The DCIT, Central Circle, Rajahmundry v. Sri K S V Raja, Narsapur

ITA 393/VIZ/2010 | 2007-2008
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 39325314 RSA 2010
Bench Visakhapatnam
Appeal Number ITA 393/VIZ/2010
Duration Of Justice 6 month(s) 13 day(s)
Appellant The DCIT, Central Circle, Rajahmundry
Respondent Sri K S V Raja, Narsapur
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 07-01-2011
Date Of Final Hearing 30-12-2010
Next Hearing Date 30-12-2010
Assessment Year 2007-2008
Appeal Filed On 24-06-2010
Judgment Text
ITA NOS.391-393 OF 2010KV RAMAN KUMAR & OTHERS 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. 391/VIZAG/2010 ASSESSMENT YEAR:2007-08 D.C.I.T. RAJAHMUNDRY VS. K V RAMAN KUMAR NARSAPUR (APPELLANT) (RESPONDENT) PAN NO:ACWPK 3299 H ITA NO. 392/VIZAG/2010 ASSESSMENT YEAR:2007-08 D.C.I.T. RAJAHMUNDRY VS. K V RAMA KRISHNA RAO NARSAPUR (APPELLANT) (RESPONDENT) PAN NO:AGXPK 5879 Q ITA NO. 393/VIZAG/2010 ASSESSMENT YEAR:2007-08 D.C.I.T. RAJAHMUNDRY VS. K S V RAJA NARSAPUR (APPELLANT) (RESPONDENT) PAN NO:AKUPK 9237 H Q APPELLANT BY: SHRI D.S.SUNDER SINGH DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THESE THREE APPEALS OF THE REVENUE ARE DIRECTED AG AINST THE SEPARATE ORDERS PASSED BY LD. CIT(A)-I HYDERABAD IN THE RES PECTIVE HANDS OF THE ASSESSEE AGAINST THE ASSESSMENT ORDER FOR ASSESSMEN T YEAR 2007-08. SINCE THE ISSUES URGED IN THESE THREE APPEALS ARE IDENTIC AL IN NATURE THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.391-393 OF 2010KV RAMAN KUMAR & OTHERS PAGE 2 OF 6 2. THE SOLITARY ISSUE URGED IN ALL THESE APPEALS I S WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN HOLDING THAT THE INCOME OF T HE ASSESSEE HAS TO BE COMPUTED UNDER NET WORTH BASIS METHOD. 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THESE ASSESSEES HERE IN ARE CIVIL CONTRACTORS. THEY FILED THEIR RE SPECTIVE RETURNS OF INCOME AND FOR THE PURPOSE OF DETERMINING THE INCOME THEY FOLLOWED THE NET WORTH BASIS METHOD I.E. THE ANNUAL ACCRETION TO THE NET ASSETS PLUS EXPENDITURE BASIS. IN THE IMMEDIATELY PRECEDING SI X YEARS THE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT CONSEQUENT TO THE SEARCH CONDUCTED IN THEIR RESPECTIVE HANDS. TH E MATTER WENT UP TO THE ITAT AND THE TRIBUNAL VIDE ITS COMMON ORDER DATED 31-08-2009 DIRECTED THE ASSESSING OFFICER TO COMPUTE THE TOTAL INCOME U NDER NET WORTH BASIS METHOD. 3.1 BEFORE THE ASSESSING OFFICER THESE ASSESSEES SUPPORTED THE NET WORTH BASIS METHOD OF COMPUTATION BY PLACING RELIANCE ON THE DECISION OF ITAT REFERRED (SUPRA). THESE ASSESSEES ALTERNATIVELY HA VE STATED THAT IF THE ASSESSING OFFICER WANTS TO APPLY THE NET PROFIT RAT E THE PROFIT RATE OF 6% ADOPTED IN THE CASE OF A RELATIVE SHRI A.KASI VISWE SWARA RAO MAY BE ADOPTED IN THEIR RESPECTIVE HANDS ALSO. ACCORDINGL Y THE ASSESSING OFFICER ARRIVED AT THE TOTAL INCOME OF THESE ASSESSEES BY A DOPTING 6% OF THE GROSS CONTRACT RECEIPTS RECEIVED IN THEIR RESPECTIVE HAND S. THESE ASSESSEES CHALLENGED THE ASSESSMENT ORDERS BEFORE LEARNED CIT (A) BY HEAVILY PLACING RELIANCE ON THE DECISION OF ITAT REFERRED (SUPRA). IN VIEW OF THE DECISION OF ITAT THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME BY ADOPTING NET WORTH BASIS METHOD. AGGRI EVED THE REVENUE HAS PREFERRED THESE APPEALS BEFORE US WITH THE FOLLOWIN G IDENTICAL GROUNDS IN ALL THE THREE CASES. ITA NOS.391-393 OF 2010KV RAMAN KUMAR & OTHERS PAGE 3 OF 6 1. THE CIT (A) HAS ERRED BOTH ON QUESTION OF LAW AND FACTS. 