THE DY. CIT, VIJAYAWADA vs. M/S. R.R. CONSTRUCTIONS, VIJAYAWADA

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the revenue is directed against order of the

Commissioner of Income Tax (Appeals) {CIT(A)}, Vijayawada vide ITA

No.66/CIT(A)/VJA/2015-16 dated 24.8.2016 for the assessment year

2009-10.

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada 2. Ground Nos.1, 4 & 5 are general in nature, which does not require

specific adjudication.

Ground No.2 is related to the depreciation on estimated income.

In this case, the assessment was completed u/s 143(3) r.w.s. 147 of the

Income Tax Act, 1961 (hereinafter called as 'the Act') by an order dated

29.11.2011 on total income of ` 41,35,830/-. During the assessment

proceedings, the A.O. rejected the books of accounts and estimated the

income @ 8% on gross contract receipts. The Ld. CIT taken up the

case for revision u/s 263 of the Act and set aside the order of the A.O.

dated 29.11.2011. Subsequently, the A.O. completed the assessment

consequent to the order passed u/s 263 of the Act. In the re-

assessment made u/s 143(3) r.w.s. 263 of the Act, the A.O. estimated

the income of ` 91,11,388/- @ 8% on contract receipts but not allowed

the depreciation. Another addition made by the A.O. was in respect of

the unsecured loans accepted from Mr. G. Ajay Kumar & Mr. G. Sudheer

Kumar amounting to ` 5,84,615/- and ` 6,13,267/- respectively.

before the CIT(A) and the Ld. CIT(A) allowed the appeal of the

assessee. Hence, the revenue is in appeal before us. During the appeal

hearing, the Ld. D.R. argued that the A.O. has estimated the income @

8% on contract receipts and the CIT has taken up the assessment order

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada dated 29.11.2011 for revision u/s 263 of the Act and directed the A.O. to

make the addition of ` 31,67,480/- relating to the depreciation. Since

the Ld.CIT has given a specific direction to add the depreciation, the

CIT(A) has no jurisdiction to interfere with the order of the Ld. CIT,

hence, requested to set aside the order of the Ld. CIT(A) and restore

the order of the AO. Further, the Ld. A.R. submitted that as per the

provisions of section 30 to 38 of the Act, once the income is estimated,

it is deemed that the expenses relating to section 30 to 38 of the Act

have been considered and no further deduction required to be allowed

to the assessee. The depreciation is an expenditure allowable u/s 32 of

the Act which is covered in the estimation, hence, no further deduction

required to be given. Accordingly, the Ld. D.R. submitted that on both

counts, the order of the Ld. CIT(A) is erroneous and hence, requested to

set aside the order of the Ld. CIT(A).

para of the Ld. CIT’s order u/s 263, though the Ld.CIT directed the A.O.

to add the depreciation, it follows with further directions of the CIT to

determine the total income in accordance with law and established

procedure and after affording a reasonable opportunity of being heard

to the assessee. The Ld. A.R. submitted that though the Ld.CIT directed

the A.O. to make the addition of ` 31,67,480/-, and gave further

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada instruction to redetermine the income in accordance with law and as per

established procedure and it is a clear indication that the issue has been

set aside to the file of the A.O. to reconsider the issue as per law,

hence, argued that the CIT(A) has rightly invoked the jurisdiction and

allowed the appeal of the assessee, hence that no interference is called

for on this issue. On merits, the Ld. A.R. submitted that it is established

as per the precedences of law that once the income is estimated

allowable deductions required to be allowed as per Hon’ble jurisdictional

High Court’s order in the case of CIT vs Y. Ramachandra Reddy, [2014]

50 taxmann.com 129 (Andhra Pradesh), hence argued that there is no

error in the order of the Ld.CIT(A), which requires interference of this

Tribunal.

on record and gone through the orders of the authorities below. In this

case, the CIT(A) has taken up the case for revision u/s 263 of the Act

and set aside the order of the A.O. passed u/s 143(3) of the Act dated

29.11.2011. In the revision order, the CIT though directed the A.O. to

make the addition of ` 31,67,480/-, it follows with further direction of

CIT to re-determine the total income in accordance with law and

established procedure and after affording reasonable opportunity of

being heard to the assessee. For the sake of convenience and clarity,

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada we reproduce relevant part of the order passed u/s 263 of the Act as

under:

“The A.O. is directed to add the depreciation at ` 31,67,480/-, which was wrongly allowed, to the total income and re-determine the total income in accordance with law & established procedure and after affording a reasonable opportunity of being heard to the assessee.”

consider the issue as per law and decide the issue after giving

reasonable opportunity to the assessee and to re-determine the income

in accordance with law and established procedure. Since the Ld. CIT’s

direction in 263 order is clear to afford the reasonable opportunity and

to re-determine the total income, we are of the considered opinion that

the A.O. was given free hand to re-do the assessment as per law after

giving opportunity to the assessee. Combined reading of the specific

mandate followed by the general instructions shows that the Ld. CIT

intended to remit the matter back to the file of the A.O. to re-do the

same as per law. Hence, we hold that there is no error in invoking the

jurisdiction by the Ld. CIT(A) in the consequential order and hence we

reject the argument of the Ld. D.R. on this issue.

