AVVA VENKATA RAMA RAO,VIJAYAWADA vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4), HYDERABAD

Date of hearing: 26/06/2023 Date of pronouncement: 28/06/2023 ORDER Per R.K. Panda, Vice-President & 1999/Hyd/2017 filed by the assessee are directed against the separate orders dated 21.08.2017 of the learned CIT (A)-12, Hyderabad relating to A.Y 2013-14 & 2014-15 respectively. ITA Nos. 14 & 15/Hyd/2018 filed by the Revenue are directed against the separate orders dated 9.10.2017 of the CIT (A)-12 Hyderabad relating to A.Y 2012-13 and 2013-14 respectively. ITA No.762/Hyd/2018 filed by the Revenue is directed against the order dated 16.02.2018 of the learned CIT (A)- 12, Hyderabad for the A.Y 2014-15. 217 and 219/Hyd/2018 filed by the Revenue are directed against the separate orders dated 22.11.2017 of the learned CIT (A)-12, Hyderabad relating to A.Ys 2012-13 & 2013-14 respectively. It may be mentioned here that for A.Y 2013-14, the Revenue has filed two appeals against the order passed by the CIT (A) i.e. one u/s 144 r.w.s. 153C and the other one passed u/s 143(3) of the I.T. Act. For the sake of convenience, all these appeals were heard together and are being disposed of with this common order.

ITA 1998/Hyd/2017 – A.Y 2013-14 (Assessee) ITA 1999/Hyd/2017 – A.Y 2014-15 (Assessee)

“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in dismissing the appeal without giving another opportunity.

3. The learned Commissioner of Income Tax (Appeals) ought to have adjudicate the appeal after examining the bank accounts and reconciliation statement produced at the time of hearing.

4. Any other ground that may be urged at the time of appeal hearing.”

a) Interest paid on self-occupied Rs.2,30,108 house disallowed b) Deductions claimed under Rs.1,00,000 Chapter VIA disallowed c) Unexplained credits as Rs.83,00,651 discussed above Total Rs.86,30,759

5. In appeal, the learned CIT (A) dismissed the appeal filed by the assessee.

6. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal.

by the assessee are accordingly allowed for statistical purposes. – A.Y 2014

15. (Assessee)

“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.

2. The learned Commissioner of Income Tax (Appeals) is not justified in dismissing the appeal without giving another opportunity.

3. The learned Commissioner of Income Tax (Appeals) ought to have adjudicate the appeal after examining the bank accounts and reconciliation statement produced at the time of hearing.

4. Any other ground that may be urged at the time of appeal hearing.”

in . We have already decided the issue and the grounds raised by the assessee have been allowed for statistical purposes. Following similar reasonings, the grounds raised by the assessee in the above appeal are also allowed for statistical purposes. ITA 14/Hyd/2017 – A.Y 2012

13. (Revenue)

by the Revenue are as under: “1. Whether on the facts and circumstances of the case, and in law, the ld.CIT(A) failed in treating the interest income as business income without appreciating the fact that it has not been brought on record by the assessee that the surplus funds were put in FDRs on account of commercial expediency. Since the funds were not required at the relevant point of time in construction activities, the same were parked with bank to earn interest. Therefore, the interest earned on surplus funds parked with bank is not inextricably linked with the business activity of the assessee. Therefore, the interest earned by assessee cannot be treated as business income and same has been rightly treated as income from other sources by the A0.

2. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessarily.”

13. Facts of the case, in brief, are that the assessee is a company engaged in the business of real estate i.e. purchase of land and developing & selling the same. It filed its return of income for the impugned A.Y admitting loss at Rs.34,01,777/- under the regular provisions and Rs.2,16,93,917/- u/s 115JB of the Act. The return was processed u/s 143(1) and subsequently the case was selected for scrutiny and statutory notice u/s 143(2) was issued and duly served on the assessee to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details.

13.1 The Assessing Officer completed the assessment u/s 143(3) on 30.03.2015 determining the total income of the assessee at Rs.4,58,43,092/- wherein he determined the business income of the assessee at Rs.1,41,56,092/- by estimating the profit at 5% of the gross business receipt of Rs.28,31,21,833/-. Similarly, he made addition of Rs.3,16,86,937/- being the interest income as “income from other sources” by separating it from the gross business receipts.

