TaxTMI 
TaxTMI 
2019 (8) TMI 1603
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....together and a common order is being passed as under. I.T.A. No.445/Viz/2016, 112/Viz/2013 and CO No. 106/Viz/2019 and 79/Viz/2013 I.T.A. No.112/Viz/2013, A.Y.2008-09 2. All the grounds in this appeal are related to the other income admitted by the assessee in the return of income assessed separately as income from other sources. Brief facts of the case are that the assessee is engaged in the business of civil contract works, filed it's return of income declaring total income of Rs. Nil on 30.09.2008. Subsequently, filed the revised return of income admitting taxable income of Rs. 1,34,26,464/- on 29.10.2008. The return was processed u/s 143(1) and the case was taken up for scrutiny. During the previous year relevant to the A.Y. 2008-09, the assessee had received the gross contract receipts of Rs. 69,50,82,879/- and arrived at net profit of Rs. 2,25,17,950/-. During the assessment proceedings, the AO found that the bills and vouchers for expenses relating to items like sand, soil, metal, construction of compound wall, labour charges, repairs and maintenance of crusher etc. were mostly met by self made vouchers which are not amenable for verification. Therefore, the AO rejecte....
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....item is interest received on partners' current accounts and interest on partners' capital. These also being on business account, the amount of Rs. 77,72,358 being business income cannot form receipts under the other sources and accordingly the AO is directed to delete this also. Like that net insurance claims received at Rs. 44,578, scrap sales of Rs. 6,26,100 and sundry creditors credit balances written off at Rs. 1,51,16,482 forms business income and as such the AO is directed not to include these items under the head other income. Now, it leaves rental income from property at Rs. 4,15,000, dividend on chits at Rs. 3,20,000 and interest received on IT Refund of Rs. 7,66,095 alone could form income from other sources and income from house property, which shall be brought to tax and the AO is directed accordingly." Accordingly appeal of the assessee is partly allowed by the Ld.CIT(A). 4. Against the order of the Ld.CIT(A), the revenue has filed appeal before this Tribunal. During the appeal hearing, the Ld.DR argued that interest on term deposits, interest received on partners' current account, interest on partners' capital, rental income, insurance claims received, scrap sal....
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....ame business. Therefore, once the books of accounts are rejected, the AO is not permitted to make use of the same books of accounts, to make separate addition. The Ld.AR relied on the decision of Hon'ble High Court of Rajasthan in the case of Malpani House of Stones Vs. Commissioner of Income Tax (2017) 395 ITR 0385 (Raj). 6. We have heard both the parties and perused the material placed on record. In the instant case, the AO rejected the books of accounts and estimated the income @ 12.5% on main contracts and 8% on sub contract receipts and allowed the depreciation and made separate additions relating to the 8 items mentioned in para No.2 of this order. 6.1. With regard to the rental income, dividend on chits and interest on IT refund, the Ld.CIT(A) held that the same cannot be included in the business income and they are required to be separately taxed and there is no dispute on this issue. 6.2. With regard to the other income declared by the assessee in respect of interest on term deposits, interest received on partners' current account, insurance claims received, scrap sales, sundry creditors credit balances written off, the contention of the assessee is that they form....
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....terest earned on bank deposits would cover under the scope of business income, but not for industrial activity, therefore, the Hon'ble Delhi High Court held that the interest on bank deposits cannot be treated as profit and gain derived from the manufacturing activity by an industrial unit. Thus, the facts of the case law relied upon by the Ld.DR in Krishak Bharati Cooperative Ltd. are distinguishable, not applicable in the assessee's case. Accordingly we, hold that the interest on term deposits are required to be treated as business income, but not to be taxed separately under other sources. 7. The next issue is interest received on partner's current accounts. The assessee had the received interest on partners' current account to the tune of Rs. 77,72,358/- which was stated to be advanced from the bank borrowings. The Ld.AR further submitted that the assessee is maintaining separate capital accounts and current accounts while the capital accounts are fixed capital accounts, current accounts are variable accounts. The major part of the debit balances in current accounts represent the losses ascertained by the company in the earlier years on which the assessee has charged the int....
