TaxTMI 
TaxTMI 
2010 (3) TMI 1256
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....ctional H.C and directed to calculate the profit from interest income at the same rate at which the contractual receipt has been taxed. Brief facts: 3. The assessee was carrying on the business of civil contract for PWD, VISL, MPM etc. During the year under dispute, the assessee had shown the total receipts of Rs. 4.3 crores whereas he had offered the income from business only at 5%, besides the other incomes being remuneration and interest from the partnership firm - Krishna Tyres, Bhadravathi. The assessee had neither maintained any books of account nor got audited u/s 44 AB of the Act. 4. By virtue of having concurrent jurisdiction over the assessee, the Addl. CIT ('the AO' hereinafter), during the course of assessment proceedings sought certain details with regard to difference between the total credits available in bank accounts and total receipts shown by the assessee while computing the net profit. Consequent on the reconciliation of the total credits of bank accounts, the following credits available in the bank accounts represent the contractual receipts of the assessee which have not been included in the total turnover of the assessee: (i) receipt....
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....ecurity deposits or earnest money deposits connected with contract or not? In case, they are directed related with the contract owing to the decision of Hon'ble Karnataka High Court, interest income will be treated as a part of business receipts. Therefore, AO is directed to allow the same after finding out the deposits are related to contract business." 6. Disillusioned with the stand of the Ld. CIT(A) on twin issues, the Revenue has come up before us for re-dressal. 6.1. It was contended by the Revenue that - (i) The Board's Circular as relied by the CIT(A) was issued much earlier to the introduction of s.44AD of the Act in Finance Act 1994 w.e.f 1.4.1994; - the CIT(A) erred in allowing depreciation in this case where books of accounts were not maintained and that the above circular is applicable for the cases where the books of accounts were rejected by the AO; - the CIT (A) erred in not giving opportunity to the AO on the claim of allowability of depreciation and hence the provisions of rule 46A of the I.T.Rules have been violated; - relies on the case law of Surinder Pal Nayyar v. CIT reported in (2009) 177 Taxman 207 (P & H) ....
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....t depreciation should be allowed even when income was estimated on net profit basis, the Board had not referred to maintenance or otherwise of books of account; - there was no condition in the income-tax provisions that the books of account should be maintained for allowance of depreciation which is not in the nature of any expenditure as such and, therefore, the same cannot be subsumed into total expenditure that may be deemed to have been allowed when income is estimated on net profit basis; - case laws relied upon: (a) CIT v. Daudayal Hotels P. Ltd. (2006) 282 ITR 132 (Guj) (b) Shri Ram Jhanwar Lal v. ITO (2009) 177 Taxman 135 (Raj) (c) CIT v. Sriram & Co. (2001) 250 ITR 169 (Raj) (d) Allahabad Glass Works v. CIT (1961) 42 ITR 439 (All) (iv) While computing income by applying net profit rate, depreciation being in the nature of a statutory allowance should have been allowed by the AO; (v) With regard to the claim of depreciation, the assessee had furnished the requisite particulars - balance sheet, fixed asset details for the years-ended 31.3.04, 31.3.05 and 31.3.06, schedule of OB, additions, deletions, net....
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.... 241. 7.1.1. We have duly considered the submission of the assessee and also the case law referred to by the assessee. The jurisdiction over the assessee, no doubt, lies with the DCIT, Shimoga and that the Addl. CIT, Shimoga Range who had concurrent jurisdiction vested with him, concluded the assessment which is under dispute. Since the DCIT, Shimoga is having jurisdiction over the assessee, the CIT, Davanagere, perhaps, directed the DCIT, Shimoga to prefer an appeal against the order of the CIT (A). Though there was a technical flaw on the part of the CIT's direction, in our considered view, it does not alter the jurisdiction over the assessee vests with the DCIT, Shimoga for all practical purposes and, thus, the appeal preferred by the DCIT, Shimoga is in order. 7.2. Let us now analyze the issues raised by the Revenue chronologically. 7.2.1. The bone of contention of the Revenue is that the CIT (A) had quoted the date of the Circular as 31.3.1995 instead of 31.3.1965. While pointing out the gaffe committed by the CIT (A), the Revenue itself had unwittingly made a faux pas in mentioning the date as 31.3.1965 whereas the actual date of the Circular has been 31.8.1965. 7.2.2.....
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....e Revenue's banking heavily on the provisions of s.44AD of the Act to drive home its point is rather misplaced. 7.4. The Revenue's other grouse was that the CIT(A) had violated the provisions of rule 46A in not affording an opportunity to it of being heard on the claim of allowability of depreciation. 7.4.1. What rule 46A(3) says? 46A (3) The Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the assessing officer has been allowed a reasonable opportunity- (a) to examine the evidence o document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. 7.4.2. We could have agreed with the Revenue's argument that the CIT(A) had erred in not taking into confidence the Revenue before allowing the claim of depreciation provided such evidences were not furnished before the AO by the assessee. 7.4.3. It has been vouched by the Ld. AR that "16..............the respondent had already furnished requisite particulars for claiming depreciation and the same were available on re....
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....venue's argument that the CIT(A) erred in allowing depreciation in the instant case where no books of accounts were maintained as the said Circular would be applicable where the books of accounts of the assessee rejected by the AO is also rather wanting. On a careful reading of the Circular, we find that the Circular doesn't expressly say so as claimed by the Revenue. 7.6.2. No reference has been brought to the knowledge of this Bench by the Revenue to suggest that the said Circular was either superseded or withdrawn by the Board, and, thus, it holds good even now. 7.6.3. In view of the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs, the AO is directed to allow the eligible and correct depreciation on the basis of particulars furnished by the assessee on the estimated profit. It is ordered accordingly. 8. The other grievance of the Revenue is that the CIT (A) erred in quoting the finding of the jurisdictional H.C and thereby directed to calculate the profit from interest income at the same rate at which the contractual receipt has been taxed. 8.1. We have duly considered the rival submissions as narrated supra. We find force i....