2017 (12) TMI 1258

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....f, are that the assessee is a partnership firm, engaged in the business of civil contracts, filed its return of income for the Assessment Year 2009-10 on 30/09/2009 on a total income of Rs. 1,06,59,300/-. The return was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny under CASS and the assessment was completed under section 143(3) of the Act on a total income of Rs. 1,52,85,740/-. The Assessing Officer found that assessee had received total contract receipts of Rs. 26,66,70,613/-. Out of which, an amount of Rs. 5,42,90,048/- was given for sub-contract works to others and received sub-contract commission @1%, amounting to Rs. 5,42,901/-. Further, a sum of Rs. 12,68,58,376/- was received on sub-co....

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....not be less than the admitted income of the assessee. The ld. CIT(A), while allowing the appeal of the assessee, followed the order of this tribunal in the case of DCIT vs. R.R. Constructions in ITA No. 47/VIZ/2013, by order dated 06/11/2015. For the sake of convenience, the relevant portion of the order is extracted as under:- "6.1 Hon'ble ITAT, Visakhapatnam in the case of M!s.Ratna Constructions v.ACIT, Circle-2(1), Vijayawada in ITA No. 370/Viz/2011 order dated 13.12.2013 held that A.O. should not disallow interest and remuneration payment to partners. Relevant excerpt of the order is reproduced below: 5. We have considered submissions of Id. Representatives of parties and orders of authorities below. It is a fact on record that....

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....nst this order of the Tribunal, Hon'ble Jurisdictional High Court upheld the view of the ITAT Hyderabad in judgement dt. 25.6.2013 in ITTA No.82 of 2013 by holding that in view of CBDT circular dated 31.8.1965, relied upon by the Tribunal, interest has to be allowed separately even in case of estimation of profit. Since the view taken by the AO is in consonance with the decision of the coordinate benches of the Tribunal and that view is one of the possible views, the assessment order passed under section 143(3) cannot be held to be either erroneous or prejudicial to the interests of the revenue on this issue. In the aforesaid view of the matter, we direct the AO not to disallow the interest and remuneration payment to partners. The orde....

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....imated is only the net profit before allowing any non-cash expenditure / statutory deductions. Further, the quantum of depreciation would also depend upon the value of assets. For example, a business man having lower version of Car or Air Conditioner would be entitled to claim lower amount of depreciation, since the cost of the lower version of car and Air Conditioner will be less. Whereas another business man having higher version of Car and Air Conditioner would get higher amount of depreciation, since the cost of those assets shall be higher. Hence, even if the level of operations and other things are equal between the two, the depreciation amount will be different due to the difference in the value of assets. Hence the total income shal....

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....eration separately. The Assessing Officer stated to have considered all the disallowances, which are required to be allowed to the assessee while estimating the net profit. Therefore, no separate deduction is required to be allowed. 6. The case of the assessee is that the deduction is a statutory allowance, which is required to be allowed even if income is estimated as has been held by the Hon'ble Jurisdictional High Court in the case of CIT vs. Y. Ramachandra Reddy in I.T.T.A. No. 48/2002, by order dated 30/07/2014. The Authorised Representative of the assessee further submitted that in this line of business, maintenance of pakka vouchers are impossible since the assessee is engaged in the business of civil contracts, however, the ass....

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....s & maintenance, salaries, labour charges, transport charges etc. are not verifiable hence, made self paid vouchers. Many petty payments were made in cash and it is also not ascertainable whether the payments attract the disallowance under section 40A(3) of the Act or not. Therefore, the Assessing Officer rejected the books of account and estimated the income. During the hearing in appeal, ld.Authorised Representative for the assessee did not make out any case to controvert the findings given by the Assessing Officer with regard to nature of expenses and its capability of verification. When the assessee cannot establish the genuineness of the expenses, we do not find any error in the action of the Assessing Officer for computing the income....