The Dy. Commissioner of Income-tax, Pathankot V. M/s. Krishan Kumar Sud, Pathankot

ITA 281/ASR/2012

• Counselvise Citation: 28120914 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 26-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Corroborative evidences
• Section: 143(3); 32; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.281(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AAEFK4903A DY.COMMR. OF INCOME TAX, VS. M/S. KRISHAN KUMAR SUD , CONTRACTOR, CIRCLE VI, PATHANKOT. MIRPUR COLONY, PATHANKOT. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.MAHAVIR SINGH, DR RESPONDENT BY:SH. SUDHIR SEHGAL, DATE OF HEARING: 20/01/2014 DATE OF PRONOUNCEMENT:14/02/2014 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), AMRITSAR, DATED 25.04.2012 FOR THE ASSESSMENT YEAR 2006-07. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN APPLYING NET PROFIT RATE OF 4% ON GROSS RECEIPT AGAINST 7% APPLIED BY THE AO. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN APPLYING NET PROFIT RATE OF 4% ON GROSS 2 RECEIPT SUBJECT TO SALARY AND INTEREST TO PARTNERS. WHEREAS AS PER SECTION 185(5) OF THE INCOME TAX ACT, 1961, WHERE A SSESSMENT HAS BEEN FRAMED U/S 144 NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SALARY SHALL BE ALLOWED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATIONS CLAIMED BY ASSESSEE, WHILE WHERE INCOME HAS BEEN COMPUTED BY A PPLYING NET PROFIT RATE, DEDUCTION U/S 32 IS TO BE DEEMED T O HAVE BEEN ALREADY GIVEN FULL EFFECT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT EVERY ASSESSM ENT YEAR IS INDEPENDENT ONE AND AO APPLIED N.P. RATE OF 7% DUE TO PECULIAR FACTS AND CIRCUMSTANCES IN THIS ASSESSMENT YEAR. 5. THAT THE ORDER OF THE LD. CIT(A) BE VACATED AND THAT OF THE AO BE RESTORED.. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR WITHDRAW ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING O F THE APPEAL. 2. THE BRIEF FACTS OF THE CASE IN THE APPEAL OF THE REVENUE ARE THAT THE ASSESSEE IS A BUILDING CONTRACTOR AND DERIVING BUSI NESS INCOME BY EXECUTING WORK MOSTLY FOR THE MES AT PLACES LIKE BARMER, BATH INDA, JODHPUR, BELGUM ETC. THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF AC COUNT AND VOUCHERS AND ON VERIFICATION, THE AO HAS GIVEN HIS FINDING VIDE PARA 4 & 5 OF HIS ORDER, WHICH FOR THE SAKE OF CLARITY IS REPRODUCED AS UNDE R: 4. ON 5.3.2008 SH. C.P. JANDIAL, ADV. SOUGHT ADJOU RNMENT AND CASE WAS ADJOURNED TO 11.3.2008. ON 11.3.2008 SH. C .P. JANDIAL, ADV. ALONGWITH SH. ASHWANI KUMAR ACCOUNTANT ATTENDING TH E PROCEEDING. THEY PRODUCED BOOKS OF ACCOUNTS AND VOUCHERS BUT ON VERIFICATION IT 3 IS FOUND THAT THE ASSESSEE DONT HAVE MOST OF THE V OUCHERS FOR PURCHASES/EXPENSES. SOME OF THE INSTANCES ARE AS UN DER: A) ASSESSEE MADE PURCHASES OF RS.9,92,092/- FROM MA DAN MOHNA JAIN AND MADE PAYMENTS OF RS.5,80,000/- TO HIM DURI NG THE