ACIT, Circle-10, Kolkata, Kolkata V. M/s Gourangalal Chatterjee, Kolkata

ITA 760/KOL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3367 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2012
• Court: TRIBUNAL
• Department Lawyers: P B PRAMA NICK JCITLD
• Keywords: Presumptive income; Business income; Depreciation; Unabsorbed depreciation
• Section: 44AD; 143(3); 32; 145; 37

Judgement Text

ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 760/KOL/2012 A.Y : 2007-08 A.C.I.T., CIR-10, KOLKATA VS. M/S. GOURA NGALAL CHATTERJEE CONSTRUCTION PVT. LTD PAN: AABCG 9694G (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.B. PRAMANI CK, JCIT, LD. SR.DR FOR THE RESPONDENT: SHRI D.S DAMLE, F CA SHRI AKKAL DUDHWALA, CA, LD.AR S DATE OF HEARING: 21-12-2015 DATE OF PRONOUNCEMENT: 20 -01 -2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORD ER OF THE LEARNED CIT(A), XII, KOLKATA IN APPEAL NO. 951/XII/CIR-10/09-10 DATED 1 3-02-2012 FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER OF ASSESSMENT FRAME D BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LEARNED CIT(A) IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I S RIGHT IN ESTIMATING THE NET PROFIT @ 2.5% OF CONTRACT RECEIPTS OF THE ASSESSEE AS AGAINS T 8% ADOPTED BY THE LEARNED AO. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE IS A COMPANY ENGAGED IN CIVIL CONSTRUCTION CONTRACTS AWARDED BY GOVERNMENT DEPART MENTS. DURING THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TAXABLE INCOME OF RS. 18,63,450/-. THE ACCOUNTS OF THE ASSESSEE WERE DULY SUBJECTED TO TAX AUDIT U/S ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 2 44AB OF THE ACT. THE NET PROFIT REPORTED BY THE ASSESSEE WAS 2.03% OF NET CONTRACT RECEIPTS. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE DID PRODUCE THE BOOKS OF ACCOUNTS AND FILED DETAILS CALLED FOR BY T HE LEARNED AO. HOWEVER, THE LEARNED AO RESORTED TO ESTIMATE THE NET PROFIT FROM CONTRACT BUSINESS @ 8% OF TOTAL CONTRACT RECEIPTS AND ACCORDINGLY ADDED A SUM OF RS . 55,72,100/-. 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 BUSINESS PROFIT OF 8% U/S 44AD OF THE ACT. THE LEARNED CIT(A) FOUND T HAT IF THE SAME ARE REDUCED, THEN THE RESULTANT PROFIT WOULD BE 2.1% AND ACCORDINGLY, THE LEARNED CIT(A), TO MEET THE ENDS OF JUSTICE, RESORTED TO ESTIMATE THE NET PROF IT @ 2.5% OF CONTRACT RECEIPTS. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN LAW, THE LD CIT(A) HAS ERR ED IN DEDUCTING BANK INTEREST, BANK CHARGES AND DEPRECIATION FROM T HE PROFIT WORKED OUT U/S 44AD OF THE I TAX ACT, 1961, INSTEAD OF THE TOTAL RECEIPT OF THE BUSINESS. 2. THE A.O. REJECTED THE ACCOUNTS U/S 145 OF THE I TAX ACT, 1961, AND CALCULATED THE PROFIT @ 8% OF NET CONTRACT RECEIPT, AS THE ASSESSEE DID NOT PROVIDE NECESSARY DETAILS AS REQUIRED AND A LSO DID NOT EVEN PRODUCE BOOKS OF ACCOUNTS ON BEING SPECIFICALLY ASK ED FOR. THE LD CIT(A) HAS ERRED IN FACT AND LAW TO ESTIMATE THE NE T PROFIT @ 2.5% OF THE BUSINESS TURNOVER OF THE ASSESSEE. 4. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO AND STATED THAT THE ACTION OF THE LEARNED CIT(A) IN RESORTING TO ALLOW INTEREST AND DEPRECIATION FROM THE ESTIMATED PROFIT @ 8% OF RECEIPTS AND LATE R RESORTING TO ESTIMATE THE NET PROFIT @ 2.5% OF NET CONTRACT RECEIPTS IS NOT WARRANTED. IN RESPONSE TO THIS, THE LEARNED AR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A ) AND ALSO RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS:- ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 3 A) DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS EARTH TECH ENGINEERS REPORTED IN (2014) 46 TAXMA NN.COM 287 (P&H) B) DECISION OF HONBLE ANDHRAPRADESH HIGH COURT IN THE CASE OF CIT VS Y. RAMACHANDRA REDDY REPORTED IN (2014) 50 TAXMANN. COM 129 (AP) C) DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF AMPLIFIED ENGINEERS VS ADDL CIT IN ITA NO. 757/KOL/2011 FOR A SST YEAR 2005-06 DATED 26.8.2011. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE CONTRACT RECEIPT OF ASSES SEE AMOUNTING TO RS. 9,17,46,745/- IS MORE THAN RS 40 LACS AND HENCE THE PROVISIONS OF SE CTION 44AD OF THE ACT CANNOT BE MADE APPLICABLE TO THE INSTANT CASE. HENCE THE EST IMATION OF PROFIT @ 8% OF CONTRACT RECEIPTS DOES NOT GAIN ANY SUPPORT FROM THE PROVISI ONS OF THE 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 CHARGIN G INTEREST AND DEPRECIATION IS 8% OF CONTRACT RECEIPTS. THIS ASPECT WAS MISTAKENLY UND ERSTOOD BY THE LEARNED AO THAT THE ASSESSEE ITSELF HAD ADMITTED TO ADOPTION OF 8% OF R ECEIPTS AS ITS NET PROFIT 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 ACC EPTANCE WAS DENIED BY THE ASSESSEE BEFORE THE LEARNED CIT(A). 5.1. WE FIND THAT THE ASSESSEE HAD TAKEN SECURED LOANS 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 O F 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 L EARNED 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 THAT THE ASSESSEE WAS FORMED WITH AN OBJECTIVE OF TAKING OVER BUSINESS OF AN EXI STING PARTNERSHIP FIRM AND IN ORDER ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 4 TO BUILD CREDENTIALS OF THE NEW COMPANY IN GOVERNME NT RECORDS, THE ASSESSEE ACCEPTED CONTRACTS AT SUBSTANTIALLY LOWER RATES. AS A RESUL T, THE PROFIT MARGIN DURING THE YEAR WAS LOW. THIS FACT WAS NOT DISPROVED BY THE LEAR NED AO AND NO EVIDENCE WAS BROUGHT ON RECORD BY THE LEARNED AO TO SHOW THAT TH E TENDERS WERE WON BY THE ASSESSEE AT HIGHER PRICES. WE FIND THAT THE LEARNE D CIT(A) HAD SOUGHT TO RESTRICT THE ESTIMATION OF NET PROFIT @ 2.5% OF CONTRACT RECEIPT S BY MAKING THE FOLLOWING OBSERVATIONS :- 8. THE ASSESSEE'S PLEA THAT IN ESTIMATING INCOME; DEDUCTION FOR THE INTEREST AND DEPRECIATION SHOULD BE