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TMI Blog2017 (2) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at the business premises of the assessee on 5.2.2010. During the course of survey operation, the assessee did not choose to produce books of accounts for the assessment years 2006-07 to 2009-10 and also for the period from 1.4.2009 to 5.2.2010. It was further noticed that the assessee has maintained only katcha account books which were impounded. During post survey investigation, on close analysis of impounded material reveals that there existed a concealed income and that the receipts and payments are not in tally with the books of accounts. In view of survey operation conducted u/s 133A of the Act, which resulted in identification of deficiencies and shortcomings on different counts, action u/s 147 of the Act was invoked by issuance of a notice u/s 148 of the Act, on 8.2.2010 requiring the assessee to furnish return of income. Since, the assessee failed to respond to the notice issued u/s 148 of the Act, a reminder dated 28.5.2010 has been issued directing it to file the return of income for the assessment years 2006-07 to 2009-10. In response thereto, the assessee filed a reply dated 14.6.2010 seeking for copies of impounded material. However, the assessee filed its return o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also expenditure on different counts on the basis of approximate figure which are not reliable and authenticated and going by this anomalous situation and inherent deficiencies contained in the books of accounts maintained by the assessee, opined that the books of accounts maintained by the assessee are incomplete and does not give true and correct profit from the business. Therefore, rejected books of accounts u/s 145(3) of the Act and resorted to a reasonable estimate of net profit as upheld by the judiciary in terms of section 144 of the Act. Accordingly, rejected books of accounts u/s 145(3) of the Act and estimated net profit of 7% on gross receipts net of all deductions including depreciation. In so far as depreciation, the A.O. observed that the assessee has failed to prove the ownership of assets, which is mandatory for claiming depreciation under the provisions of section 32 of the Act. Since, the assessee has failed to prove the ownership of assets to claim depreciation and also fact that the assessee has made this claim in the revised return filed in response to notice u/s 148 of the Act, rejected depreciation claim. 5. Aggrieved by the assessment order, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext, the A.R. has filed certain judgements of appellate authorities, wherein they have upheld estimation of net profit of 10% on which depreciation was allowed. The A.R. relied upon the decision of ITAT, Hyderabad 'A' Bench in the case of Munumuri Krishna Murthy Vs. ACIT Circle-1, Vijayawada, in ITA No.898/Hyd/1995 dated 4.12.1996, wherein the ITAT, has directed estimation of income at 10% of gross receipts subject to allowance of depreciation. The ITAT, Visakhapatnam bench, in the case of ITO Ward-1(3), Vijayawada Vs. Sri Padmavathi Transports, Jaggaiahpet in ITA No.42/Vizag/2005 dated 4.6.2009, directed the A.O. to estimate income from truck plying at 10% of gross receipts subject to allowance of depreciation. Thus, the legal opinion is predominantly in favour of assessee and accordingly, the A.O. is directed to estimate income at 10% of gross receipts subject to allowance of depreciation for all the assessment years under consideration. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 7. The Ld. D.R. submitted that the Ld. CIT(A) failed to appreciate the settled law that re-opening of an assessment could only be for the benefit of the revenue and in the re- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts net of all deductions including depreciation. The A.O. was of the opinion that the books of accounts maintained by the assessee are not amenable for verification as the assessee has not maintained regular books of accounts along with supporting bills and vouchers. The A.O. further was of the opinion that the impounded material reveals that the assessee has not accounted certain freight charges received on return trips. The A.O. further observed that in the katcha accounts maintained by the assessee, the assessee has accounted expenditure in relation to income which is not part of regular books of accounts. Therefore, opined that the books of accounts maintained by the assessee are not susceptible for verification. It is the contention of the assessee that the net profit estimated by the A.O. is very much on higher side compared to the nature of business of the assessee. The assessee further contended that it is operating with a very low profit margin, as it works as transport contractor by operating trucks owned by outsiders in addition to its own trucks, therefore the A.O. was incorrect in adopting 7% net profit. The assessee further contended that the CIT(A) has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reasonable percentage of net profit has to be adopted keeping in view of the facts and circumstances of the case. In this case, the A.O. has adopted 7% net profit which is supported by the decision of ITAT, whereas, the assessee has relied upon the decision of ITAT Hyderabad 'A' Bench in the case of Income Tax Officer, Ward-1 Vs. Sri Gundapaneni Nageswara Rao, Kodad in ITA No.1799/Hyd/2013 dated 29.4.2014, wherein the ITAT has upheld estimation of net profit of 3% net of all deductions including depreciation. 12. We find that the coordinate bench of this Tribunal in the case of ITO Vs. Sri Gundapaneni Nageswara Rao (supra), under similar set of facts, has directed the A.O. to estimate net profit of 3% net of all deductions including depreciation. Though, there are divergent views from the appellate authorities, the view which is more beneficial to the assessee has to be adopted in view of the Supreme Court, decision in the case of CIT vs. Vegetable Products Limited (1973) 88 ITR 192. Therefore, we are of the considered view that since, the assessee has not proved the ownership of assets to claim the depreciation and also fact that the facts of the present case are similar to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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