2008 (8) TMI 906 - HC - Income Tax

Rejection of the books of accounts - application of the net profit rate and allowing depreciation separately claimed by the assessee - HELD THAT - We do not find any illegality in the finding recorded by the Tribunal that the profit assessed on the gross receipts is arrived at by taking into consideration all allowable expenses and no further deduction on account of depreciation can be separately allowed. Therefore there is no merit in the present appeals. Hence the same are dismissed.

Summary

Issues:
1. Disallowance of expenses and addition to income by Assessing Officer.
2. Disallowance of interest and salary paid to partners.
3. Disallowance of depreciation by Assessing Officer.
4. Appeal against CIT(A) decision.
5. Appeal against Tribunal's decision on depreciation.
6. Legality of assessment jurisdiction.
7. Legality of impugned orders.

Analysis:

1. The appellant, a contractor, declared total income for the assessment year 2000-01. The Assessing Officer rejected the claim of mercantile accounting method, disallowed expenses, interest, and salary paid to partners, and declined depreciation claim due to lack of evidence. Best judgment assessment was made as books of account were not produced.

2. The CIT(A) partially allowed the appeal, stating gross receipts should not be considered profits under section 28. Section 44AD prescribes a minimum flat rate of 8% of gross receipts for civil construction contractors, with provisions for presumptive taxation. The appellant cannot claim loss if gross receipts exceed Rs. 40 lakhs without evidence.

3. The CIT(A) allowed interest and salary paid to partners as per partnership deed and set aside an addition under section 69 of the Act.

4. The revenue appealed to the Tribunal, which dismissed the appeal and rejected the argument for allowing depreciation. The Tribunal held that if income is derived by applying a net profit rate, depreciation cannot be claimed separately.

5. The appellant appealed to the High Court, questioning the disallowance of depreciation without adequate reason and the jurisdiction of assessment. The Court found no grounds to challenge the CIT(A) or Assessing Officer's findings, as they were not disputed earlier.

6. The Court noted that the appellant did not challenge the CIT(A)'s order before the Tribunal, preventing the findings from being reconsidered. The claim for depreciation was based on non-existent facts, and the Tribunal's decision on profit assessment was upheld.

7. The Court dismissed the appeals, finding no merit in challenging the assessments or orders. The legality of the jurisdiction and impugned orders was upheld, leading to the dismissal of the appeals.