YEAR. THIS ACCOUNTS APPEARS AT LEDGER FOLIO NO.335 & 336. PERU SAL OF THIS ACCOUNT REVEALS THAT THE ASSESSEE HAS MADE ALL THE PAYMENTS TO THIS PERSON IN CASH AND THE EACH ENTRY IS EITHER RS.20,0 00/- OR LESS. AS ON 31.3.2006 AS SUM OF RS.4,12,090/- WAS PAYABLE TO SH . MADAN MOHAN JAIN BUT NO CONFIRMATION HAS BEEN FILED. B ASSESSEE MADE PURCHASES OF RS.1,86,299/- FROM BAL DEV SINGH AND MADE PAYMENTS OF RS.2,00,000/- TO HIM DURING TH E YEAR. THIS ACCOUNTS APPEARS AT LEDGER FOLIO NO.334. PERUSAL OF THIS ACCOUNT REVEALS THAT THE ASSESSEE HAS MADE ALL THE PAYMENTS TO THIS PERSON IN CASH AND THE EACH ENTRY IS OF RS.20,000-. C. ASSESSEE MADE PURCHASES OF RS.4,91,980/- FROM M/ S. BHAGWATI CRASHER STONE AND MADE PAYMENTS OF RS.3,74,337/- TO HIM DURING THE YEAR. THIS ACCOUNTS APPEARS AT LEDGER FOLIO NO.285. PERUSAL OF THIS ACCOUNT REVEALS THAT THE ASSESSEE HAS MADE ALL THE PAYMENTS TO THIS PERSON IN CASH AND THE EACH ENTRY IS EITHER RS.20,0 00/- OR LESS. AS ON 31.3.2006 AS SUM OF RS.1,17,643/- WAS PAYABLE TO M/ S. BHAGWATI CRASHER STONE BUT NO CONFIRMATION HAS BEEN FILED. D. ASSESSEE MADE PURCHASES OF RS.40,053/- FROM ISHA MIL STONE TRADERS AND MADE PAYMENTS OF RS.40,053/- TO HIM DUR ING THE YEAR. THIS ACCOUNTS APPEARS AT LEDGER FOLIO NO.280. PERUS AL OF THIS ACCOUNT REVEALS THAT THE ASSESSEE HAS MADE ALL THE PAYMENTS TO THIS PERSON IN CASH AND THE EACH ENTRY IS EITHER RS.20,000/- OR LE SS. E. ASSESSEE MADE PURCHASES OF RS.6,19,978/- FROM M/ S. KARNI STONE CRASHER COMPANY AND MADE PAYMENTS OF RS.6,10, 000/- TO HIM DURING THE YEAR. THIS ACCOUNTS APPEARS AT LEDGER FO LIO NO.274. PERUSAL OF THIS ACCOUNT REVEALS THAT THE ASSESSEE H AS MADE ALL THE PAYMENTS TO THIS PERSON IN CASH AND THE EACH ENTRY IS EITHER RS.20,000/- OR LESS. AS ON 31.3.2006 AS SUM OF RS.9 9,078/- WAS PAYABLE TO M/S. KARNIL STONE CRASHER COMPANY BUT NO CONFIRMATION HAS BEEN FILED. 4 F. ASSESSEE HAS DEBITED TO P/L ACCOUNT A SUM OF RS. 8,67,626/- ON ACCOUNT OF MACHINERY RUNNING EXPENSES, RS.93,013/- ON ACCOUNT OF LANGER EXPENSES, RS.1,68,804/- ON ACCOUNT OF CONVEY ANCE EXPENSES, RS.29,946/- ON ACCOUNT OF MISC. EXPENSES BUT NO VOU CHERS OF THESE EXPENSES HAS BEEN PRODUCED BY THE ASSESSEE. G. ASSESSEE HAS DEBITED A SUM OF RS.5,91,18,949/- O N ACCOUNT OF MATERIAL AND CARRIAGE. THIS ACCOUNT APPEAR AT LEDGE R FOLIO NO.95 TO 110. NO VOUCHERS OF CARRIAGE (TRUCK PAYMENTS) AND O THER PURCHASE HAS BEEN PRODUCED. H. DURING ASSESSMENT PROCEEDINGS IT IS NOTICED THAT AS SESSEE HAS MADE PURCHASES FROM M/S. NAVKAR AGENCY AS UNDER (L EDGER FOLIO 306-COPIES OF THE PURCHASE VOUCHERS DULY SIGN ED BY ASSESSEE): SL.NO. ITEM BILL NO./DATE AMOUNT 1. CEMENT 234/27.5.2005 25,600/- 2 DO 254/2.7.2005 25,200/- 3. DO 336/25.7.2005 25,600/- 4. DO 369/3.8.2005 39,000/- 5. DO 395/20.9.2005 39,000/- 6 DO 418/30.08.2005 26,600/- 7. DO 424/1.9.2005 34,320/- 8. DO 436/6.9.2005 39,600/- 