DCIT, Sangrur V. Sh. Tejwant Rai, Sangrur

ITA 686/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95681 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 30-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B B BANSAL
• Assessee Lawyers: MANJIT SINGH
• Keywords: Unexplained cash credit; Rejection of books of accounts; Business income; Depreciation
• Section: 2; 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.686/CHD/2014 ASSESSMENT YEAR:2010-11 THE DCIT VS. SH TEJWANT RAI CIRCLE C/O SH ASHOK BANSAL, ADVOCATE SANGRUR CLUB ROAD SANGRUR PAN NO. AAKPR6324C & ITA NO. 627/CHD/2014 ASSESSMENT YEAR: 2010-11 SH TEJWANT RAI VS. ADDL. CIT C/O SH ASHOK BANSAL, ADVOCATE SANGRUR RANGE CLUB ROAD SANGRUR SANGRUR PAN NO. AAKPR6324C (APPELLANT) (RESPONDENT) APPELLANT BY : SH. B.B. BANSAL RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 31/08/2015 DATE OF PRONOUNCEMENT :06/11/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THE APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTE D AGAINST THE ORDER OF LD. CIT(A), PATIALA DT. 13/05/2014. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND ALSO DERIVES INCOME FROM DE-HUSKING OF PADDY. DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE FILED RETURN OF INCOME DECLARING AN INCOME OF RS. 5,96,3590/-. ASSESSMENT ORDER U/S 143(3) OF THE ACT. WAS PASSED ON THE ASSESSEE, DATED 25- 02-2013, ASSESSING THE INCOME AT RS. 1,13,81,621/- BY REJECTING THE BOOKS OF 2 ASSESSEE U/S 145(3) OF THE ACT AND APPLYING A PROFI T RATE OF 10% ON THE GROSS RECEIPTS OF THE ASSESSEE. FURTHER, AN ADDITION OF R S. 2,79,600/- WAS ALSO MADE ON ACCOUNT OF SALE OF BARDANA OUTSIDE THE BOOKS OF ASS ESSEE. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO VIDE HIS ORDER DT. 13/05/2014, UPHELD THE REJECTION OF THE BOOKS OF ACCOUNTS BUT REDUCED THE PROFIT RATE APPLIED ON THE TURNOVER OF THE ASSESEE FROM 10% TO 8%. LD. CIT(A) FURTHER RESTRICTED THE ADDITION TO RS. 1 LACS MADE ON ACCOUNT OF SALE OF BARDANA OU TSIDE THE BOOKS OF ASSESSEE. AGGRIEVED BY THE SAME THE PRESENT APPEALS HAVE BEEN FILED BEFORE US. 3. WE SHALL FIRST DEAL WITH THE APPEAL OF THE REVEN UE IN ITA NO. 686/CHD/ 2014 WHEREIN THE FOLLOWING GROUNDS OF APPEAL HAVE B EEN RAISED. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN NOT UPHOLDING NET PROFIT @10% APPLIED BY THE AO AFTER SUSTAINING THE ACTION OF THE AO REGARDING REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961 FOR THE REASON MENTIONED IN THE ASSESSMENT ORD ER, IN VIEW OF THE NUMEROUS DEFICIENCIES POINTED OUT BY THE AO. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) HAS ERRED IN APPLYING THE NET PROFIT OF 8% INSTEAD OF 10% ADO PTED BY THE AO, WITHOUT APPRECIATING THAT THE RATE OF NET PROFIT OF 10% HAS BEEN HELD TO BE REASONABLE IN THE CASE OF CIT VS. M/S SHIVAM CONSTRUCTION CO. IN ITA NO. 197 OF 2007 DATED 07/05/2007 SUBJECT TO ALLOWING OF INTEREST AND SALA RY TO THE PARTNERS AND DISALLOWING THE DEPRECIATION. