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M/s. D. Viswanatha Reddy & Co., Kurnool Vs. The Income Tax Officer Ward-2 Kurnool Appellant Respondent
July, 14th 2014


                   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



      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
                                                  MA No. 78/Hyd/2014
                                       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
                                                   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

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

       Pronounced in the open court on 9th July, 2014

              Sd/-                             Sd/-
Hyderabad, dated the 9th July, 2014

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.
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