9. DO 495/1.10.2005 39,600 TOTAL 2,94,520/- PERUSAL OF THE PURCHASE BILLS AS PRODUCED BY THE A SSESSEE REVEALS THAT ALL THESE ARE CASH PURCHASES WHICH MEA NS THAT THE ASSESSEE HAS MADE THE CASH PAYMENT AT THE TIME OF P URCHASE WHERE AS IN THE BOOKS OF ACCOUNT ASSESSEE HAS SHOWN THESE PU RCHASES AS CREDIT AND HAVE SHOWN CASH PAYMENT ON DIFFERENT DATES OF R S.20,000/- OR LESS. 5 5. NO EVIDENCE/CONFIRMATION OF CREDITORS FILE. NO DETA ILS OF POINT 1-7 AS REQUIRED VIDE ORDER SHEET ENTRY DATED 21.2.2 008 WERE FILED. 3. THE ASSESSEE WAS GIVEN REASONABLE TIME TO PRODUC E VOUCHERS TO SUPPORT THE ENTRIES OF BOOKS OF ACCOUNT AS PRODUCED BY HIM. BUT THE ASSESSEE FAILED TO COMPLY WITH THE SAME. THE AO DID NOT HAVE ANY ALTERNATIVE BUT TO REJECT THE BOOKS OF ACCOUNT AND MADE ASSESSMENT U/ S 144 OF THE ACT BY MAKING ESTIMATION OF INCOME. THE NET PROFIT SHOWN B Y THE ASSESSEE IS 2.8% AT RS.24,90,713/- ON THE GROSS RECEIPTS OF RS.8,83, 54,495/- WHICH WAS 3.79% FOR THE ASSESSMENT YEAR 2003-04, 5.41% FOR THE ASSE SSMENT YEAR 2004-05 AND 0.78% FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSME NT FOR THE A.YS. 2003- 04 AND 2005-06 HAVE BEEN STATED TO BE UNDER SECTION 143(1) AND NO SCRUTINY ASSESSMENT HAS BEEN MADE WHEREAS ASSESSMENT FOR THE A.Y. 2004-05 AND 2005-06 HAVE BEEN MADE U/S 143(3) OF THE ACT. THE A O KEEPING INTO CONSIDERATION THAT THE ASSESSEE FAILED TO FILE SUPP ORTING EVIDENCE, COPY OF TENDER, COMPARATIVE CHART SHOWING RATE AND QUANTITY OF MATERIAL AND THE RATE AT WHICH GOODS WERE ACTUALLY PURCHASED, SUPPORTED BY PURCHASE VOUCHERS, WHICH WAS NOT FILED BY THE ASSESSEE. THESE INFORMA TIONS WERE REQUIRED BY THE AO SINCE THE AO WAS INFORMED THAT THERE WAS IN CREASE IN THE COST OF BUILDING MATERIAL AND ACCORDINGLY THERE WAS FALL IN PROFIT. 6 NOTHING WAS BROUGHT ON RECORD BY THE ASSESSEE TO SU BSTANTIATE HIS CLAIM AND ACCORDINGLY KEEPING INTO CONSIDERATION, THE FAILURE TO FILE SUBMISSIONS BY THE ASSESSEE WITH REGARD TO INCREASE OF COST OF BUILDI NG MATERIAL AND FALL IN NET PROFIT AND NON-VERIFIABILITY OF THE EXPENDITURE, TH E AO ESTIMATED NET PROFIT AT 7% OF THE GROSS RECEIPTS AT RS.61,84,814/- AND ACCO RDINGLY MADE THE ADDITION. THE AO ALSO DISALLOWED INTEREST AND SALA RY TO PARTNERS SINCE THE ASSESSMENT HAS BEEN MADE U/S 144 OF THE ACT AND DID NOT ALLOW THE DEPRECIATION AS CLAIMED. 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH E WRITTEN SUBMISSIONS WHICH WERE FORWARDED TO THE AO. THE AO SUBMITTED TH AT HE HAS NO OBJECTION IN ACCEPTING THE SUBMISSION AS AN ADDITIO NAL EVIDENCE UNDER RULE 46A OF THE I.T. RULES, 1962. THE LD. CIT(A) VIDE PA RAS 14 TO 24 HAS OBSERVED THAT THE AO HAS ACCEPTED THE CONTRACT RECE IPTS AND ACCEPTED THE SUBMISSIONS OF THE ASSESSEE THAT THE MATERIAL HAS BEEN PROCURED FROM THE SUPPLIERS WHICH ARE VERY SMALL AND EXPENSES ARE REQ UIRED TO BE MADE FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS FILED CONFIR MATIONS FROM MOST OF THE CREDITORS AND SOME OF THE CREDITORS HAD CONFIRMED BALANCES AS PER BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. CIT(A) COMPARED EX PENSES WITH EARLIER YEARS AND FOUND THAT THEY WERE COMPARED FAVORABLY W ITH THE EXPENSES AS CLAIMED IN THE IMPUGNED ORDER. THE LD. CIT(A) ALSO OBSERVED THAT THERE 7 BEING NO ESCALATION CLAUSE IN THE AGREEMENT WITH TH E MES AUTHORITIES AND THE ASSESSEE HAD EXPLAINED BEFORE THE AO ABOUT THE ESCALATION IN THE STEEL AND CEMENT PRICES TO A LARGE EXTENT . VIDE PARA 20 OF CIT(A)S ORDER, IT WAS FOUND THAT THE AO HAS NOT BEEN ABLE TO REBUT THE P LEA OF THE ASSESSEE ABOUT ESCALATION OF 26% AND 20% INCREASE IN THE RATES OF STEEL AND CEMENT, BESIDES OTHER INCREASES IN THE WAGES, SALARY AND EX PENSES . NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD TO JUSTIFY THE APPLICATION OF 7% NET PROFIT. THEREFORE, THE LD. CIT(A), IN THE INTEREST OF JUSTICE APPLIED THE NET PROFIT RATE OF 4% WHICH IS MORE THAN THE AVERAGE NE T PROFIT RATE FOR THE LAST THREE YEARS BUT CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. THE LD. CIT(A) ALSO ALLOWED INTEREST AND SA LARY AND ALSO DEPRECIATION AS CLAIMED BY THE ASSESSEE VIDE PARA 22 & 23 OF HIS ORDER. 5. THE LD. JCIT(DR),MR. MAHAVIR SINGH ARGUED THAT AT VARIOUS PAGES OPENING BALANCES OF THE COPY OF ACCOUNTS WITH DIFFE RENT PARTIES AND THE ACCOUNTS OF THE ASSESSEE DIFFERED TO A GREAT EXTENT . MOST OF THE VOUCHERS HAVE NOT BEEN PRODUCED BY THE ASSESSEE, AS MENTIONED BY THE A.O. IN HIS ORDER. THE ASSESSEE WAS GIVEN A REASONABALE TIME TO PRODUC E VOUCHERS IN SUPPORT OF THE ENTRIES IN THE BOOKS OF ACCOUNT WHICH WERE, IN FACT, NOT PRODUCED AND THEREFORE, THE LD. CIT(A) HAS RIGHTLY CONFIRMED TH E APPLICATION OF NET PROFIT RATE. 8 5.1. AS REGARDS THE ESTIMATION OF INCOME IN THE ABS ENCE OF MOST OF THE EVIDENCES WHICH WERE REQUIRED IN SUPPORT OF THE ENT RIES IN THE BOOKS OF ACCOUNT WERE NOT PRODUCED.. THERE IS GREAT POSSIBIL ITY OF LEAKAGE AND THEREFORE, THE PAST HISTORY CANNOT BE THE GUIDE FOR APPLICATION OF NET PROFIT RATE. THEREFORE, THE FACTS AND CIRCUMSTANCES OF TH E IMPUGNED YEAR HAVE TO BE TAKEN INTO CONSIDERATION FOR ESTIMATION OF INCOME. ACCORDINGLY, THE AO HAS RIGHTLY PASSED THE ORDER AND PRAYED TO REVERSE TO T HE ORDER OF THE LD. CIT(A). 5.2. THE LD. DR ARGUED WITH REGARD TO THE ALLOWANCE OF DEPRECIATION BY THE LD.CIT(A). THE ASSESSEE HAS NOT PRODUCED COPIES OF THE BILLS OF THE ASSETS PURCHASED BY HIM AND HAS NOT BROUGHT ON RECO RD WHETHER ASSETS HAVE BEEN PUT TO USE FOR THE PURPOSE OF BUSINESS DURING THE YEAR. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEPRECIAT ION. 5.3. AS REGARDS THE ALLOWANCE OF INTEREST AND SALAR Y, THE CLEAR PROVISION OF SECTION 184(5) HAS NO AMBIGUITY WITH REGARD TO THE DISALLOWANCE OF INTEREST AND SALARY IN CASE OF ASSESSMENT IS MADE UNDER SECT ION 144 OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE, MR. SUDHIR SE HGAL, ON OTHER HAND, ARGUED THAT THERE IS NO DENIAL TO THE APPLICABILITY OF PROVISIONS OF SECTION 145(3) OF THE ACT. AS REGARDS THE ESTIMATION OF INC OME BY THE LD. CIT(A), HE BASICALLY RELIED UPON THE SUBMISSIONS MADE BEFORE T HE LD. CIT(A) AND SUPPORTED THE ORDER OF THE LD. CIT(A). HE ARGUED TH AT THE CONTRACTS COPIES 9 WHICH ARE PLACED AT PB-29, 31 & 32 COULD NOT BE COM PLETED. IN FACT, CONTRACTS WERE ALLOTTED DURING THE YEARS 2002-03 A ND 2003-04. 6.1. AS REGARDS THE ALLOWANCE OF INTEREST AND SALAR Y, HE RELIED UPON THE DECISIONS OF VARIOUS COURTS OF LAW AS UNDER: I) CIT VS. JAIN CONSTRUCTION CO. & OTHERS 245 ITR 527 (RAJ) II) CIT VS. VIJAY CONSTRUCTIONS 213 CTR 105 (ALL) III) DIAMOND CONSTRUCTION CO. VS. ACIT ITA NO.1010/CHD/ 2011, ITAT, CHANDIGARH BENCH, CHANDIGARH. IV) NARESH KATARE CONTRACTORS VS. ACIT ITA NO.567(AGRA) /2012, ITAT, AGRA BENCH, AGRA. THEREFORE, HE PRAYED TO ALLOW INTEREST AND SALARY T O THE PARTNERS. 6.2. HE ALSO RELIED UPON THE DECISIONS OF VARIOUS C OURTS OF LAW WITH REGARD TO ALLOWABILITY OF DEPRECIATION AS UNDER: I) CIT VS. VINOD KUMAR BHATIA 211 ITR 253 (P&H) II) GIRDHARI LAL VS. CIT 256 ITR 318 (P&H) III) CIT VS. CHOPRA BROS. INDIA (P) LTD. 252 ITR 413 (P& H) IV) SHRI RAM JHANWAR LAL VS. ITO 321 ITR 400 (RAJ.) THE LD. COUNSEL ACCORDINGLY PRAYED TO ALLOW DEPRECI ATION IN CASE BOOKS OF ACCOUNTS ARE REJECTED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT IS NOT UNDER DISPUTE THAT THE ASSESSEE HAS NOT B EEN ABLE TO SUBSTANTIATE THE CLAIM OF THE EXPENSES AS PER FINDINGS OF THE AO IN PARA 4(A) TO PARA 4(H) AND 10 THE ASSESSEE HAS NOT FILED CONFIRMATION WITH REGA RD TO VARIOUS PURCHASES MENTIONED IN THE SAID PARAS OF AOS ORDER. ON PERUS AL OF THE ORDER OF THE LD. CIT(A), WE FIND NO SPECIFIC REFERENCE WITH REGARD T O THE FILING OF SUCH CONFIRMATION OR VOUCHERS IN SUPPORT OF THE CLAIM OF THE EXPENDITURE INSPITE OF SUFFICIENT TIME GIVEN TO THE ASSESSEE. EVEN IN T HE REMAND PROCEEDINGS BEFORE THE AO AND THE LD. CIT(A), THE CLAIM HAS NOT BEEN SUBSTANTIATED BY THE ASSESSEE. AS REGARDS THE INCREASE IN THE COST O F BUILDING MATERIAL AND FALL IN NET PROFIT, NO COGENT EXPLANATION OR SUPPORTING EVIDENCE HAS BEEN BROUGHT ON RECORD BEFORE ANY OF THE AUTHORITIES BELOW OR EV EN BEFORE US AND EVEN IN THE REMAND PROCEEDINGS BEFORE THE AO AND THE LD. C IT(A). ACCORDINGLY, THE LD. CIT(A) HAS RIGHTLY HAS RIGHTLY CONFIRMED THE P ROVISIONS OF SECTION 145(3) OF THE ACT THOUGH THAT HAVE NOT BEEN CHALLENGED BY THE ASSESSEE EITHER IN THE CROSS APPEAL OR IN THE CROSS OBJECTION BEFORE US. A S IS EVIDENT HEREINABOVE, THE AO COULD NOT VERIFY OR EXAMINE THE EXPENSES CL AIMED AT RS.6,21,30,678/- OUT OF GROSS CONTRACT RECEIPTS AT RS.8,83,54,495/-. NO COGENT EXPLANATION HAS BEEN GIVEN BEFORE ANY OF THE