TaxTMI 
TaxTMI 
2016 (11) TMI 729
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....erest on fixed deposits receipts which were claimed to have been held as business assets. The assessee is also aggrieved with the denial of depreciation claim from the profits worked out by estimation on % age basis. 3. In ITA No.113(Asr)/2016, the Revenue is aggrieved with the action of learned CIT(A) by which he had reduced the application of rate of 10% to 8% and is also aggrieved with the action of learned CIT(A) by which he had allowed depreciation from the estimated income. 4. None was present on behalf of Revenue and neither any application for adjournment was filed by Revenue, therefore, it was decided to proceed ex-parte qua Revenue. 5. The brief facts of the case as noted in the assessment order are that assessee is a Govt. Contractor. The case of the assessee was selected for scrutiny. The Assessing Officer, during the course of assessment proceedings observed various discrepancies in the books of accounts, therefore, he rejected the books of accounts and estimated the income of assessee after applying 10% of profit to gross receipts. The Assessing Officer, further made addition on account of interest on fixed deposits. The learned CIT(A) in assessment year 2010....
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....fair cannot be accepted and in view of same application of past profit rate in this case will not be correct as this will give leeway to the assessee to report any income and get away with estimated profit. In view of above mentioned reasons, in the present case, as AO has found certain unverified expenses and unverifiable labour and wage expenses, and in view of same estimation of profit at 10 per cent is justified. The AO has compared the case of assessee with M/s Shivam Construction V/s CIT-3 Ludhiana in ITA no. 167 of 2007, where net profit rate of 10% was confirmed by Hon'ble jurisdictional High Court. The AO has quoted another case of Hon'ble ITAT Chandigarh of M/s ESS ESS Builders Private Limited in ITA no. 707/Chd/1997 and M/s Agarwal construction in ITA No 387 & 490/Chd/2004 where income was determined at 12 per cent of contract receipt. It was further mentioned that application of rate of 12 per cent on the contract receipt has been upheld by Hon'ble jurisdictional high court also. In my opinion, particular facts of the case cannot be compared with any other case as circumstances and situations have been different, even for the same assessee. Civil construction work varie....
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....f mind of the concerned authority to the issues/points raised before it. The requirement of recording reasons is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision making process. Another reason which makes it imperative for quasi-judicial authorities to give reasons is that their orders are not only subject to the right of the aggrieved persons to challenge them by filing statutory appeal land revision but also by filing wit petition under article 226 of the Constitution. Such decisions can also be challenged by way of appeal under article 136 of the Constitution of India. The High Courts hve the power to issue writ of certiorari to quash the orders passed by quasi-judicial authorities/Tribunals. Likewise, in appeal the Supreme Court can nullify such order/decision. This power of judicial review can be effectively exercised by the superior courts only if the order under challenge contains reasons. If such order is cryptic and devoid of reasons, the Courts cannot effectively exercise the power of judicial review. " ....
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.... to be computed by applying a net rate and the assessee hs furnished the prescribed particulars for the claim in respect of depreciation, the depreciation should be allowed separately and deducted out of the gross profits. The order of the Income Tax appellate Tribunal is in conformity with the circular issued by the Central Board of Direct Taxes. No provision of the Income Tax Act was brought to our notice which makes the claim to depreciation inadmissible where the income is computed by applying the flat rate. Secondly, subsequent to the Assessment Year 1994-95, in such matters the basic principle as enumerated in Section 44-AD of the Income Tax Act, 1961 is taken to be applicable wherein the matrix of estimation of profit on Gross receipts have been laid down for the civil construction work. The sub-section (2) of Section 44-AD reads under: "Any deduction allowable under the provisions of Sections 30 to 38, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed: Provided that where the assessee is firm, the salary and interest paid to is partners shall be d....
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....7. (vi) Decision of Hon'ble ITAT, Chandigarh in the case of Jaswant Singh Contractor vs. ACIT, Circle Kurushetra in ITA No.1109/Chd/2011 dated 29.02.2012. (vii) Decision of Hon'ble ITAT, Amritsar in the case of M/s Satish Aggrawal & Co. vs. Addl. CIT in ITA no. 483(Asr)/2013 dated 26.08.2013. The past history of the last five years of the case of the appellant was as under: A Y Total Contract Payments made (Rs) NP declared N P rate declared Additions made 2008-09 54170909/- 1615750/- 2.98% Rs. 90,000/- disallowed 2009-10 47821200/- 1531742/- 3.20% Addition of Rs. 130,000/- 2010-11 70743474/- 2494330/- 5.80% 1 i Books rejected and N P rate of 10% applied 2011-12 74539163/- 4126316/- 5.53% Books rejected and N P rate of 2012-13 106342563/- 5884400/- 5.53% Books rejected and N P rate of 10% applied The books of account of the appellant were audited by the Chartered Accountant and the appellant had produced his cash book 8s ledger alongwith vouchers (but not complete vouchers) before the AO during the assessment proceedings. The labour expenses were not....
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....d that the assets on which the depreciation has been claimed by the appellant were not put to use for the business purposes of the appellant firm but for the personal use of the partners of the appellant firm. It has been held by Hon'ble Punjab & Haryana High Court in the case of Lali Construction Co vs ACIT-cum Assessing Officer (2015) 229 Taxman 286 that depreciation is allowable from Net profits even if total income is computed by applying net profit rate. Several other hon'ble High Courts and the hon'ble Income Tax Appellate Tribunals have held likewise. Accordingly, in view of the above discussion, the AO is directed to allow the depreciation claimed at Rs. 32,37,428/- from the Net profit determined by applying the Net profit rate of 8% of gross contract receipts declared by: the appellant (held above), and subject to the returned income . (iv) The ground of appeal no. 8 is against the separate addition of interest of Rs. 11,98,006/- earned on FDR shown as business income. In the written submission the appellant had not made any submission with respect to this ground of appeal. The appellant had declared the interest on fixed deposits of Rs.....
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.... FDRs reflected in the books of account. It is well settled that when net profit rate is applied, all the income has been considered. It is also true that the Assessing Officer had not denied this fact that the FDRs were related to the business because he himself admitted that the assessee has reflected the interest accrued in the profit and loss account which was based on the books of account maintained by the assessee. We, therefore, considering the totality of the facts as discussed above, are of the view that the Assessing Officer was not justified in making separate addition on account of interest on FDR's when he had applied a net profit rate of 8% on the gross receipts for the full- year by invoking the provisions of Sec. 145 of the Income Tax Act, 1961. We, therefore, set aside the order of the learned CIT(A) on this issue and direct the Assessing Officer not to include the interest accrued on the FDR's amounting to Rs. 2,94,700/- in the income of the assessee" 14. In view of the above, Ground No.6 in Asst. Year 2010-11 and 2011- 12 is allowed. 15. In view of the above, two appeals filed by assessee are partly allowed. 16. Now coming to the appeal filed by ....