M/S Alectra Consts.Ltd., Samastipur V. DCIT, Darbhanga

ITA 1/PAT/2011

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0017 (ITAT-PATNA)
• Duration Of Justice: 8 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYA BISWAS
• Assessee Lawyers: PANKAJ JYOTI
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA , . . , BEFORE SHRI CHANDRA MOHAN GARG, J M & SHRI L .P. SAHU, AM ./ ITA NO. 01 / P AT /201 1 ( / ASSESSMENT YEAR : 2007 - 2008 ) ALECTRA CONSTRUCTION LTD., C/O ANIL KUMAR SINGH, NEW COLONY, DHARAMPUR, SAMASTIPUR VS. DCIT, CIRCLE - 3, DARBHANGA ./ PAN NO. : A A ECA 8497 Q ( / APPELLANT ) .. ( / RESPONDE NT ) /ASSESSEE BY : SHRI PANKAJ JYOTI, AR /REVENUE BY : SHRI SUPRIYA BISWAS, JCIT - DR / DATE OF HEARING : 16 /0 9 /2019 / DATE OF PRONOUNCEMENT : 18 /0 9 /2019 / O R D E R PER BEN CH : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I , PATNA , DATED 30 .09.2010 FOR THE ASSESSMENT YEAR 20 07 - 20 08 . 2 . EARLIER THIS APPEAL WAS DISPOSED OFF BY THE TRIBUNAL VIDE ORDER DATED 08 .08.2011, HOWEVER, ON MISCELLANEO US APPLICATION FILED BY THE ASSESSEE, THE SAME WAS RESTORED TO ITS ORIGINAL NUMBER VIDE ORDER DATED 26.06.2019 . NOW, THE APPEAL WAS LISTED TODAY I.E. ON 16.09.2019 AND THE SAME WAS HEARD AND DISPOSED OFF IN THE FOLLOWING MANNER . ITA NO . 0 1 / PAT /201 1 2 3. THE SOLE AND EFFECTIVE G ROUND OF APPEAL RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ESTIMATION OF 8% MADE BY THE ASSESSING OFFICER. 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM CIVIL CONTRACT WORK OF DIFFERENT WORKS DEPARTMENT OF GOVT. OF BIHAR AND FILED ITS RETURN OF INCOME ON 23.12.2007 DECLARING TOTAL INCOME AT RS.1,07,66,591/ - . THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. THEREAFTER THE ASSESSING OFFICER FRAMED THE ASSESSMENT ESTIMATING NET PROFIT @8% ON THE GROSS CONTRACT RECEIPT AFTER CONSIDERING ALL EXPENSES INCLUDING DEPRECIATION. 5. IN FIRST APPEAL, THE CIT(A) UPHELD THE ACTION OF ASSESSING OFFICER IN ESTIMATING THE NET PROFIT @8% ON THE GROSS CONTRACT RECEIPT OF THE ASSESSEE. THE CI T(A) FURTHER OBSERVED THAT THE ASSESSEE IS NOT ENTITLED TO DEPRECIATION SINCE THE SAME HA S BEEN ASSUMED TO HAVE BEEN ALLOWED WHILE DETERMINING THE INCOME BY APPLYING NET PROFIT ON THE GROSS RECEIPTS. 6. LD. AR , AT THE OUTSET, PLACED RELIANCE ON THE DECISIO N OF HONBLE PATNA HIGH COURT IN THE CASE OF DCIT VS. M/S SALAUDDIN, RENDERED IN MISCELLANEOUS APPEAL NO.77 OF 2010, DATED 11.04.2012 AND SUBMITTED THAT ESTIMATION OF NET PROFIT MAY KINDLY BE REDUCED TO 6% WHICH HAS BEEN FOUND JUSTIFIED AND PROPER IN A CAS E OF CIVIL CONTRACT BY THE HONBLE PATNA HIGH COURT IN THE ABOVE CASE (SUPRA). FURTHER LD. AR ITA NO . 0 1 / PAT /201 1 3 SUBMITTED THAT IN VIEW OF THE BINDING NATURE OF CBDT CIRCULAR, NO.29 - D/(XIX - 14 OF 1965), BOTH THE AUTHORITIES BELOW OUGHT TO HAVE ALLOWED THE DEPRECIATION FROM TH E ESTIMATED NET PROFIT. IN THIS REGARD, L D. AR RELIED ON THE DECISION S OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHRI RAM JHANWAR LAL VS. ITO, 321 ITR 400 (RAJ) AND DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SHYAM BIHARI VS. CIT, [2012] 345 ITR 283 (PATNA) . 7. ON THE OTHER HAND, LD.DR RELIED ON THE ORDER OF THE CIT(A). 