income of Rs.,4,93,03,513/-. We find the learned CIT (A) while sustaining the addition of Rs.2,45,00,000/- directed the Assessing Officer to adopt profit rate @ 5% of gross receipts in line with the order of the Assessing Officer in the original assessment proceedings passed u/s 143(3) on 22.02.2011 wherein the Assessing Officer had adopted the profit rate of 5% for estimation of income of the assessee company. Similarly, he directed the Assessing Officer to consider the interest income as part of business receipts and estimate the profit @ 5%. So far as the insurance commission is concerned, he noted that the Assessing Officer in the original assessment had estimated such insurance commission at 50% of the total receipts, therefore, he directed the Assessing Officer to restrict the addition at 50% of such receipt and accordingly allowed the claim of the assessee. It is the submission of the learned Counsel for the assessee that during the proceedings u/s 153A, the assessee could not produce the books of account and furnish other details as called for by the Assessing Officer since the Directors were under custody and there was nobody available to produce the record/details before the Assessing Officer. It is his submission that given an opportunity, the assessee is in a position to substantiate its case before the Assessing Officer since the share capital that has been added by the Assessing Officer and upheld by the learned CIT (A) u/s 68 is nothing but receipt from the group concerns and therefore addition u/s 68 could not have been made. It is his submission that since the Directors are now free and the books of account are available with the assessee therefore, given an opportunity, the assessee is in a position to substantiate his case. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh after giving due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the assessee and the Revenue are accordingly allowed for statistical purposes.

10. Since identical issues have been raised by the assessee and Revenue in other appeals therefore, following our reasoning given above, we deem it proper to restore the issues to the file of the Assessing Officer for fresh adjudication for all these years. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the respective appellants are accordingly allowed for statistical purposes.”

by the Revenue is accordingly allowed for statistical purposes. -A.Y 2013

14. (Revenue)

by the Revenue read as under: “1. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in directing to assess the business income @5% of the gross receipt as against 15% adopted in the assessment order; ignoring the reasons specified in the assessment order for estimating the income @15% of the gross receipt.

2. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in directing to assess the business income @5% of the gross receipt as against 15% adopted in the assessment order; ignoring the fact that the estimate is based on the findings emanating from search conducted u/s 132?

3. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in directing to assess the business income @5% instead of @15% adopted by the A0 without appreciating that the assessee failed to produce books of account and it is an admitted fact that the assessee has not furnished any documentary evidence in support of the claim of expenditure under different head?

4. Whether on the facts and circumstances of the case, and in law, the ld. CITA) failed to appreciate the Apex Court's decision in Commissioner of Income Tax vs. M/s. Mcmillan and Co., AIR 1958 SO 207, wherein the Hon'ble Supreme Court has laid down that if true income or profit cannot be ascertained on the basis of the assessee's methods of preparing accounts, then income must be computed upon such basis and in such a manner as the AO may determine.

5. Whether on the facts and circumstances of the case, and in law, the ld. CITA) failed in treating the interest income as business income without appreciating the fact that it has not been brought on record by the assessee that the surplus funds were put in FDRs on account of commercial expediency.

Since the funds were not required at the relevant point of time in construction activities, the same were parked with bank to earn interest. Therefore, the interest earned on surplus funds parked with bank is not inextricably linked with the business activity of the assessee. Therefore, the interest earned by assessee cannot be treated as business income and same has been rightly treated as income from other sources by the A0.

– A.Y 2014-15 (Revenue) 20. Grounds raised by the Revenue are as under: “1) Whether on the facts and circumstances of the case, and in law, the ld CITA) is justified in holding that the rejection of books of account by the AO is not proper, when the ld CIT(A) herself categorically stated that "in the instance case the books of accounts were neither produced during scrutiny proceedings nor during appellate proceedings". 2) Whether on the facts and circumstances of the case, and in law, the ld CIT(A) is justified in holding that the rejection of books of account by the AO is not proper, when the ld CIT(A) herself categorically stated that many of bills/vouchers are self-made and non-verifiable and therefore it cannot be denied that huge unverifiable expenses are being claimed by the assessee. 3) Whether on the facts and circumstances of the case, and in law, the ld CIT(A) is justified in restricting the addition to lump sum amount of Rs. 50,00,000/- as against Rs.48,06,64,892/- made by the AO without giving any opportunity to the AO or without calling for any remand report. 4) Whether on the facts and circumstances of the case, and in law, the decision of the ld. CIT(A) is stereo typed, non-speaking, unreasoned and arbitrary in as much as that there is no justification for restricting the addition to Rs.50. 00 lakhs as against Rs.48,06,64,892/- made by the AO and not giving any cogent reasons for doing so. 5) Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in following the pattern in earlier year without appreciating that the facts during the AY under consideration are much different than in earlier years and whether erred in not appreciating that that there cannot be wide application of the rule of consistency and there is no such thing as res-judicata in income-tax matter?" 6) The grounds appellant which craves may leave to amend or alter any ground or add any other be necessary”.

