TMI Blog2006 (5) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... are involved in all these appeals, the same are disposed of by a common order. 2. All these assessees are road contractors carrying on the business as such since more than 10 years. The return of income in all the cases have been filed on estimate basis, on the basis of turnover certificates, bank statements and statement of financial affairs prepared on the basis of these documents. All these assessees estimated their income from the business at 9 per cent of gross receipts. After reducing depreciation and interest on borrowed capital, the net income was offered for taxation. The Assessing Officer originally accepted the same as offered by intimation under section 143(1)( a ). Later on the Assessing Officer initiated action under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any books of account, the net income at 8 per cent of the gross receipts is considered reasonable. In arriving at the percentage, the Assessing Officer was guided by the provisions of section 44AD of the Income-tax Act which provides that if a person is engaged in the business of civil construction, the income is to be treated as 8 per cent of gross receipts after allowing all the expenses including depreciation. The learned CIT(A) held that since the turnover of assessee is exceeding the limit of Rs. 40.00 lakhs, the provisions of section 44AD cannot be applied. He held that the Assessing Officer has not given any basis for adopting income at the rate of 8 per cent of turnover. Since the income offered by the assessee is not found to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of turnover, the estimation by the Assessing Officer is required to be upheld. Once the estimation is found to be reasonable, the same cannot be disturbed. Though there are no comparable cases for estimating the net profit at 8 per cent, in view of the guiding principle of section 44AD, the same is to be upheld. 4. The learned counsel for assessee Shri Krishna Moorthy submitted that for all the years including earlier years and later years, the assessee is filing return of income on estimate basis only. This fact is made known to the Assessing Officer in the return of income itself. The Assessing Officer having accepted the same even though in assessment under section 143(1)( a ), the Assessing Officer has no other basis for invokin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has furnished the prescribed particulars in respect of depreciation, the depreciation should be allowed separately and deducted out of the profits so computed. The assessee has all the time filed its bank statement and statement of affairs. By referring to statement of affairs, the incremental wealth can be worked out so as to compute the income therefrom. The Assessing Officer having not done such an exercise, cannot merely adopt 8 per cent net profit based on the provisions of section 44AD. Section 44AD cannot apply in a case where the turnover exceeds Rs. 40 lakhs. It is also settled commercial consideration that higher the turnover the lesser the profit margin. Even in subsequent years the Assessing Officer has not chosen to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear. The Rajasthan High Court in Jain Construction Co. s case ( supra ) held that when the accounts of the assessee are rejected and income is to be estimated as per CBDT Circular, depreciation should be allowed separately even after such estimation. The Circular issued by CBDT are binding upon the Income-tax authorities. Once again the Rajasthan High Court in the case of Bhawan VA Path Nirman (Bhora) Co. (No.1) ( supra ) held that after estimating the net profit based on the earlier years performance, the depreciation on fixed assets and interest on borrowing has to be considered and the income should be reduced to such extent. The Assessing Officer though accepts such proposition in page 2 of his order, yet while computing income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h prescribes that income in all cases has to be 8 per cent of turnover, the income offered by assessee cannot be said to have escaped assessment merely because the same is less than 8 per cent of the gross receipts. The Hon ble Punjab and Haryana High Court in the case of Vipan Khanna ( supra ) has held that if notice under section 143(2) is not issued within the limitation period, the subsequent enquiry under section 147 seeking information to verify return is not valid. The Assessing Officer cannot do in reassessment what he failed to do in regular assessment. The action under section 147 is not initiated for bringing to tax any income which has escaped assessment, but merely to apply a different percentage of income. This is not permis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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