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....sales and sundry creditors credit balances written off. All the three items constitute business transactions which takes the character of business income. Further if the AO wants to tax the sundry creditors written off, the same should be taxed under section 41(1) of the Income Tax Act which is not the case of the AO. The AO has not brought on record any evidence to show that sundry creditors balances written off satisfy the conditions laid down in section 41(1) of the act. Therefore, we agree with the Ld.CIT(A) that no separate addition is required to be made with respect of sundry creditors credit balances written off. From the above discussion, it is established that interest received on partners current account, insurance claims, scrap sales and sundry creditors credit balances constitute business income. The assessee is engaged in the civil constructions and all the transactions are from the same business. It was informed during the appeal hearing that in the earlier years also the assessments were completed by estimation of income thus the expenditure claimed in the earlier years also was taken care in estimation. The department has not produced any evidence to show that i....
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.... case of KNR Constructions, hence, the AO issued notice u/s 154 on 27.03.2015 proposing to make the disallowance of depreciation already allowed called for the objections of the assessee. The assessee objected for the proposed disallowance stating that the depreciation is statutory allowance and the deduction required to be allowed from estimated income. The assessee relied on the various decisions supporting the allowance for depreciation including the Jurisdictional High Court in Y.Ramachandra Reddy (supra). The AO rejected the objections of the assessee and held as per the ratio laid down in the case of KNR Constructions depreciation is taken care no separate deduction required to be allowed. Since it was a mistake apparent from record, the AO passed the order u/s 154 making addition of depreciation already allowed in the order passed u/s 143(3) dated 01.12.2010. 11. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed the appeal of the assessee holding that the issue of rectification is wrong adoption of law and is not permissible to make rectification u/s 154 of the Act and relied on the decision of Hon'ble Supreme Court ....
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.... point of law and the same is not maintainable for rectification u/s 154 of the Act. Even the Board Circular No.29-D(XXX-14) [F.No:45/239/65-ITJ] dated 31.08.1965 says that the gross profit should be estimated and the deductions and the allowances including the depreciation allowance should be separately deducted from the gross profit. Therefore, the AO has rightly computed the gross profit by estimation of income and allowing deduction on account of depreciation separately as per the Board Circular cited supra and the case laws. Hence, there is no mistake apparent from the record and the Ld.CIT(A) has rightly allowed the appeal of the assessee. We do not find any infirmity in the order of the Ld.CIT(A), hence we uphold the same and dismiss the appeal of the revenue. Cross Object No.106/Viz/2019, A.Y.2008-09 13. The assessee filed cross objection supporting the orders of the CIT(A), however, cross objection was filed with delay of 919 days and no petition for condonation is filed, therefore, the cross objection filed by the assessee is dismissed in limine. I.T.A. 442/Viz/2016, A.Y.2009-10 14. In this case, assessment was originally completed on 17.10.2011. The assessee ....
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....ved by the order of the AO dated 31.03.22015, the assessee filed appeal before the CIT(A) and the Ld.CIT(A) allowed the appeal of the assessee following the decision of Hon'ble High Court of Andhra Pradesh in the case of Y.Ramachandra Reddy and the decision of ITAT, Visakhapatnam in the case of DCIT, Circle -2(1), Vijayawada Vs. R.R.Constructions, Vijayawada vide ITA No.47/Viz/2013 dated 06.11.2015 in page Nos. 6 to 8 which reads as under : "5.2. Hon'ble A.P. High Court in the case of CIT vs Y.Ramachandra Reddy (ITTA No.48 of 2002) in order dated 30072014 held the following "Wherever the Parliament wanted to deviate from the ordinary procedure for determination of income or for that matter, the depreciation in the process of reckoning the taxable income specific provisions of that effect are made. While in some cases, such steps are reflected directly in the very provisions of the Act or in other cases they are in the form of the cross reference from other provisions-----" "For example, Section 44AD of the Act provides for determination of the income of an assessee from the business at 8% of the total turnover or the gross receipts of the previous yea....
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....r: 24, On consideration of rival contentions, we find merit in the submissions made by the assessee. The capital expenditure incurred is not allowed as deduction but the deterioration in their value is allowed as deduction with the name "depreciation". Hence, it is called non-cash expenditure and also called statutory deduction. While estimating the income, the trading results only are estimated on the basis of sales / gross receipts, meaning thereby, what is estimated 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. Henc....