2. THAT THE CIT (A) HAS OUGHT TO HAVE NOTICED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE DIFFERENT F ROM SEARCH ASSESSMENTS IN WHICH THE DECISION OF THE ITAT WAS G IVEN ESPECIALLY IN VIEW OF THE JUDGMENT IN THE CASE OF B HARAT SANCHAR NIGAM LTD VS. UNION OF INDIA (S.C) (282 ITR 286) WHEREIN IT WAS HELD BY THE HON'BLE SUPREME COURT TH AT THE CAUSE OF ACTION FOR EACH ASSESSMENT YEAR IS DISTINC T AND RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. 3. THAT THE CIT(A) HAS OUGHT TO HAVE NOTICED THAT THE ASSESSEE HAS FAILED TO FURNISH CERTAIN INFORMATION WHICH WAS ESSENTIAL FOR ESTIMATING THE INCOME ON NET WORTH ME THOD. 4. THAT THE CIT (A) HAS OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AS PER THE ALTERNATIVE PLEA OF THE ASSESSEE AND THE ASSESS EES GRIEVANCE SHOULD NOT HAVE BEEN CONSIDERED IN VIEW O F THE FOLLOWING JUDGMENTS: (I) BOMBAY HIGH COURT IN THE CASE OF RAMESH CHANDR A & CO. VS. CIT (168 ITR 375) (II) BOMBAY HIGH COURT IN THE CASE OF JIVATLAL PUR TAPSHI VS. CIT (65 ITR 261) (III) KERALA HIGH COURT IN THE CASE OF V KUMHAMBU AND SONS VS. CIT (219 ITR 235) THE COMMON RATIO LAID DOWN IN THE AFORESAID DECISIO N IS THAT WHAT IS VOLUNTARILY ACCEPTED CANNOT GIVE RISE TO A GRIEVANCE WHICH CAN BE TAKEN FURTHER IN APPEAL 5. THAT THE CIT (A) HAS OUGHT TO HAVE NOTICED THAT ACCORDING TO SECTION 145 OF THE INCOME TAX ACT THE METHOD OF ACCOUNTING SHOULD BE EITHER CASH OR MERCANTILE S YSTEM REGULARLY FOLLOWED BY THE ASSESSEE. THE AMENDED PRO VISION HAS BEEN ENACTED WITH EFFECT FROM 1-4-1997. THE NET WOR TH METHOD FOLLOWED BY THE ASSESSEE DOES NOT FIND ANY M ENTION IN THE ACT OR RULES. 6. ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. ITA NOS.391-393 OF 2010KV RAMAN KUMAR & OTHERS PAGE 4 OF 6 4. LEARNED CIT D.R SUBMITTED THAT THE DECISION OF ITAT REFERRED (SUPRA) HAS BEEN RENDERED IN CONNECTION WITH SEARCH ASSESSM ENTS WHERE AS THE INSTANT CASES RELATE TO REGULAR ASSESSMENT. HE FUR THER SUBMITTED THAT THE SEARCH ASSESSMENTS NORMALLY INVOLVE MANY COMPLICATI ONS AND HENCE IN THE FACTS AND CIRCUMSTANCES SURROUNDING THE SEARCH ASSE SSMENTS THE ITAT HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOM E UNDER NET WORTH BASIS METHOD. ACCORDINGLY HE CONTENDED THAT THE DECISION OF ITAT WHICH HAS BEEN RENDERED IN A PARTICULAR SET OF FACTS CANNOT BE TAKEN AS THE METHOD FOR COMPUTING INCOME IN THE COURSE OF REGULAR ASSES SMENTS ALSO. 5. ON THE CONTRARY THE LEARNED AUTHORISED REPR ESENTATIVE HEAVILY PLACED RELIANCE ON THE DECISION OF TRIBUNAL REFERRED (SUPR A) AND SUBMITTED THAT THE ISSUE BEFORE THE TRIBUNAL IS SQUARELY COVERED BY TH E ORDER OF THE TRIBUNAL. HE FURTHER SUBMITTED THAT THE YEAR UNDER CONSIDERAT ION IS A YEAR WHICH IS IMMEDIATELY SUCCEEDING THE YEAR OF SEARCH ASSESSMEN TS AND HENCE THE NET WORTH BASIS METHOD COULD BE APPLIED FOR COMPUTING THE INCOME OF THE INSTANT YEARS ALSO. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. ADMITTEDLY THE ORDER DATED 31-8-2009 PASSED BY THE ITAT IN THE HANDS OF THESE ASSESSEES RELATES TO THE SEARCH ASSESSMENT O RDERS PASSED FOR THE ASSESSMENT YEARS 2000-01 TO 2006-07. THERE CANNOT B E ANY DISPUTE THAT THE SEARCH ASSESSMENTS INVOLVE CONSIDERATION OF MAN Y MATERIALS AND HENCE THE DETERMINATION OF TOTAL INCOME IS USUALLY A COMP LICATED PROCESS MORE PARTICULARLY WHEN THE BOOKS OF ACCOUNT AND OTHER DA TA ARE INADEQUATE. HENCE BY CONSIDERING THE TOTALITY OF FACTS THE TR IBUNAL HAS OBSERVED AS UNDER: KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMST ANCES OF THE CASE WE ARE OF THE VIEW THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES WHERE THE BOOKS OF ACCOUNTS AND OTHER RECORDS ARE NOT PROPERLY MAINTAINED BY THE ASSESSEES THE M ETHOD ADOPTED BY THE ASSESSEES I.E. NET WORTH BASIS TO DE TERMINE ITA NOS.391-393 OF 2010KV RAMAN KUMAR & OTHERS PAGE 5 OF 6 THE PROFIT SHOULD HAVE BEEN ACCEPTED BY THE REVENUE AS IT IS A DISCRETION OF THE ASSESSEE TO FOLLOW ANY ONE OF THE RECOGNIZED METHOD OF ACCOUNTING. WE THEREFORE DO NOT FIND AN Y INFIRMITY IN THE MODE OF ACCOUNTING ADOPTED BY THE ASSESSEE FOR DETERMINING THE PROFITS FOR THE YEAR. HENCE WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT PLACE RELIANCE ON THE ABOVE SAID ORDER FOR THE PURPOSES OF REGULAR ASSESS MENTS AS THE SAID DECISION HAS BEEN RENDERED ONLY ON THE SPECIFIC FAC TS AND CIRCUMSTANCES OF THAT WERE PREVAILING IN THAT YEARS. 7. THE ASSESSMENT ORDERS UNDER CONSIDERATION IN THE INSTANT CASES DO NOT RELATE TO SEARCH ASSESSMENT. HENCE THERE SHOULD NO T BE ANY COMPLICATION IN THE PROCESS OF COMPUTATION OF TOTAL INCOME OF THESE ASSESSES. IN ANY CASE IT WAS NOT SHOWN BY THE ASSESSEES THAT THE COMPUTAT ION OF INCOME OF THE YEAR UNDER CONSIDERATION INVOLVES A COMPLICATED PRO CESS. THESE ASSESSEES BEING CIVIL CONTRACTORS ARE UNDER AN OBLIGATION TO MAINTAIN PROPER BOOKS OF ACCOUNT IN ORDER TO ARRIVE AT THE CORRECT TOTAL INC OME. HOWEVER THESES ASSESSEES HAVE FAILED TO MAINTAIN SUCH REGULAR BOOK S OF ACCOUNT. HENCE THE ASSESSING OFFICER HAD TO ESTIMATE THE INCOME OF THE SE ASSESSEES AND AS PER THE ALTERNATIVE SUBMISSIONS OF THE ASSESSEES; THE A SSESSING OFFICER HAS ADOPTED THE RATE OF 6% FOR ARRIVING AT THE TOTAL IN COME OF THESE ASSESSEES. WE HAVE ALREADY NOTICED THAT THE DECISION IN THE CA SE OF SEARCH ASSESSMENTS HAS BEEN RENDERED BY THE TRIBUNAL UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. THUS THE TRIBUNAL HAS N OT LAID DOWN ANY PRINCIPLE IN THIS REGARD WHICH MAY BE FOLLOWED IN OTHER YEARS ALSO. THE METHOD OF COMPUTATION OF INCOME HAS TO BE DECIDED O N THE BASIS OF FACTS AND CIRCUMSTANCES PREVAILING IN EACH YEAR IN EVERY CASE. HENCE IN OUR VIEW THE ASSESSEE CANNOT RELY UPON THE ABOVE SAID DECISION OF THE TRIBUNAL IN REGULAR ASSESSMENTS IN ORDER TO COVER UP HIS FAI LURE TO MAINTAIN THE BOOKS OF ACCOUNT. HENCE WE ARE OF THE VIEW THAT THE ASSE SSING OFFICER IS RIGHT IN ESTIMATING THE INCOME OF THESES ASSESSEES BY ADOPTI NG NET PROFIT RATE ITA NOS.391-393 OF 2010KV RAMAN KUMAR & OTHERS PAGE 6 OF 6 METHOD IN THE INSTANT YEARS. IN VIEW OF THE FOREGOIN G DISCUSSIONS WE SET ASIDE THE ORDERS PASSED BY LEARNED CIT(A) IN THE HA NDS OF THESE ASSESSEES. 8. IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:07-01-2011 COPY TO 1 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE R AJAHMUNDRY 2 SHRI K.V. RAM KUMAR D.NO.6-12-18 MAIN ROAD NARSA PUR W.G DISTT. 3 SHRI K.V. RAMA KRISHNA RAO D.NO.6-12-18 MAIN ROA D NARSAPUR W.G DISTT. 4 SHRI K.S.V. RAJA D.NO.6-12-18 MAIN ROAD NARSAPU R W.G DISTT. 5 6 THE CIT CENTRAL HYDERABAD THE CIT(A)-I HYDERABAD 7 THE DR ITAT VISAKHAPATNAM. 8 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM