2002 (5) TMI 516 - AT - Income Tax

Summary

Issues:
1. Estimation of total income at 10% of contract receipts.
2. Allowance of deduction for depreciation and sales tax.

Estimation of Total Income at 10% of Contract Receipts:
The appeal arose from the Commissioner of Income-tax (Appeals) confirming the Assessing Officer's decision to estimate the total income at 10% of contract receipts, not applying a net profit of 8%. The Assessing Officer justified this by noting a significant drop in net profit rate from 9.52% to 4.98%. The assessee, in response, agreed to a gross profit rate of 10% on net payments of Rs. 39,30,243. The Assessing Officer, citing non-furnishing of accurate income particulars, invoked penalty under section 271(1)(c) of the Act. The Assessing Officer also relied on the precedent set by the Hon'ble Apex Court in CIT v. K.Y. Pilliah [1967] 63 ITR 411, allowing estimation of gross profit based on similar businesses. The CIT(A) upheld this decision, emphasizing the significant drop in net profit rate and the assessee's agreement to a 10% GP rate. The Tribunal, after considering arguments and precedents, affirmed the CIT(A)'s decision, highlighting the lack of grounds for interference.

Allowance of Deduction for Depreciation and Sales Tax:
The second ground of appeal concerned the disallowance of depreciation and sales-tax deductions by the Assessing Officer. The assessee contended that the CIT(A) did not address this issue in the order. The CIT(A) directed the Assessing Officer to verify the sales tax deduction as per the Haryana Sales-tax Act, without passing a merit-based decision. The Tribunal noted that under section 44AD of the Act, when a net rate is applied, the question of depreciation does not arise. Consequently, the Tribunal dismissed this ground of appeal, emphasizing the statutory provisions and lack of merit in the argument.

In conclusion, the Tribunal dismissed the appeal, upholding the decisions regarding the estimation of total income at 10% of contract receipts and the disallowance of depreciation and sales tax deductions. The judgment focused on the legal provisions, precedents, and factual circumstances to arrive at a comprehensive and reasoned decision.