ITO, WD-10(1), KOLKATA, Kolkata V. M/s Gourangalal Chatterjee Constructions Pvt. Ltd., Kolkata

ITA 1425/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1468 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: D S DAMLE
• Keywords: Rejection of books of accounts; Presumptive income; Business income; Depreciation; Unabsorbed depreciation
• Section: 44AD; 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI N.V. VASUDEVAN, JM & SHRI M. BALAGANESH, AM ] I.T.A NOS. 1425- 1429 /KOL/2015 ASSESSMENT YEARS : 2006- 07, 2008-09 TO 2011-12 ITO, WARD-10(1),KOLKATA -VS- M/S GOURANGALAL CH ATTERJEE CONSTRUCTION PVT. LTD. [PAN: AABCG 9694 G] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI KALYAN NATH, ADDL. CIT FOR THE RESPONDENT : SHRI D.S. DAMLE, FCA DATE OF HEARING : 19.08.2017 DATE OF PRONOUNCEMENT : 21.09.2017 ORDER PER BENCH: 1. THESE APPEALS BY THE REVENUE ARISE OUT OF THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -4, KOLKATA [ IN SHORT THE LD CITA] IN APPEAL NO. 279/CIT(A)-4/WD-10(1)/(13-14)/14-15 DATED 28.09.20 15 FOR ASSESSMENT YEAR 2006-07, APPEAL NO. 277/CIT(A)-4/WD-10(1)/(13-14)/14-15 DATE D 28.09.2015 FOR ASSESSMENT YEAR 2008-09, APPEAL NO. 278/CIT(A)-4/WD-10(1)/(13- 14)/14-15 DATED 28.09.2015 FOR ASSESSMENT YEAR 2009-10, APPEAL NO. 29/CIT(A)-4 /WD-10(1)/(13-14)/14-15 DATED 28.09.2015 FOR ASSESSMENT YEAR 2010-11, APPEAL NO. 282/CIT(A)-4/WD-10(1)/(13- 14)/14-15 DATED 28.09.2015 FOR ASSESSMENT YEAR 201 1-12 RESPECTIVELY AGAINST THE ORDERS PASSED BY THE ITO, WARD-10(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 147/144/145(2) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT) DATED 17.05.2013 FOR 2 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 2 THE ASSESSMENT YEARS 2006-07, 2008-09 AND 2009-10 R ESPECTIVELY, AND ORDERS U/S 144/145(2) OF THE ACT DATED 07.03.2013 AND 19.04.20 13 FOR ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVELY. AS THE ISSUES INVOLVED I N ALL THESE APPEALS ARE IDENTICAL IN NATURE FOR ALL THE YEARS, THE SAME ARE TAKEN UP TOG ETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE TO BE DECIDED IN ALL THESE APPEAL S IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DIRECTING THE LD AO TO ADOPT THE NET P ROFIT AT 2.5% OF TURNOVER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS OF ASST YEAR 2006-07 ARE TAKEN UP FOR ADJUDICATION AND THE DECISION RENDERED THEREON WOUL D APPLY WITH EQUAL FORCE FOR OTHER ASSESSMENT YEARS ALSO HEREIN EXCEPT WITH VARIANCE I N FIGURES. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A COMPANY ENGAGED IN CIVIL CONSTRUCTION CONTRACTS AWARDED BY GOVERNMENT DEPART MENTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2006-07 DECLARIN G TAXABLE INCOME OF RS 23,96,540/-. THE ACCOUNTS OF THE ASSESSEE WERE DULY SUBJECTED TO TAX AUDIT U/S 44AB OF THE ACT. THE DETAILS OF RETURNED INCOME, TURNOVER, NET PROFIT RE PORTED BY THE ASSESSEE ARE AS UNDER:- ASSESSMENT YEARS 2006-07 2008-09 2009-10 2010-11 2011-12 TURNOVER 51857700 167616037 146060004 137912395 102956387 NET PROFIT 2822049 3454999 2761506 2787263 1711449 NP % 5.441909 2.061258 1.8906654 2.0210388 1.6623048 RETURNED INCOME 2396540 3531218 2710956 2798850 2411449 3 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE REJECTED THE BOOKS OF ACCOUNTS AND RESORTED TO ESTIMATE THE NET PROFIT FR OM CONTRACT BUSINESS AT 8% OF TOTAL CONTRACT RECEIPTS AND ACCORDINGLY ADDED THE SAME. ON FIRST APPEAL, IT WAS PLEADED BY THE ASSESSEE THAT DEDUCTION TOWARDS BANK INTEREST, BANK CHARGES AND DEPRECIATION SHOULD BE ALLOWED TO BE DEDUCTED FROM THE ESTIMATED BUSINE SS PROFIT OF 8% . THE LD CITA UPHELD THE ACTION OF THE LD AO IN REJECTION OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE BOOK RESULTS. THE LD CITA OBSERVED THAT FOR T HE ASST YEAR 2007-08, IN ASSESSEES OWN CASE, IT WAS HELD THAT ESTIMATION OF NET PROFIT AT 2.5% GROSS CONTRACT RECEIPTS WOULD MEET THE ENDS OF JUSTICE AND ACCORDINGLY FOLLOWED T HE SAME FOR THESE ASST YEARS ALSO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUNDS:- I.T.A. NO.1425/KOL/2015 FOR ASSESSMENT YEAR-2006-07 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO ADOPT THE RATE AT 2.5% OF THE TURNOVER THOUGH THE ASSESSEE-COMPANY FAILED TO GIVE DETAILS OF OPEN ING STOCK AS WELL AS CLOSING STOCK BEFORE THE AUDITORS, ASSESSING OFFICE R AND THE LD. CIT(A). 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO ADOPT THE RATE AT 2.5% OF THE TURNOVER WITHOUT GIVING COGNIZANCE OF THE FACT THAT THE ASSE SSEE HAD EARNED MORE THAN 2.5% PROFIT IN OTHER YEARS WITHOUT ANY EXTRA ORDINA RY INCOME. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO ADOPT THE RATE AT 2.5%. 4. THE APPELLANT CRAVES LEAVE TO ADD/DELETE/MODIFY THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS . WE FIND T HAT THE ONLY ISSUE INVOLVED IN ALL THESE APPEALS IS AS TO WHETHER THE LD CITA WAS JUST IFIED IN ESTIMATING THE NET PROFIT AT 2.5% OF GROSS CONTRACT RECEIPTS AS BUSINESS INCOME OF THE ASSESSEE AS AGAINST 8% ADDED BY THE LD AO. WE FIND THAT THE LD CITA HAD ESTIMAT ED THE NET PROFIT AT 2.5% OF GROSS 4 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 4 CONTRACT RECEIPTS BY PLACING RELIANCE ON THE DECISI ON OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR THE ASST YEAR 2007-08. AGAINST THIS O RDER, THE REVENUE HAD PREFERRED AN APPEAL BEFORE THIS TRIBUNAL , WHICH WAS DISPOSED OF F IN ITA NO. 760/KOL/2012 DATED 20.1.2016 WHEREIN IT WAS HELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CONTRACT RECEIPT OF ASSESSEE AMOUN TING TO RS. 9,17,46,745/- IS