Tribunal clarifies income tax assessment independence, allows appeals partially.

The Tribunal partly allowed the Assessee's appeals for statistical purposes and allowed the Revenue's appeal for statistical purposes. It emphasized the need for separate assessment of depreciation and consideration of relevant factors in income estimation. The Tribunal clarified that the principle of res judicata does not apply in income tax proceedings, highlighting that each year's assessment is independent. It directed a review of profit for the current year if projects and facts are the same as the previous year, and upheld the allowance of interest paid to the bank against income from FDRs assessed as business income.

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Issues:
1. Part allowance of appeals against assessments u/s. 143(3) of the Income Tax Act, 1961 for assessment years 2005-06 & 2006-07.
2. Applicability of the principle of res judicata in income tax proceedings.
3. Claim for review of profit based on previous year's assessment.
4. Allowance of depreciation and its statutory nature.
5. Allowance of interest paid to bank against income from FDRs assessed as business income.

Issue 1: Part Allowance of Appeals
The judgment deals with two consecutive year appeals by the Assessee contesting part allowance of assessments against income from civil construction work. The Assessing Officer assessed income at 8% of contract receipt after rejecting books of account, upheld by CIT(A). The Assessee argued for consistency based on a previous year's decision. The Tribunal emphasized each year as a separate assessment unit and set aside the matter to examine if profit for the current year should be reviewed based on previous year's assessment.

Issue 2: Principle of Res Judicata
The Tribunal clarified that the principle of res judicata does not apply in income tax proceedings. It highlighted that each year's assessment is independent, and decisions from previous years are not binding. The Tribunal directed the first appellate authority to review the profit for the current year if the projects and facts are the same as the previous year.

Issue 3: Claim for Review of Profit
The Assessee's claim for a review of profit based on the previous year's assessment was considered valid by the Tribunal if the projects were the same. The onus to establish the facts lies on the Assessee, and the Revenue can examine other factors affecting income estimation.

Issue 4: Allowance of Depreciation
The Tribunal stressed that depreciation is a statutory allowance and should be assessed separately after estimating net profit. It directed a speaking order after considering all relevant materials and hearing both parties. The Tribunal highlighted the need for clarity on whether the profit rate in the previous year included depreciation.

Issue 5: Allowance of Interest
The Tribunal addressed the claim for allowance of interest paid to the bank against income from FDRs assessed as business income. It upheld the direction by CIT(A) to allow expenditure for earning interest income. The Tribunal found the Assessee's argument regarding FDRs and bank guarantee to be without merit and directed the AO to decide per a speaking order based on materials provided by the Assessee.

In conclusion, the Tribunal partly allowed the Assessee's appeals for statistical purposes and allowed the Revenue's appeal for statistical purposes, emphasizing the need for separate assessment of depreciation and consideration of relevant factors in income estimation.

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