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE FIND IN THE INSTANT CASE THE ASSESSING OFFIC ER ESTIMATED NET PROFIT @8% AFTER CONSIDERING ALL EXPENSES INCLUDING DEPRECIATION. THE CIT(A) CONFIRMED THE NET PROFIT @8% DONE BY THE ASSESSING OFFICER AND ALSO OBSERVED THAT THE ASSESSEE IS NOT ENTITLED TO DEPRECIATION ON THE ESTIMATED NET PROFIT. HOWEVE R, AS PER PROPOSITION RENDERED BY THE HONBLE PATNA HIGH COURT IN THE CASE OF M/S SALAUDDIN, RENDERED IN MISCELLANEOUS APPEAL NO.77 OF 2010, DATED 11.04.2012 , WHEREIN IT HAS BEEN HELD THAT IN A CASE OF CIVIL CONTRACTOR ESTIMATION OF NET PROFIT @6% OF THE TOTAL CONTRACTUAL RECEIPTS IS JUSTIFIED AND REASONABLE. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE OF NET PROFIT OF THE ASSESSEE @6% OF THE TOTAL GROSS CONTRACT RECEIPTS. WITH REGARD TO ALLOWABILITY OF DEPRECIAT ION AS RAISED BEFORE US BY THE LD. AR OF THE ITA NO . 0 1 / PAT /201 1 4 ASSESSEE, WE FIND THAT T HE BOARD CONSIDERED 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 WO RKED 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. THIS ISSUE HAS ALSO BEEN DECIDED BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHRI RAM JHANWAR LAL (SUPRA) RELYING ON ITS EARLI ER DECISIONS IN THE CASE OF JAIN CONSTRUCTION CO. [2000] 245 ITR 527 AND BHARAT CONSTRUCTION CO . [2002] 125 TAXMANN 366 (RAJ) HAS HELD THAT WHERE THE ASSESSING OFFICER HAS ADOPTED NET PROFIT RATE IN MAKING ASSESSMENT ON BEST JUDGMENT ASSESSMENT BASIS, EVE N IN THAT CASE ALLOWANCE OF DEPRECIATION IS REQUIRED TO BE MADE. FURTHER THE HONBLE PATNA HIGH COURT IN THE CASE OF SHYAM BIHARI (SUPRA) HAS OBSERVED AS UNDER : - 10. WE HAVE BEEN TAKEN THROUGH THE PROVISIONS OF CIRCULAR OF THE BOARD DATED 31.8.1965. ACCO RDING TO THAT CIRCULAR WHICH IS BINDING ON THE DEPARTMENT AND ITS AUTHORITIES, 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 AL L SUCH CASES, AS PER THE CIRCULAR, THE GROSS PROFIT SHOULD BE ESTIMATED AND THE DEDUCTIONS AND ALLOWANCE INCLUDING THE DEPRECIATION ALLOWANCE SHOULD BE SEPARATELY DEDUCTED FROM THE GROSS PROFIT. IF THE NET PROFIT IS REQUIRED TO BE ESTIMATED, IT SHOULD BE E STIMATED SUBJECT TO THE ALLOWANCE FOR DEPRECIATION AND THE DEPRECIATION ALLOWANCE SHOULD BE DEDUCTED THEREFROM. ITA NO . 0 1 / PAT /201 1 5 9. FROM THE ABOVE JUDGMENTS OF THE HONBLE RAJASTHAN AND PATNA HIGH COURT S AS WELL AS THE CBDT CIRCULAR, IT IS CLEAR THAT W HERE THE ASSESSING O FFICER HAS ADOPTED NET PROFIT RATE IN MAKING THE ASSESSMENT ON BEST JUDGMENT ASSESSMENT BASIS, EVEN IN THAT CASE ALLOWANCE OF DEPRECIATION IS REQUIRED TO BE MADE. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE TOTAL INCOME APPLYING THE NET PR OFIT @6% AND ALLOW THE DEPRECIATION ACCORDINGLY AS PER OUR ABOVE OBSERVATIONS , SUBJECT TO RETURNED INCOME DECLARED BY THE ASSESSEE. THE SOLE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED . 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONO UNCED IN THE OPEN COURT ON 18 / 09 /201 9 . SD/ - ( C.M.GARG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /PATNA ; DATED 18 / 0 9 /201 9 PRAKASH KUMAR MISHRA , S R.P.S. (ON TOUR) / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( PRIVATE SECRETARY ) , / ITAT, PATNA 1. / THE APPELLANT - . 2. / THE RESPONDENT - 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, PATNA 6. / GUARD FILE. //TRUE COPY//