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN FOLLOWING THE DECISION IN THE CASE OF M/S HARBH AJAN SINGH & CO., SANGRUR PARTICULARLY WHEN THE DEPARTMENT IS IN APPEAL BEFOR E THE HONBLE HIGH COURT AGAINST THE SAID DECISION. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN RELYING UPON THE TRADING RESULTS OF EARLIER YEAR , IGNORING THE FACT THAT EACH YEAR HAS TO BE ASSESSED ON ITS MERITS, WHICH HAS BEEN DO NE BY THE AO BY RELYING UPON THE JUDGMENTS OF M/S PARBHAT KUMAR CONTRACTOR AND M /S ESS ESS BUILDERS(P) LTD. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 2,79,600/- MADE BY THE AO UNDER THE HEADS LOSS OF BARDANA CONSUMED IN THE MANUFACTURING PROCESS TO RS. 1,00,000/-, WITHOUT APPRECIATING THAT THE AO HAS ALREADY GIVEN A BENEFI T OF 20% FOR THE BAGS DESTROYED DUE TO VARIOUS REASONS. 4. IN GROUND NO. 1, 2, 3 & 4 THE REVENUE HAS AGITAT ED THE APPLICATION OF NET PROFIT RATE OF 8% TO THE GROSS TURNOVER OF THE ASSE SSEE AS AGAINST THE NET PROFIT RATE OF 10% APPLIED BY THE LD. A.O. AFTER REJECTING THE BOOKS OF THE ASSESSEE U/S 145(3) OF THE INCOME TAX ACT, 1961. 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G ASSESSMENT PROCEEDINGS THE A.O. REJECTED THE BOOKS OF THE ASSESSEE IN VIEW OF VARIOUS DISCREPANCIES FOUND IN 3 THE SAME. THEREAFTER, HE APPLIED A PROFIT RATE OF 1 0% ON THE GROSS RECEIPTS OF RS. 9,28,85,067 OF THE ASSESSEE AND COMPUTED THE INCOME OF THE ASSESSEE AT RS. 92,88,506/- BY HOLDING AS FOLLOWS:- THE ASSESSEE WAS ASKED IN PARA 3 OF THE LETTER DAT ED 18-12-2012 AS TO WHY THE NET RATE OF PROFIT 12% ON THE GROSS RECEIPTS OF RS. 9,28,85,067/- MAY NOT BE APPLIED IN THE CASE OF THE ASSESEE. THE ASSESSEE HAS NOT OF FERED ANY EXPLANATION / SUBMISSION IN THIS REGARD THE SILENCE ON THE PART O F THE ASSESSEE CLEARLY INDICATES NOTHING TO SAY IN THE MATTER. ACCORDINGLY THE INCOM E OF THE ASSESSEE FROM THE CONTRACT BUSINESS IS COMPUTED U/S 143(3) R.W.S. 145 THE INCOME TAX ACT BY APPLYING PROFIT RATE OF 10% ON THE GROSS RECEIPT OF RS. 9,28,85,067 WHICH WORKS OUT TO RS 92,88,506/-. THE LD. CIT(A) REDUCED THE NET PROFIT RATE FROM 10% TO 8% OF THE GROSS RECEIPTS OF THE ASSESEE BY HOLDING AT PARA 5.0 OF THE ORDER AS FOLLOWS:- AS REGARDS GROUND NO. 3, IT IS NOTED THAT THE A.O . HAS APPLIED NET PROFIT RATE OF 10% AFTER DEPRECIATION. THE APPELLANT CONTENDED THA T THE CASE OF THE APPELLANT FOR A.Y. 2007-08 AND 2009-10 IS ALSO COMPLETED UNDE R SCRUTINY PROCEEDINGS. IN THESE YEARS, THE NET PROFIT HAS BEEN ASSESSED AT 6. 69% AND 6.25% RESPECTIVELY ON GROSS TURNOVER OF RS. 4,01,65,742/- AND 5,20,02,830 /- RESPECTIVELY. THE APPELLANT HAS DECLARED THE NET PROFIT BEFORE DEPRECIATION AT 5.57% & 5.59% RESPECTIVELY IN A.Y 2007-08 & 2009-10. IN THIS YEAR, I.E. ASSESSMEN T YEAR 2010-11, THE NET PROFIT BEFORE DEPRECIATION INCOME IS DECLARED AT 7.55%. TH E A.O. ON THE OTHER HAND HAS APPLIED NET PROFIT RATE OF 10% AFTER DEPRECIATION. IN THE CASE OF M/S HARBHAJAN SINGH & CO. VS. JCIT IN ITA NO. 183/CHD/2013 FOR TH E A.Y. 2008-10, HONBBLE ITAT, CHANDIGARH IN THE ORDER DATED 15/04/2013 REFERRED T O THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PA RVEEN KUMAR MITTAL AND OBSERVED THAT THE PAST HISTORY OF THE ASSESSEE HAS TO BE APP LIED AND ADOPTED EVEN AFTER REJECTION OF BOOKS OF ACCOUNTS. IN THIS YEAR, THE N ET PROFIT RATE DECLARED BY THE APPELLANT IS MORE THAN THE NET PROFIT DECLARED IN E ARLIER YEAR AND ACCEPTED UNDER SCRUTINY PROCEEDINGS. AS PER SUBMISSION MADE, THE NET PROFIT AFTER DEPRECIATION AS DECLARED BY THE APPELLANT IS RS. 70 16545 RS. 2216370 I.E. RS. 48800175. THE APPELLANT EVEN IN APPELLATE PROCEEDIN G HAS NOT EXPLAINED THE CREDIT BALANCE OF RS. 15,60,000/- AS ADDED BY THE A .O. THUS, CONSIDERING THIS ADDITION THE NP AS PER APPELLANTS SUBMISSION COMES TO RS. 63,60,175/ 9,28,85,067 I.E. 6.85%. THEREFORE, KEEPING INTO THE VIEW, THE T OTALITY OF THE CASE, I AM OF THE OPINION THAT THE NET PROFIT RATE AS ESTIMATED BY TH E A.O. BE REDUCED FROM 10% TO 8% IN THIS CASE. THUS, THE NET ADDITION WILL BE 8% OF RS. 9,28,85,067/- LESS RS. 48,00,175/- WHICH EQUALS TO RS. 26,30,630/-. ADDITI ON ON ACCOUNT OF UNEXPLAINED CREDIT IS DEEMED TO BE INCLUDED IN THIS ADDITION. 6. BEFORE US THE LD. DR RELIED UPON THE ASSESSMENT ORDER, WHILE THE LD. A.R. PLACED RELIANCE ON THE ORDER OF CIT(A). 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRES ENTATIVE OF BOTH THE PARTIES AND PERUSED DOCUMENTS PLACED BEFORE US AND THE ORDER OF THE AUTHORITIES BELOW. 8. UNDENIABLY, WHERE BOOKS OF ACCOUNTS ARE REJECTED , THE PROFITS HAVE TO BE ESTIMATED AND THE ESTIMATION HAS TO BE ON A REASONA BLE BASIS SO AS TO ARRIVE AT AN APPROXIMATION OF THE PROFITS WHICH AN ASSESSEE W OULD ORDINARILY WOULD HAVE EARNED IN HIS LINE OF BUSINESS AND WHICH COULD HAVE BEEN ARRIVED AT FROM HIS BOOKS OF ACCOUNTS IF MAINTAINED PROPERLY. THE PURPO SE OF APPLYING A PROFIT RATE 4 TO THE TURNOVER OR ANY OTHER BASIS, IS TO COMPUTE T HE PROFITS ON A REASONABLE BASIS OF ESTIMATE. TO ARRIVE AT A REASONABLE BASIS, THE PROFIT RATE TO BE APPLIED CAN BE DETERMINED HAVING REGARD TO THE RATE OF PROF ITS MADE BY THE ASSESSEE IN PAST YEARS, THE AVERAGE RATE OF PROFIT MADE IN SIMI LAR LINE OF BUSINESS OR ANY OTHER SUCH BASIS. IN THE PRESENT CASE WE FIND THAT THE AP PLICATION OF PROFIT RATE OF 10% BY THE AO IS WITHOUT ANY BASIS AT ALL. THE A.O. HAS NEITHER STATED THAT 10% NET PROFIT RATE IS SHOWN BY ASSESSEES IN SIMILAR LINE OF BUSINESS NOR HAS BROUGHT FORTH ANY EVIDENCES TO JUSTIFY THE APPLICATION OF 10% PRO FIT RATE. WE ALSO FIND THAT THIS RATE IS NOT COMMENSURATE WITH THE PAST HISTORY OF T HE ASSESSEE WHICH SHOWS AN AVERAGE PROFIT RATE OF 6.5% IN THE PRECEDING ASSESS MENT YEARS. THE LD. CIT(A), WE FIND HAS, ON THE OTHER HAND CONSIDERED THE PAST HIS TORY OF THE