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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 307/VIZ/2017 (Asst. Year : 2009-10) Mallampati Feroz Gandhi, vs. ITO, Ward-2, D.No. 9-47, Appanaveedu, Eluru. Hanuman Junction, Pedapadu Mandal, West Godavari District. PAN No. AHZPM 7453 K (Appellant) (Respondent)
Assessee by : Shri G.V.N. Hari – Advocate. Department By : Shri K.C. Das – Sr.DR
Date of hearing : 07/08/2018. Date of pronouncement : 10/08/2018. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Vijayawada, dated 21/02/2017 for Assessment Year 2009-10. 2. Facts of the case, in brief, are that assessee is a work contractor, filed his return of income by declaring income of Rs.1,73,129/- and agricultural income of Rs. 74,500/-. The assessee has shown net income of Rs. 1,59,830/- and total gross
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receipts of Rs. 1,37,39,084/- after claiming expenditure of Rs.1,35,79,254/-. During the course of assessment proceedings, the Assessing Officer has asked the assessee to produce all the bills/vouchers for the expenses incurred by him. In spite of several opportunities given by the Assessing Officer, the assessee had not produced bills/vouchers, therefore, the Assessing Officer rejected the books of account and estimated the income of the assessee at Rs. 12,36,518/- from contract works, which was at 9% of gross contract receipts of Rs. 1,37,39,084/-. Accordingly, the difference amount of Rs. 10,76,688/- (Rs. 12,36,518 – Rs.1,59,830) was added to the total income of the assessee. 3. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer by observing as under:- “6.1. I have perused the copy of profit & loss account and balance sheet of appellant as on 31.03.2009. Appellant had not claimed any depreciation in profit and loss account. There is no fixed asset reflected in balance sheet also. Appellant claimed the following major expenditure: (i) Labour charges of Rs.50,51 31 5/- and (ii) Purchase of materials of Rs.59,52,915/-. In the absence of any details like bills / invoices etc. for this substantial expenditure, A.O. estimated net profit @ 9% of gross receipts as net profit admitted by appellant at Rs.1,62,860/- was 1.2% of gross receipts of Rs.1,37,39,084/- 6.2. Various courts / tribunals have adopted different rates of estimates of income in many cases. Details are as follows:-
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/ High Estimated Net Sl. Name of the case Tribunal No. Court Income 1) M/s.KNR Constructions ITAT, Hyderabad 12.5% on contract Order dated 12.10.2012 receipts ITA No. 1141/Hyd/2005 & ITA No.9/Hyd/2007 2) Teja Constructions ITAT, Hyderabad 9% of gross ITA No.308/Hyd/2009 order dated receipts 23.10.2009 3) CIT vs. Parbhat Kumar Punjab & Haryana 12% of contract [323 ITR 675 (P&H)] Receipts * High Court 4) ---- Raja Ram Contractors v. CIT Punjab & Haryana 10% of contract receipts ITA No.689 of 2009 order High Court dated 07.04.2010 5) M/s.Krishna Mohan ITAT, Hyderabad 12.5% on entire Constructions ITA No.380 & contract receipts 381/Hyd/94 order dated 20.03.1998
* The reason for application of the said rate in the case of CIT vs. Parbhat Kumar contractor by the Hon'ble Punjab & Haryana High Court was the un-verifiability of the wages claimed as expenditure. In appellant's case also, the claim remained unverifiable due to non-production of vouchers / bills etc. Hence, in my view, A.O. is justified in resorting to estimate of income. 6.3. Once income is estimated, then all deductions are deemed to have been taken into account while making estimate. This view was upheld by Hon'ble Andhra Pradesh High Court in the case of Indwell Constructions vs. CIT (AP) 232 ITR 776. Hence, appellants claim of allowability of statutory liability of VAT payment of Rs.4,15,700/- as business expenditure is not tenable as no separate deductions can be considered in the event of rejection of books of accounts and estimation of income. Further, appellant had not claimed any depreciation in the profit & loss account. Hence, there is no deduction possible in such estimated income.”
Ld. counsel for the assessee has submitted that estimation of
income by the Assessing Officer is on higher side and requested to
reduce the same to 6%.
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Ld. Departmental Representative has relied on the orders of the authorities below. 6. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. 7. In this case, assessee has claimed an expenditure of Rs.1,35,79,254/-. When the Assessing Officer asked to produce the bills/vouchers, the assessee failed to do so, therefore, the Assessing Officer has estimated at 9% of the gross receipts as income of the assessee. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. After gone through the assessment order and the order of the ld.CIT(A), in our opinion, estimation of income at 9% is on higher side and to meet the ends of justice, it should be reduced to 8%. Ordered accordingly. 8. In the result, appeal filed by the assessee is allowed for statistical purposes. Order Pronounced in open Court on this 10th day of August, 2018.
Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated : 10th August, 2018. vr/- Copy to:
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The Assessee – Mallampati Feroz Gandhi, D.No. 9-47, Appanaveedu, Hanuman Junction, Pedapadu Mandal, West Godavari District. 2. The Revenue – ITO, Ward-2, Eluru. 3. The Pr.CIT, Eluru Range, Eluru. 4. The CIT(A), Vijayawada. 5. The D.R., Visakhapatnam. 6. Guard file. By order
(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.