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TMI Blog2013 (12) TMI 1566X X X X Extracts X X X X X X X X Extracts X X X X ..... Sree Lalitha Constructions. In the course of search proceedings, certain incriminating documents were found out and the statement from Managing Director was recorded u/s 132(4) of the Act, wherein he has admitted income at 9.5% net of depreciation in all the impugned assessment years. 3. However, subsequently the Managing Director retracted the statement with reference to the erstwhile partnership firm Sree Lalitha Constructions on the reason that those assessments have been completed u/s 143(3) of the Act. The assessing officer in the course of assessments u/s 153A examined the issues in detail and came to the conclusion that books of accounts of the assessee cannot be relied upon. Accordingly, he estimated the income at 12% on the gross receipts, net of permissible deductions. In addition he also brought to tax interest income admitted by assessee separately as income from other sources and other incomes. The assessee contended various issues before the Ld. CIT(A) including completion of assessments in the case of firm on jurisdictional matters. The Ld. CIT(A) rejected the assessee's contentions as far as issues of jurisdiction is concerned. However, considering the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has no grievance in the assessments. Ld. Counsel placed a chart of various depreciation claims in respective assessment years to submit that depreciation being statutory allowance, the same is required to be allowed. 6. The Ld. D.R. however submitted that notice u/s 153A of the Act was issued in the case of erstwhile firm also as it was succeeded by the assessee SLC Projects Ltd in whose case a search was initiated and accordingly since both the assessees pertaining to the same business the revenue is correct in issuing the notice to the erstwhile firm. He relied on the order of the CIT(A) in this regard. With reference to the rejection of books of accounts, it was submitted that the assessee's books of accounts were not accepted during the scrutiny assessment completed in the case of erstwhile firm and so the AO was correct in estimating the incomes. He further submitted that on the basis of the statement given by the M.D. in the course of search proceedings, the Ld. CIT(A) determined the net income inclusive of allowance for depreciation at 9.5% of the gross receipts and this should be confirmed as the same is based on the statement of the M.D. He also placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not correct. Accordingly, even the issuance of notice is bad in law. For these reasons, we are not in a position to uphold proceedings completed by the assessing officer in the three impugned assessment years pertaining to the assessee firm. 9. In the case of All Cargo Global Logistics Ltd. Vs. DCIT 137 ITD 287 (Mum) (SB). the special bench of the ITAT has held that provisions of section 153A coming to operation if search or requisition is initiated after 31.5.2003. The special bench further held that in case assessment has abated, AO retains the original jurisdiction as well as jurisdiction u/s 153A in which assessment shall be made for each assessment year separately. Thus in case where assessment has abated, the AO can make addition in the assessment, even if any incriminating material has been found but in other cases, special bench held that assessment held u/s 153A can be made only on the basis of incriminating material which in the context of relevant provisions means books of accounts and other documents found in the course of search, but not produced in the course of original assessment or undisclosed income or property disclosed during the search. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, the grounds are considered academic. 11. In the result, the three appeals 162 to 164/Vizag/2013 are allowed. 12. As briefly stated above, there was a search in the case of the assessee M/s SLC Projects Ltd and the assessing officer has rejected the books of accounts in the course of assessment proceedings u/s 153A of the Act. The AO estimated the income at 12% on the gross receipts which the Ld. CIT(A) reduced it to 9.5% on the gross receipts net of depreciation. In the course of arguments, various legal issues were raised but they are not seriously pressed and the arguments of the Ld. Counsel are with reference to estimation of income at 9.5%. relying on various orders of the ITAT on similar issue in the case of Contractors, it was the submission of the Ld. Counsel that the depreciation claimed by the assessee may be allowed even if the estimation at 9.5% is kept at the same level. In the course of arguments, Ld. Counsel also did not press claim of higher depreciation claimed in the returns of income and has submitted that if depreciation at the normal rate is allowed that would be sufficient. Ld. Counsel also fairly admitted that if depreciation of claim is allowed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the later years from 2007-08 to 2010-11 which are under consideration now. 15. It is also a fact that assessee's Managing Director has accepted 9.5% in the statements given u/s 132(4) which was however later retracted. The Ld. CIT(A) based on the above has reduced the estimation from 12% to 9.5% as declared by the assessee MD in the course of search. 16. The Income Tax Appellate Tribunal is estimating the income from 8% to 12.5% depending on the nature of contract work, business of the assessee, turnover and the machinery employed in the business. Thus there is no fixed rate of uniform estimation and the cases are decided on the basis case of Arihant Builders, Developers & Investors Pvt. Ltd. 106 ITD 10 have held the rate of 8%, net of depreciation as reasonable after rejection of books of accounts. There are many other cases, wherein on sub-contract payments, income was estimated at 5% net. Considering above judicial precedents, we are of the opinion that estimation of income at 9.5% by the CIT(A) is on higher side. Considering the past record of the assessee, we are of the opinion that it is reasonable to estimate 5% income net of depreciation on sub-contract pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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