MADAN LA PAHARIA, Jaipur V. ITO, Jaipur

ITA 703/JPR/2013

• Counselvise Citation: 70323114 RSA 2013
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Rejection of books of accounts; Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH : JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 703/JP/2013 (A.Y. 2010-11) MADAN LAL PAHARIA, VS. ITO, WARD4(2), 5/52, VIDHYADHAR NAGAR, JAIPUR. JAIPUR. PAN NO. AAAPP 3893 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 29/01/2014. DATE OF PRONOUNCEMENT : 11/03/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 23/07/2013 OF LD. CIT (A)-II, JAIPUR. THE FOLLOWIN G GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE APPLICATION OF NET PROFIT RATE OF 11.5% ADOPTED BY THE AO AFTER ALL EXPENSES INCLUDING DEPRECIATION AND INTEREST AND TH EREBY CONFIRMING ADDITION OF RS. 17,83,151/- 2 1.1 THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT ASSESSEE IS IN SIMILAR LINE OF BUSINESS AS THAT OF M/S CHOUDHAR Y AND BROTHERS. HE HAS FURTHER ERRED IN HOLDING THAT IN CASE OF M/S. C HAUDHARY BROTHERS, NET PROFIT RATE OF 11.5% IS CONFIRMED BY HON'BLE IT AT AFTER ALL EXPENSES IGNORING THAT NET PROFIT RTE APPLIED IN TH AT CASE IS SUBJECT TO DEPRECIATION AND INTEREST. 1.2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N NOT ALLOWING THE CLAIM OF DEPRECIATION OF RS. 21,58,220/- AND FINANCE CHAR GES OF RS. 6,21,041/- FROM THE NET PROFIT RATE CONFIRMED BY HI M BY INCORRECTLY HOLDING THAT CASES RELIED BY ASSESSEE ARE ON DIFFER ENT FACTS. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 2,34,000/- BY HOLDING THAT AMOUNT CREDITED I N THE CAPITAL ACCOUNT IS UNEXPLAINED. HE HAS FURTHER ERRED IN NO T ALLOWING SET OFF OF TRADING ADDITION CONFIRMED BY HIM AGAINST THE ADDIT ION CONFIRMED ABOVE. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2 GROUNDS NO. 3 & 4 ARE GENERAL IN NATURE, SO DO NOT REQUIRE COMMENTS ON OUR PART, WHILE THE GRIEVANCE OF THE AS SESSEE VIDE GROUNDS NO. 1 TO 1.2 RELATES TO THE CONFIRMATION OF TRADING ADDITION OF RS. 17,83,151/-. 3. FACTS OF THE CASE RELATED TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE IS A CONTRACTOR ENGAGED IN SUPPLY OF LABOU R AND LAYING OF SEWAGE/WATER PUMP LINES. THE ASSESSEE FILED HIS RE TURN OF INCOME ON 22/09/2010 DECLARING AN INCOME OF RS. 10,09,760/- W HICH WAS PROCESSED 3 UNDER SECTION 143(1) OF THE I.T. ACT, 1961 (HEREINA FTER REFERRED TO AS THE ACT IN SHORT). LATER ON, CASE WAS SELECTED FOR SC RUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAD DECLARED NET PROFIT OF RS. 12,47,109/- ON THE GROSS RECEIPTS OF RS. 2,63,50,091/- GIVING NET PROFIT RATE OF 4.37 % AS AGAINST NET PROFIT RATE OF 