«1arge other expenses were claimed in P&&LA/c" and this was in fact one of the reasons for the selection of case in CASS for A.Y:2013-14. The Assessing Officer had disallowed 10% of such expenditure at Rs.21,69,594/-, observing 6.4 that the expenses booked are huge and unverifiable. Similarly, in A.Y:2012- 13 lumpsum addition was made by disallowing expenditure to an extent of Rs.25,00,000/ -, since the bills/vouchers furnished towards Sales Promotion expenses, General expenses, Office maintenance, Vehicle maintenance, Travelling expenses, were found to be self-made and were not maintained properly. In the instant case, the books of accounts were neither produced Therefore, during scrutiny proceedings nor during appellate proceedings. following the pattern of the earlier years, it can be concluded that although many of the bills/vouchers are self-made books of accounts are maintained, and non-verifiable, and therefore, it cannot be denied that huge unverifiable expenses are being claimed by the assessee. Viewing the facts and circumstances of the case in entirety, and also looking to the nature of the business and quantum of the turnover, therefore, it would serve the ends of justice if a lumpsum disallowance of Rs.50,00,000/- is made, on account of improper maintenance of bills and vouchers etc. The Assessing Officer is therefore directed to restrict the addition made to Rs.50,00,000/-. The grounds related to this issue are PARTLY ALLOWED.”

ITA 216/Hyd/2018 – A.Y 2012-13 (Revenue)

by the Revenue are as under: “1. Whether on the facts and CIT(A) circumstances of the case, and in law, the ld. erred in directing to assess the business income @5% of the gross receipt as against 15% adopted in the assessment order, ignoring the reasons specified in the assessment order for estimating the income @15% of the gross receipt.

2. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in directing to assess the business income @5% of the gross receipt as against 15% adopted in the assessment order, ignoring the fact that the estimate is based on the findings emanating from search conducted u/s 132?

3. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in directing to assess the business income @5% instead of @15% adopted by the AO without appreciating that the assessee failed to produce books of account and it is an admitted fact that the assessee has not furnished any documentary evidence in support of the claim of expenditure under different heads?

4. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) failed to appreciate the Apex Court's decision in Commissioner of Income Tax versus M/s. Mcmillan and Co., AIR 1958 SC 207, wherein the Hon'ble Supreme Court has laid down that if true income or profit cannot be ascertained on the basis of the assessee's methods of preparing accounts, then income must be Computed upon such basis and in such a manner as the AO may determine.

as mentioned in Sr. No. 1 to 4 above, whether on the facts and circumstances of the case, and in law, the ld. CIT(A) erred in estimating the profit @ 5% of gross receipt without appreciating that in the appellate order dated 27.06.20 14 for AY 2011-12 on which the present ld. CIT(A) relied upon, the then CIT(A) in Para-5 of the appellate order has directed the A0 to adopt estimation @ 8% of gross receipts of construction work and adopt estimation@ 5% of gross receipt on sale of plots?

6. Whether on the facts and circumstances of the case, and in law, the ld. CIT(A) failed in treating the interest income as business income without appreciating the fact that it has not been brought on record by the assessee that the surplus funds were put in FDRs on account of expediency. Since commercial the funds were not required at the relevant point of time in construction activities, the same were parked with bank to earn interest. Therefore, the interest earned on surplus funds parked with bank is not inextricably linked with the business activity of the assessee. Therefore, the interest earned by assessee cannot be treated as business income and same has been rightly treated as income from other sources by the AO.

7. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary”.

26. Facts of the case, in brief, are that the assessee company is engaged in the business of real estate i.e. purchase of land and developing and selling the same. It filed its return of income for the impugned A.Y on 27.12.2012 declaring total income of Rs.56,05,050/- under the normal provisions and Rs.2,72,71,140/- under 115JB (MAT) provisions. The case was selected for scrutiny and statutory notices u/s 143(3) and 142(1) were issued and served on the assessee to which the AR of the assessee appeared before the Assessing Officer from time to time and furnished the requisite details. The Assessing Officer completed the assessment u/s 143(3) on 12.3.2015 determining the total income of the assessee at Rs.5,92,73,230 by determining the business income at Rs.67,70,833/- by estimating the profit @ 5% of the gross business receipt of Rs.13,54,16,666/-. Further, he made addition of Rs.5,25,02,399/- being the interest income received by the assessee treating the same as income from other sources.

ITA Nos.217/Hyd/2018 u/s 143(3) and u/s 144 r.w.s. 153C (A.Y 2013-14) s