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....ciation. Since the CIT(A) has followed the order of this Tribunal and the decision of Jurisdictional High Court, we find no error in the order of the Ld.CIT(A) and the same is upheld. Accordingly, the appeal of the revenue is dismissed. CO No.105/Viz/2019, A.Y.2009-10 18. The assessee filed cross objections supporting the order of the CIT(A) with a delay of 919 days without filing condonation petition. Since the CO was filed without condonation petition, the Cross Objection filed by the assessee is dismissed in limine. I.T.A. No.235/Viz/2015, A.Y.2010-11 19. In this case, the assessee admitted gross receipts of Rs. 15,31,97,252/-relating to contracts and Rs. 3,33,35,889/- pertaining to sale of chips. Since the books of accounts are not amenable for verification, the AO rejected the books of accounts and estimated the income @9% on gross receipts of Rs. 15,31,97,252/- net of depreciation which worked out to Rs. 1,37,87,752/-. Further the AO also estimated the income @15% on gross sales of chips of Rs. 3,33,35,889 which was worked out to Rs. 50,00,383/-. Accordingly, the AO computed the income of Rs. 1,87,88,140/-. against the income returned by the assessee, loss of Rs. ....
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.... order of the Hon'ble jurisdictional High Court and this Tribunal has also taken decision to allow depreciation from the estimated income, we find no error in the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue is dismissed. CO No.107/Viz/2019, A.Y.2010-11 23. The assessee filed cross objection supporting the order of the Ld.CIT(A). However, the cross objection was filed with a delay of 1416 days without filing condonation petition. Since the assessee failed to furnish the condonation petition, the cross objection filed by the assessee is dismissed in limine. I.T.A. No.210/Viz/2015, A.Y.2010-11 24. As stated in the earlier paragraphs, the AO passed assessment order u/s 143(3) on total income of Rs. 1,87,88,140/- and the assessee went on appeal before the Ld.CIT(A) challenging the estimation of net income on the gross receipts. The assessee filed appeal and requested to allow depreciation on the income so estimated. Pending disposal of appeal by the Ld.CIT(A), the CIT, Vijayawada has taken up the order dated 27.03.2013 for revision u/s 263. Since the order passed was found to be erroneous and prejudicial to the interest of the revenue, the CIT held t....
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....,44,347 4. The learned Commissioner of Income Tax is not justified in directing the assessing officer to make separate addition of Rs. 1,68,201 towards interest on refund received in terms of S244A of the Income Tax Act, 1961. 5. The learned Commissioner of Income Tax is not justified in directing the assessing officer to reexamine the possibility to enhance the percentage of profit estimated by the assessing officer @9% of gross receipts. 6. The learned Commissioner of Income Tax ought to have appreciated that the assessing officer initiated enquiries in respect of all the above issues and as such it is not a case of lack of inquiry 'to enable the learned Commissioner of Income Tax to invoice the provisions of S.263. 7. Any other ground that may urged at the time of appeal hearing." 26. Ground No.1,2 and 7 are general in nature which does not require specific adjudication. 27. Ground No.3 is related to the interest on term deposits, interest on partners current accounts, rental income, sundry creditors balances written back. Except rental income all the other issues i.e. interest on term deposits, interest on partners current account a....
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.... is rental income. Both the issues required to be taxed separately. The rental income required to be taxed under property, whereas the interest on income tax refund required to be assessed as income from other sources as discussed in detail in the assessee's case in this order. The Ld.AR also did not make any argument on both the issues. Therefore, we uphold the order of the CIT with regard to rental income and the interest on income tax refund. Accordingly, the appeal of the assessee is partly allowed. 30. Ground No. 6 is general in nature, Since we have discussed the appeal of the assessee item-wise, we consider ground No.6 need not be adjudicated separately. The assessee did not place any argument to support ground No.6, accordingly, ground No.6 is dismissed as not pressed. I.T.A. No.75/Viz/2017, A.Y.2012-13 31. The assessee filed the return of income for the A.Y.2012-13 admitting loss of Rs. 3,36,74,138/-. The case was taken up for scrutiny and during the course of assessment proceedings, the AO found that the books of accounts were defective and hence, the income was estimated @12.5% before depreciation. In addition to the above, the AO also estimated the income @15% ....