8.93% ON GROSS RECEIPTS OF RS. 71,65,246/- DECLARED IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE ON WAGES AT RS. 1, 92,30,850/-, OUT OF WHICH, RS. 23,43,100/- WAS PAYABLE AT THE END OF TH E YEAR. HE ALSO OBSERVED THAT THE EXPENSES CLAIMED WERE NOT VERIFIA BLE. HE, THEREFORE, REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND APPLIED NET PROFIT RATE OF 11.5% ON THE GROSS RECEI PTS DECLARED BY THE ASSESSEE ON THE BASIS OF THE DECISION OF THE ITAT D ATED 31/05/2011 IN THE CASE OF M/S. CHOUDHARY AND BROTHERS IN I.T.A.NO. 1177/JP/2010, BUT DID NOT ALLOW ANY OTHER DEDUCTION ON ACCOUNT OF DEPRECI ATION OR INTEREST. ACCORDINGLY, ADDITION OF RS. 17,83,151/- WAS MADE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER:- L. THERE IS NO DISPUTE AS TO THE FACT THAT BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT DULY VERIFIABLE. IN THESE CIRCUMST ANCES SECTION 145(3) IS APPLICABLE AND THEREFORE ASSESSMENT IS TO BE MADE I N THE MANNER PROVIDED 4 UNDER SECTION I44. IE. ON BEST JUDGMENT BASIS. IN M AKING A BEST JUDGMENT ASSESSMENT, THE AO MUST NOT ACT DISHONESTLY OR VIND ICTIVELY OR CAPRICIOUSLY BECAUSE HE MUST EXERCISE JUDGMENT IN THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMATE OF THE PROP ER FIGURE OF ASSESSMENT & FOR THIS PURPOSE HE MUST BE ABLE TO TAKE INTO CONSIDERA TION LOCAL KNOWLEDGE & REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES & HIS OWN KNOWLEDGE OF THE PREVIOUS RETURNS & ASSESSMENT OF THE ASSESSEE & ALL OTHER MATTERS WHICH HE THINKS WILL ASSIST HIM IN ARRIVING AT A FAIR & PROP ER ESTIMATE & THOUGH THERE MUST NECESSARILY THE GUESS WORK IN THE MATTER, IT M UST BE A HONEST GUESSWORK. IN MAKING BEST JUDGMENT ASSESSMENT, THE AO DOES NOT POSSESS ABSOLUTELY ARBITRARY AUTHORITY TO POSSESS AT ANY FIGURE HE LIK ES & THAT ALTHOUGH HE IS NOT BOUND BY THE STRICT JUDICIAL PRINCIPALS, HE SHOULD BE GUIDED BY RULES OF JUSTICE, EQUITY & GOOD CONSCIENCE. 2. LN THE PRESENT CASE ASSESSEE IS MAINLY LABOUR CONTRACTOR SUPPLYING THE LABOUR OR DOING THE WORK OF EXCAVATION AND LAYING/J OINING OF PIPE LINES WHICH INVOLVES SUBSTANTIAL LABOUR. DURING THE YEAR ENTIRE WORK WAS CARRIED BY HIM AS A SUB CONTRACTOR OF IVRCL INFRASTRUCTURE LTD. THESE WORKS WERE CARRIED OUT AT BHARATPUR, TONK AND ALLAHABAD. FURTHER IT RECEIVED HIRE CHARGES FROM HIRING OF TATA 200 PROCLAIN MACHINE AT ALIGARH TO IVRCL LNFRA STRUCTURES LTD. COPY OF SAMPLE WORK ORDERS ARE AT PB 36-57. THE WORK AT ALL AHABAD WAS CARRIED OUT FOR THE FIRST TIME. AS AGAINST THIS IN THE LAST YEAR AS SESSEE HAS CARRIED OUT THE WORK OF EXCAVATION AND LYING/JOINING OF PIPELINES FOR IV RCL LNFRASTRUCTURE LTD. AND LNDIAN HUME PIPE CO. LTD. AT BHARATPUR AND TONK ONL Y THE BREAK UP OF RECEIPT OF THE ASSESSEE DURING THE YEAR AS COMPARED TO THE LOST YEAR IS AS UNDER:- NATURE OF RECEIPT AY 2010 - 11 AY 2009 - 10 FROM SUPPLY OF LABOUR 1,62,08,644/- NIL FROM LAYING OF PIPE LINES/SITE ESTABLISHMENT OFFICE 84,44,718/ - 71,42,381/ - FROM HIRING OF PROCLAIN MACHINE 16,44,773/ - NIL OTHER MISCELLANEOUS RECEIPT 51,956/ - 22,865/ - TOTAL 2,63,50,091/ - 71,65,246/ - FROM THE ABOVE TABLE IT CAN BE NOTED THAT THE NATUR E OF RECEIPT AS WELL AS THE SITE OF THE WORK HAS SUBSTANTIALLY CHANGED DURING T HE YEAR AS COMPARED TO THE LAST YEAR. DURING THE YEAR THE MAJOR RECEIPT IS FRO M THE SUPPLY OF LABOUR AT 5 ALLAHABAD SITE. IN LABOUR SUPPLY ASSESSEE RECEIVED RS.150 PER LABOURER DAY. AGAINST THIS HE HAS TO PAY RS.145 PER LABOUR PER DA Y AND ALSO TO INCUR EXPENSES ON THEIR SHIFTING. THUS IN. THIS ACTIVITY ASSESSEE HARDLY HAS A MARGIN OF 2.50 % TO 3%. IT IS FOR THIS REASON THAT THE EXPENDITURE ON LABOUR AT SITE HAS INCREASED DURING THE YEAR AS COMPARED TO THE LAST YEAR AND TH E NET PROFIT MARGIN HAS DECLINED AS COMPARED TO THE PREVIOUS YEAR. 3. THE AO HAS APPLIED NP RATE OF 11.5% ON THE BASIS OF DECISION OF HON'BLE ITAT IN THE CASE OF M/S CHOUDHARY & BROTHERS. LN DO ING SO HE IGNORED THE BASIC FACT THAT M/S CHOUDHARY AND BROTHERS IS NOT A SUB C ONTRACTOR BUT A MAIN CONTRACTOR FOR CARRYING OUT THE WORK OF CONSTRUCTIO N OF ROAD BRIDGES ETC. FOR PWD RAJASTHAN AND VARIOUS OTHER GOVT. DEPORTMENTS. HE IS NOT A LABOUR CONTRACTOR BUT A CIVIL CONTRACTOR. FURTHER HIS GROS S RECEIPT IS RS 76.85 CRORES WHICH IS MUCH MORE THON THE GROSS RECEIPT OF ASSESS EE. M/S CHOUDHARY & BROTHERS BEING THE MAIN CONTRACTOR HAVE DECLARED NP RATE OF 10.07% BEFORE THE CLAIM OF INTEREST TO PARTNERS, DEPRECIATION AND FINANCE CHARGES AND THEREFORE, CONSIDERING THE SAME HON'BLE ITAT DIRECT ED TO APPLY NP RATE OF 11.5 % AS AGAINST THE DECLARED NP RATE OF 10.07%. IN THESE FACTS, THE CASE OF M/S CHOUDHARY & BROTHERS RELIED BY THE AO IS NOT CO MPARABLE TO THE CASE OF THE ASSESSEE AND THEREFORE APPLICATION OF NP ROTE O F 17.5% IN THE CASE OF ASSESSEE IS NOT JUSTIFIABLE. COPY OF THE ORDER OF H ON'BLE ITAT AND THE WRITTEN SUBMISSION FILED BEFORE IT IN CASE OF CHOUDHARY & B ROTHERS IS AT PB 17-25. 4. THE AO AFTER APPLICATION OF NP RATE HAS NOT ALLO WED CLAIM OF DEPRECIATION AND THE INTEREST PAID TO THIRD PARTIES. THE HON'BLE RAJASTHAN HIGH COURT AND ITAT, JAIPUR BENCH HAVE CONSISTENTLY HELD THAT AFTE R THE APPLICATION OF NP RATE, DEDUCTION ON ACCOUNT OF DEPRECIATION AND FINANCE CH ARGES SHOULD BE SEPARATELY ALLOWED. FOR THIS RELIANCE IS PLACED IN FOLLOWING C ASES: CIT VS. JAIN CONSTRUCTION COMPANY 245 ITR 527 (RAJ CIT VS. BHOWAN PATH NIRMAN (BOHRA) & CO. 258 ITR 44 0 (RAJ) KIRODIMAL MODI VS. ACIT IN MA NO. 37/JP/2009 FOR A. Y. 05-06 DCIT VS. KIRODIMAL MODI IN ITA NO. 119/JP/2010 DT. 10.09.2010 FOR A.Y. 07-08 (P.B 63-69) BESIDE DEPRECIATION, INTEREST PAID TO THIRD PARTIES IS ALSO ALLOWABLE FROM THE NET PROFIT RATE APPLIED. 6 5. IN VIEW OF ABOVE, WHATEVER NP RATE IS CONSIDERED , DEPRECIATION AND FINANCE CHARGES SHOULD BE SEPARATELY ALLOWED FROM THE INCOM E ESTIMATED BY APPLICATION OF NP RATE. IN THE PRESENT CASE THE CLA IM OF DEPRECIATION IS RS.21,58,220/- AND FINANCE CHARGES IS RS. 6,21,041 TOTALLING TO RS. 27,79,261/-. IF THE SAME IS REDUCED FROM THE NET PROFIT ARRIVED BY THE AO BY APPLICATION OF NP RATE, THE INCOME FROM BUSINESS WOULD REDUCE BELO W WHAT IS DECLARED BY THE ASSESSEE. IN THESE FACTS THE INCOME FROM BUSINESS DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT SINCE THE BOOKS OF ACCOUNT S WERE NOT MAINTAINED PROPERLY, THE REJECTION OF BOOK RESULT UNDER SECTIO N 145(3) OF THE ACT WAS JUSTIFIED. HE FURTHER OBSERVED THAT ON THE BASIS O F CHOUDHARY & BROTHERS CASE, NET PROFIT RATE OF 11.5% HAS BEEN APPLIED BY THE ASSESSING OFFICER AND THAT THE ITAT HAD NOT MENTIONED ALLOWING OF DEP RECIATION AND INTEREST AFTER ADOPTING 11.5% OF NET PROFIT RATE AN D IF THE ASSESSEE ARGUMENT IS ACCEPTED, THE NET PROFIT DECLARED BY TH E ASSESSEE WILL GET REDUCED TO 4.73%. LD. CIT(A) ALSO OBSERVED THAT I N CASE, THE DECLARED NET PROFIT RATE OF THE ASSESSEE IS COMPUTED BEFORE INTEREST AND DEPRECIATION, IT WILL BE MORE THAN 16%. THE LD. CI T(A) WAS OF THE VIEW THAT HOW THE ASSESSING OFFICER COULD HAVE ESTIMATED THE NET PROFIT LOWER THAN WHAT WAS DECLARED BY THE ASSESSEE EVEN WHEN NO PROPER BOOKS OF ACCOUNTS WERE MAINTAINED. THEREFORE, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING THAT NET PROFIT ESTI MATED AT 11.5% WAS TO 7 BE ADOPTED AFTER ALLOWING INTEREST AND DEPRECIATION AND NO FURTHER CLAIM WAS TO BE ALLOWED. NOW THE ASSESSEE IS IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT IF THE NET PROFIT RATE IS APPLIED, THE ASSESSEE IS ENTITLED FOR DEDUC TION ON ACCOUNT OF DEPRECIATION, INTEREST & REMUNERATION TO THE PARTNE RS AND INTEREST TO THE THIRD PARTIES. THEREFORE, THE LD. CIT(A) WAS NOT JU STIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS OF THE ITAT, JAIPUR BENCH, JAIPUR. 1) DCIT VS. SHRI KIRODI MAL MODI IN I.T.A.NO. 119/ JP/2010 ORDER DATED 10/09/2010. 2) DCIT VS. M/S. RISHABH CONSTRUCTION (P) LTD. IN I .T.A.NO. 1081/JP/2011 ORDER DATED 30/08/2012. COPIES OF THE SAID ORDERS WERE FURNISHED WHICH ARE PLACED AT PAGE NOS. 61-70 OF THE ASSESSEES PAPER BOOK. 7 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. STRONGLY S UPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBSERVA TIONS MADE IN THEIR RESPECTIVE ORDERS. 8 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT CERTAIN DISCREPAN CIES WERE POINTED OUT BY THE ASSESSING OFFICER AND THE BOOKS WERE REJECTE D BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE SAID ACTION OF THE ASSESSING OFFICER HAS BEEN UPHELD BY THE LD. CIT(A) AND THE A SSESSEE HAD NOT CHALLENGED THE REJECTION OF THE BOOKS OF ACCOUNTS. IN SUCH TYPE OF CASES WHEN BOOKS ARE REJECTED, THE ONLY WAY TO WORK OUT T HE INCOME IS TO APPLY NET PROFIT RATE ON THE BASIS OF PAST HISTORY OF THE ASSESSEES CASE OR COMPARABLE CASE HAVING SIMILAR FACTS. IN THE INSTA NT CASE, THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNTS APPLI ED NET PROFIT RATE OF 11.5% ON THE BASIS OF A SIMILAR CASE OF M/S. CHOUDH ARY & BROTHERS DECIDED BY THE ITAT, JAIPUR BENCH, JAIPUR ON 31/05/2011 IN I.T.A.NO. 1177/JP/2010. NOW, THE QUESTION ARISES AS TO WHETH ER THE DEDUCTION ON ACCOUNT OF DEPRECIATION, INTEREST AND REMUNERATION TO THE PARTNERS OR INTEREST TO THE THIRD PARTIES IS TO BE ALLOWED FROM THE INCOME WORKED OUT BY APPLYING THE NET PROFIT RATE. ON THIS ISSUE, VA RIOUS BENCHES OF THE ITAT HAVE TAKEN CONSISTENT VIEW BY FOLLOWING THE JUDGMEN T OF THE HON'BLE JURISDICTIONAL HIGH COURT THAT WHEN THE NET PROFIT RATE IS APPLIED, THE DEDUCTION ON ACCOUNT OF DEPRECIATION, INTEREST & RE MUNERATION TO THE 9 PARTIERS AND INTEREST TO THE THIRD PARTIES IS TO BE ALLOWED. IT IS ALSO RELEVANT TO POINT OUT THAT IN THE CASE OF CHOUDHARY & BROTHERS VS. ACIT, JAIPUR WHICH HAS BEEN RELIED BY THE ASSESSING OFFIC ER, FOR WORKING OUT THE TAXABLE INCOME BY APPLYING THE NET PROFIT RATE OF 1 1.5%, THE ASSESSEE MOVED A MISCELLANEOUS APPLICATION DATED 27/06/2012 UNDER SECTION 254 OF THE ACT AND WHERE IN PARA 4 IT HAS BEEN STATED A S UNDER:- 4. FROM ABOVE, IT CAN BE NOTED THAT HON'BLE ITAT S DIRECTION TO APPLY NP RATE OF 11.5% SUBJECT TO DEPRECIATION & INTEREST PAYMENT. HOWEVER, THIS IS NOT MADE EXPLICITLY CLEAR & THEREF ORE, AO WHILE GIVING THE APPEAL EFFECT HAS NOT ALLOWED THE CLAIM OF DEPR ECIATION & INTEREST PAYMENT FROM N.P. RATE OF 11.5%. IN VIEW OF THE ABOVE FACTS, THE ORDER PASSED BY HO N'BLE ITAT BE SUITABLY MODIFIED BY DIRECTING THAT N.P. RATE OF 11 .5% IS SUBJECT TO ALLOWANCE OF DEPRECIATION, INTEREST TO PARTNERS & I NTEREST TO THIRD PARTIES. FROM THE ABOVE FACTS, IT IS CLEAR THAT IN THE CASE , WHICH HAS BEEN RELIED BY THE ASSESSING OFFICER, MISCELLANEOUS APPL ICATION FOR CERTAIN CLARIFICATIONS HAS BEEN FILED BY THE ASSESSEE, HOWE VER, IT IS NOT BROUGHT ON RECORD AS TO WHETHER THE