The Commissioner of Income Tax - VI V. M/s. Sri Venkateswara Swamy Lorry Service

ITTA/82/2013

AI Insights

The case involves an appeal by the Commissioner of Income Tax-VI, Hyderabad against M/s. Sri Venkateswara Swamy Lorry Service concerning the assessment year 2005-06. The primary issues were the appropriate percentage for estimating profit in the absence of books of accounts and the treatment of depreciation in such estimations. The Tribunal had estimated the profit at 4% of turnover and allowed depreciation separately, which the appellant contested. The High Court, after reviewing the Tribunal's decision and relevant legal provisions, dismissed the appeal, affirming the Tribunal's findings.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 739317 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 25-06-2013
• Assessment Year: misc
• Other Referred Cases: CIT vs. Jain Construction Co., and others
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Depreciation allowance; Estimated profit; Income estimation; Absence of books of accounts
• Section: 143(3)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE MS. JUSTICE G. ROHINI I.T.T.A. No.82 of 2013 DATE: 25.06.2013 Between: The Commissioner of Income Tax-VI, Hyderabad. … Appellant And M/s. Sri Venkateswara Swamy Lorry Service, Nayanagar, Kodad. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE MS. JUSTICE G. ROHINI I.T.T.A No.82 of 2013 JUDGMENT: (Per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal in relation to the assessment year 2005-06 is sought to be admitted on the following suggested substantial questions of law. “1. Whether on the facts and in the circumstances of the case, the appellate Tribunal is justified in deleting the addition of income on the estimate basis and directing acceptance of the return of income as disclosed by the assessee? 2. Whether on the facts and in the circumstances of the case, the appellate Tribunal is justified in granting relief for grant of depreciation allowance from the estimated income in spite of there being no books of accounts maintained by the assessee? 3. Whether the implied finding of the appellate Tribunal that the claim for depreciation made by the assessee as admissible can be said to be based on material on record?” We have heard the learned counsel for the parties and we have gone through the impugned order of the learned Tribunal. The grievance of the appellant is that the Commissioner of Income Tax (Appeals) as well as the learned Tribunal ought not to have assessed the estimated income @ 4% instead of 5% in the absence of books of accounts. The learned Tribunal found that since the authorized representative of the assessee agreed for estimation of profit at 5%, it will not automatically bind the assessee for the subsequent assessment year. The learned Tribunal has correctly applied the law that there is no justification for estimating the profit at 5% for the assessment year 2005-06 on the ground that the assessee agreed for estimation of profit for the assessment year 2004-05 at 5%. Moreover, it is a settled principle of law that in the absence of books of accounts, the assessing officer can estimate the income based on the material available on record. In a legitimate case, in a matter of this nature, it is always permissible to accept the estimation of profit @ 4% on the total turnover when it is acceptable by both the parties. The Tribunal held that there is no justification for estimating the profit at 5% for the assessment year under consideration on the ground that the assessee agreed for estimation of profit for the assessment year 2004-05 at 5% and dismissed the appeal filed by the revenue. Therefore, we do not want to interfere with the same. Moreover, on the question of depreciation, the learned Tribunal relied on the circular, dated 31.08.1965, issued by CBDT, wherein it is made clear that where it is proposed to estimate the profit and prescribed particular have been furnished by the assessee, the depreciation allowance should be separately worked out. In all such cases, the gross profit should be estimated and the deductions and allowances including depreciation allowance should be separately deducted from the gross profit. The said circular of CBDT was examined by the Rajasthan High Court in CIT vs. Jain Construction Co., and others[1] and found that depreciation and payment of interest have to be allowed separately while estimating the profit. Following the said judgment, the learned Tribunal came to the opinion that the depreciation has to be allowed separately. In view of the aforesaid finding of the learned Tribunal, we are of the opinion that this matter does not call for interference by this Court and the appeal is liable to be dismissed. Accordingly, the appeal is dismissed. No costs. _____________________ K.J. SENGUPTA, CJ ______________ G. ROHINI, J Date: 25.06.2013 ES [1] (2000) 245 ITR 527 "