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2016 (11) TMI 1250 - ITAT HYDERABAD

2016 (11) TMI 1250 - ITAT HYDERABAD - TMI - Initiation of revision proceedings u/s 263 - estimation of income - non maintenance of proper books of account - Held that:- While giving a finding that income is to be estimated on the basis of the survey, the AO has accepted the income returned which is at 1.97% of the gross receipts. The reasons for accepting the income returned on the basis of the books of account are not forthcoming from the order. Therefore, we are of the opinion that Ld. Pr.CIT .....

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d should have been examined by the AO afresh. Thus we modify the order of CIT directing the AO to enhance the income, to set aside the impugned order of the AO and restore the entire assessment proceedings to the file of AO to examine assessee’s contentions in detail a - In case of rejection of books of account, however, we make it clear that any estimation of income should not exceed 5% as determined by the Pr.CIT/or admitted by assessee in the course of survey. Consequently, the direction .....

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are partly allowed. - I.T.A. No. 457/HYD/2016 - Dated:- 21-10-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri B. Ramakotaiah, Accountant Member For Assessee : Shri V. Siva Kumar, AR For Revenue : Smt. G. Aparna Rao, CIT-DR ORDER Per B. Ramakotaiah, A. M. This is an appeal by assessee against the order of the Pr. Commissioner of Income Tax-2, Hyderabad dated 18-02-2016, u/s. 263 of the Income Tax Act [Act]. 2. Briefly stated, assessee-firm is engaged in transportation of coal for M/s. Singa .....

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net profit at 5% for AY. 2011-12 & 2012-13. However, for AY. 2013- 14, during which year the survey operations were conducted, assessee seems to have maintained books of account after the survey and filed return declaring income at ₹ 29,16,856/- on gross receipts of ₹ 14,75,28,963/-. The AO i.e., ITO, Ward-I, Mancheriyal, completed the assessment in the case of assessee on 10-12-2013 by accepting the income returned. However, in the impugned assessment order, AO mentioned that t .....

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f the opinion that AO s order was erroneous and prejudicial to the interest of Revenue. There is a mention that income returned was accepted when on the face of the order, AR agreed for estimating the income as admitted during the survey. Accordingly, Ld. Pr.CIT issued a notice u/s. 263 and asked assessee to explain why the order cannot be modified by determining the income at 5% of the gross receipts as estimated during the survey. Assessee, however, submitted that AO has not found any discrepa .....

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ction to revise the total income by adopting 5% of the gross contract receipts. He also directed the AO to initiate the penalty proceedings u/s. 271(1)(c). His orders in para 6, 7 & 8 are as under: 06. A perusal of the written statements filed by the assessee firm for the A.Ys 2011-12 and 2012-13 reveals that the assessee has disclosed net total incomes of ₹ 73,44,370/- on gross receipts of ₹ 14,68,87,443/- for AY 2011-12 and ₹ 83,39,680/- on-total gross receipts of ₹ .....

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only 1.97% of the gross transport receipts. The Assessing Officer, during the course of scrutiny assessment proceedings, has neither confronted the assessee about this gross under-statement of the returned income nor the assesse has disclosed the fact and explained the reasons. On the contrary, the AR in the course of hearing of the scrutiny assessment, exhorted the AO to accept the returned income as they have disclosed the income as per admission made during the course of survey and the Assess .....

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/s 263 also, the ARs, on specifically asking, have admitted that no regular books of accounts were maintained even after the date of survey and that whatever books were produced were prepared subsequently from the rough note books and also admitted that there were no agreements with the lorry owners and there was no basis for the payments allegedly made to them. Thus the situation existing prior to the date of survey was equally persisting subsequent to the date of survey also and there was no c .....

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itional income could never be achieved in the nature of the business. However, the facts in the present case are clearly different and as such the rate in the cited decision does not appear in the facts of the present case. At the outset, the assessee has not only admitted its net income at 5% of the gross transport receipts in the statement recorded during the course of survey, but also confirmed the admission in the sworn statement recorded from the same partner u/s 131 immediately thereafter .....

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en in the course of assessment for the AY 2013-14, the assessee tried to mislead the Assessing Officer by stating that they have returned the income as per their admission made during the course of survey and exhorted him to accept the returned income. The Assessing officer has simply acceded to its request without any verification and passed the impugned Assessment Order by recording the wrong fact of returned income being at the rate at which admission was made. The assessee also cannot accept .....

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prejudicial to the interests of revenue and direct the Assessing Officer to revise it by adopting the total income at 5% of the gross contract receipts and issue the revised demand notice to the assessee. Penalty notice u/s 271(1)(c) also may be issued in view of the concealment of true particulars of the assessee's income by not disclosing the correct amount of profits in the return filed for AY 2013-14 . 2.2. Contesting the above, assessee raised the grounds as under: 2. The learned Princi .....

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ut considering the facts of the case . Grounds Nos. 1 & 4 are general in nature. 3. Ld. Counsel submitted that assessee has maintained books of account post survey and has got them audited and AO has not found any discrepancies, therefore, the income returned was accepted. He referred to the submissions made before the CIT about the acceptance of the returned income and why Gross Profit should not be estimated. On a query by the Bench, it was fairly submitted that no information was furnishe .....

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in fact offered income at 5% of the gross receipts as it has not maintained proper books of account. Not only that, assessee also followed it up by filing the returns for AY. 2011-12 and 2012-13 offering incomes at 5% of the gross receipts which were accepted by the department. Therefore, assessee s contention that statement given during the survey does not have any evidentiary value has no basis. For the reasons best known to the Managing Partner, assessee not only agreed for estimation of inco .....

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rder indicates that there are certain deficiencies noticed. This is what the AO has recorded in the assessment order. The assessee-firm s one of the partner and the A.R., had explained the transactions found in the material impounded during the course of survey and on account of deficiencies noticed, requested to complete the assessment based on the admission made during the course of survey and also in view of the resultant taxes may be adjusted from the refunds due. In view of the above, the a .....

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