TMI Blog2016 (9) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed on this ground. Disallowing on account of depreciation - use of machinery in the assessment year under consideration - Held that:- AR has failed to point out the bill showing that it was purchased prior to 30/03/2006 and was put to use by the assessee in the year under consideration. Since the assessee has failed to produce any document showing the uses of machine in the assessment year under consideration, therefore, depreciation on the machine is disallowed. Accordingly, this ground of assessee appeal is dismissed. Addition of outstanding liabilities - Held that:- AO was not required to travel and examine the outstanding liabilities of wages which was specifically disallowed by the Assessing Officer in the earlier years and the order of the Assessing Officer was set aside after upholding the rejection of books and specific directions were issued to estimate the profit on the basis of the past history. Since the profit of the assessee has been estimated @ 17% of the turnover by the Tribunal hereinabove, that will take care of all the disallowances earlier made by the Assessing Officer in its assessment year and therefore, no specific addition should have been made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her in not following the directions of the Hon ble ITAT while adding a sum of ₹ 16,40,214/-.The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 16,40,214/-. (b) In the facts and circumstances of the case and in law, the ld CIT (A) has erred in confirming the action of the ld. AO in adding a sum of ₹ 16,40,214/- out of outstanding liabilities. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 16,40,214/-. Grounds of revenue s appeal:- i The CIT(A) has erred in reducing the net profit rate from 29.52% to 15% even when the Hon ble ITAT in its set aside order dated 30/09/2010 had directed the A.O., to estimate net profit on the basis of past history of the assessee 2. Brief facts of the case are that the assessee is a civil contractor. The 1st ground of the assessee s appeal as well as revenue is against for confirming the action of the ld. AO in rejecting the books of accounts and confirming the net profit rate of 15% against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the A.Y. 2005-06, the assessee worked more on private contract orders, wherein the profit margin is comparatively higher than the government contracts. Due to this reason, the N.P. rate in the A.Y. 2005-06 is higher as compared to the A.Y. 2006-07. Further, in AY 2005-06 assessee s Gross Receipts were almost 1/4th of the Gross Receipts recorded for the year under reference. The Gross Receipts, for the year under reference, are similar and closely comparable to A.Y. 2004-05. If the gross profit rates for the two years are compared, the gross profit rate has improved from 9.89% (N.P. rate for A.Y. 2004-05) to 10.08% (N.P. rate for A.Y. 2006-07). It is further submitted that in the Assessment Year 2004-05, the N.P. rate of 9.89% (as declared) [Subject to depreciation, interest remuneration to partners] was accepted by the Id. CIT (A) which was also upheld by the Hon ble ITAT. Thus it constitutes settled past history. Since, in the current year, assessee declared NP rate of 10.08% [Subject to depreciation, interest remuneration to partners], the same should be upheld being better than the comparable preceding year i.e. AY 2004-05. Ld. CIT(A), although has referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the Assessing Officer has rightly estimated the profit @ 29.52% or not? The NP rate of 29.52% were there for the assessment year 2005-06 and 9.89% for the assessment year 2004-05. In our view, the past result will not mean the immediate past result i.e. result for the A.Y. 2005-06 as the said result was available with the Tribunal even at the time of passing of the order on 30/09/2010, therefore, the estimation is required to be done based on the earlier results available i.e. for the A.Y. 2004-05 and 2005-06. In the year 2005- 06, the turnover of gross contract receipts was ₹ 12102939/- and whereas gross receipts in the year was ₹ 34012026/-. Whereas the gross receipt in the A.Y. 2006-07 was ₹ 46441234/- . ₹ 46114965 is the gross contract receipts for the year 2004-05 and 2005-06, in our view, in fact the gross receipt of 2006-07 was ₹ 46441234/-. Thus, the gross receipts of 2006-07 is matching the gross receipts for the earlier two years. Therefore, to apply the NP rate for the year 2005-06 @ 29.52%, in our view, was not correct and therefore, a rational view is required to be taken estimating the profit of the assessee. The ends of justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable/ready to use and not put to use, will be eligible for claiming depreciation under the Income Tax Act. Hon ble Delhi High Court in the case of National Thermal Power Corpn. Ltd. [2012] 28 taxmann.com 89 (Delhi) (Case Law Page 50), adjudicated the following question of law:- ... Whether on the facts and in the circumstances of the case, the assessee is entitled to depreciation in respect of capital construction equipment acquired by the assessee and kept ready for use by the contractor putting up the power plants of the assessee... It was held by the Hon ble Delhi High that In the aforesaid circumstances, we are of the view that the Tribunal erred in rejecting the assessee's claim for depreciation on capital construction equipment kept ready for use, though not actually used, for the assessment years 1979- 80 and 1980-81. The common question of law is accordingly answered in the affirmative, in favour of the assessee and against the Revenue... The lower authorities have completely ignored the legal proposition with regard to the allow ability of depreciation w.r.t asset ready to use even though not put to use. In view of the above, depreciation on the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even where the books of accounts are rejected and profit estimated. The assessee has not given any argument/explanation/ evidence on the merit of the issue. He has not proved that the liability shown in the balance sheet is genuine. He has not given the names and addresses of the persons to whom the amount was payable. The addition of unexplained liability is sustained u/s 68 of the Act. Reliance is placed on the following case laws where it has been held that there is nothing in law which prevents AO in taxing both unexplained cash credit and business income estimated after rejecting the books of accounts being unreliable- 1. CIT V/S Devi Prasad Vishwanath Prasad (72 ITR 194) (SC) 2. Kale Khan Mohammed Hanif V/s CIT (50 ITR 1) (SC) 3. Ratanchand Dipchand v/s CIT (38 ITR 188) (MP) 4. CIT v/s Madhuri Rajaiahgari Kistaiah (38 ITR 188) (MP) 5. D.C. Auddy Bros, vs. CIT (28 ITR 713) (Cal) 6. S. Kumaraswami Reddiar Vs. CIT (40 ITR 590) (Ker) 7. Grover Fabrics (India) P. Ltd. vs. CIT (332 ITR 312) (P H) Reliance is also placed on the decision of Hon'ble Kerala High Court in the case of CIT vs. Smt. Annamkuty Jose (2008) (174 Taxman 328)/ (2009) (221 CTR 474) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and jurisdiction set out by the Hon ble ITAT, but also since the books were rejected by the ld. AO, no disallowance can further be made relying on the same set of books. 14. At the outset, the ld. DR has vehemently supported the order of the ld. CIT(A). 15. We have heard the rival contentions of both the parties and perused the material available on the record. The order dated 30/09/2010 mentioned that the outstanding liabilities of wages has been shown as ₹ 1640214, which was disallowed by the Assessing Officer and confirmed by the ld. CIT(A). Again the said disallowance and other disallowances , the assessee was in appeal. Moreover, at page 6 of the earlier Tribunal order, it is categorically mentioned that the Assessing Officer had disallowed the claim liabilities of ₹ 1640214 towards the payable wages on the basis that it is not verifiable. Thereafter, the Tribunal, by the specific direction has held that the disallowances in question (referred at page 1 of the order), the matter was remanded back to the Assessing Officer to estimate the profit of the assessee keeping in view the past result of the assessee. 16. In our view, the Assessing Officer was not re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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