SAID MISCELLANEOUS APPL ICATION HAS BEEN DECIDED OR NOT. ON A SIMILAR ISSUE IN THE CASE OF DCIT, CIRCLE-5, JAIPUR VS. M/S. RISHABH CONSTRUCTION (P) LTD. IN I.T.A.NO. 1081/JP/ 2011 FOR THE A.Y. 2008-09, VIDE PARA 2.7 OF THE ORDER DATED 30/08/201 2 IT HAS BEEN HELD AS UNDER:- 10 2.7 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIALS AVAILABLE ON RECORD, IT IS NOTICED THAT I N EARLIER YEAR THE ITAT JAIPUR BENCH VIDE ITS ORDER DATED 17/06/2010 IN ITA NO. 581/JP/2009 FOR THE ASSESSMENT YEAR 2006-07 IN ASSESSEES OWN C ASE CONFIRMED THE ORDER OF THE LD. CIT(A) IN DIRECTING THE AO TO ALLOW DEPRECIATION AND FINANCIAL EXPENSES FROM NET PROFIT. THE LD. CI T(A) BY FOLLOWING THE AFORESAID DECISION DIRECTED THE AO TO ALLOW THE BEN EFIT OF DEPRECIATION AND FINANCIAL EXPENSES TO THE ASSESSEE AFTER APPLYI NG THE NET PROFIT RATE OF 8% AND THAT VIEW IS ALSO SUPPORTED BY JUDGM ENTS OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JA IN CONSTRUCTION, 245 ITR 527 AND CIT VS. BHAWAN VA PATH NIRMAN (BOHRA) A ND CO. 258 ITR 440. WE THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 9 . SO, BY RESPECTFULLY FOLLOWING THE AFORESAID DECIS ION OF THE COORDINATE BENCH, WE ARE OF THE VIEW THAT THE ASSES SEE IS ENTITLED FOR DEDUCTION ON ACCOUNT OF DEPRECIATION AND INTEREST F ROM THE INCOME DETERMINED BY APPLYING THE NET PROFIT RATE. IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE ON ACCOUNT OF DEPRECIATION IS OF RS. 21,58,220/- AND OF FINANCIAL CHARGES OF RS. 6,21,041/-, TOTALING TO RS. 27,79,261/- AND THE INCOME WAS DETERMINED BY THE ASSESSING OFFICER BY A PPLYING THE NET PROFIT RATE 11.5% IS AT RS. 30,30,260/-. THE ASSES SING OFFICER ASSESSED THE TOTAL BUSINESS INCOME AT RS. 38,46,894/- AND IF THE AFORESAID AMOUNT OF RS. 27,79,261/- IS REDUCED FROM THE INCOME DETERMIN ED BY THE ASSESSING OFFICER, THE NET INCOME WILL COME AT RS. 10,67,633/ - WHICH IS LESS THAN THE INCOME DECLARED BY THE ASSESSEE AT RS. 12,46,46 7/-. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ACCEPT THE INCOME D ECLARED BY THE 11 ASSESSEE BECAUSE THE INCOME CANNOT BE ASSESSED AT A LOWER FIGURE THAN THE INCOME DECLARED BY THE ASSESSEE. WE, THEREFORE , ALLOW THE GROUNDS NO. 1 TO 1.2 OF THE ASSESSEES APPEAL AND DIRECT TH E ASSESSING OFFICER TO ACCEPT THE INCOME DECLARED BY THE ASSESSEE. 10 . SINCE WE HAVE ALLOWED THE GROUNDS NO. 1 TO 1.2, T HEREFORE, GROUND NO.2 BECOMES OF ACADEMIC INTEREST. ACCORDINGLY, TH E SAME IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. (ORDER PRONOUNCED IN THE COURT ON 11 TH MARCH, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH MARCH, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JAIPUR.