2008 (7) TMI 505

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....of the income on the basis of best judgment assessment, any further adjustment of the profits arrived at by applying the net profit rate by way of allowance of depreciation of the assets used in business is permissible? (ii) Whether the Commissioner of Income-tax could validly assume jurisdiction under section 263 by holding an opinion that the order passed by the Assessing Officer allowing the claim of depreciation was erroneous and prejudicial to the interests of the Revenue? (iii) Whether the Tribunal was justified in adopting the principle underlying section 44AD of the Income-tax Act in sustaining the order passed by the Commissioner of Income-tax, when section 44AD was not admittedly applicable in the case?" 3. At the outset it may....

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....her by the previous results of the assessee or some comparable cases. In the instant case, the Assessing Officer has allowed deduction of direct expenses at 75 per cent. of the gross receipts without any cogent material. His ad hoc estimate of expenses divorced from the relevant facts cannot be upheld. We have also gone through the details of income furnished by the assessee, which shows the net profit at 8.05 per cent. In this calculation, the assessee had determined the net profit at Rs. 3,40,350 before depreciation, interest and remuneration to partners. If the amount of depreciation of Rs. 49,324 is reduced this net profit comes at Rs. 2,91,116. Its ratio of gross receipts comes at 6.88 per cent. It is the manner in which the assessee h....

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....at when the best judgment assessment of net profit is made, thereafter, depreciation is required to be allowed to be deducted therefrom and for that purpose reliance is placed on the judgments of this court in CIT V. Jain Construction Co. [2000] 245 ITR 527 and Bharat Construction Co. v. CIT [2002] 258 ITR 140 decided on September 13, 2001. 7. On the other hand, learned counsel for the Revenue submitted that the findings recorded are pure findings of fact and do not require any interference. 8. In our view, so far as question No. 1 is concerned, it is clear from the judgments of this court in Jain Construction Co.'s case [2000] 245 ITR 527 and Bharat Construction Co.'s case [2002] 258 ITR 140, that where the Assessing Officer has adopted ....