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Dy. Commissioner of Income-tax, Central, Circle 3, Hyderabad Versus M/s. Maa Highways, Khammam and Others and Vica-Versa

2016 (5) TMI 344 - ITAT HYDERABAD

Estimation of business income - Held that:- The issue has already been considered and adjudicated by the coordinate bench of this Tribunal in the case of one of the assessees herein, viz., Maa Highways, for assessment year 2007-08, wherein estimation of income in the hands of subcontracts at 5% of the gross receipts was held to be reasonable. Respectfully following the same, we hold that in all these cases as well, the business income of the assessees for the years under appeal be estimated at 5 .....

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ture. The CIT(A) has rightly pointed out that the amounts withdrawn cannot be presumed to have been deployed and incurred towards revenue expenditure and got debited to the Profit & Loss Account. Where there is estimation of business income, disallowance and consequential addition of revenue expenditure is not sustainable, as held by the jurisdictional High Court in the case of Indwell Constructions (1998 (3) TMI 121 - ANDHRA PRADESH High Court ). In view of the same held that no separate disall .....

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MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Appellants : Shri P. Murali Mohana Rao For The Respondent : Smt. Vasundhara Sinha CIT-DR ORDER Per Bench : There are sixteen appeals in this bunch, concerning three assessees of a common group. There are cross appeals for assessment years 2007-08 to 2010-11 in the case of M/s. Maa Highways, Khammam, besides cross appeals for assessment years 2009-10 and 2010-11 in the case of M/s. Ragini Constructions. In the case of M/s. Sree Nagendra .....

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in the case of Madhucon Projects Limited and group of cases on 4.2.2011. After the search in the case Madhucon Projects Ltd. and its group concerns including the assessees herein, notices under S.153A were issued to the assessees. In response thereto, the assessees filed returns of income for relevant assessment years. During the assessment proceedings, under S.143(3), the books of account maintained by the assessees were rejected and the income of the assessees was estimated at 8% of the gross .....

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books of account and other supporting documents, the assessees have failed to produce the same. He further observed that the assessees were mainly stationed at Khammam and have opened bank accounts in Hyderabad and New Delhi, where they do not have any operations, and therefore, he came to the conclusion that these bank accounts are opened only to facilitate the diversion of funds to the principal contractor, Madhucon Projects Ltd. He further observed that these accounts are used for withdrawing .....

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agement of M/s. Madhucon Projects Ltd. during the relevant financial year, the Assessing Officer concluded that these amounts were never used for the business activity of the assessees herein but were returned back to the contractor. He therefore, disallowed the same in the hands of the principal contractor, and added the same protectively in the hands of the assessee firms herein. 4. Against the assessments thus made, assessees preferred appeals before the CIT(A), who though, confirmed the esti .....

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sue of estimation of income in the case of M/s Maa Highways, one of the assessees herein, has come up before this Tribunal in ITA No.54/Hyd.2013 and this Tribunal vide its order dated 30.7.2013 has directed estimation of income at 5% of the gross receipts in the case of sub-contracts and therefore, since all the assessees herein belong to the same group and factual background in these cases also being same, income of these assessees herein should also be estimated at 5%. 6. As regards the estima .....

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rotective basis, the Learned Departmental Representative submitted that since the substantive additions made in the hands of M/s. Madhucon Projects Ltd., are pending adjudication by the CIT(A), these appeals may be kept pending, to which the learned counsel for the assessee objected. The Learned Departmental Representative also relied upon the decision of the coordinate Bench of this Tribunal in the case of Prabhu Wines in ITA No.1100/Hyd.2013 dated 23.10.2013, wherein after considering the prin .....

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se of Indwell Constructions (232 ITR 776), wherein it was held that where the income of an assessee is estimated, there cannot be any other addition. Therefore, according to him, the addition of rerouting of funds in the hands of the assessees herein on protective basis is rightly deleted by the CIT(A). 9. Having regard to the rival contentions and the material on record, we find that on the issue of estimation of business income, the issue has already been considered and adjudicated by the coor .....

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ly treated as allowed. 10. As regards the Revenue s appeals against the deletion of the additions made on protective basis in the cases of these assessees, we find that the additions have been made consequent to detecting that the assessees received funds from M/s. MPL Ltd. and rerouted the same back to M/s. MPL itself. Assessing Officer therefore, presumed that the assessees have not expended the said receipts towards their business activity. But as rightly held by CIT(A), all withdrawals canno .....

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hdrawals were accounted in books as expenditure incurred during the year and further, the expenditure was not only revenue in nature but was also debited to the P&L account to be disallowed as expenditure. In the absence of books and vouchers, one cannot specifically conclude that the amounts withdrawn were indeed deployed and were incurred towards revenue expenditure and got debited to P&L acct. It is also seen that the withdrawals were actually more than the entire turnover of the appe .....

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