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Income Tax Appellate Tribunal - Hyderabad

D. Viswanath Reddy & Company, Kurnool vs Department Of Income Tax on 9 July, 2014

       IN THE INCOME TAX APPELLATE TRIBUNAL
          HYDERABAD BENCH "A", HYDERABAD

BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
 AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

                   MA No. 78/Hyd/2014
                 in ITA No. 147/Hyd/2013
                Assessment year 2005-06

M/s. D. Viswanatha Reddy    vs.   The Income Tax Officer
& Co., Kurnool                    Ward-2
PAN: AAEFV5865C                   Kurnool
Appellant                         Respondent

               Appellant by: Sri S. Rama Rao
             Respondent by: Smt. Esther N. Hanghal

             Date of hearing: 13.06.2014
     Date of pronouncement: 09.07.2014


                         ORDER

PER ASHA VIJAYARAGHAVAN, J.M.:

By this MA the Revenue seeks rectification in the order of the Tribunal 28.8.2013 in ITA No. 147/Hyd/2013 for A.Y. 2005-06.

2. The facts of the case are that the assessee firm has filed its return of income on 1.11.2005 admitting an income of Rs. 26,624/- on the turnover of Rs. 1,58,74,587/-. The case was selected for scrutiny and notice u/s. 143(2) was issued on 24.10.2006. The assessment was completed u/s. 143(3) by assessing the income of Rs. 49,10,620/- on the turnover of Rs. 3,90,72,000 by adopting a rate of 12.5% profit on turnover. The turnover of Rs. 3,90,72,000/- has been adopted on the basis of the Commercial Department feedback.

M/s. D. Viswanatha Reddy & Co.

========================

3. Aggrieved by the above assessment u/s. 143(3), the assessee firm has preferred an appeal before the CIT(A)- IV, Hyderabad. The CIT(A) had upheld the decision of the AO on adoption of the turnover and given part relief to the assessee firm by decreasing the percentage of profit from 12.5% to 6% on the turnover.

4. Aggrieved, the assessee firm has appealed before the Tribunal. The Tribunal has upheld the decision of the CIT(A) on adoption of the turnover and has given relief to the assessee firm in case of per cent of profit to be adopted for determining the income. The Tribunal has directed the AO to consider the last three years average net profit rate of the assessee to determine the income of the assessee and thereafter also directed that deduction u/s. 40(b) has to be allowed, if the assessee has claimed the same in its return of income.

5. By this MA, the AO has brought to our notice that it is not possible to calculate three years average net profit margin as directed by the Tribunal, as the assessee firm which is a partnership firm, was started with effect from 20.05.2003. The assessee firm has filed its return of income for A.Y. 2004-05 only and for the A.Ys. 2002-03 and 2003-04 the assessee firm was not in existence and hence no return of income was filed for these assessment years.

6. Further, the AO in his petition has pointed that the Tribunal in MA No. 154/Hyd/2013 in ITA No. 1505/Hyd/2012 for A.Y. 2004-05 remitted an identical issue back to the file of the CIT(A) for fresh consideration. The Tribunal while remitting back held that income at 8% of the gross receipts is to be adopted taking in view the order of the Tribunal 3 MA No. 78/Hyd/2014 M/s. D. Viswanatha Reddy & Co.

======================== Ahmedabad Special Bench in the case of Arihant Builders Pvt. Ltd. vs. ACIT (291 ITR 41) (AT) (SB) (AHD) wherein the Special Bench held that estimation of income at 8% of the gross receipts is justified.

7. We have heard both the parties and are convinced that an error has crept in the order of the Tribunal dated 28.8.2013. The assessee has come up on appeal against estimation of income at 6% of turnover. We cannot increase it to 8% as decided in ITA No. 1505/Hyd/2012 for the A.Y. 2004-05. In these circumstances, we recall the Tribunal order in ITA No. 147/Hyd/2013 dated 28.8.2013. The Registry of the ITAT is directed to post the appeal for hearing in due course and issue notice to both the parties accordingly.

8. In the result, the MA is treated as allowed.

Pronounced in the open court on 9th July, 2014 Sd/- Sd/-

       (B. RAMAKOTAIAH)              (ASHA VIJAYARAGHAVAN)
     ACCOUNTANT MEMBER                  JUDICIAL MEMBER
Hyderabad, dated the 9th July, 2014
tprao

Copy to:

1. The Income Tax Officer, Ward-2, Kurnool

2. M/s. D. Viswanatha Reddy & Co., c/o. Sri S. Rama Rao, Advocate, Flat No. 102, Shriya's Elegance, H. No. 3-6-643, St. No. 9, Himayathnagar, Hyderabad- 500 029.

3. The CIT(A)-IV, Hyderabad.

4. The CIT-III, Hyderabad.

5. The DR, A-Bench, ITAT, Hyderabad.