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TMI Blog2020 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... n law in not admitting the additional ground in respect of alliawability of Rs. 1,56,732/- for interest on capital contribution and Rs. 2,40,000/- for remuneration to working partners which was originally allowed by the Ld. AO but later on disallowed/withdrawn through rectification order dt. 06.08.2013 u/s 154 of the IT Act i.e. after about 21 months of filing the appeal by assessee against order dt. 14.11.2011, ignoring the law laid down by Hon'ble jurisdictional High Court (245 ITR 527). 4. Additional and legal ground of appeal: Ld. CIT(A) has erred in law in not allowing remaining depareciation of Rs. 2,27,013/- out of Rs. 2,38,263/- on fixed assets used in carrying on contract business by assessee {( @ 10% on shop of Rs. 22,87,000/- and @ 15% on tools & plant of Rs. 63,750/-} allowable as per expl. 5 to section 32 of IT Act for which no claim was needed." 2. Briefly the facts of the case are that the assessee firm is engaged in the business of civil construction and has filed its return of income declaring total income of Rs. 2,64,178/- which was selected for scrutiny and notice U/s 143(2) of the IT Act was issued. Subsequently, during the course of assessment proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the provisions of Section 145(3) of the Act. Further, it was submitted by the ld. DR that the assessee has taken this ground as an additional ground before the ld. CIT(A) and in absence of a specific payer made by the assessee, the said ground was not admitted and dismissed by the ld. CIT(A). 5. Regarding ground no. 2, the ld. AR submitted that the assessee had made payment of certain expenses after gap of few days from the date of receipt of expenses vouchers but due to mistake of the accountant, had entered the payment of these expenses on the date of vouchers which resulted in negative cash balance on 04.03.2019. Otherwise, at the end of the year, cash balance was a positive amount as per audited statements of accounts. As per practice of Department, in given facts, had the ld. AO applied NP rate on gross receipts, there was no need for separate addition. 6. Per contra, the ld. DR submitted that during the course of assessment proceedings on verification of cash book, it was found that the assessee was having negative cash balance of Rs. 4,29,625/- on 04.03.2009 and assessee has failed to submit any explanation on this issue. Accordingly, in the absence of any explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO should have allowed remaining depreciation on shop even if not claimed by the assessee and in support, reliance was placed on the decision of Platiblends India Ltd. vs. Add.CIT (2017) 398 ITR 568(SC). 10. Per contra, the ld. DR submitted that in the computation of income filed by the assessee at its Paper book page 17, it has shown tools and plants under the head " Fixed Assets" on which depreciation of Rs. 11,250/- has been claimed and duly allowed by the Assessing Officer. Further, our reference was also drawn to the audit report wherein the auditors have also considered the fixed assets consisting of only tools and plants on which depreciation has been computed at Rs. 11,250/-. It was accordingly submitted that there is nothing on record in terms of any asset other than tools and plants on which depreciation has not been allowed by the AO and thus, the additional ground so raised by the assessee deserve to be dismissed. 11. We have heard the rival contentions and perused the material available on record. The question that arises for consideration is whether the Assessing officer was correct in invoking the provisions of section 144 of the Act and if the answer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts of Rs. 90,71,494/- i.e. 7.40%. During the immediately preceding year the assessee has declared net profit rate of 8% before depreciation, interest and remuneration to partners. During assessment proceeding written submissions were filed and copy of audit report was filed. copy of cash book and ledger was filed but bills, vouchers, wages sheets, muster rolls, vouchers for payments were not produced although sufficient opportunity was provided to the assessee. Opportunity was provided to the assessee 09-06-2011, 05-07-2011, 12-07-2011, 25-07-2011, 02- 08-2011, 08- 18-20-1I, 25-08-2011, 02-09-2011, 09-09-2011, 07-10-2011, 12-10-2011, 19-10-2011, but the assessee failed to avail these opportunities and failed to produce complete bills, vouchers, muster rolls, wages register and purchase bills. The assessee was asked vide order sheet entry dated 02-09-2011 to show cause as to why assessment shall not be completed u/s 144 i.e. best judgment assessment. But the assessee failed to furnish any reply on show cause and even bills/ vouchers etc. were not produced till date, therefore, I have no alternative but to complete the assessee u/s 144 i.e. best judgment assessment." 13. We ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... har Sales Tax Act, would be material: "No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion." Again in Stale of Kerala v. C. Velukutty [1966] 60 ITR 239 (SC), which was a case under the Travancore-Cochin General Sales Tax Act, Subba Rao J. (as he then was), speaking for this court, observed at page 244 of the report thus: "The limits of the power are implicit in the expression 'best of his judgment'. Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guesswork in a 'best judgment assessment', it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case." It will appear clear from what has been said above that the authority making a best judgment assessment must make an honest and fair estimate of the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly been made by the Assessing officer. Lastly, regarding non-allowance of full depreciation on all the fixed assets, we find that in the balance sheet as on 31.03.2009, the assessee has shown a shop with a book value of Rs. 22,87,000 besides Tools and plant with book value of Rs. 63,750. In the profit/loss account, depreciation on only tools and plant has been debited and similar is the position in the computation of income and the auditor's report where depreciation claim is limited to tools and plants. At the same time, given that value of shop has been reflected as part of block of assets in the financial statements and is a matter of record which can be verified in terms of ownership and where such shop premises are utilized for the purposes of business, the assessee shall be eligible for depreciation even though not claimed earlier and the matter is remanded to the file of the Assessing officer for limited purposes of verifying the depreciation on shop forming part of assessee's block of assets and where the same is found to be in order, allow the claim as per law. 16. In the result, ground no. 1 & 3 are dismissed, ground no. 2 is partly allowed, ground no. 4 is allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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