PALLE PRABHAKAR REDDY.,HYDERABAD vs. INCOME TAX OFFICER, WARD-1., HYDERABAD

Facts of the case, in brief, are that assessee is an individual filed his return of income by declaring total income of Rs.6,02,000/-. The case of the assessee was selected for scrutiny and after following due procedure, Assessing Officer completed the assessment u/sec. 143(3) dated 13/12/2011. During the course of assessment proceedings, the Assessing Officer has estimated the income at 8% by observing as under:- “During the course of scrutiny assessment proceedings, the AR explained that the credits in SB A/c are related to the money received from M/s. Raga Mayuri Builders (P) Ltd., to whom the assessee has done supervisory work and while doing the supervisory work, the assessee had received advances from the above party and used to deposit the payment into Bank A/c, and draw the amounts required for the work done on behalf of M/s. Raga Mayuri Builders (P) Ltd. The assessee could only furnish a statement from M/s. Raga Mayuri Builders showing that the amounts are given by M/s. Raga Mayuri Builders (P) Ltd. The account extract in the books of Raga Mayuri Builders clearly indicate that the expenditure incurred by Mr.Prabhakar Reddy was not taken credit of. During the year, they have paid an amount of Rs. 2,93,45,429/-. The contention of the assessee that he has done supervisory work for Raga Mayuri Builders for which the advances are given by them and expenditure incurred on behalf of Raga Mayuri Builders is not acceptable. In the statement filed along with the return of income, the assessee clearly mentioned that the assessee is doing civil contract and estimated the income at Rs. 2,95,500/-. From the information filed, no other civil contract works i.e. construction of buildings for private persons is not furnished and in view of the same, the assessee was asked to explain why the income of the assessee should not be estimated at 8% of the total receipts of Rs. 2,93,45,429/- received from Raga Mayuri Builders (P) Ltd. In response to the same, the assessee filed a letter from Raga Mayuri Builders wherein it is mentioned as under:- “This is to confirm that our company had spent a total amount of Rs. 2,93,45,429/- during the Financial Year 2008- 09 towards constructions of temple, roads and other works fo our company. This amount was spent through you towards labour payments, material procurement etc., as you are engaged by the company for supervising the execution of the above works taken up by the company.” The letter filed by M/s. Raga Mayuri Builders (P) Ltd., is taken note of. As stated earlier, the account extracts filed by the assessee in the books of Raga Mayuri Builders indicates only payments and no corresponding entries for incurring expenditure on behalf of Raga Mayuri Builders. In view of the same, the claim of the assessee is not acceptable. At the time of hearing on 08/12/2011, the assessee’s AR was requested to furnish further evidence like. Account extracts from Raga Mayuri Builders (P) Ltd., for the expenditure incurred by the assessee on behalf of Raga Mayuri Builders (P) Ltd. is called for. The AR was also requested to explain as to why the total receipts from Raga Mayuri Builders should not be treated as Contract Receipts. The case was adjourned for hearing on 13/12/2011. On 13/12/2011, the assessee’s AR present and expressed his inability in furnishing further evidence as called for. In view of the same, the claim of the assessee that the amounts are received on behalf of the Raga Mayuri Builders and expenditure incurred on behalf of them is not accepted and since the assessee in the statement of income mentioned that he is in the business of Civil Contracts, the income of the assessee is estimated @ 8% of the total receipts of Rs. 2,93,45,429/-.”

On appeal, ld. CIT(A) confirmed the order of the Assessing Officer.

I have heard both the sides and perused the material available on record. The case of the assessee is that amounts deposited in the bank account on behalf of M/s. Raga Mayuri Builders (P) Ltd., in the capacity of supervising works, however, he was not able to substantiate his case either before the Assessing Officer or before the ld. CIT(A). By considering the entire facts and circumstances of the case, I am of the opinion that the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is on higher side. In my opinion, estimation of income of the assessee at 4% is sufficient to meet the ends of justice. Accordingly, the order passed by the ld. CIT(A) is modified to 4% instead of 8%. Thus, this appeal of the assessee is partly allowed.

In the assessment order the Assessing Officer has noted that the assessee has deposited an amount of Rs. 20.00 lakhs in Andhra Bank, Kurnool in different dates. The Assessing Officer asked the assessee to explain the source of deposits. The assessee has submitted before the Assessing Officer that assessee is carrying on contract works and the deposit of Rs.1.53 crores are made out of the amount received from the contract works. As the assessee has not filed the details, the Assessing Officer has treated the amount of Rs. 15.00 lakhs as ‘income from other sources’ and he granted relief of Rs. 5.00 lakhs on the ground that it is opening balance of the assessee as on 01/04/2010.

On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. 7. I have heard both the parties and find that the assessee is in the business of contract works in earlier years also, and therefore the entire amount deposited in the bank account treating it as ‘income from other sources’ is not justified. In earlier years, the profit of the assessee from business receipts estimated at 4%, therefore I estimate this year also at 4% and direct the Assessing Officer to calculate accordingly. Thus, this appeal filed by the assessee is partly allowed. 8. In the result, both the appeals filed by the assessee are partly allowed. Order Pronounced in open Court on this 22nd day of Jan., 2020.