computed estimating the income @ 8% on total receipts. The CIT(A)

has directed the A.O. to make the addition of depreciation as per law

after giving opportunity to the assessee. Therefore, the CIT(A) has 5

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada followed the law laid down by the higher judicial forum allowed the

appeal of the assessee. In the assessee’s case for the assessment year

2008-09, the jurisdictional Tribunal has allowed the depreciation from

the estimated income. The Hon’ble jurisdictional High Court in the case

of Y. Ramachandra Reddy (supra) held that the depreciation is required

to be allowed from the estimated income. Therefore, the CIT(A) has

followed the order of this Tribunal in assessee’s own case, hence, we do

not find any reason to interfere with the order of the Ld. CIT(A) and the

same is upheld. The appeal of the revenue on this ground is dismissed.

creditors. During the re-assessment proceedings passed u/s 143(3)

r.w.s. 263 of the Act, the A.O. made the addition in respect of loans of `

5,84,615/- from G. Ajay Kumar and ` 6,13,267/- from G. Sudheer

Kumar. The reason given by the A.O. to hold the loans in question are

unexplained was since the assessee had not furnished the funds flow

statement and source. The A.O. also held that the loans appear to be

squared up and sourced from unaccounted funds. The A.O. further held

that the assessee failed to establish identity, creditworthiness and

genuineness of the transactions, hence held that the loans are from

unexplained sources, accordingly, added back to the income.

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada 9. Aggrieved by the order of the A.O., the assessee went on appeal

before the CIT(A) and the Ld. CIT(A) after thorough verification of the

complete details accepted that the loans are genuine and deleted the

addition.

before this Tribunal.

A.O., whereas the Ld. A.R. supported the order of the CIT(A).

on record and gone through the orders of the authorities below. During

the appeal hearing, the Ld. A.R. submitted that cash flow statement was

submitted to the A.O. explaining the source and the A.O. has landed in a

wrong conclusion that the loans were squared up. How and why the

A.O. has arrived at such conclusion is only known to the A.O. Further,

Ld. A.R. submitted that the entire information with regard to the loan

credits was submitted to the CIT(A) also and the Ld. CIT(A) after

thorough verification of the complete details accepted the credits.

Hence, no interference was called for. We have gone through the order

of the CIT(A), which is made available in para 5.3 to 5.3.2 which is

reproduced hereunder:

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada 5.3. Assessing Officer stated that no fund flow statement was furnished by appellant in respect of disallowance of unproved loan creditors. However, Assessing Officer did not let in any evidence as to how and why he arrived at the conclusion that loan credit appeared to be a squared up one sourced from out of appellant's unaccounted funds.

5.3.1. Appellant submitted copies of PAN card, bank account and IT return of creditors. Loan creditors are sons of Managing Partner of the appellant firm is evident from PAN card. They had filed their Income Tax Returns within due dates for the relevant Asst. Year. A sum of Rs.5,84,615/- and Rs.6,13,267/- were shown as outstanding receivable in the asset side of balance sheet as on 31.03.2009 in the respective balance sheet of Mr.G.Ajay Kumar and Mr.Sudheer Kumar (loan creditors). Further, payment of Rs.4 lakh each to appellant firm is through banking channel by way of cheques (No.390714 of Andhra Bank, Ring Road, Vijayawada, in the case of Mr.G.Ajay Kumar and No.422371 of Andhra Bank, Ring Road, Vijayawada in the case of Mr.G.Sudheer Kumar). Their bank account copies confirmed adequate bank balance availability on the date of advance, i.e. on 18.10.2008 (in both cases). Sri G.Sudheer Kumar paid another sum of R.75,000!-by cheque No.436165 to appel[a4in on 01 .09.2008 which is also evidenced by bank account copy. Ledger account copies of both loan creditors as appearing in the books of appellant firm were also submitted. Thus, all the three ingredients of loan creditor viz. (1) identity of creditors (2) capacity of creditors and (3) genuineness of loan transaction are proved by appellant.

5.3.2 Hence, I fail to agree with Assessing Officer that the loan credits are squared up ones that were outsourced from out of the appellant’s unaccounted funds. Both loans are outstanding as on 31.3.2009. I, therefore, direct the Assessing Officer to delete addition of ` 11,97,882/-. Ground of appeal 4 is allowed.”

assessee has submitted the complete information to the A.O. with

regard to both the credits. Copies also submitted to the CIT(A). the Ld.

CIT(A) after verifying the PAN card, bank account, IT return and all the

relevant details held that the loans were not squared up and the

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada assessee has established the identity of creditors, capacity and the

genuineness of the transactions. Therefore, we do not see any reason

to interfere with the detailed and well reasoned order of the Ld. CIT(A).

Accordingly, the order of the Ld. CIT(A) is upheld and the appeal of the

revenue is dismissed.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 28.02.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-

ITA No.467/Vizag/2016 M/s. R.R. Constructions, Vijayawada

Sl. Description Date Initials No. 1. Date of dictation by the Author 21.02.2018 Sr.PS 2. Draft placed before the Dictating Member 22.02.2018 Sr.PS 3. Draft placed before the Second Member Sr. PS 4. Draft approved by the Second Member Sr. PS 5. Date of approved order comes to the Sr. PS Sr. PS 6. Date of pronouncement of order Sr. PS 7. Date of file sent to the Bench Clerk Sr. PS 8. Date on which file goes to the Head Clerk Hd. Clk 9. Date of dispatch of order Sr. PS