1992 (10) TMI 126 - AT - Income Tax

Tribunal Upholds Commissioner's Decision on Assessee Firm's Total Income Determination

The Tribunal dismissed the appeal, upholding the Commissioner (Appeals)' decision that the total income of the assessee firm should be determined at Rs. ... Appellate Assistant Commissioner, Assessed Income, Assessment Order, Original Assessment, Total Income Issues Involved:1. Adjustment of departmental recoveries from gross contract bills.2. Separate addition of interest paid to partners under section 40(b).3. Allowance of depreciation claim.4. Treatment of interest on FDRs as part of business profits.5. Nature and scope of re-assessment under section 147.Detailed Analysis:1. Adjustment of Departmental Recoveries from Gross Contract Bills:The assessee contended that departmental recoveries amounting to Rs. 9,94,174 should be adjusted from the gross contract bills of Rs. 39,49,890 before estimating profits. The Commissioner (Appeals) rejected this claim, stating that the assessee had accepted the original assessment without pressing for this relief. The Tribunal upheld this decision, citing the principle that re-opening of an assessment is intended to benefit the Revenue, not the assessee. The Tribunal referenced the Full Bench decision of the Andhra Pradesh High Court in Sri Venkata Rama Lingeshwara Rice Mill's case, which supported the view that claims not raised in the original assessment cannot be entertained in re-assessment proceedings.2. Separate Addition of Interest Paid to Partners under Section 40(b):The assessee argued that interest paid to partners should not be separately added, referencing the Tribunal's decision in ITO v. Sri Ramakrishna Contractors. The Commissioner (Appeals) directed that the income determined on estimate should include disallowance under section 40(b) and that the Assessing Officer should work out the percentage to be adopted in estimating the income so that it does not exceed 12.5% of the gross bills. The Tribunal upheld this directive.3. Allowance of Depreciation Claim:The assessee claimed depreciation of Rs. 34,257, which was not allowed in the original assessment. The Commissioner (Appeals) did not entertain this claim, stating that it was not raised in the original assessment. The Tribunal, referencing the Andhra Pradesh High Court's decision in State Bank of Hyderabad's case, held that the claim is entertainable in re-assessment proceedings but cannot reduce the income below the originally assessed amount of Rs. 5,75,370.4. Treatment of Interest on FDRs as Part of Business Profits:The assessee contended that interest on FDRs amounting to Rs. 21,310 should be treated as part of business profits and not under the head 'other sources.' The Commissioner (Appeals) rejected this claim, stating that it was decided against the assessee in the original assessment. The Tribunal upheld this decision, referencing the Andhra Pradesh High Court's decision in State Bank of Hyderabad's case, which states that claims considered and rejected in the original assessment cannot be raised again in re-assessment proceedings.5. Nature and Scope of Re-assessment under Section 147:The assessee argued that the assessment completed on 28-8-1989 should be considered an independent assessment and not a re-assessment. The Tribunal rejected this argument, stating that the fresh assessment made in pursuance of the directions of the first appellate authority remains a re-assessment under section 147. The Tribunal cited Chaturvedi and Pithisaria's Income-tax Law to support this view. The Tribunal also held that re-assessment proceedings do not open the entire assessment for fresh claims but are confined to considering escaped income.Conclusion:The Tribunal dismissed the appeal of the assessee, upholding the decision of the Commissioner (Appeals) and confirming that the total income of the assessee firm should be determined at Rs. 5,75,370. The Tribunal emphasized that re-assessment proceedings are intended to benefit the Revenue and not to allow the assessee to raise new claims that were not considered in the original assessment.