MORE THAN RS 40 LACS AND HENCE THE PROVISIONS OF SECTION 44AD OF THE ACT CANNOT BE MADE APPLICABLE TO THE INSTANT CASE. HENCE THE ESTIMATIO N OF PROFIT @ 8% OF CONTRACT RECEIPTS DOES NOT GAIN ANY SUPPORT FROM THE PROVISIONS OF TH E ACT AND HAS TO BE CONSTRUED ONLY AS A GENERAL ESTIMATION MADE BY THE LEARNED AO. WE ALSO FIND THAT THE OPERATING PROFIT OF THE ASSESSEE BEFORE CHARGING INTEREST AND DEPREC IATION IS 8% OF CONTRACT RECEIPTS. THIS ASPECT WAS MISTAKENLY UNDERSTOOD BY THE LEARNE D AO THAT THE ASSESSEE ITSELF HAD ADMITTED TO ADOPTION OF 8% OF RECEIPTS AS ITS NET P ROFIT AND THIS MADE THE LEARNED AO TO REJECT THE BOOKS OF ACCOUNTS OF ASSESSEE AND RESORT TO PRESUMPTIVE TAXATION U/S 44AD OF THE ACT. THIS ACCEPTANCE WAS DENIED BY THE ASSESSEE BEFORE THE LEARNED CIT(A). 5.1. WE FIND THAT THE ASSESSEE HAD TAKEN SECURED LO ANS OF RS. 326.89 LAKHS ON WHICH BANK INTEREST OF RS. 35,08,977/- AND BANK CHARGES O F RS. 6,57,561/- WAS INCURRED BY THE ASSESSEE. SIMILARLY FIXED ASSETS TO THE TUNE OF RS. 80,27,539/- WAS USED FOR CIVIL CONSTRUCTION BUSINESS AND DEPRECIATION THEREON OF R S. 12,87,911/- WAS CLAIMED AS ALLOWANCE U/S 32 OF THE ACT BY THE ASSESSEE. THE LE ARNED CIT(A) FOUND THAT THESE FIGURES OF BANK INTEREST, BANK CHARGES AND DEPRECIA TION , IF REDUCED FROM THE ESTIMATED PROFIT OF 8% OF NET CONTRACT RECEIPTS, THE RESULTAN T PROFIT FIGURE WAS 2.1%. WE FIND THAT THE ASSESSEE HAD EXPLAINED BEFORE THE LEARNED AO TH AT THE ASSESSEE WAS FORMED WITH AN OBJECTIVE OF TAKING OVER BUSINESS OF AN EXISTING PA RTNERSHIP FIRM AND IN ORDER ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CO NSTRUCTION 3 PRIVATE LTD TO BUILD CREDENTIALS OF THE NEW COMPANY IN GOVERNMENT RECORDS, THE ASSESSEE ACCEPTED CONTRACTS AT SUBSTANTIALLY LOWER RATES. AS A RESULT , THE PROFIT MARGIN DURING THE YEAR WAS LOW. THIS FACT WAS NOT DISPROVED BY THE LEARNED AO AND NO EVIDENCE WAS BROUGHT ON RECORD BY THE LEARNED AO TO SHOW THAT THE TENDERS W ERE WON BY THE ASSESSEE AT HIGHER PRICES. WE FIND THAT THE LEARNED CIT(A) HAD SOUGHT TO RESTRICT THE ESTIMATION OF NET PROFIT @ 2.5% OF CONTRACT RECEIPTS BY MAKING THE FO LLOWING OBSERVATIONS :- '8. THE ASSESSEE'S PLEA THAT IN ESTIMATING INCOME; DEDUCTION FOR THE INTEREST AND DEPRECIATION SHOULD BE SEPARATELY ALLOWED IS ALSO R EASONABLE. THE ISSUE REGARDING ALLOWANCE OF DEPRECIATION IN BEST JUDGMEN T ASSESSMENT WAS CONSIDERED BY THE CBDT IN ITS CIRCULAR NO 290 AND I T WAS DIRECTED AS FOLLOWS:- 'EVEN WHERE BEST JUDGMENT 'IS MADE, THE ABOVE PROCE DURE SHOULD BE ADOPTED PROVIDED THE REQUIRED PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE. IN CASES WHERE REQUIRED PARTICULARS HAVE NOT BEEN FURNISHED BY THE ASSESSEE AND NO CLAIM FOR DEPRECIATION HAS BEEN MADE IN THE RETURN, THE INCOME-TAX OFFICER