ASSESSEE WHEREIN THE ASSESSEE HAS BEEN ASSESSED AT A NET PROFIT RATE BEFORE DEPRECIATION OF 6.69% IN ASSESSMENT YEAR 2007-08 AND 6.25% IN ASSESSMENT YEAR 2009-10. IN THE IMPUGNED AY THE ASSESSEE HAS DECLARED A NET PROFIT RATE BEFORE DEPRECIATION OF 7.55%. LD.CIT(A) AFTER ADJUSTING DEPRECIATION FOR T HE YEAR AND THE UNEXPLAINED CREDIT BALANCE OF RS. 15,60,000/- CALCULATED THE NE T PROFIT AFTER DEPRECIATION FOR THE YEAR AT RS. 63,60,175/- WHICH CAME TO 6.85% OF THE TURNOVER. THEREAFTER THE LD. CIT(A) TAKING INTO CONSIDERATION THE TOTALITY O F THE AFORESTATED FACTS APPLIED A NET PROFIT RATE OF 8%. WE FIND THAT THE PROFIT RA TE ADOPTED BY THE LD. CIT(A) IS REASONABLE AND APPROPRIATE BEING COMMENSURATE WITH THE PAST HISTORY OF THE ASSESSEE. WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT(A) AND APPROVE THE APPLICATION OF NET PROFIT RATE OF 8% TO THE GROSS T URNOVER DISCLOSED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE BUSINESS INCOME OF THE ASSESSEE. 9. THE GROUND OF APPEAL OF THE REVENUE ARE THEREFOR E DISMISSED. 10. GROUND NO. 5 IS AGAINST THE RESTRICTION OF THE ADDITION OF RS. 2,97,600/- MADE BY THE LD. A.O. UNDER THE HEAD LOSS OF BARDANA CONSUMED IN THE MANUFACTURING PROCESS TO RS. 1,00,000/- 5 11. BRIEF FACTS OF THE CASE ARE THAT DURING THE IMP UGNED ASSESSMENT YEAR THE ASSESSEE HAD PURCHASED 62,000 BAGS / BARDANA AND SO LD 27,500 BAGS / BARDANA, WHILE THE BALANCE BAGS / BARDANA WERE STAT ED TO BE CONSUMED / RUINED IN RAIN AND SUN. THE LD. A.O. REJECTED THE C ONTENTION OF THE ASSESSEE AND HELD THAT THE BALANCE BAGS OF 34,500 WERE SOLD OUTS IDE THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE VALUED THE SAME AT RS. 3,49,485 /- AND AFTER ALLOWING THE BENEFIT OF LOSS OF BAGS TO THE EXTENT OF 20%, ADDED THE BALANCE AMOUNT OF RS. 2,97,600/- TO THE INCOME OF THE ASSESSEE. BEFORE TH E LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE BAGS BEING MADE OF JUTE, NORMALL Y 50% TO 60 % BAGS WERE DESTROYED IF LEFT UNCOVERED IN SUN AND RAIN FOR A L ONG PERIOD OF TIME WHILE THE REMAINING DEPRECIATED TO 30% TO 40% OF THEIR ORIGIN AL VALUE. THE ASSESSEE FURTHER STATED THAT THE LD. A.O. HAD ALLOWED BENEFIT ON THI S ACCOUNT TO ONLY 11% OF THE BAGS AND HAD TAKEN THE RATE PER BAG AT RS. 10.13 WH EREAS THE ACTUAL PURCHASE RATE PER BAG WAS RS. 12.41.THE LD. CIT(A) AFTER CON SIDERING THE ASSESSEES SUBMISSION RESTRICTED THE ADDITION TO RS. 1,00,000/ - BY HOLDING AT PARA 10.3 OF HIS ORDER AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS MADE I FIND SOM E FORCE IN THE SUBMISSION OF THE APPELLANT THAT BAGS ARE DESTROYED DUE TO VARIOU S REASONS. THE A.O. HIMSELF HAS GIVEN THE BENEFIT OF 20% FOR THE SAME LOOKING I NTO THE TOTALITY OF THE FACTS I HAVE OF THE OPINION THAT THE ADDITION OF RS. 1,00,0 00/- IS JUSTIFIABLE IN THIS CASE. 12. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE AO WHILE THE LD. AR PLACED RELIANCE ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO UPON THE ORDER OF THE LD. CIT(A). 13. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. R EPRESENTATIVES OF BOTH THE PARTIES AND HAVE PERUSED THE ORDERS OF AUTHORIT IES BELOW. 14. WE FIND THAT OUT OF A TOTAL OF 62,000 BAGS PURC HASED, THE ASSESSEE HAD CLAIMED 34,500 TO HAVE BEEN DESTROYED. THUS THE AS SESSEE CLAIMED LOSS OF 55.56% BAGS, WHICH AS PER THE ASSESSEE WAS NORMAL S INCE THE BAGS WERE MADE OF JUTE AND EXPOSED TO SUN AND RAIN. WE FIND THAT T HE AO ACCEPTED THE EXPLANATION OF THE ASSESSEE TO THE EXTENT THAT SOME BAGS ARE DESTROYED IN THE 6 NORMAL COURSE OF BUSINESS DUE TO EXPOSURE TO SUN AN D RAIN BUT RESTRICTED THE QUANTUM OF DESTRUCTION TO 20% OF THE PURCHASES MADE . WE FURTHER FIND THAT NO BASIS WAS GIVEN BY THE A.O FOR ADOPTING A FIGURE OF 20% FOR DETERMINING THE QUANTUM OF BAGS / BARDANA DESTROYED. LD. CIT(A) QUA NTIFIED THE LOSS IN BARDANA ACCOUNT TO RS. 1 LACS AGAIN WITHOUT ANY JUSTIFIABLE REASON. WE FIND, THAT SOME BARDANA IS DESTROYED IN THE NORMAL COURSE OF BUSINE SS DUE TO EXPOSURE TO SUN AND RAIN, IS AN UNDISPUTED FACT. WE ALSO FIND THAT THE ASSESSEE CLAIM OF 55% OF THE TOTAL PURCHASE BEING DESTROYED IS ON THE HIGHER SIDE AND QUITE UNREASONABLE. ON THE OTHER HAND THE AOS CALCULATI ON OF LOSS ON ACCOUNT OF BARDANA @ 20% IS REASONABLE. WE THEREFORE UPHOLD T HE ORDER OF THE AO DISALLOWING LOSS ON ACCOUNT OF BARDANA CLAIMED BY T HE ASSESSEE TO THE EXTENT OF RS. 2,97,600/-. THIS GROUND OF APPEAL OF THE REVENU E IS THEREFORE ALLOWED. 15. THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOW ED. ITA NO. 627/CHD/2014 16. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE TAK ING THE FOLLOWING GROUNDS OF APPEAL: 2. THAT THE APPLICATION OF FLAT RATE OF 10% BY THE ASSESSING OFFICER AND REDUCED BY THE CIT(A), PATIALA TO 8% IS ILLEGAL, UN JUST AND UNCALLED FOR AND RATE OF 8% AS SUSTAINED BY THE LD. CIT(APPEALS), PATIALA IS MUCH HIGHER AND AGAINST THE ACTUAL FACTS OF THE CASE ON THE FILE. 3. THAT THE DISALLOWANCE OF DEDUCTION OF DEPRECIATI ON FOR WHICH THE APPELLANT IS ENTITLED SEPARATELY HAS WRONGLY BEEN D ISALLOWED WHICH IS AGAINST THE ACTUAL FACTS, THE LAW AND IS ILLEGAL, UNJUST AND UN CALLED FOR. 4. THAT THE ADDITION SUSTAINED AT RS. 1 LAC ON ACCO UNT OF BARDANA LOSS BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), PATIALA I S ILLEGAL, UNJUST AND AGAINST THE ACTUAL FACTS OF THE CASE ON THE FILE. 17. GROUND NO. 2 RAISED BY THE ASSESSEE IS AGAINST THE APPLICATION OF NET PROFIT RATE OF 8% TO THE TURNOVER OF THE ASSESSEE AFTER RE JECTING THE BOOKS OF THE ASSESSEE. 18. THIS ISSUE HAS ALREADY BEEN DECIDED BY US IN PA RA NO. 8 OF THE ORDER PASSED BY US IN THE APPEAL FILED BY THE REVENUE IN THIS CASE IN ITA NO. 686/CHD/2014(SUPRA). 7 FOLLOWING THE SAME WE HOLD THAT THE LD. CIT(A) HAS CORRECTLY APPLIED THE NET PROFIT RATE OF 8% TO THE TURNOVER OF THE ASSESSEE. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 19. GROUND NO. 4 RAISED BY THE ASSESSEE IS ON THE I SSUE OF SUSTAINING THE ADDITION MADE ON ACCOUNT OF BARDANA LOSS TO THE EXT ENT OF RS. 1.00 LACS. 20. THIS ISSUE HAS ALREADY BEEN DECIDED BY US IN PA RA NO. 14 OF THE ORDER PASSED BY US IN THE APPEAL FILED BY THE REVENUE IN THIS CASE IN ITA NO. 686/CHD/2014(SUPRA). FOLLOWING THE SAME WE HOLD THAT BARDANA LOSS CLAIME D BY THE ASSESSEE BE REDUCED TO RS. 2,97,600/-. 21. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREF ORE DISMISSED. 22. GROUND NO. 3 IS AGAINST DISALLOWANCE OF CLAIM O F DEPRECIATION AGAINST THE NET PROFIT ESTIMATED. 23. BRIEFLY STATED WHILE FRAMING ASSESSMENT, THE AO COMPUTED INCOME OF THE ASSESSEE BY APPLYING A NET PROFIT RATE OF 10% TO TH E GROSS TURNOVER OF THE ASSESSE, AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3). T HE ASSESSES CLAIM OF DEPRECIATION OF RS. 22,16,370/- WAS NOT ALLOWED WIT HOUT ASSIGNING ANY REASONS. LD. CIT(A), AFTER CONSIDERING THE HISTORY OF THE NE T PROFIT RATE BEFORE DEPRECIATION OF THE ASSESSEE, REDUCED THE N.P. RATE APPLIED TO T HE INCOME OF THE ASSESSEE TO 8%. DEPRECIATION WAS NOT REDUCED FROM THE SAME FOR ARRIVING AT THE TAXABLE PROFITS OF THE ASSESSEE. 24. BEFORE US LD. AR POINTED OUT THAT THE JURISDICT IONAL HIGH COURT IN CIT VS. CHOPRA BROS. 170 CTR 597 AND GIRDHARI LAL VS. CIT 1 72 CTR 267 HAS HELD THAT DEPRECIATION IS TO BE ALLOWED AFTER ESTIMATING INCO ME BY APPLICATION OF NET PROFIT RATE. 25. LD. DR ON THE OTHER HAND ARGUED THAT NET PROFIT MEANS PROFIT ARRIVED AFTER ALLOWING ALL PERMISSIBLE DEDUCTIONS AND THEREFORE O NCE NET PROFIT RATE IS APPLIED 8 FOR ESTIMATING INCOME NO OTHER CLAIM / DEDUCTION IS ALLOWABLE SINCE IT WOULD TANTAMOUNT TO ALLOWING DOUBLE DEDUCTION. 26. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND PERUSED ALL THE MATERIAL ON RECORD PLACED BEFORE US. 27. WE FIND THAT THE NET PROFIT RATE OF 8% APPLIED BY THE LD. CIT(A) FOR ESTIMATING THE ASSESSES INCOME WAS DETERMINED BY TH E LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE NET PROFIT AFTER DEPRECIATIO N. LD. CIT(A) AT PARA 5.0 OF HIS ORDER, WHILE ESTIMATING THE APPLICABLE NET PROFIT R ATE, HELD AS FOLLOWS: IN THIS YEAR, THE NET PROFIT RATE DECLARED BY THE APPELLANT IS MORE THAN THE NET PROFIT DECLARED IN EARLIER YEAR AND ACCEPTED UNDER SCRUTINY PROCEEDINGS. AS PER SUBMISSION MADE, THE NET PROFIT AFTER DEPRECIATION AS DECLARED BY THE APPELLANT IS RS. 7016545 RS. 2216545 I.E. RS. 48800175. THE AP PELLANT EVEN IN APPELLANT PROCEEDING HAS NOT EXPLAINED THE CREDIT BALANCE OF RS. 15,60,000/- AS ADDED BY THE AO. THUS, CONSIDERING THIS ADDITION THE NP AS P ER APPELLANTS SUBMISSION COMES TO RS. 63,60,175/ 9,28,85,067 I.E; 6.85%. THE REFORE, KEEPING INTO THE VIEW, THE TOTALITY OF THE CASE, I AM OF THE OPINION THAT THE NET PROFIT RATE AS ESTIMATED BY THE A.O. BE REDUCED FROM 10% TO 8% IN THIS CASE. THUS, THE NET ADDITION WILL BE 8% OF RS. 9,28,85,067/- LESS RS. 48,00,175/- WHICH EQUALS TO RS. 26,30,630/-. ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT IS DEEMED TO BE IN CLUDED IN THIS ADDITION. 28. A TABULATED WORKING OF THE LD. CIT(A) IS BEING REPRODUCED HEREUNDER FOR THE PURPOSE OF CLARITY : TURNOVER OF THE ASSESSEE FOR THE IMPUGNED YEAR 9,28,85,067 NET PROFIT BEFORE DEPRECIATION 70,16,545 LESS: DEPRECIATION CLAIMED FOR THE YEAR 22,16, 545 NET PROFIT AFTER DEPRECIATION 48,00,175 ADD: UNEXPLAINED CREDIT BALANCE 15,60,000 TOTAL INCOME OF THE ASSESSEE 63,60,175 PERCENTAGE OF TOTAL INCOME 63,60,175 X 100 = 6.85% 9,28,85,067 NET PROFIT APPLIED BY LD. CIT(A) AFTER CONSIDERING TOTALITY OF FACTS OF THE CASE 8% IT IS EVIDENT FROM THE ABOVE THAT THE N.P. RATE APP LIED BY THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE CLAIM OF DEPRECIATION ALLOWANCE OF THE ASSESSEE AND THEREFORE ANY FURTHER CLAIM OF DEPRECIATION WIL L TANTAMOUNT TO GRANTING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION. 9 29. THE LD. CIT(A) HAS APPLIED THE N.P. RATE AFTER DEPRECIATION AND REJECTED ASSESSES CLAIM OF DEPRECIATION FROM THE SAME, AFTER APPLYING THE RATIO PROPOUNDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHOPRA BROTHERS 170 CTR 597 AND GIRDHARI LAL VS. CI T 172 CTR 267, WHEREIN IT WAS HELD THAT, WHEN N.P. RATE WAS ESTIMATED BY AO WITHO UT MENTIONING THAT DEPRECIATION HAS BEEN CONSIDERED THEREIN, THERE CAN BE NO PRESUMPTION THAT DEPRECIATION CLAIM HAS BEEN CONSIDERED WHILE APPLYI NG N.P. RATE AND IN SUCH CIRCUMSTANCES, IT WAS HELD, THAT CLAIM OF DEPRECIAT ION WAS TO BE SEPARATELY ALLOWED. EVEN OTHERWISE WE FIND THAT THE ESTIMATED INCOME OF THE ASSESSEE AFTER APPLYING 8% N.P. RATE TO THE TO THE TURNOVER COMES TO RS. 74,30,805/- ( 9,28,85067 X 8/100). ON REDUCING DEPRECIATION CLAIM OF ASSESSE E OF RS. 22,16,545/-, THE NET TAXABLE INCOME OF THE ASSESSEE COMES TO RS. 52,14,2 60/- (74,30,805 22,16,545). ON THE OTHER HAND THE TAXABLE INCOME OF THE ASSESSE E AS PER BOOK RESULTS AND AFTER INCLUDING UNDISCLOSED INCOME FROM CASH CREDIT COMES TO RS. 63,60,175/-. THUS IF THE ASSESSEE IS ALLOWED DEPRECIATION AFTER APPLYING N.P. RATE, IT WILL ONLY RESULT IN REDUCING THE UNDISCLOSED INCOME OF THE AS SESSEE. IN VIEW OF THE SAME WE HOLD THAT ON ACCOUNT OF THE FACT THAT THE N.P. RATE APPLIED TO THE GROSS TURNOVER OF THE ASSESSEE FOR E STIMATING ITS INCOME CHARGEABLE TO TAX HAS BEEN CALCULATED AFTER ALLOWIN G THE CLAIM FOR DEPRECIATION ANY FURTHER DEDUCTION ON ACCOUNT OF DE PRECIATION CANNOT BE ALLOWED TO THE ASSESSEE SINCE IT WOULD TANTAMOUNT T O ALLOWANCE OF DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION. IN VIEW OF TH E SAME THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 30. IN THE RESULT THE ASSESSEES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :06/11/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR