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Income Tax Appellate Tribunal, CUTTACK
Before: SHRI N.S SAINI
This is an appeal filed by the assessee against the order of CIT(A)-
Cuttack, dated 19.1.2015, for the assessment year 2009-2010 .
Ground No.1 of the appeal reads as under:
“Under the facts and circumstances, considering the nature of work executed by the appellant the 8% estimation of profit on gross turnover is excessive.”
At the time of hearing, ld Authorised Representative of the assessee
did not press this ground of appeal and, therefore, same is dismissed for
want of prosecution.
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Ground No.2 of the appeal reads as under:
“The ld CIT(A) erred in law as well as in facts allowing the “depreciation from the gross turnover rather than the estimated profit. Depreciation is an allowance which is to be charged against profit and not from the gross turnover.”
I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. In the instant case, the
Assessing Officer estimated the profit from contract work of the assessee
after rejecting book results of the assessee at 8% of the gross receipts.
On appeal before the CIT(A), the assessee contended that the
Assessing Officer did not allow deduction for depreciation from the income
of the assessee estimated at 8% of the gross contract receipts.
6.1. The CIT(A) directed the Assessing officer to deduct depreciation of
Rs.19,46,166/- from the gross contract bills of Rs.3,11,28,314/- and
estimate net profit @ 8% on the balance amount.
Being aggrieved against this order of the CIT(A), the assessee is in
appeal before me.
Ld Authorised Representative of the assessee relied on the decision
of Hon’ble Rajasthan High Court in the case of M/s. Shri Ram Jhanwar Lal
vs ITO, Bikaner in Income Tax Appeal No.10 of 2006 order dated 3rd July,
2008, wherein, it was held that where the Assessing Officer adopted net
profit rate in making assessment to the best of his judgment, allowance
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of depreciation therefrom is required to be made. He also relied on CBDT
Circular No.29D dated 31.3.1965 and submitted that in the said circular, it
has been provided that for estimating the income, deduction for interest
and depreciation should be separately allowed.
On the other hand, ld Departmental Representative relied on the
decision of Visakhapatnam Bench of the Tribunal in the case of G.Raja
Gopala Rao vs DCIT (2017) 78 taxmann.com 61 (Visakhapatnam) ,
wherein, it was held that since the Assessing Officer adopted a reasonable
rate of 8% on gross contract receipts, further deduction towards
depreciation could not be allowed as it would result into determination of
total income below income returned by the assessee.
After considering the rival submissions and perusing the materials on
record, I find that the assessee had filed the return of income showing total
income of Rs.14,18,244/- after claiming deduction under chapter VIA at
Rs.1,00,000/-. The Assessing Officer determined the income at 8% of the
total receipts of Rs.4,11,06,911/- at Rs.32,88,553/-. The Hon’ble Rajasthan
High Court in the case of M/s. Shri Ram Jhanwar Lal vs ITO, (supra) has
held that where the Assessing Officer adopted net profit rate in making
assessment to the best of his judgment, allowance of depreciation
therefrom is required to be made. Ld D.R. has relied on the decision of
Visakhapatnam Bench of the Tribunal in the case G.Raja Gopala Rao
(supra), wherein, it has been held that when the Assessing Officer adopted
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a reasonable rate of 8% on gross contract receipts, further deduction
towards depreciation could not be allowed as it would result into
determination of total income below income returned by the assessee. Ld
D.R. has brought no material on record to show that by deducting
depreciation from the estimated net profit of 8% on gross contract receipts
of the assessee would result in income being assessed below the returned
income of the assessee. Therefore, the decision of Visakhakapatnam Bench
of the Tribunal in the case of in the case of G.Raja Gopala Rao(supra) is
not applicable in the present case. Hence, I set aside the orders of lower
authorities and direct the Assessing Officer to allow depreciation against
the net profit estimated by applying rate of 8% and not from the gross
turnover and allow this ground of appeal of the assessee.
Ground No.3 of the appeal reads as under:
“That the CIT(A) erred in law as well as in facts, by considering the “other receipts amounting to Rs.53,68,597/- as income from other sources undisclosed or other income and not as receipts from works contract.” 12. I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. In the instant case, the brief
facts are that the Assessing Officer after rejecting the book results of the
assessee estimated the income by applying profit rate at 8% to the gross
contract receipts of Rs.4,11,06,911/-.
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On appeal before the CIT(A), the assessee contended that this
amount included Rs.53,68,597/-, which are other receipts from different
persons for executing work of small jobs through labourers and machinery
and payment for which is received in cash.
The CIT(A) held that the statement of receipts of Rs.53,68,597/- from
different persons against execution of contract works did not contain
address or PAN of the persons and the nature of work performed. There
was no deduction of TDS from such receipts. Therefore, the CIT(A) held
that the amount is to be treated as income from other sources undisclosed
or other income, which should be added to the net profit arrived at from
contract works.
Being aggrieved against the said order of the CIT(A), the assessee is
in appeal before me.
Ld Authorised Representative of the assessee reiterated the
submissions made before the CIT(A). He could not file any material before
me to demonstrate that the amount of Rs.53,68,597/- was the receipts
from small jobs done by the assessee. In absence of the same, in my
considered view, no interference with the order of the CIT(A) is called for.
Hence, same is confirmed and ground of appeal of the assessee is
dismissed.
17 In the result, the appeal filed by the assessee is partly allowed.
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Order pronounced in the open court on 08/03/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 08/03/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Sri Purna Chandra Biswal, Jakhapura, Jajpur 2. The Respondent. ITO, Ward 1(2), Cuttack 3. The CIT(A) Cuttack Cuttack 4. CIT, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,
SR.PRIVATE SECRETARY ITAT, Cuttack