TMI Blog2016 (8) TMI 1409X X X X Extracts X X X X X X X X Extracts X X X X ..... a) are not applicable as this amount has been shown in the hands of the receipt ant and which has suffered tax. As such the disallowance is not called for and the department has got no justification for coming in appeal before the Tribunal. - ITA No. 63 (Asr)/2016 - - - Dated:- 26-8-2016 - Sh. A. D. Jain, Judicial Member And Sh. T.S. Kapoor, Accountant Member Appellant by : Sh. Bhawani Shanker, DR Respondent by : S/Sh.P.N. Arora Anil Vasudeva, CA ORDER Per A. D. Jain, JM This is the Revenue s appeal for the assessment year 2011-12, against the order dated 08.10.2015, passed by the ld. CIT(A)-2, Amritsar. The Revenue has raised the following grounds of appeal: 1. On the facts and law, the Ld. Commissioner of Income Tax (Appeals)-II, Amritsar has erred in applying net profit rate of 7% and further allowing separate deduction of depreciation against net profit of 10%(after taking in to consideration of depreciation) reasonable applied by the AO after rejecting the books of account under section 145(3) after pin pointing specific defects in the books of account. 2. On the facts and law, The Ld. Commissioner of Income Tax (Appeals)-II, Amritsar has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition of ₹ 58,76,454/- on account of interest paid without deduction of tax, by holding that once books of account are rejected, there is no scope for further disallowance, which is illogical and contradictory to the allowance of separate further deduction of depreciation. He accordingly prayed that the order of the ld. CIT(A) may be set aside and that of the AO be restored. 6. The ld. counsel for the assessee, on the other hand, relied on the impugned order and reiterated the submissions made before the ld. CIT(A). He has filed written submissions in support of his case, which are placed on record. 7. We have heard the rival contentions in the light of the material available on record. We have carefully gone through the order of the ld. CIT(A) and find that the ld. CIT(A) has passed a well reasoned and detailed order, considering all aspects of the matter, which requires no interference at our hands. The relevant portion of the findings given by the ld. CIT(A) is reproduced as under: 6. I have considered the rectification order, the grounds of appeal and written submissions of the appellant and the grounds of appeal are disposed of as under: i) The groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 lacs paid to the partners the net profit rate comes to 64%.Further depreciation was claimed at ₹ 2,13,22,380/- in P L a/c , and the net profit before salary to partners and depreciation comes to 26%. The appellant argued that the AO straightaway applied the profit rate of 10% and did not allow salary to partners and depreciation. It was argued that under similar circumstances, Department and Hon ble ITAT, Amritsar had been accepting net profit rate of 5%, and relied on the following decisions of Hon ble ITAT, Amritsar, namely- 1. In the case of Mohan Singh Contractor vs ITO in ITA No.59(Asr)/2012dated 05-06-2012. 2. In the case of ITO vs Surinder Pal Nayyar , Contractor in ITA No. 366(Asr)/2010 dated 30-04-2012. 3. In the case of Abdul Salam Mir vs DCIT in ITA No. 102(Asr)/2013 dated 18-03-2014. As mentioned in the assessment order, the Appellant was asked by the AO to furnish complete details of expenses c l a i m e d but complete details called for were hot furnished. Confirmations in only a few cases were filed. Muster rolls of labour and bills/ vouchers of other expenses were not filed. The assessed produced cash book and ledgers alongwith only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case of the appellant and therefore the ratio in the case of M/s Shivam Construction Co cannot be applied straightaway in the case of the appellant. Moreso, the AO had omitted to notice that the appellant was not the main contractor of National Highway Authority of India but had taken contract from IRB Ltd for construction of National Highway as a sub-contractor only. In the case of a subcontractor, the net profit is only lower than that of the main contractor. Therefore, considering the fact that the appellant was not the main contractor of National Highway Authority of India but had taken contract from IRB Ltd for construction of National Highway as a sub-contractor only and the discrepancies noticed by the AO in the books of accounts of the appellant and non maintenance of complete bills and vouchers of expenses claimed by the appellant in the P L account, in my opinion it would meet ends of justice by determining the net profit by applying the net profit rate of 7% of the gross contract receipts declared by the appellant and the salary to partners and depreciation as claimed at ₹ 2,13,22,380/- (discussed ground of appeal no. 3) shall be allowed thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of CIT vs Fazilka Dabwali Tpt Co. (P) Ltd reported in (2004) 270 ITR 378 iii) Decision of Hon ble Punjab Haryana High Court in the case of CIT vs Metalman Auto (P) Ltd., reported in 336 ITR 434. The submissions of the appellant are considered and are found to be applicable in its case. Just for the simple reason that the cars were purchased in the name of Shri Sunil Grover and not the appellant firm would not disentitle the depreciation claimed on cars since the same were put to use for the business of the appellant firm and not for personal use of Shri Sunil Grover. The AO had nowhere stated in the assessment order that the cars were used for personal purposes of the partners of the appellant firm. Likewise the other assets purchased by the appellant which were not in the name of the appellant firm but nevertheless were put to use for the purposes of the business of the appellant firm. The AO has not held anywhere in the assessment order that the assets on which the depreciation has been claimed by the appellant were not used for the business purposes of the appellant firm but for the personal use of the partners of the appellant firm. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Samurai Techno Trading Co (P) Ltd vs CIT reported in 197 taxman 144. The Appellant pointed out that in the own case of the appellant in AY 2012-13,the AO had applied the net profit rate without making separate addition of interest paid without deduction of TDS u/s 40(a)(ia) of the Act. The books of account of the appellant had been rejected u/s 145(3) of the Act as they were unreliable and correct income could not be deduced therefrom. The invoking of section 145(3) of the Act has been upheld above. In the above circumstances, when the rejection of books of account u/s 145(3) of the Act has been upheld and Net Profit rate applied has been upheld/confirmed @ 7% of the gross receipts declared, then once the rate of profit is applied, no such disallowance u/s 40(a)(ia) of the Act is called for in view of the decisions of Hon ble High Courts stated above. The provision of section 40(a)(ia) of the Act is a part of computation of income under head business from section 28 to 43D of the Act and once books of accounts are rejected and net profit rate is applied, that would take care of everything and there was no scope for any further disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also held the same view. In many other cases, as follows, in which the Tribunal has held that rate of 5% is applicable subject to depreciation and interest salary to partners: i) Decision of ITAT, Amritsar Bench, in the case of Sh. Mohan Singh Contractor vs. ITO , in ITA No.59(Asr)/2012, order dated 05.06.2012, relating to AY 2008-09 (page 52 to 56 of APB). ii) Decision of ITAT, Amritsar Bench, in the case of ITO VS. Surinder Pal Nayyar Contractors in ITA No.366(Asr)/2010, order dated 30.04.2012 relating to AY 2006-07 (SAPB 57 to 65) iii) Decision of ITAT, Amritsar Bench, in the case of DCIT vs. Abdul Salam Mir in ITA No. 115(Asr)/2013, order dated 06.08.2014, relating to AY 2009-10 (APB 66 to 79). iv) Decision of ITAT, Amritsar Bench, in the case of The Mattewa Co-operative L/C Housing Society vs. ACIT , in ITA No.450(Asr)/2012, order dated 27.12.2012, relating to AY 2008-09 (APB 84 to 97). 9. The second point against which the department has come in appeal is against the allowing of depreciation. In this connection the Ld CIT(A) has discussed the order at great length and by following the decision of P H High Court in the case of Lali Construction C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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