2016 (4) TMI 741 - HC - Income Tax

Allowance of depreciation after applying net profit rate - Held that - Neither before the Assessing Officer or before the Commissioner of Income Tax (Appeals) or before the Tribunal, the appellant referred to the balance-sheet to contend that he should have been allowed depreciation after applying net profit rate. Once the Assessing Officer has found that net profit rate has been applied @12% after depreciation, one can infer that the Assessing Officer was conscious of the depreciation claimed by the assessee. Even if it was not so, the appellant has not made a grievance before the Commissioner or before the Tribunal to claim depreciation after applying the net profit rate. Since no argument was raised or examined by the authorities under the Act, the appellant cannot be permitted to raise a question of fact in an appeal before this Court for the first time. - Decided against the assessee

Summary

Issues:
1. Whether deduction of depreciation should have been separately allowed?
2. Whether addition of unexplained cash credit as part of gross profit amounts to double taxation?

Analysis:

Issue 1:
The appellant, a Contractor, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order passed by the Income Tax Appellate Tribunal, Patna Bench, confirming the addition of unexplained cash credit and applying a net profit rate of 8%. The primary contention was regarding the allowance of depreciation separately. The Assessing Officer estimated the net profit at 12% of the turnover after allowing depreciation and identified a sum introduced in the capital account as unexplained cash credit under Section 68 of the Act. The Commissioner of Income Tax (Appeals) and the Tribunal upheld the decision. The appellant argued that depreciation should have been allowed based on a Circular from 1965. However, the Court found no merit in this argument as the appellant did not raise this issue before the authorities earlier. The Court held that the appellant cannot introduce a new argument in an appeal before the Court for the first time. Therefore, the first question of law was answered against the assessee.

Issue 2:
The second question of law, concerning the addition of unexplained cash credit as part of gross profit and the possibility of double taxation, was not considered for discussion as the counsel for the assessee conceded that it did not arise for consideration. Consequently, the Court dismissed the appeal, stating that there was no merit in the arguments presented. The judgment highlighted the importance of raising all relevant arguments before the lower authorities to avoid introducing new issues during the appeal process.