DONTHALA PURNACHANDRA RAO,G KONDURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), , VIJAWADA

PER S. BALAKRISHNAN, Accountant Member :

2 out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] dated 12/12/2017 for the AY 2015-16.

Accordingly, notice U/s. 143(2) of the Act was served on 2/8/2016. In response to the notice, the assessee’s Authorized Representative (AR) appeared and filed the required details.

Based on the discussions with the AR and the submissions made by the assessee, the Ld. AO directed the Income Tax Inspectors [ITIs] to examine the genuinity of the expenses and submit a report. The Inspectors submitted a report wherein it was submitted that the assessee has not produced vouchers or verifiable details for the following major expenses: i. Aggregate purchases Rs. 55,22,790 ii. Bitumen Transport Expenses Rs. 4,25,330 iii. Brick Purchases Rs. 9,60,200 iv. Concrete Charges Rs. 1,37,194

3 v. Earth Work Charges Rs. 6,73,223

3. The Ld. AO considered the report of the Inspectors and provided another opportunity to the assessee to produce complete details for all the expenses on 15/11/2017. The Ld. AO observed that the assessee could not produce the bills, vouchers or any other details with regard to the above expenses. Therefore, the Ld. AO proposed to reject the books of account and estimated the income @ 12.5% of the gross receipts and called for the objections from the assessee on or before 30/11/2017. Since the assessee has not filed any objections, the Ld. AO rejected the books of accounts U/s. 145(3) of the Act and estimated the income @ 12.5% of gross receipts at Rs. 88,18,049/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld.CIT(A) the only contention of the assessee is with respect to the estimation of income @ 12.5% . To support his ground before Ld.CIT(A), the assessee produced a copy of the Hon’ble ITAT, Visakhapatnam decision in the assessee’s own case for the AY 2009-10. The assessee has not contested before the Ld. CIT(A) regarding the non-verification of the books of accounts of the assessee by the Ld. AO. The assessee has merely pleaded before the Ld. CIT(A) to estimate the income @ 8% instead of 12.5% estimated by the Ld. AO on gross receipts based on the ITAT decision in assessee’s own case for earlier AY. Accordingly, the Ld. CIT(A) considered the submissions of the assessee and partly allowed the appeal and directed the Ld. AO to calculate the income @ 8% on gross receipts. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

4. The assessee has raised the following grounds of appeal:

“1. The order made by the Ld. CIT(A), Vijayawada is bad in law, arbitrary, contrary to the provisions of law and against the principles of natural justice.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A), Vijayawada erred in directing the Assessing Officer to calculate the income at 8% on the Gross Receipts since the appellant maintained the books of accounts regularly.

5 4.2, 4.3 & 4.4 of the assessment order state that the assessment is completed U/s. 144 of the IT Act, 1961. This is to further submit that depreciation ought to have been allowed from the income assessed. 5. For these reasons and those which may be urged at the time of hearing of appeal and on the facts and circumstances of the case, the order passed by the CIT(A) to estimate income at 8% on gross receipts may be modified by accepting the income returned.

6. The appellant craves leave to add, alter, amend, modify, substitute, delete and / or rescind all or any of the grounds of appeal on or before the final hearing, if the necessity so arises.”

5. At the outset, the Ld. AR argued that the assessee is regularly maintaining the books of accounts and was subjected to audit U/s. 44AB of the Act and hence rejection of books of accounts by the Ld. AO is not valid in law. The Ld. AR further argued that the Ld. AO has passed the assessment order U/s. 143(3) of the Act whereas the assessment is completed U/s. 144 of the Act. The Ld. AR also submitted that the Ld. CIT(A) has erred in calculating the income @ 8% on the gross receipts.

Per contra, the Ld. DR referred to para 4.2 of the order of the Ld. AO wherein the Ld. AO has clearly mentioned about the proposal to reject the books of accounts and to estimate the income @ 12.5% on the gross receipts. The Ld. DR further submitted that the Ld. AO has observed that the assessee has not

6 raised any objections to the above proposal of the Ld. AO. The Ld. DR further submitted that the assessee has not produced bills / confirmations before the Ld. AO and has produced only in the month of November, 2022. He therefore pleaded that the orders of the Ld. Revenue Authorities be upheld.

None of the above grounds raised before us was contested before the Ld. CIT(A). It is also noted that after pleading for estimation of 8% on the gross receipts as income against 12.5% estimated by the Ld. AO, the assessee contested before us that the Ld. CIT(A) has erred in directing the Ld. AO to calculate the income @ 8% on the gross receipts. Further, as submitted by the Ld. DR, we observe that the confirmation of the accounts were obtained on 26/11/2022 only from Sri Maheswari Stone Crusher. In view of 7 the afterthought of the assessee to contest the rejection of books of accounts before us inspite of accepting the 8% on gross receipts allowed by the Ld. CIT(A), following the ITAT, Visakhapatnam order in the assessee’s own case. We are also of the considered view that merely not mentioning section 144 by the Ld.AO cannot invalidate findings nor render the assessment void ab initio. We also are of the opinion that since the assessee has not produced any details / confirmations before the Ld. Revenue Authorities before the completion of proceedings, and also not contested any of the above grounds before the Ld. CIT(A).

Even before us, the assessee has not placed any satisfactory evidence to establish his case except filing of one confirmation letter dated 26/11/2022, which is an afterthought. We are therefore inclined to uphold the order of the Ld. CIT(A) and hence no interference is required in the order of the Ld. CIT(A).