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2022 (5) TMI 1128 - AT - Income TaxRevision u/s 263 - interest and depreciation is not allowed on the profit estimated u/s.44AD - as per CIT relevance of interest and depreciation in the assessment and also the deletion of penalty by the AO are erroneous to the interest of the revenue - AO proceeded to estimate the income of the assessee as a percentage of gross receipts as per form 26AS in the absence of any evidence furnished by the assessee for expenditure incurred apart from depreciation and interest - AO estimated the income of the assessee at 10% on turnover as per 26AS - AO also initiated the penalty proceedings u/s. 271A on the assessee for not maintain books of accounts but later deleted the same - HELD THAT:- This is not the correct facts of the case, as the assessee has clearly submitted that 44AD is not applicable to him and this fact has been acknowledged by the AO in his order. The PCIT has substituted his view with that of the AO to state that the deduction of interest and depreciation is allowed u/s.44AD by the AO and concluded the order of the AO as erroneous. The learned AR drew our attention to para 4 and 5 of the AO’s order where the AO has clearly acknowledged that the assessee has used the % specified in 44AD and that the said section is not applicable in assessee’s case. It is because of this reason the AO has adopted a higher % for estimation viz., 10% which fact is not correctly noticed by the PCIT. PCIT has also misinterpreted the reliance placed by the assessee and considered by the AO in the case of Sammurai Techno Trading Co Ltd. [2009 (11) TMI 938 - KERALA HIGH COURT] PCIT had stated that when reliance is placed on this decision on the applicability of 44AD then the assessee ought not to have claimed interest and depreciation and the AO should have allowed the claim. This is a gross misconception on the part of the PCIT, since the assessee had relied on the decision only to justify the applicability of 8% as a profit estimate even when section 44AD is not applicable in his case. The AO though accepted the estimation proceeded to enhance the % to 10% after considering the facts and the details furnished. Therefore the conclusion of the PCIT that the order passed by the AO is erroneous is not tenable as the assumption of the PCIT that the AO has estimated the profits by applying the provisions of section 44AD and allowed interest and depreciation on the estimated profit, is not correct interpretation of AO’s order. AO dropping the penalty proceedings initiated u/s.271B for non-maintenance of books of accounts being erroneous and prejudicial to the interest of the revenue - As decided in case of Siddappa B.T [2022 (4) TMI 535 - ITAT BANGALORE] with regard to the observation of Ld. PCIT that the dropping of penalty u/s 271A of the Act was on wrong appreciation of the judgment of the High Court, the Ld. A.R. contended that the Ld. PCIT should have passed separate order on this issue. However, the Ld. A.R. did not cite any authority in support of his contention. In any case we notice that the Ld. PCIT has given opportunity to the assessee in this regard. Accordingly, we do not find it necessary to interfere with observations made by Ld. PCIT on the second issue We notice that the Hon’ble Tribunal has held a similar view in the case of K R Mahesh vs PCIT [2022 (1) TMI 682 - ITAT BANGALORE] Respectfully following the decision of the coordinate bench of the tribunal we do not find it necessary to interfere with the observations of the PCIT on the issue of dropping the penalty proceedings initiated u/s.271A by the AO - Appeal of assessee partly allowed.
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