TaxTMI 
TaxTMI 
2016 (9) TMI 1429
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....he facts of the case. Relief may please be granted by accepting the book results and deleting the said addition of Rs. 22,55,589/-. 2. In the facts and circumstances of the case and in law, the ld CIT (A) has erred in confirming the action of the ld. AO in disallowing a sum of Rs. 6,63,750/- on account of depreciation. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 6,63,750/-. 3. (a) In the facts and circumstances of the case and in law the ld CIT(A) has erred in confirming the action of the ld AO in exceeding his jurisdiction and further in not following the directions of the Hon'ble ITAT while adding a sum of Rs. 16,40,214/-.The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 16,40,214/-. (b) In the facts and circumstances of the case and in law, the ld CIT (A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 16,40,214/- out of outstanding liabilities. The action of ld. CIT (A) is illegal, unjustified, arbitrary a....
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.... past history of the assessee and the defects in accounts books of the assessee, pointed out by the A.O. Assessee has claimed that with the increase of turnover, profit rate is decreased. For this very reason, he has challenged the application of profit rate shown in A.Y. 2005-06. Considering the profit rate of 11.5% on turnover of 16.84 crores estimated by Hon'ble Tribunal in A.Y. 2007-08, the profit is estimated @ 15% on turnover of 4.62 crores in A.Y. 2006-07. The ground raised by the appellant is partly allowed." 4. Now, the assessee as well as the revenue in appeal before us. The ld. AR of the assessee has submitted that in the A.Y. 2005-06, the assessee worked more on private contract orders, wherein the profit margin is comparatively higher than the government contracts. Due to this reason, the N.P. rate in the A.Y. 2005-06 is higher as compared to the A.Y. 2006-07. Further, in AY 2005-06 assessee's Gross Receipts were almost 1/4th of the Gross Receipts recorded for the year under reference. The Gross Receipts, for the year under reference, are similar and closely comparable to A.Y. 2004-05. If the gross profit rates for the two years are compared, the gross profit rate has....
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.... the profit of the assessee @ 15% on the turnover. In our view, the order dated 30/09/2010, has directed the Assessing Officer to estimate the profit of the assessee keeping in view the past result of the assessee i.e. the results, which are available for the past years and were existing at the time of passing of the order. In our view, the order dated 31/5/2011 was passed by the Tribunal after passing the order dated 30/09/2010, therefore, the same cannot be considered to be past result considering the direction issued by the Tribunal in its earlier order dated 30/09/2010. Having said so, now we have to examine whether the Assessing Officer has rightly estimated the profit @ 29.52% or not? The NP rate of 29.52% were there for the assessment year 2005-06 and 9.89% for the assessment year 2004-05. In our view, the past result will not mean the immediate past result i.e. result for the A.Y. 2005-06 as the said result was available with the Tribunal even at the time of passing of the order on 30/09/2010, therefore, the estimation is required to be done based on the earlier results available i.e. for the A.Y. 2004-05 and 2005-06. In the year 2005- 06, the turnover of gross contract rec....
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....he file of the A.O to decide the issue afresh after verifying the very date of purchase of machine and that when it was ready to use in view of the decision cited by the Id. A.R. after affording opportunity of being heard to the assessee.." Ld. AO at page 4 of his order came up with a specific finding that the date of purchase of machine was 30.03.2006. Thus, it is undisputed that the machine was purchased on 30.03.2006 itself and was available for use within the relevant previous year. It is to be noted that with regard to depreciation of machinery, even the machinery which is available/ready to use and not put to use, will be eligible for claiming depreciation under the Income Tax Act. Hon'ble Delhi High Court in the case of National Thermal Power Corpn. Ltd. [2012] 28 taxmann.com 89 (Delhi) (Case Law Page 50), adjudicated the following question of law:- "... Whether on the facts and in the circumstances of the case, the assessee is entitled to depreciation in respect of capital construction equipment acquired by the assessee and kept ready for use by the contractor putting up the power plants of the assessee..." It was held by the Hon'ble Delhi High that "In the aforesaid ci....
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....cer, the assessee carried the matter before the ld. CIT(A), who had upheld the disallowance by observing as under:- "0.4.3 I have duly considered the submission of the Id. AR and material available on records. Hon'ble Tribunal has nowhere dealt with the issue of addition of unexplained liabilities (wages payable). It has only held that instead of making disallowance of expenses, A.O. should estimate the profit on the basis of past history. Addition of unexplained liability in the balance sheet is not by way of disallowance of expenses and can be made even where the books of accounts are rejected and profit estimated. The assessee has not given any argument/explanation/ evidence on the merit of the issue. He has not proved that the liability shown in the balance sheet is genuine. He has not given the names and addresses of the persons to whom the amount was payable. The addition of unexplained liability is sustained u/s 68 of the Act. Reliance is placed on the following case laws where it has been held that there is nothing in law which prevents AO in taxing both unexplained cash credit and business income estimated after rejecting the books of accounts being unreliable- 1. ....
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....f law arises for consideration of this Court in this appeal...." He further relied on the following case laws:- (i) Dulla Ram, Labour Contractor, Kotkapura [2014] 42 taxmann.com 349 (Punjab & Haryana) (ii) CIT vs. Dhiraj R Rungta [2013] 40 taxmann.com 284 (Gujarat) (iii) CIT vs. Banwari Lai Banshidhar [1998] 229 ITR 229 (ALL.) (iv) Nardev Kumar Gupta [2013] 142 ITD 303 (Jaipur - Trib.) In view of the above, disallowance made with regard to outstanding expenses may please be deleted as the ld. AO not only exceeded the remand jurisdiction set out by the Hon'ble ITAT, but also since the books were rejected by the ld. AO, no disallowance can further be made relying on the same set of books. 14. At the outset, the ld. DR has vehemently supported the order of the ld. CIT(A). 15. We have heard the rival contentions of both the parties and perused the material available on the record. The order dated 30/09/2010 mentioned that the outstanding liabilities of wages has been shown as Rs. 1640214, which was disallowed by the Assessing Officer and confirmed by the ld. CIT(A). Again the said disallowance and other disallowances , the assessee was in appeal. Moreover, at page 6 of the ....