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TMI Blog2013 (10) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 8-10-2013 - Hon'ble Rajiv Sharma And Hon'ble Dr. Satish Chandra,JJ. For the Appellant : D. D. Chopra For the Respondent : Sushil Kumar ORDER (Delivered by Hon. Dr. Satish Chandra, J) All the present appeals have been filed by the Department under Section 260-A of the Income-Tax Act, 1961 against the different judgments and orders passed by the Income Tax Appellate Tribunal, Lucknow. The details of the Income Tax Appeals are as under:- ITA No. Assessment Year Judgment order dated 44/2009 2002-03 28.11.2008 passed in ITA No.778/Luc/2008; 127/2007 2002-03 11.5.2007 passed in ITA No.170/Luc/2006;11.5.2007 passed in ITA No.54/Luc/2006; 128/2007 2003-04 11.5.2007 passed in ITA No.1203/Luc/2006; 11.5.2007 passed in ITA No.1140/Luc/2006; 129/2007 2001-02 11.5.2007 passed in ITA No.357/Luc/2005; 11.5.2007 passed in ITA No.411/Luc/2005; 130/2006 1995-96 16.9.2005 passed in ITA No.511/Alld/2000; 94/2007 1994-95 16.3.2007 passed in ITA No.30/Luc/2007; 107/2007 1999-2000 11.5.2007 passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of law:- "I. Whether on the facts and in the circumstances of the case, the learned I.T.A.T. was justified in law in deleting the penalty imposed u/S 271 (1) (c) of the Income Tax Act, 1961 when in quantum appeal the rejection of books of accounts by the Assessing Officer for the reason of particulars of income being inaccurate had been upheld and application of net profit rate to the extent of 3.5% had also been confirmed by them? II. Whether on the facts and in the circumstances of the case, the learned I.T.A.T. was justified in deleting the penalty u/S 271 (1) (c) when both the preconditions despite being mutually exclusive, for imposition of such penalty, were fully satisfied in the case." On 14.11.2007, a Coordinate Bench of this Court has admitted the Income Tax Appeal No.127 of 2007, 128 of 2007, 129 of 2007, 130 of 2007 and 131 of 2007, on the following substantial questions of law:- "I. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in law and on facts in reducing the estimated net profit to 3.5% as against the 10% rate applied by the Assessing Officer and further allowing depreciation from it. II. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made addition on estimate basis for the same assessment years, then he has also levied the penalty under Section 271 (1) (C) of the Income-tax Act. Income Tax Appeal Nos.127 of 2007, 128 of 2007, 129 of 2007, 130 of 2007, 131 of 2007 and 135 of 2006 are pertaining to the quantum, i.e. additions which were made on estimate basis. The remaining Income Tax Appeal Nos. 94 of 2007, 130 of 2006, 93 of 2007, 107 of 2007, 108 of 2007 and 44 of 2009 are related to penalty under Section 271 (1) (c) which were rejected by the Tribunal. Being aggrieved, the Department has filed the present appeals. With this background, Sri D. D. Chopra, learned counsel for the Department, at the strength of written submissions, submits that the Tribunal has reduced the net profit rate by following its earlier order. He further submits that each assessment year will have to be dealt separately. He also submits that the Tribunal has passed the order in an arbitrary manner without considering the finding of the Assessing Officer. Further, he submits that Hon'ble Supreme Court in the case of CST Vs H.M. Esufali H.M. Abdulali, (1973) 90 ITR 72 ISC, observed that in estimating any escaped turnover, it is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made to go into the factual arena and then keeping in view the legal position applicable to the facts of the case, a categorical finding is recorded by the Tribunal." On the other hand, learned Counsel for the assessee, Sri Aruneshwar Gupta, assisted by Sri Sushil Kumar and Sri Sunil Kumar, has justified the impugned orders. He submits that the Assessing Officer has rejected the books of accounts and has applied net profit @ 10% of the gross receipts. Finally, the Tribunal has reduced the net profit rate @ 3.5% plus depreciation. All the appeals were decided after inserting Section 44-AD of the Income-tax Act. However, this Hon'ble High Court in ITA Nos.134 of 2006 and 129 of 2006, in the assessee's case observed that Section 44-AD is not applicable as the turnover is less then 40 lacs. So, no substantial questions of law were involved. This order has attained the finality. Lastly, he made a request for dismissal of the appeals. We have heard the parties at length and gone through the material available on record. It is an undisputed fact that the A.O. has rejected the books of accounts and estimated the net profit rate at the rate of 10% of gross contract receipts. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive one or in a nutshell it is the profit which has been arrived at after netting off of income over the expenditure, meaning thereby that whatever expenses or notional expenses were due and to be deducted from the income of the firm or the company had been done prior to deriving the final figure, i.e. profit. It is the same profit that is offered for taxation. Therefore, when the Assessing Officer applied the rate of 10% for estimating the net profit then the depreciation is deemed to have already been given especially when the Assessing Officer in his concluding line of the assessment order had clearly mentioned that "Since no deduction from section 30 to 38 including depreciation is allowable as per section 44AD, in case of small contractors, therefore no deduction on account of depreciation etc. will be allowed, on net profit, in this case also." Thus, the estimated net profit includes depreciation and it can not be claimed separately. Further, the case laws on which the ITAT has placed its reliance is also distinguishable on two grounds- Firstly, the circular no.29D dated 31.8.1965 which prescribed to allow depreciation out of the estimated profit, is not applicable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractors [(2009) 316 ITR 127 (P H)], it was observed that no further separate deduction is allowable as per Sections 29, 144 and 145 of the Act. Relevant portion of the judgment reads as under:- "Section 145 of the Income-tax Act, 1961 provides for computation of income under section 29 on the basis of books of account and methods of accounting regularly followed by the assessee. However, where the Assessing Officer is not satisfied with the correctness or completeness of the books, he may reject them and estimate the income to the best of his judgment in accordance with the provisions of Section 144 of the Act. When an estimate is made to the best judgment of an Assessing Officer, he substitutes the income that is to be computed under section 29 of the Act. Once best judgment assessment is made by fixing a rate of net profit, the assessee's claim for deduction on account of expenses cannot be deemed to have been ignored. The net profit rate is applied after taking into consideration all factors and it accounts for all the deductions which are referred to under section 29 and are deemed to have been taken consideration while making such estimate." In the case of Indwell Const ..... X X X X Extracts X X X X X X X X Extracts X X X X
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