ITO, Ward 8 (1), Hyderabad v. Vamshi Constructions, Hyderabad

MA 42/HYD/2011
Pronouncement Date: 11-03-2011 | Result: Dismissed

Appeal Details

RSA Number 4222524 RSA 2011
Bench Hyderabad
Appeal Number MA 42/HYD/2011
Duration Of Justice 24 day(s)
Appellant ITO, Ward 8 (1), Hyderabad
Respondent Vamshi Constructions, Hyderabad
Appeal Type Miscellaneous Application
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 11-03-2011
Appeal Filed On 17-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER M.A. NO. 42/HYD/2011 ARISING FROM I.T.A. NO. 771/HYD/2010 (ASSESSMENT YEAR 2005-06) THE INCOME - TAX OFFICER WARD 8(1) HYDERABAD VS. M/S. VAMSHI CONSTRUCTIONS 8-3-228/327 HYDERABAD PAN: AADPV 1285 A APPELLANT RESPONDENT APPELLANT BY: SHRI K.E. SUNIL BABU RESPONDENT BY: SHRI S. RAMA RAO O R D E R PER CHANDRA POOJARI AM: THIS MISCELLANEOUS APPLICATION IS FILED BY THE REV ENUE AGAINST THE ORDER OF THIS TRIBUNAL IN I.T.A. NO. 77 1/HYD/2010 DATED 25.8.2010. 2. THE LEARNED DR SUBMITTED THAT THE ASSESSEE FIRM FIL ED ITS RETURN OF INCOME FOR A.Y. 2005-06 ON 30.10.2005 ADMITTING AN INCOME OF RS. 3 66 357. THE CASE WAS CONVERTED INTO SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 144 R.W.S. 143(3) OF THE ACT BY ESTIMATING THE PROFIT @ 12.5% OF THE GROSS RECEIPTS CLEAR OF ALL THE DEDUCTIONS SUCH DEPRECIAT ION REMUNERATION AND INTEREST ON PARTNERS CAPITALS. AG AINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE CIT(A) DIRECTED THE ASSES SING OFFICER TO COMPUTE THE INCOME AT 8% OF THE GROSS RECEIPTS A FTER EXCLUDING THE SALES TAX AND SEIGNERAGE CHARGES AND ALSO DIRECTED THAT THE INCOME SO ESTIMATED WOULD BE CLEA RED OF ALL THE DEDUCTIONS INCLUDING REMUNERATION AND INTEREST TO PARTNERS. THE ITAT VIDE ITS ORDER DATED 25.8.2010 IN ITA NO. M.A. NO. 42/HYD/2011 M/S. VAMSHI CONSTRUCTIONS ====================== 2 771/HYD/2010 DIRECTED THE ASSESSING OFFICER TO GRAN T DEDUCTION TOWARDS REMUNERATION AND INTEREST PAID TO PARTNERS ON THE PROFIT SO ESTIMATED. WHILE DOING S O THE ITAT RELIED ON THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT REPORTED IN 2 32 ITR 776 (AP). 3. THE LEARNED DR FURTHER SUBMITTED THAT IN THE CASE O F INDWELL CONSTRUCTIONS THE HIGH COURT HELD THAT : THE PATTERN OF ASSESSMENT UNDER THE INCOME-TAX ACT IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN THE SECTIONS 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLE TE THE INCOME-TAX OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGEMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS ALL THE DEDUCTIONS WHICH ARE REFERR ED TO UNDER SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS W ILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. 4. ACCORDINGLY THE LEARNED DR SUBMITTED THAT THERE IS MISTAKE APPARENT FROM THE ORDER OF THE TRIBUNAL AND PRAYED FOR RECTIFICATION OF THE SAME. 5. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. IN THIS CASE THE A SSESSING M.A. NO. 42/HYD/2011 M/S. VAMSHI CONSTRUCTIONS ====================== 3 OFFICER ESTIMATED THE INCOME AT 12.5% OF GROSS TURN OVER AND THEREAFTER NOT ALLOWED ANY DEDUCTION SUCH AS DEPREC IATION REMUNERATION AND INTEREST TO PARTNERS SINCE THE ASS ESSEE HAD FAILED TO FURNISH BOOKS OF ACCOUNT BANK ACCOUN T AS ALSO EVIDENCE IN SUPPORT OF ITS CLAIM. ON APPEAL THE CI T(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME AT 8% O F THE TURNOVER AFTER EXCLUDING SALES TAX AND SEIGNERAGE C HARGES. THE CIT(A) ALSO DIRECTED THE ASSESSING OFFICER THAT THE INCOME SO ESTIMATED WOULD BE CLEARED OF ALL THE DEDUCTIONS INCLUDING REMUNERATION AND INTEREST TO PARTNERS. THE TRIBUNA L REJECTED THE OPINION OF THE CIT(A). THE TRIBUNAL HELD THAT EVEN ON BEST JUDGEMENT ASSESSMENT ON REJECTION OF BOOKS OF ACCO UNT THE ASSESSEE IS ENTITLED FOR DEDUCTION TOWARDS PARTNERS SALARY AND INTEREST. THE INCOME OF THE ASSESSEE IS TO BE ESTIMATED SUBJECT TO THE ALLOWANCES FOR DEPRECIATION REMUNER ATION AND INTEREST TO PARTNERS. THIS IS A CONSCIOUS DECISION OF THE TRIBUNAL WHICH IS SUPPORTED BY VARIOUS JUDGEMENTS O F THE HIGH COURTS LIKE CIT VS. JAIN CONSTRUCTION CO. & ORS. 245 ITR 527 (RAJ) CIT VS. HEERA LAL BHAT 158 CTR 59 (RAJ) MA LIYEKKAL CONSTRUCTION CO. VS. CIT 260 ITR 333 (KER.) CIT V S. SURINDER PAL NAYAR 327 ITR 236. IN VIEW OF THE ABOVE DISCUSSIO N THE CLAIM OF THE ASSESSEE WITH REGARD TO INTEREST AND SALARY PAID TO PARTNERS AS PER THE PARTNERSHIP DEED SUBJECT TO THE PROVISIONS OF SECTION 40(B) OF THE ACT HAS TO BE AL LOWED. AS SUCH WE DO NOT FIND ANY FORCE IN THE ARGUMENT OF TH E LEARNED M.A. NO. 42/HYD/2011 M/S. VAMSHI CONSTRUCTIONS ====================== 4 DR AND ACCORDINGLY WE DO NOT FIND ANY MISTAKE APPA RENT FROM THE ORDER OF THE TRIBUNAL. 7. IN THE RESULT THE MA FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH 2011. SD/ - (G.C. GUPTA) VICE PRESIDENT SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED 11 TH MARCH 2011 TPRAO COPY FORWARDED TO: 1. I.T.O. WARD 8(1) HYDERABAD. 2. M/S. VAMSHI CONSTRUCTIONS C/O. SHRI S. RAMA RAO ADVOCATE FLAT NO. 103 INDIRADEVI NILAYAM HIMAYAT NAGAR HYDERABAD-29. 3. THE CIT(A) - IV HYDERABAD. 4 THE CIT - III HYDERABAD 5. THE DR B BENCH ITAT HYDERABAD