SHOULD ESTIMATE THE INCOME W ITHOUT ALLOWING 5 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 5 DEPRECIATION ALLOWANCE. IN SUCH CASES, THE ESTIMATE OF NET PROFIT WOULD BE NATURALLY HIGHER THAN OTHERWISE AND THE FACT THA T THE ESTIMATE HAS BEEN MADE WITHOUT CONSIDERING DEPRECIATION ALLOWANC E MAY BE CLEARLY BROUGHT OUT IN THE ASSESSMENT ORDER. IN SUCH CASES, THE WRITTEN DOWN VALUE OF DEPRECIABLE ASSETS WOULD CONTINUE TO BE TH E SAME AS AT THE END OF THE PRECEDING YEAR AS NO DEPRECIATION WOULD ACTU ALLY BE ALLOWED IN THE ASSESSMENT YEAR'. 9. THIS CBDT CIRCULAR WAS CONSIDERED AND APPLIED IN VARIOUS JUDGMENTS WHEREIN THE HIGH COURTS DIRECTED THE ASSESSING AUTH ORITIES TO ALLOW DEDUCTION FOR DEPRECIATION SEPARATELY WHILE ESTIMATING THE IN COME. SOME OF SUCH DECISIONS ARE CIT V. FRIENDS CORPORATION [1989] 180 ITR 334 (PUNJ. & HAR.), BECO ENGG. CO. LTD. V. CIT [1984] 148 ITR 478 (PUNJ. & HAR.), CIT V. ARUN TEXTILE [1991] 192 ITR 700 (GUJ.), CIT V. SHRI SOMESHWAR SAHAKARI SAKHAR KARKHANA LTD . [1989] 177 ITR 443 (BOM.), CIT V. BISHAMBAR DAYAL & CO . [1994] 21O ITR 118 (ALL.), CHOPRA BROS. (INDIA) (P.) LTD. V. ITO [1993] 202 ITR 40 (CHD. TRIB.), CIT V. JAIN CONSTRUCTION CO . [2000] 110 TAXMAN 156 (RAJ.) 10. AS REGARDS ALLOWABILITY OF INTEREST AND BANK CH ARGES THE SAME IS COVERED BY THE ORDER OF THE THIRD MEMBER ITAT CHANDIGARH IN-TH E CASE OF ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CO NSTRUCTION 4 PRIVATE LTD INCOME- TAX OFFICER V. NIKKA RAM SANJEEV KUMAR [1999] 69 ITD 195 (CHD.) (TM) WHERE THE THIRD MEMBER HELD AS FOLLOWS: 'WHEN AN ESTIMATE OF AN INCOME IS MADE, ALL THE INP UTS I.E., THE EXPENSES INCLUDING INTEREST PAID FOR CAPITAL BORROWED FOR TH E PURPOSE OF THE BUSINESS ARE ALLOWABLE DEDUCTIONS. IN DOING SO, IT IS TO BE SEEN WHETHER THE ASSESSEE BORROWED CAPITAL FOR THE PURPOSE OF TH E BUSINESS AND WAS USED FOR THE SAME. IF SO, THEN THE INTEREST THEREON HAS TO BE ALLOWED AS A DEDUCTION. IF, HOWEVER, THE ASSESSEE HAS SUFFICIENT CAPITAL AND IN SPITE OF THAT BORROWED MONEY WHICH WAS NOT UTILISED FOR THE PURPOSE OF THE BUSINESS IT IS FOR THE ASSESSING OFFICER TO DISALLO W THE CLAIM AS THE BORROWED MONEY WAS NOT FOR THE PURPOSE OF THE BUSIN ESS. IN THE PRESENT CASE, THERE IS NO DISPUTE REGARDING THE CAPITAL BOR ROWED WHICH WAS UTILISED FOR THE PURPOSE OF THE BUSINESS. ADMITTEDL Y, IT IS ALLOWABLE DEDUCTION. ' 11. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE CASE AS ARE AVAILABLE BEFORE ME I THEREFORE HOLD THAT IN ESTIMA TING APPELLANT'S INCOME; DEDUCTION FOR DEPRECIATION AND INTEREST WAS REQUITE D TO BE ALLOWED SEPARATELY. THIS WAS NOT DONE BY THE AO. I FIND THAT EVEN IF NE T PROFIT RATE OF 8% AS ADOPTED BY THE AO IS APPLIED IN ASSESSEE'S CASE THEN THE GR OSS OPERATING PROFIT WORKS, OUT, TO RS. 73,39,740 BEING 8% OF RS.9,17,46,745. F ROM THIS; IF BANK INTEREST OF RS.3508977, BANK CHARGES OF RS.657561 AND DEPRECIAT ION OF RS.12,87,911 IS 6 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 6 REDUCED THEN THE NET. INCOME FROM BUSINESS OF CIVIL CONTRACT EXECUTION WORKS, OUT TO RS.18,85,290 WHICH IN % REPRESENTS 2.1 % OF CONT RACT RECEIPT. THIS COMPARES FAVORABLY AGAINST RETURNED NET PROFIT OF RS.18,69,4 54 EXCEPT FOR MINOR DIFFERENCE OF RS.16,000 APPROXIMATELY. THE LD. COUNSEL RELIED ON A COMPARATIVE CASE OF AMPLIFIED ENGINEERS PAN AACCA6890M FOR AY 2005-2006 IN ITA NO.757/ K/2011 WHERE THE ITAT KOLKATA IN SIMILAR CIRCUMSTAN CES ESTIMATED THE INCOME OF A CIVIL CONTRACTOR AT 2% OF THE TURNOVER OF THAT ASSESSEE. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE COMPARATIVE INSTANCE I AM OF THE OPINION THAT IT WILL MEET THE ENDS OF JUSTICE IF THE ASSESSEE'S BUSINESS INCOME FOR THE YEAR UNDER CONSIDERATION IS ESTIMATED AT 2.50% OF THE TURNOVER. OF RS.9,17,46,745. ACCORDINGLY I DIRECT T HE AO TO ASSESS THE BUSINESS INCOME AT RS.22,93,668/- IN PLACE OF RS.18,63,450/- AS DISCUSSED BY THE ASSESSEE. THE ASSESSEE ACCORDINGLY GETS RELIEF OF RS.51,41,88 2/-. THESE GROUNDS ARE PARTLY ALLOWED.' 5.2. THE FOLLOWING DECISIONS RELIED UPON BY THE LEA RNED AR SUPPORT THE CASE OF THE ASSESSEE:- CIT VS EARTH TECH ENGINEERS REPORTED IN (2014) 46 TAXMANN.COM 287 (P&H HC) DAT ED 13.3.2014, WHEREIN THE QUESTIONS RAISED BEFORE THEI R LORDSHIPS AND DECISION RENDERED THEREON ARE REPRODUCED BELOW:- QUESTIONS: 1) WHETHER THE HON'BLE ITAT WAS CORRECT IN LAW IN C ONFIRMING THE ORDER OF THE LEARNED CIT(A) SCALING DOWN THE NET PROFIT TO 8% ON THE GRO SS RECEIPTS AS AGAINST 12% APPLIED BY THE AO AT THE TIME OF ASSESSMENT? 2) WHETHER THE HON'BLE ITAT WAS CORRECT IN LAW IN C ONFIRMING THE ORDER OF THE LEARNED CIT(A) ALLOWING THE DEPRECIATION OUT OF THE NET PRO FIT? HELD : '7. THE ISSUE BEFORE THIS COURT IN CIT V. CHOPRA BROS . INDIA (P) LTD [2001] 252 ITR 412/119 TAXMAN 866 AND GIRDHARI LAL V. CIT [2002] 256 ITR 318 [2001] 119 TAXMAN 863 WAS WITH REGARD TO DEDUCTION TO BE MADE ON ACCO UNT OF DEPRECIATION FROM THE GROSS RECEIPTS WHILE APPLYING NET PROFIT RATE. IT WAS HEL D ON THE BASIS OF A CIRCULAR ISSUED BY THE BOARD, WHICH WAS BINDING ON THE REVENUE THAT TH E GROSS RECEIPTS TO WHICH NET PROFIT RATE IS TO BE APPLIED SHALL BE DETERMINED AFTER GIV ING ALLOWANCE ON ACCOUNT OF DEPRECIATION.' CIT VS Y.RAMACHANDRA REDDY REPORTED IN (2014) 50 TAXMANN.COM 129 (AP HC) DATE D 30.7.2014, WHEREIN THE QUESTIONS RAISED BEFORE THEIR LORDSHIP S AND DECISION RENDERED THEREON ARE REPRODUCED BELOW:- QUESTIONS: '1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE TRIBUNAL IS CORRECT IN LAW IN DIRECTING THE ASSESSING OFFICER T O ALLOW DEPRECIATION AND INTEREST PAYMENTS FROM THE ESTIMATE OF PROFIT AT 12 %? 7 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 7 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL IS CORRECT IN LAW IN DIRECTING THE ASSESSING OFFICER T O GRANT RELIEFS ON THOSE ITEMS WHICH ARE NOT CLAIMED BY THE ASSESSEE? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL IS CORRECT IN GRANTING DEPRECIATION THOUGH IT WAS ALRE ADY GRANTED BY THE ASSESSING OFFICER? HELD: 13. THE LEARNED COUNSEL FOR THE APPELLANT IS NOT AB LE TO POINT OUT ANY PROVISION OF LAW IN THE ACT OR RULES MADE THEREUNDER, WHICH R ESTRICTS THE ALLOWANCE OF THE DEPRECIATION AND INTEREST. ON THE OTHER HAND, THE F ACILITY CREATED UNDER THE ACT IS SO FIRM AND STRONG THAT IF FOR ANY REASON IT BEC OMES IMPERMISSIBLE OR UNNECESSARY FOR AN ASSESSEE TO SEEK THE ALLOWANCE O F DEPRECIATION FOR A PARTICULAR ASSESSMENT YEAR, HE IS ENTITLED TO CARRY IT FORWARD, FOR THE SUBSEQUENT YEARS. IN SUCH AN EVENT, IT ASSUMES THE CHARACTER O F UNABSORBED DEPRECIATION. IN THIS VERY CASE, THE ASSESSING OFFICER PERMITTED THE ALLOWANCE OF UNABSORBED DEPRECIATION TO THE RESPONDENT. HOWEVER. HE DENIED THE BENEFIT OF THE ALLOWANCE OF CURRENT DEPRECIATION AND INTEREST. NO REFERENCE IS MADE TO ANY PROVISION OF LAW TO MAKE SUCH DISTINCTION. HIS UNDERSTANDING OF THE MATTER IS THAT SECTION 44AD OF THE ACT, THAT PROVIDES FOR A COMPREHENSIVE FORM ULA OF DETERMINING NET PROFIT DERIVED BY A CIVIL CONTRACT OR AT 8%, TAKES IN ITS FOLD, ALLOWANCE OF DEPRECIATION, INTEREST AND OTHER BENEFITS. THE FACT , HOWEVER, REMAINS THAT SUCH A PROVISION WAS NOT IN EXERCISE IN THE ASSESSMENT YEA R 1994-95. 14. IF AN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION O F INTEREST, BE IT UNDER SECTION 36(1)(III) OF THE ACT OR ANY OTHER RELEVANT PROVISION AND OF DEPRECIATION UNDER SECTION 37 OF THE ACT, IN THE ORDINARY COURSE OF ASSESSMENT, THERE IS NO REASON WHY THE SAME FACILITIES BE NOT EXTENDED TO H IM, MERELY BECAUSE THE PROFIT IS DETERMINED ON THE BASIS OF ESTIMATION AS WAS DON E IN THE INSTANT CASE. WE ARE OF THE VIEW THAT DEPRECIATION AND INTEREST, WHICH A RE OTHERWISE DEDUCTIBLE IN THE ORDINARY COURSE OF ASSESSMENT, REMAIN THE SAME LEGA L CHARACTER, EVEN WHERE THE PROFIT OF ASSESSEE IS DETERMINED ON PERCENTAGE BASI S. 15. THE CONCLUSIONS ARRIVED AT BY US, GET SUPPORT F ROM THE CIRCULAR DATED 31.08.1965 ISSUED BY THE CENTRAL FOARD OF DIRECT TA XES. THOUGH THE CIRCULAR WAS WITH REFERENCE TO THE 1922 ACT, IT HOLDS GOOD F OR THE ANALOGOUS PROVISIONS UNDER THE 1961 ACT. 16. THE LEARNED COUNSEL FOR THE APPELLANT RELIED ON A JUDGMENT OF THIS COURT IN INDWELL CONSTRUCTIONS V. CIT [1998] 232 1TR 776. THAT WAS A CASE IN WHICH THIS COURT TOOK THE VIEW THAT ONCE THE BOOKS OF ACC OUNT ARE DISBELIEVED FOR A PARTICULAR PURPOSE, THEY CANNOT BE RELIED UPON IN T HE CONTEXT OF INTEREST. IN THE INSTANT CASE, WE ARE CONCERNED WITH THE DEPRECIATIO N. THE OCCASION TO DENY THE 8 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 8 ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJE E CONSTRUCTION 7 PRIVATE LTD DEDUCTION OF DEPRECIATION OR INTEREST W OULD ARISE IF ONLY THE MATERIAL PLACED BEFORE THE ASSESSING AUTHORITY IN PROOF OF P URCHASE OF MACHINERY AND OTHER ITEMS AND PAYMENT OF INTEREST IS DISBELIEVED. NO FINDING OF THAT NATURE WAS RECORDED BY THE ASSESSING OFFICER. ' 5.3. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANC ES AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS , WE HOLD THAT DEPREC IATION AND INTEREST IS ALLOWABLE AS DEDUCTION FROM THE ESTIMATED NET PROFIT OF 8% BY TH E LEARNED AO AND THE RESULTANT PROFIT FIGURE WAS 2.1% OF CONTRACT RECEIPTS AND FUR THER HOLD THAT THE LEARNED CIT(A) HAD RIGHTLY ESTIMATED THE NET PROFIT @ 2.5% OF CONT RACT RECEIPTS TO MEET THE ENDS OF JUSTICE. HENCE WE DON'T FIND ANY INFIRMITY IN THE O RDER OF THE LEARNED CIT(A). ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 4.1. WE FIND PURSUANT TO THE FOLLOWING OF THIS TRIB UNAL ORDER FOR THE ASST YEAR 2007-08 FOR ALL THE ASST YEARS UNDER APPEAL BEFORE US, THE POSITION OF NET PROFIT WOULD BE AS UNDER :- ASSESSMENT YEARS 2006-07 2008-09 2009-10 2010-11 2011-12 TURNOVER 51857700 167616037 146060004 137912395 102956387 NET PROFIT 2822049 3454999 2761506 2787263 1711449 NP % 5.441909 2.061258 1.8906654 2.0210388 1.6623048 RETURNED INCOME 2396540 3531218 2710956 2798850 2411449 ASSESSED INCOME 3457937 13985382 11674199 12241640 11091570 NP @ 2.5% 1296443 4190401 3651500 3447810 2573910 4.2. HENCE WE FIND FROM THE ABOVE CHART, IN EACH OF THE YEARS UNDER APPEAL, THE DETERMINATION OF NET PROFIT AT 2.5% OF GROSS CONTRA CT RECEIPTS WOULD ALWAYS BE HIGHER THAN THE RETURNED INCOME OF THE ASSESSEE FOR EACH O F THE YEARS UNDER APPEAL. HENCE WE 9 ITA NOS.1425-1429/KOL/2015 GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD. A.YRS.06-07, 08-09 TO 11-12 9 DIRECT THE LD AO TO ADOPT NET PROFIT AT 2.5% OF GRO SS CONTRACT RECEIPTS BY FOLLOWING THE ORDER OF THIS TRIBUNAL SUPRA. HENCE WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUNDS RAISE D BY THE REVENUE ARE DISMISSED. 5. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21.09.2017 SD/- SD/- [N.V.VASUDEVAN] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21.09.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-10(1), KOLKATA, P-7, CHOWRINGHEE SQUAR E, 3 RD FLOOR, KOLKATA-700069. 2. M/S GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD ., 164/A/9, LAKE GARDENS, KOLKATA- 700045. 3..C.I.T.(A)-4, KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S