SEPARATELY ALLOWED IS AL SO REASONABLE. THE ISSUE REGARDING ALLOWANCE OF DEPRECIATION IN BEST J UDGMENT 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 B EEN MADE IN THE RETURN, THE INCOME-TAX OFFICER SHOULD ES.TIMATE THE INCOME WITHOUT ALLOWING DEPRECIATION ALLOWANCE. IN SUCH CASES, THE ESTIMATE OF NET PROFIT WOULD BE NATURALLY HIGHER THAN OTHERWISE AND THE FACT THAT THE ESTIMATE HAS BEEN MADE WITHOUT CONSIDERING DEPRECIA TION ALLOWANCE MAY BE CLEARLY BROUGHT OUT IN THE ASSESSMENT ORDER. IN SUCH CASES, THE WRITTEN DOWN VALUE OF DEPRECIABLE ASSETS WOULD CON TINUE TO BE THE SAME AS AT THE END OF THE PRECEDING YEAR AS NO DEPR ECIATION WOULD ACTUALLY 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 ESTIMAT ING THE INCOME. 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 (B OM.), CIT V. BISHAMBAR DAYAL & CO. [1994] 21O ITR 118 (ALL.), CHOPRA BROS. (INDIA) (P.) LTD. V. ITO [1993] 202 ITR 40 (CHD. TR IB.), 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 CHAND IGARH IN-THE CASE OF ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 5 LNCOME-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 BORROW ED FOR THE PURPOSE OF THE BUSINESS ARE ALLOWABLE DEDUCTIONS. I N DOING SO, IT IS TO BE SEEN WHETHER THE ASSESSEE BORROWED CAPITAL FO R THE PURPOSE OF THE BUSINESS AND WAS USED FOR THE SAME. IF SO, THEN THE INTEREST THEREON HAS TO BE ALLOWED AS A DEDUCTION. IF, HOWEV ER, THE ASSESSEE HAS SUFFICIENT CAPITAL AND IN SPITE OF THAT BORROWE D MONEY WHICH WAS NOT UTILISED FOR THE PURPOSE OF THE BUSINESS I T IS FOR THE ASSESSING OFFICER TO DISALLOW THE CLAIM AS THE BORR OWED MONEY WAS NOT FOR THE PURPOSE OF THE BUSINESS. IN THE PRESENT CASE, THERE IS NO DISPUTE REGARDING THE CAPITAL BORROWED WHICH WAS UT ILISED FOR THE PURPOSE OF THE BUSINESS. ADMITTEDLY, IT IS ALLOWABL E DEDUCTION. ' 11. CONSIDERING THE TOTALITY OF THE FACTS AND CIR CUMSTANCES OF THE CASE AS ARE AVAILABLE BEFORE ME I THEREFORE HOLD THAT IN ES TIMATING APPELLANT'S INCOME; DEDUCTION FOR DEPRECIATION AND INTEREST WAS REQUITED TO BE ALLOWED SEPARATELY. THIS WAS NOT DONE BY THE AO. I FIND THA T EVEN IF NET PROFIT RATE OF 8% AS ADOPTED BY THE AO IS APPLIED IN ASSESSEE'S CA SE THEN THE GROSS OPERATING PROFIT WORKS, OUT, TO RS. 73,39,740 BEING 8% OF RS.9,17,46,745. FROM THIS; IF BANK INTEREST OF RS.3508977, BANK CHA RGES OF RS.657561 AND DEPRECIATION OF RS.12,87,911 IS REDUCED THEN THE NE T. INCOME FROM BUSINESS OF CIVIL CONTRACT EXECUTION WORKS, OUT TO RS.18,85, 290 WHICH IN % REPRESENTS 2.1 % OF CONTRACT RECEIPT. THIS COMPARES FAVORABLY AGAINST RETURNED NET PROFIT OF RS.18,69,454 EXCEPT FOR MINO R DIFFERENCE OF RS.16,000 APPROXIMATELY. THE LD. COUNSEL RELIED ON A COMPARAT IVE CASE OF AMPLIFIED ENGINEERS PAN AACCA6890M FOR AY 2005-2006 IN ITA NO .757/ K/2011 WHERE THE ITAT KOLKATA IN SIMILAR CIRCUMSTANCES EST IMATED THE INCOME OF A CIVIL CONTRACTOR AT 2% OF THE TURNOVER OF THAT ASSE SSEE. 