The ACIT, Circle-1, Rajahmundry v. M/s R Subba Raju, Rajahmundry

ITA 203/VIZ/2011 | 2007-2008
Pronouncement Date: 26-07-2011 | Result: Dismissed

Appeal Details

RSA Number 20325314 RSA 2011
Assessee PAN AAGFR9133F
Bench Visakhapatnam
Appeal Number ITA 203/VIZ/2011
Duration Of Justice 2 month(s) 7 day(s)
Appellant The ACIT, Circle-1, Rajahmundry
Respondent M/s R Subba Raju, Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 26-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 26-07-2011
Assessment Year 2007-2008
Appeal Filed On 19-05-2011
Judgment Text
ITA NO 203 OF 2011 R SUBBA RAJU RAJAHMUNDRY PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.203/VIZAG/2011 ASSESSMENT YEAR: 2007-08 ACIT CIRCLE-1 RAJAHMUNDRY VS. R. SUBBA RAJU RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO:AAGFR 9133 F APPELLANT BY: SHRI TG.H. LUCAS PETER CIT(DR) RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 14.03.2011 PASSED BY LEARNED CIT(A) RAJAHMUNDRY AN D IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE READ AS UNDER: I. THE LEARNED CIT (A) ERRED IN SCALING DOWN AND R ESTRICTING THE DISALLOWANCE FROM 20% TO 10% ON UNVOUCHED LABOU R CHARGES HIRE CHARGES HIRE CHARGES AND METAL PURCH ASE WITHOUT ANY VALID BASIS AND COGENT ANALYSIS. II. THE LEARNED CIT (A) ERRED IN DELETING THE ADDITIO N OF RS.2 43 501/- REPRESENTING THE OUTSTANDING CREDIT B ALANCE IN THE NAME OF M/S VYSHNAVI EXPLOSIVES; WITHOUT CONDUC TING COGENT EXAMINATION OF DETAILS. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF UNDERTAKING CIVIL CON TRACT WORKS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION ADMITTING A TOTAL INCOME OF RS.85 58 560/-. HOWEVER THE ASSESSING OF FICER COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS AND DETERMIN ED THE TOTAL INCOME OF ITA NO 203 OF 2011 R SUBBA RAJU RAJAHMUNDRY PAGE 2 OF 5 THE ASSESSEE AT RS.1 49 67 990/-. THE ASSESSEE CHAL LENGED ALL THE ADDITIONS BEFORE THE LEARNED CIT (A) BUT GOT ONLY PARTIAL RE LIEF. AGGRIEVED BY THE RELIEF GRANTED BY THE LEARNED CIT (A) IN RESPECT OF THE TWO ITEMS CITED ABOVE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE RELATES TO REDUCTION OF ADHOC DISALLOWA NCE ON UNVOUCHED LABOUR CHARGES; HIRE CHARGES ETC. FROM 20% TO 10%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTIC ED THAT THE FOLLOWING EXPENSES ARE SUPPORTED MOSTLY BY SELF MADE VOUCHERS WITHOUT FULL DETAILS INCLUDING IDENTITY OF THE PAYEE. S.NO HEAD OF THE EXPENDITURE AMOUNT (RS.) 1 SAND PURCHASE 5 01 935 2 HIRE CHARGES 27 29 893 3 METAL PURCHASE 92 250 4 LABOUR CHA RGES CLAIMED UNDER VARIOUS HEADS 1 36 52 227 5 MESS CHARGES 30 33 556 TOTAL 2 00 09 861 THE ASSESSING OFFICER WAS OF THE VIEW THAT THE GENU INENESS OF THESE EXPENSES COULD NOT BE VERIFIED AS THEY ARE SUPPORT ED BY SELF MADE VOUCHERS AND ACCORDINGLY MADE AN ADHOC DISALLOWANCE OF 20% T HEREOF. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LEARNED CIT (A) BY F OLLOWING HIS OWN ORDERS THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200 6-07 REDUCED THE ADHOC DISALLOWANCE TO 10% OF THE TOTAL AMOUNT CITED ABOVE. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4.1 DURING THE COURSE OF HEARING THE LEARNED AUTHO RISED REPRESENTATIVE PLACED A COPY OF THE ORDER DATED 18.11.2010 PASSED IN THE ASSESSEES OWN CASE IN ITA NOS.235/VIZAG/2008 AND OTHERS RELATING TO THE ASSESSMENT YEARS 2005-06 AND 2006-07. HE FURTHER SUBMITTED THAT THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE ABOVE SAID APPEAL AND HAS UPHELD THE DECISION OF ITA NO 203 OF 2011 R SUBBA RAJU RAJAHMUNDRY PAGE 3 OF 5 THE LEARNED CIT (A) IN THOSE YEARS IN SUSTAINING TH E DISALLOWANCE ONLY TO 10% OF THE TOTAL EXPENDITURE. WE HAVE GONE THROUGH THE SAID ORDER AND WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY THE TRIBUNAL IN THIS REGARD. 17. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM PE RUSAL OF THE ORDER OF THE AUTHORITIES BELOW WE FIND THAT AS SESSING OFFICER HAS MADE AN AD-HOC DISALLOWANCE BY ESTIMATI NG IT AT 25% OF THE TOTAL UN-VOUCHED VOUCHER WHICH WAS REDUC ED TO 10% BY THE CIT (A) AFTER HAVING OBSERVED THAT MEREL Y BECAUSE A BULK OF SUPPORTING EVIDENCE HAVE NOT BEEN PRODUCED IT CANNOT BE INFERRED THAT THE ASSESSEE H AS EARNED HUGE INCOME NOT COMMENSURATE WITH THE PERCENTAGE OF PROFIT NORMALLY EARNED IN THE LINE OF CONTRACTUAL B USINESS UNDERTAKEN BY THE ASSESSEE. IN THE ABSENCE OF EVIDE NCE IN SUPPORT OF THE EXPENDITURES THE EXPENDITURE CLAIME D BY THE ASSESSEE CANNOT BE OUT RIGHTLY REJECTED UNLESS IT I S BROUGHT ON RECORD THAT SUCH TYPE OF EXPENDITURES WERE NEVER INCURRED BY THE ASSESSEE. ADMITTEDLY ASSESSEE IS A CIVIL CONTRACTOR AND IN CONSTRUCTION BUSINESS SOMETIMES THE SUPPORTING EVIDENCE ARE NOT AVAILABLE FOR THE EXPEN SES. BUT ID DOES NOT MEAN THE EXPENSES WERE NEVER INCURRED. THE ASSESSING OFFICER HAS ESTIMATED A PARTICULAR PERCEN TAGE OF DISALLOWANCE AND CIT (A) REDUCED IT. IT IS A QUESTIO N OF ESTIMATE ONLY AND WE ARE OF THE VIEW THAT THE ESTIM ATION MADE BY THE CIT (A) IS REASONABLE AND FAIR. WE THE REFORE UPHOLD HIS ESTIMATION AND APPROVE HIS ORDER. ACCORD INGLY THE REVENUES APPEAL IS DISPOSED OFF. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE SAID OR DER WE UPHOLD THE DECISION OF THE LEARNED CIT (A) IN SUSTAINING THE A DDITION TO 10% OF THE TOTAL EXPENSES CITED ABOVE. 5. THE NEXT ISSUE PERTAINS TO THE DISALLOWANCE OF O UTSTANDING AMOUNT OF RS.2 43 501/- PERTAINING TO A CREDITOR NAMED M/S VY SHNAVI EXPLOSIVES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER ASKED THE ASSESSEE TO PRODUCE CONFIRMATION LETTER FROM TH E CREDITOR CITED ABOVE IN ORDER TO PROVE THE GENUINENESS OF THE CREDIT. HOWE VER THE ASSESSEE FAILED TO PRODUCE THE SAME AND HENCE THE ASSESSING OFFICER ADDED THE ABOVE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPELLATE PROCEEDING ITA NO 203 OF 2011 R SUBBA RAJU RAJAHMUNDRY PAGE 4 OF 5 BEFORE LEARNED CIT(A) THE ASSESSEE FILED RELEVANT DETAILS AND THE FIRST APPELLATE AUTHORITY SOLICITED A REMAND REPORT FROM THE ASSESSING OFFICER IN TERMS OF RULE 46A OF THE INCOME TAX RULES. HOWEVER THE ASSESSING OFFICER DID NOT GIVE ANY OPINION ON THE DOCUMENTS SO FILED. THE RELEVANT OBSERVATIONS OF LEARNED CIT (A) ARE EXTRACTED BELOW : DURING THE APPELLATE PROCEEDINGS THE APPELLANT FI LED FRESH EVIDENCE WITH REGARD TO THE OUTSTANDING CREDIT IN T HE NAME OF VYSHNAVI EXPLOSIVES TO THE EXTENT OF RS.2 43 501/- AND ACCORDINGLY THE OBJECTIONS IF ANY REGARDING THE ADMISSIBILITY OF THE SAME IN TERMS OF RULE 46A OF THE I.T RULES ( HEREINAFTER REFERRED TO AS RULES) WAS SOLICITED FROM THE ASSE SSING OFFICER APART FROM DIRECTING TO VERIFY THE GENUINE NESS OF THE PAYMENT OF RS.5 00 000/- TO M/S. VYSHNAVI EXPLOSIVE S ON BEHALF OF THE SUB-CONTRACTOR M/S JAI MATHA WORKS. T HE IN- CHARGE ASSESSING OFFICER AFTER A PROLONGED GAP FU RNISHED A REPORT DT.22.02.2011 BY MERELY REPEATING THE FACTUA L DETAILS OF VARIOUS ISSUES DISCUSSED IN THE ASSESSMENT ORDER WITHOUT PASSING ANY DEFINITE OPINION ON THE ISSUES INVOLVED . THE ASSESSING OFFICER HOWEVER HAS NOT RAISED ANY OBJE CTION TO THE ADMISSION OF A STATEMENT OF CONFIRMATION OF THE TRANSACTIONS OF THE APPELLANT FIRM AS APPEARING IN THE BOOKS OF M/S VYSHNAVI EXPLOSIVES FOR THE ACCOUNTING YEAR ENDED 31.03.2007. THE ASSESSING OFFICER HAS ALSO NOT PASS ED ANY OPINION ON THE GENUINENESS OF THE TRANSACTION RELAT ING TO THE PAYMENT BY THE APPELLANT OF RS.5 00 000/- TO M/S VY SHNAVI EXPLOSIVES ON BEHALF OF ITS SUB-CONTRACTOR M/S JAI MATHA WORKS EXCEPT FOR STATING THE EXPLANATION OF THE APP ELLANT TO THE EFFECT THAT A PAYMENT OF RS.5 00 000/- HAS BEEN MADE ON BEHALF OF THE SAID SUB-CONTRACTOR TO M/S VYSHNAVI E XPLOSIVES FOR PURCHASE OF EXPLOSIVE MATERIAL BY THE SUB-CONTR ACTOR IN CONNECTION WITH THE CONTRACT WORK OF THE APPELLANT FOR WHICH A JOURNAL ENTRY WAS PASSED IN THE ACCOUNTS OF THE A PPELLANT. HENCE THE LEARNED CIT (A) ADMITTED THE ADDITIONAL E VIDENCES AND ACCORDINGLY DELETED THE IMPUGNED ADDITION. 5.1 FROM THE RECORD WE NOTICE THAT M/S VYSHNAVI EXPLOSIVES IS A REGULAR SUPPLIER OF EXPLOSIVE MATERIALS TO THE ASSESSEE. FU RTHER THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES IN SUPPORT OF THE OUTSTA NDING CREDIT IN THE NAME OF THE ABOVE PARTY BEFORE LEARNED CIT(A). IN THE RE MAND REPORT THE ITA NO 203 OF 2011 R SUBBA RAJU RAJAHMUNDRY PAGE 5 OF 5 ASSESSING OFFICER DID NOT EXPRESS ANY ADVERSE VIEW ON THE ADDITIONAL EVIDENCES FILED. IN THESE CIRCUMSTANCES THE LEARNE D CIT (A) WAS SATISFIED WITH THE GENUINENESS OF THE OUTSTANDING CREDIT IN T HE NAME OF THE ABOVE SAID PARTY AND ACCORDINGLY DELETED THE ADDITION. IN THE FACTS DISCUSSED ABOVE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED CIT (A) ON THIS ISSUE AND ACCORDINGLY APPROVE HIS DECISION. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 26 TH JULY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 26-07-2011 COPY TO 1 THE ACIT CIRCLE-1 RAJAHMUNDRY 2 M/S R. SUBBA RAJU 79-2-1 PRASHANTHI ESTATES TIL AK ROAD VL PURAM RAJAHMUNDRY 3 4. THE CIT RAJAHMUNDRY THE CIT(A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM