Subash Chandra Sutar, Cuttack V. CIT, Cuttack

ITA 145/CTK/2014

• Counselvise Citation: 14522114 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUVENDU DUTTA
• Assessee Lawyers: B R PANDA
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , & , BEFORE S/SHRI P.M.JAGTAP, ACCOUNTANT M EMBER & PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ' ./ ITA NO.145/CTK/2014 ( # # # # $% $% $% $% / ASSESSMENT YEAR :2009-2010) SHRI SUBASH CHANDRA SUTAR, PROP. SLAA SUPPLIERS, TALAGARH, NARAJ, CUTTACK VS. ACIT, CIRCLE2(2), CUTTACK ' ./ & ' ./PAN/GIR NO. ( ' /APPELLANT ) .. ( ()' / RESPONDENT ) # , , , , /ASSESSEE BY : SHRI B.R.PANDA $ , , , , /REVENUE BY : SHRI SUVENDU DUTTA #$- / DATE OF HEARING : 29 TH OCT. 2015 ./% /DATE OF PRONOUNCEMENT 30 TH OCT. 2015 0 0 0 0 / O R D E R PER PARTHA SARATHI CHAUDHURY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD CIT(A)- CUTTACK DATED 2.1.2014 ON THE FOLLOWING GROUNDS: 1. FOR THAT THE ORDERS OF THE FORUMS BELOW ARE IMPROP ER, EXCESSIVE AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. FOR THAT THE .A.O. EVEN THOUGH THE PROFIT WAS DETER MINED IN ESTIMATE BASIS AFTER REJECTING THE BOOKS OF ACCOUNT S, THE CLAIM OF DEPRECIATION SHOULD HAVE BEEN ALLOWED FROM THE NET PROFIT SEPARATELY ON THE BASIS OF THE CIRCULAR OF THE C.B. D.T. THEREFORE, THE ORDER PASSED INFLATING THE INCOME IS LIABLE TO BE REDUCED ACCORDINGLY. 3. FOR THAT, THE LD. CIT (A) HAS ERRED IN ALLOWING THE DEPRECIATION SEPARATELY FROM THE NET PROFIT AND DEPOSING OF THE ORDER CATEGORICALLY DIRECTING THE A.O. TO DEDUCT THE DEPR ECIATION FORM THE GROSS CONTRACT INCOME IN STEAD OF CONSIDERING THE D EPRECIATION SEPARATELY TO BE DEDUCTED AFTER ESTIMATION OF NET P ROFIT. THEREFORE, THE ORDER PASSED BY THE LD. CIT (A) IS L IABLE TO BE QUASHED ENTIRELY. 4. FOR THAT, IT IS OBVIOUS THAT WHEN THE NET PROFIT IS DETERMINED ON ITA NO. 145/CTK/2014 ASSESSMENT YEAR :2009-2010 2 ESTIMATE BASIS AFTER REFLECTING THE BOOKS OF ACCOUN T, THE DEPRECIATION SHOULD HAVE BEEN DEDUCTED FROM NET PRO FIT BEFORE COMPUTATION OF TAXABLE INCOME. THEREFORE THE ORDERS PASSED BY THE FORUMS BELOW WITHOUT FOLLOWING THE PRINCIPLES LAID DOWN BY THE BOARD IGNORING THE LEGAL POSITION APPLICABLE TO THE FACT OF THE CASE AND PASSED THE ORDERS INFLATING THE RETURN INCOME ABNOR MALLY ARE LIABLE TO BE REDUCED. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE, IN THE REL EVANT ASSESSMENT YEAR, WAS ENGAGED IN SUPPLY OF LABOUR FOR CIVIL CONTRACT WORK S AND FILED RETURN OF INCOME AT RS.25,58,210/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE DID NOT SUBMIT SUPPORTING BOOKS OF ACCOUNT/DOCUMENT LIKE CA SH BOOK, LEDGER OR BANK BOOK, BILL AND VOUCHERS ON THE BASIS OF WHICH THE AUDIT REPORT OR BOOK RESULT CAN BE ACCEPTED. BEFORE THE AO, IT WAS SUBMITTED THAT THE INCOME MAY BE REASONABLY ESTIMATED AS HAS BEEN DONE IN EARLIER YEARS. UNDER THESE CIRCUMSTAN CES, THE AO WAS NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNT OF THE ASSESSE AND, ACCORDINGLY, REJECTED THE BOOK RESULTS AS PER SECTION 145(3) OF THE ACT. THEREAFTER, THE AO COMPLETED THE ASSESSMENT U/S.144 OF THE ACT, ESTIMA TING THE NET PROFIT @ 5% OF THE TOTAL SUB-CONTRACT RECEIPTS AND ADDED RS.43,52,162 /- TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED THE MATT ER IN APPEAL. 3. BEFORE THE LD CIT(A), THE ASSESSEE SUBMITTED THA T WHILE ESTIMATING THE INCOME OF THE ASSESSEE THE CLAIM FOR DEPRECIATION SHOULD H AVE BEEN TAKEN INTO ACCOUNT. THE ASSESSEE RELIED ON THE CIRCULAR NO.28-D(XIX-14)(F.4 5/239/65-IT) DATED 31.8.1965 AND THE DECISION OF THE P&H HIGH COURT IN THE CASE OF G IRIDHARI LAL VS CIT, WHEREIN, IT HAS BEEN HELD THAT DEPRECIATION SHOULD BE ALLOWED IN ES TIMATING THE NET PROFIT OF THE ASSESSEE. HOWEVER, THE LD CIT(A) FOLLOWING THE DECI SION OF ITAT CUTTACK IN THE CASE OF PHULCHAND AGARWAL & O. (ITA NO.182/CTK/2005) FOR A. Y. 2001-02, WHEREIN, IT HAS BEEN HELD THAT NON-PRODUCTION OF CASH BOOK CAN LEAD TO R EJECTION OF BOOK RESULTS AND ITA NO. 145/CTK/2014 ASSESSMENT YEAR :2009-2010 3 ASSESSMENT U/S.144 OF THE ACT, CONCURRED WITH THE V IEW OF THE AO. HOWEVER, THE LD CIT(A) DIRECTED THE AO TO DEDUCT DEPRECIATION FROM THE GROSS RECEIPTS FIRST AND ESTIMATE NET PROFIT FROM SUCH NET GROSS RECEIPTS @ 5% IF THE CLAIM OF THE DEPRECIATION IS FOUND TO BE CORRECT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSES SEE THAT THE CLAIM OF DEPRECIATION SHOULD HAVE BEEN FROM THE NET PROFIT SEPARATELY ON THE BASIS OF CBDT CIRCULAR NO. NO.28-D(XIX-14)(F.45/239/65-IT) DATED 31.8.1965. O N THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND SU BMITTED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT, THE AO WAS JUSTIFIED IN REJECTING THE BOOKS RESULTS AND ESTIMATING THE NET PROFIT AT 5%. THEREFORE, HE URGED TO UPHOLD TH E ORDER OF THE LD CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE CBDT CIRCULAR NO.29-D RELIED UPON BY THE LD COUNSEL FOR THE ASSES SEE. WE FIND THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT IN A MANNER WHICH C OULD ASSIST THE COMPUTATION OF CORRECT INCOME. BEFORE THE AO, IT WAS THE CONTENTI ON OF THE ASSESSEE TO ESTIMATE THE INCOME REASONABLY. IT WOULD BE PERTINENT TO REFER T O CIRCULAR NO.29-D DATED AUGUST 31, 1965 ISSUED BY THE CENTRAL BOARD OF REVENUE, WHICH PROVIDES THAT IF A CLAIM FOR DEPRECIATION IS MADE BY THE ASSESSEE IN THE RETURN AND THE ITO PROPOSES TO ESTIMATE THE PROFITS, THE DEPRECIATION ALONE SHOULD BE SEPAR ATELY WORKED OUT. THE BOARD CLEARLY POINTED OUT THIS ASPECT OF THE MATTER IN PARA 2 OF THE CIRCULAR, WHERE IT PARTICULARLY DIRECTS THAT IF IT IS CONSIDERED THAT THE NET PROF IT SHOULD BE ESTIMATED, IT SHOULD BE ESTIMATED SUBJECT TO THE ALLOWANCE FOR DEPRECIATION AND THE DEPRECIATION ALLOWANCE SHOULD BE DEDUCTED THEREFROM. THE CIRCULAR ISSUED BY THE CBDT ARE BINDING ON THE AUTHORITIES IN THE ADMINISTRATION OF THE ACT. THE A SSESSING OFFICER IS EXPECTED TO BE CONSCIOUS OF THE CLAIM OF THE ASSESSEE FOR ALLOWANC E OF DEPRECIATION AND HE HAS TO DEAL ITA NO. 145/CTK/2014 ASSESSMENT YEAR :2009-2010 4 WITH IT IN COMPUTING THE INCOME BY APPLYING THE NET PROFIT. THUS IN OUR OPINION, THE ASSESSEE IS ENTITLED TO DEPRECIATION AS ADMISSIBLE UNDER THE RULES. IN VIEW OF THIS, WE DIRECT THE AO TO GIVE APPEAL EFFECT AS PER THE DECI SION OF THE BOARD CIRCULAR. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 /10/2 015 SD/- SD/- . . ,/P.M.JAGTAP , PARTHA SARATHI CHAUDHURY /ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK; #' DATED 30/10 /2015 B.K.PARIDA, SPS 2 22 2 0 0 0 0 ( ( ( ( 4% 4% 4% 4% / COPY OF THE ORDER FORWARDED TO : 0# 0# 0# 0# / BY ORDER, SR. PRIVATE SECRETARY, , / ITAT, CUTTACK 1. ' / THE APPELLANT : SHRI SUBASH CHANDRA SUTAR, PROP. SLAA SUPPLIERS, TALAGARH, NARAJ, CUTTACK 2. ()' / THE RESPONDENT. ACIT, CIRCLE 2(2), CUTTACK. 3. 5 ( ) / THE CIT(A), CUTTACK 4. 5 / CIT ,CUTTACK 5. $6 (# , / DR, ITAT, CUTTACK 6. 7 8- / GUARD FILE. ) ( //TRUE COPY//