AUTHORITIES BELOW IN THIS REGARD. THE ARGUMENT GIVEN BY THE LD. COUNSEL FOR THE ASSESSEE, MR. SUDHIR SEHGAL, BEFORE US CANNOT HELP THE ASSESSEE AND SUC H ARGUMENT CANNOT BE A SUBSTITUTE OF THE DOCUMENTATION OR EVIDENCE OF THE CLAIM OF EXPENSES. NOTHING HAS BEEN ARGUED OR BROUGHT ON RECORD THAT THE ASSESSEE HAS ACTUALLY 11 INCURRED EXPENSES OF RS.6,21,30,678/-. IN THE FACTS AND CIRCUMSTANCES, THERE IS EVERY POSSIBILITY OF GREAT LEAKAGE OF REVENUE. IN SUCH FACTS AND CIRCUMSTANCES, PAST RESULTS CANNOT BE A GUIDE . IN THE INCOME TAX PROCEEDINGS, EVERY YEAR IS AN INDEPENDENT YEAR AND PROFITABILITY OF EACH YEAR DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF PARTICU LAR YEAR IN DISPUTE. IN SUCH FACTS AND CIRCUMSTANCES, THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE, MR. SUDHIR SEHGAL CANNOT HELP THE ASS ESSEE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE AO WHO HAS RIGHTLY APPLIED NET PROFIT RATE OF 7% ON THE GROSS RECEIPTS BY THE ASSESSEE, WHO HAS S PECIFICALLY MENTIONED WHILE MAKING SUCH ESTIMATION THAT NO SEPARATE ALLO WANCE OR DEPRECIATION IS MADE AND THE SAID APPLICATION OF NET PROFIT RATE IS INCLUSIVE OF DEPRECIATION AND INTEREST AND SALARY TO THE PARTNERS. ONCE THE S AID ESTIMATION HAS BEEN HELD TO BE CORRECTLY MADE AND ASSESSMENT HAVING BEE N MADE U/S 144 OF THE ACT AND WITH CLEAR PROVISIONS OF SECTION 184(5), T HE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING INTEREST AND SALARY TO THE PA RTNERS. ACCORDINGLY, THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE AS SESSEE ARE NOT APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. 7.1. AS REGARDS THE ALLOWANCE OF DEPRECIATION, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISIONS OF VARIOUS COURT S OF LAW AND THE LD. DR HAS RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN 12 THE CASE OF SURINDER PAL NAYYAR VS. CIT REPORTED I N (2009) 20 DTR (P&H) 269. THE ASSESSEE IN THE PRESENT CASE HAS NOT BROUG HT ON RECORD THAT THE ASSETS PURCHASED BY HIM HAVE BEEN PUT TO USE DURI NG THE IMPUGNED YEAR. THEREFORE, THE CASES RELIED UPON THE ASSESSEE ARE NOT APPLICABLE AND ACCORDINGLY THE LD. CIT(A) IS NOT JUSTIFIED IN ALL OWING DEPRECIATION AND ACCORDINGLY HIS ORDER ON THE ISSUE IS REVERSED AND THE ORDER OF THE A.O. IS RESTORED. IN NUTSHELL, WE RESTORE THE ORDER OF THE AO IN APPLYING NET PROFIT RATE OF 7% WHICH INCLUDES ALLOWANCE OF INTEREST AND SALARY TO PARTNERS AND ALLOWANCE OF DEPRECIATION AND THE ORDER OF THE LD. CIT(A) IS REVERSED . THUS, ALL THE GROUNDS OF THE REVENUES APPEAL ARE ALLOWED . 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.281(ASR)/2012 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14T H FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. KRISHAN KUMAR SUD CONTRACTOR, PA THANKOT 2. THE DCIT, CIRCLE VI, PATHANKOT. 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY