILL ISSUE SHOW CAUSE NOTICE PROPOSING THE PROFIT RATE. SINCE T HE ASSESSEE ITSELF HAS SH OWN THE BETTER RESULTS IN COMPARISON TO THE EARLIER YEARS SUCH ADDITION 2 WAS NOT CALLED FOR. HAVING AGREED WITH THE CONTENTIONS OF THE ASSESSEE THE CIT(A) DELETED THE ADDITION AND DIRECTED THE AO TO ACCEPT THE PROFIT DECLARED BY THE ASSESSEE. 3. NOW TH E REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AR OF THE ASSESSEE HAS CANDIDLY ADMITTED THE DISCREPANCIES IN THE MAINTENANCE OF BOOKS OF ACCOUNTS AND HE HAS AGREED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THAT CERTAIN VOUCHERS ARE NOT PROPERLY MAINTAINED AND THE INCOME MAY BE ESTIMATED FROM THE BILLS OF THE ASSESSEE. THEREFORE THE AO HAS RIGHTLY ESTIMATED THE INCOME. 4 . THE LD COUNSEL FOR THE ASSESSEE HOWEVER HAS SUBMITTED THAT NO DOUBT THE AR OF THE ASSESSEE HAS AGREED FOR ESTIMATION OF INCOME BUT HE NEVER AGREED WITH THE ESTIMATION OF INCOME AT 12.5% ON CONTRACT RECEIPTS AND ADDITION OF 25% OF THE EXPENDITURE WHICH WAS SUPPORTED ONLY BY SELF MADE VOUCHERS WHEN THE AO HAS T O ESTIMATED THE INCOME OF THE ASSESSEE AFTER REJECTING THE BOOKS OF ACCOUNTS HE HAS TO BRING OUT SOME COMPARABLE CASE IN THE SAME LINE OF BUSINESS. BUT THE AO DID NOT BRING OUT ANY CASE IN THIS REGARD AND THEREFORE THE ESTIMATION MADE BY THE AO WAS BASED ON CONJUCTURES AND SURMISES. THE LD COUNSEL OF THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE COMPARATIVE STATEMENTS OF NET PROFIT FOR EARLIER YEARS AND THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005 - 06 WITH THE SUBMISSION THAT THE NET PROFIT SHOW N BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR WAS 5.62% IN COMPARISON TO EARLIER YEARS IN WHICH THE PROFIT WAS SHOWN BETWEEN 4.12% TO 5.52% . H E ALSO INVITED OUR ATTENTION TO THE ORDER OF THE HIGH COURT OF MUMBAI IN THE CASE OF CIT VS SMT SUSHILA CHATU RVEDI IN ITA NO.1076 OF 2007 DATED 18.03.2009 IN WHICH THE HONBLE COURT HAS APPROVED THE ESTIMATION OF PROFIT IN THE CASE OF CIVIL CONTRACT OR S AT 6% OF THE GROSS RECEIPTS. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE LO WER AUTHORITIES AND DOCUMENTS PLACED ON RECORD WE FIND THAT UN - DISPUTEDLY THE AR OF THE ASSESSEE HAS ADMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS CERTAIN DISCREPANCIES IN THE MAINTENANCE OF BOOKS OF ACCOUNTS AND CONSEQUENTLY HE AGREED FOR THE EST IMATION OF PROFIT BUT NO WHERE THE PERCENTAGE OF PROFIT WAS AGREED 3 UPON BY THE AR OF THE ASSESSEE AND THE AO HAS ESTIMATED THE PROFIT AT 12.5% OF THE GROSS RECEIPTS WITHOUT BRINGING OUT ANY COMPARABLE CASE IN THIS REGARD. THEREFORE WE ARE OF THE VIEW THAT THE ESTIMATION MADE BY THE AO IS NOT PROPER . S INCE TH E DISCREPANCIES ARE POINTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE AR OF THE ASSESSEE HAS AGREED FOR THE ESTIMATION W E ARE OF THE VIEW THAT THE NET PROFIT RATE SHOULD BE ESTIMATED TO MEET THE ENDS OF THE JUSTICE. WE THEREFORE DIRECT THE AO TO ESTIMATE THE NET PROFIT OF THE BUSINESS OF THE ASSESSEE AT 6.5% OF GROSS CONTRACT RECEIPTS. SO FAR AS OTHER ADDITION MADE ON ACCOUNT OF SELF MADE VOUCHERS NO ARGUMENT WAS RAISED BY THE LD DR WE T HEREFORE FIND NO INFIRMITY IN THE ORDER OF THE CIT. ACCORDINGLY WE DIRECT THE AO TO ESTIMATE THE NET PROFIT AT 6.5% ON GROSS CONTRA CT RECEIPTS OF RS.6 71 58 735/ - AND THEREAFTER NO FURTHER ALLOWANCE WOULD BE ALLOWED TO THE ASSESSEE. 6 . IN THE RESULT TH E APPEAL OF THE REVENUE IS PARTLY ALLOWED. PRONOUNCE D ACCORDINGLY IN THE OPEN COURT ON 27.12.2010. SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER MSB/ UDC VISAKHAPATNAM 27 TH DEC. 2010. COPY TO 1. THE ACIT CIRCLE - 1 1 ST FLOOR AAYAKAR BHAVAN VEERABHADRAPURAM RAJAHMUNDRY. 2. SRI M RAMA RAO 56 - 10 - 14/1 LAKSHMI NILAYAM VIDYA NAGAR RAJAHMUNDRY . 3. THE COMMISSION ER OF INCOME TAX RAJAHMU NDRY 4. THE COMMISSIONER OF INCOME TAX (APPEALS) RAJAHMUNDRY . 5. THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. VISAKHAPATNAM. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLAT E TRIBUNAL VISAKHAPATNAM