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 CONSI DERATION IS ESTIMATED AT 2.50% OF THE TURNOVER. OF RS.9,17,46,745. ACCORDINGLY I DIRECT THE AO TO ASSESS THE BUSINESS INCOME AT RS.22,93,668/- IN PLA CE OF RS.18,63,450/- AS DISCUSSED BY THE ASSESSEE. THE ASSESSEE ACCORDINGLY GETS RELIEF OF RS.51,41,882/-. THESE GROUNDS ARE PARTLY ALLOWED. ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 6 5.2. THE FOLLOWING DECISIONS RELIED UPON BY THE L EARNED AR SUPPORT THE CASE OF THE ASSESSEE:- CIT VS EARTH TECH ENGINEERS REPORTED IN (2014) 46 T AXMANN.COM 287 (P&H HC) DATED 13.3.2014, WHEREIN THE QUESTIONS RAISED BEFORE THEIR LORDSHIPS AND DECISION RENDERED THEREON ARE REPRODU CED BELOW:- QUESTIONS: 1) WHETHER THE HONBLE ITAT WAS CORRECT IN LAW IN CONF IRMING THE ORDER OF THE LEARNED CIT(A) SCALING DOWN THE NET P ROFIT TO 8% ON THE GROSS RECEIPTS AS AGAINST 12% APPLIED BY THE AO AT THE TIME OF ASSESSMENT? 2) WHETHER THE HONBLE ITAT WAS CORRECT IN LAW IN CONF IRMING THE ORDER OF THE LEARNED CIT(A) ALLOWING THE DEPRECIATI ON OUT OF THE NET PROFIT? HELD : 7. THE ISSUE BEFORE THIS COURT IN CIT V. CHOPRA BR OS. 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 R EGARD TO DEDUCTION TO BE MADE ON ACCOUNT OF DEPRECIATION FR OM 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 THE GROSS RECEIPTS TO WHICH NET PROFIT RATE IS TO B E APPLIED SHALL BE DETERMINED AFTER GIVING ALLOWANCE ON ACCOUNT OF DE PRECIATION. CIT VS Y.RAMACHANDRA REDDY REPORTED IN (2014) 50 TAXMANN.COM 129 (AP HC) DATED 30.7.2014, WHEREIN THE QUESTIONS RAISED BEFORE THEIR LORDSHIPS AND DECISION RENDERED THEREON ARE REPRODU CED BELOW:- QUESTIONS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE TRIBUNAL IS CORRECT IN LAW IN DIRECTING THE ASSESSI NG OFFICER TO ALLOW DEPRECIATION AND INTEREST PAYMENTS FROM THE ESTIMA TE OF PROFIT AT 12%? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL IS CORRECT IN LAW IN DIRECTING THE ASSESSI NG OFFICER TO GRANT RELIEFS ON THOSE ITEMS WHICH ARE NOT CLAIMED BY THE ASSESSEE? ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 7 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL IS CORRECT IN GRANTING DEPRECIATION THOUGH IT WAS ALREADY GRANTED BY THE ASSESSING OFFICER? HELD: 13. THE LEARNED COUNSEL FOR THE APPELLANT IS NOT A BLE TO POINT OUT ANY PROVISION OF LAW IN THE ACT OR RULES MADE THERE UNDER, WHICH RESTRICTS THE ALLOWANCE OF THE DEPRECIATION AND INT EREST. ON THE OTHER HAND, THE FACILITY CREATED UNDER THE ACT IS SO FIRM AND STRONG THAT IF FOR ANY REASON IT BECOMES IMPERMISSIBLE OR UNNECESS ARY FOR AN ASSESSEE TO SEEK THE ALLOWANCE OF 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 OF UNABSORBED DEPRECIATION. IN THIS VERY CASE, THE ASS ESSING OFFICER PERMITTED THE ALLOWANCE OF UNABSORBED DEPRECIATION TO THE RESPONDENT. HOWEVER. HE DENIED THE BENEFIT OF THE A LLOWANCE OF CURRENT DEPRECIATION AND INTEREST. NO REFERENCE IS MADE TO ANY PROVISION OF LAW TO MAKE SUCH DISTINCTION. HIS UNDE RSTANDING OF THE MATTER IS THAT SECTION 44AD OF THE ACT, THAT PROVID ES FOR A COMPREHENSIVE FORMULA OF DETERMINING NET PROFIT DER IVED BY A CIVIL CONTRACT OR AT 8%, TAKES IN ITS FOLD, ALLOWANCE OF DEPRECIATION, INTEREST AND OTHER BENEFITS. THE FACT, HOWEVER, REM AINS THAT SUCH A PROVISION WAS NOT IN EXERCISE IN THE ASSESSMENT YEA R 1994-95. 14. IF AN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF INTEREST, BE IT UNDER SECTION 36(1)(III) OF THE ACT OR ANY OTHER RE LEVANT PROVISION AND OF DEPRECIATION UNDER SECTION 37 OF THE ACT, IN THE ORDINARY COURSE OF ASSESSMENT, THERE IS NO REASON WHY THE S AME FACILITIES BE NOT EXTENDED TO HIM, MERELY BECAUSE THE PROFIT IS D ETERMINED ON THE BASIS OF ESTIMATION AS WAS DONE IN THE INSTANT CASE . WE ARE OF THE VIEW THAT DEPRECIATION AND INTEREST, WHICH ARE OTH ERWISE DEDUCTIBLE IN THE ORDINARY COURSE OF ASSESSMENT, REMAIN THE SA ME LEGAL CHARACTER, EVEN WHERE THE PROFIT OF ASSESSEE IS DET ERMINED ON PERCENTAGE BASIS. 15. THE CONCLUSIONS ARRIVED AT BY US, GET SUPPORT F ROM THE CIRCULAR DATED 31.08.1965 ISSUED BY THE CENTRAL FOARD OF DIR ECT TAXES. THOUGH THE CIRCULAR WAS WITH REFERENCE TO THE 1922 ACT, IT HOLDS GOOD FOR THE ANALOGOUS PROVISIONS UNDER THE 1961 AC T. 16. THE LEARNED COUNSEL FOR THE APPELLANT RELIED ON A JUDGMENT OF THIS COURT IN INDWELL CONSTRUCTIONS V. CIT [1998] 2 32 1TR 776. THAT WAS A CASE IN WHICH THIS COURT TOOK THE VIEW T HAT ONCE THE BOOKS OF ACCOUNT ARE DISBELIEVED FOR A PARTICULAR P URPOSE, THEY CANNOT BE RELIED UPON IN THE CONTEXT OF INTEREST. I N THE INSTANT CASE, WE ARE CONCERNED WITH THE DEPRECIATION. THE OCCASIO N TO DENY THE ITA NO.760/KOL/2012-A-AM M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PRIVATE LTD 8 DEDUCTION OF DEPRECIATION OR INTEREST WOULD ARISE I F ONLY THE MATERIAL PLACED BEFORE THE ASSESSING AUTHORITY IN PROOF OF P URCHASE OF MACHINERY AND OTHER ITEMS AND PAYMENT OF INTEREST I S DISBELIEVED. NO FINDING OF THAT NATURE WAS RECORDED BY THE ASSESSIN G OFFICER. 5.3. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTA NCES 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 DONT FIND ANY INFIRMITY IN THE ORDER 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. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 20- 0 1-2016 1. . THE APPELLANT: ASSTT. COMMISSIONER OF INCOME TAX, CIR-10 P-7 CHOWRINGHEE SQ., 3 RD FL., KOL-69. 2 M/S. GOURANGALAL CHATTERJEE CONSTRUCTION PVT. LTD 164/A/9 PRINCE ANWAR SHAH ROAD, LAKE GARDEN, KOL-45. 3 / THE CIT, 4.THE CIT(A) 5 . DR, KOLKATA BENCH 6 . GUARD FILE . TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 20 /01/2016 COPY OF THE ORDER FORWARDED TO:-