TMI Blog2016 (10) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... the grievance of the Revenue that the depreciation should not have been allowed, we find that the department vide Circular No. 29D, dated 31.08.1965 (placed at APB 34) has directed that where the books of the account are rejected and profits are estimated, depreciation allowance should be given Hon’ble Punjab & Haryana High Court in the case of Lali Construction Co.(2014 (9) TMI 500 - PUNJAB & HARYANA HIGH COURT) has held that where the assessee gives information required under section 32 of the Act regarding claim of depreciation, the AO is bound to allow the claim of depreciation. In view of the above, the ld. CIT(A) has rightly allowed the claim of depreciation out of net profit worked out by applying net profit rate. As regards the grievance of the Revenue regarding late filing of appeal by the assessee before the ld. CIT(A) and admission by him, we find that the ld. CIT(A) has given cogent reasons for accepting the appeal of the assessee, which he has narrated at page 3 of the impugned order, which reasons we find are reasonable for admission of the appeal and therefore, this grievance of the Revenue is rejected. As regards the grievance of the Revenue that the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses of the assessee were on account of purchases and labour expenses, which amounted to ₹ 6,85,25,610/- and ₹ 3,80,36,142/- respectively. Therefore, the assessee was directed to produce bills/vouchers in respect of purchases and labour expenses which the assessee did not produce but produced photocopies of certain bills. The AO required the assessee to furnish original bills/vouchers, but the assessee did not produce complete original bills/vouchers. However, the assessee did produce cash book and ledger but did not produce complete vouchers of purchases, labour and muster rolls of labour. The assessee was also not able to produce the bills of bajri and other material etc. Therefore, the AO rejected the books of account of the assessee and applied the net profit rate of 10% of the gross turnover relying upon the decision of ITAT, Chandigarh Bench, in the case of M/s. Ess Ess Builders Pvt. Ltd., passed in ITA No.707/Chand/1997, dated 16.09.2003. The AO also relied upon the case law of ITAT, Chandigarh Bench, in the case of M/s. Aggarwal Construction, Ludhiana, passed in ITA Nos.490 387/Chnd/2009, dated 25.01.2007, where net profit rate of 12% was applied. The AO furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR relied on the following case laws: i) ITAT, Amritsar Bench, in the case of Sh. Mohan Singh Contractor vs. ITO, in ITA No.59/Asr/2012, dated 05.06.2012 relating to A.Y. 2008-09. ii) ITAT, Amritsar Bench, in the case of ITO vs. M/s. Surinder Pal Nayyar, in ITA No.366/Asr/201, dated 30.04.2012 relating to A.Y. 2006-07. iii) ITAT, Amritsar Bench, in the case of Sh. Abdul Salam Mir vs. DCIT, in ITA No.115/Asr/2013, dated 06.08.2014 relating to A.Y. 2009-10. iv) ITAT, Amritsar Bench, in the case of M/s. Mattewal Cooperative L/C Society Ltd. vs. ACIT, Circle V, Amritsar, dated 27.12.2012 in ITA No.450/Asr/2012, relating to A.Y. 2008- 09. v) ITAT, Amritsar Bench, in the case of ACIT, Cir.VI, Pathankot vs. M/s. J.S. Grover Construction , in ITA No.63/Asr/2016, dated 26.08.2016 relating to A.Y. 2011-12. vi) ITAT, Amritsar Bench, in the case of M/s. Satish Aggarwal Co., order dated 21.01.2016 in ITA No.483/Asr/2013, relating to A.Y. 2009-10. 8. The ld. AR submitted that in the case of Sh. Mohan Singh Contractor (supra), the assessee had declared a net profit rate of 3.60% as compared to 3.87% in the immediately preceding year. The AO after rejecting the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10. Further, it was argued that since payee had included interest income in its profit loss account, therefore, also addition was not warranted. 11. The ld. DR, on the other hand, submitted that the ld. CIT(A) had wrongly allowed relief to the assessee by reducing net profit rate from 10% to 8%, as the assessee was not able to produce bills of purchases and labour. The onus was on the assessee to prove that the books of account were correct. As regards disallowance u/s 40a(ia) of the Act, the ld. DR submitted that the disallowance is a mandatory disallowance for non deduction of TDS, therefore, the ld. CIT(A) has rightly confirmed the same. 12. The ld. DR further submitted that his arguments relating to reduction of rate from 10% to 8% also applies to the Revenue s appeal. It was submitted that the AO had given cogent reasons for rejecting books of account and therefore, the ld. CIT(A) should not have taken a different view. The ld. DR further submitted that the appeal of the assessee was late by more six months and the ld. CIT(A) should not have admitted the same. 13. The ld. counsel, however, submitted that the ld. CIT(A) had given complete reasons for admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rate of net profit should not have been accepted by the Authorities below, especially keeping in view the fact that the assessee is engaged in same kind of activities as was in the earlier year. The ld. counsel has relied upon a number of case laws noted above in this order, wherein the Tribunal had held the net profit rate of 5% to be reasonable keeping in view the past history of the assessee. For the sake of convenience, the finding of the Tribunal in ITA No.58/Asr/2012 in the case of Mohan Singh Contractor are reproduced below: 5.1. As regards the estimation of income, the AO has applied Net Profit rate of 8% and has relied upon the decision of the Hon ble Punjab Haryana High Court, in the case of CIT, Hissar vs. Prabhat Kumar Contractor, Sirsa, in ITA No.293 of 2008 dated 14.11.2008. The AO has not brought out the facts on record of the case of CIT, Hissar vs. Prabhat Kumar Contractor, Sirsa (supra), as to how the facts in that case are identical to the facts of the present case. The assessee has been declaring Net Profit rate of 3.87% in the preceding year at a turnover of ₹ 1,32,26,714/-, which has been accepted by the department There is no dispute to this fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious defects in the assessment order. The Ld. CIT(A) considering all the defects pointed out by the AO and finally, validly and reasonably determined the net profit rate at 5% after allowing depreciation and interest to the partners on the assessee s turnover. Keeping in view the facts and circumstances of the present case, we are of the considered opinion that the ld. first appellate authority has rightly applied net profit rate of 5% after allowing depreciation and interest to the partners on assessee s turn over as against 8% applied by the A.O. We uphold the impugned order by dismissing the appeal filed by the Department as well as C.O. filed by the assessee. 16. The Tribunal vide its order dated 21.01.2016, in ITA No.483/Asr/2013, in the case of Satish Aggarwal Co., after taking into account the factors noted by the Hon ble Punjab Haryana High Court in Telelinks vs. CIT, Bathinda, has also held the rate of 5% to be reasonable, by holding as under: 12. As demonstrated by learned AR the past and subsequent profit margins remained less than 5% and the activities of the assessee remained same, therefore, we uphold the application of 5% net profit rate. 17. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 2. The Board consider that where it is proposed to estimate the profit and the prescribed particulars have been furnished by the assessee, the depreciation allowance should be separately worked out. In all such cases the gross profit should be estimated and the deductions and allowances including the depreciation allowance should be separately deducted from the gross profit. If it is considered that the net profit should be estimated it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom. 19. We further find that the Hon ble Punjab Haryana High Court in the case of Lali Construction Co. (supra) has held that where the assessee gives information required under section 32 of the Act regarding claim of depreciation, the AO is bound to allow the claim of depreciation. The findings of the Hon ble Court are reproduced below: Taking up the first point, the matter is no longer res integra. The Division Benches of this Court in Commissioner of Income Tax v. Chopra Bros. India (P) Limited (2001) 252 ITR 412 and Girdhari Lal v. Commissioner of Income Tax(2002) 256 ITR 318 while considering the aforesaid issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l may also be dismissed. As far as the fourth ground of appeal is concerned, it is also liable to be rejected once the rate of profit is applied no further disallowance or addition can be made. This view finds support from the following judgments:- i) Decision of Jharkhand High Court in the case of Amitabh Construction (P) Ltd vs. Addl. CIT reported in 335 ITR 523. (Refer page no 101 to 104 of paper book). ii) Decision of Kerala High Court in the case of Samurai Techno Trading Co Ltd vs. CIT reported in 197 Taxman 144. (Refer page no 105 to 109 of paper book) iii) Decision of Andhra Pradesh High Court in the case of Maddi Sudarsanam Oils Mills vs CIT reported in 37 ITR 369 which was followed in the case of Indwell Constructions vs CIT reported in 232 ITR 776. (Refer page no 110 to 112 of paper book) iv) Decision of Allahabad High Court in the case of CIT vs. Banwarilal Bansidhar reported in 229 ITR 229 in which it was held no disallowance can be made u/s 40(a)(iii) where GP rate is applied. (Refer page no 113 to 115 of paper book) v) Decision of ITAT, Amritsar Bench, in the case of Smt. Balbir Kaur vs. ITO in ITA No. 151(ASR)/2016, order dated 23/05/2016 relating ..... X X X X Extracts X X X X X X X X Extracts X X X X
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