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TMI Blog2021 (12) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... present case is a partnership firm, which is engaged in the business of executing contract works. The return of income for the year under consideration was filed by it on 23.03.2013 declaring total income of Rs. 45,31,240/-. In the assessment completed under section 143(3) of the Act vide an order dated 04.03.2015, the books of account of the assessee were rejected by the Assessing Officer and its income from the business was computed by applying the net profit rate of 6% on the total gross receipts of Rs. 8,21,96,185/- at Rs. 49,31,770/-. Thereafter the assessee moved an application under section 154 on 20.03.2015 claiming that depreciation should have been allowed by the Assessing Officer separately from the income computed by applying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 41,493/- separately to the business income estimated by applying the net profit rate. He also held that the depreciation of Rs. 7,02,732/- having been already debited by the assessee in the profit & loss account, the same was already taken into consideration while computing the business income of the assessee by applying the net profit rate and there was a mistake in allowing depreciation separately in the first order passed under section 154 on 27.04.2015. Accordingly the second order under section 154/143(3) was passed by the Assessing Officer on 26.11.2015 making addition of Rs. 41,493/- on account of interest on FDR and disallowance of Rs. 7,02,732/- on account of depreciation. 3. Aggrieved by the second order passed by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remarks made in the assessment order, it becomes evident that income from contract works was estimated at 6% and that no further expenses would be allowable. Therefore, vide the order passed u/s.154 of the Act, the AO should not have allowed the notional expenditure of depreciation from the estimated incomes from contract works. To that extent, the order passed u/s.154 of the Act, was incorrect. There is no possibility of any two opinions at this stage because while the order u/s.143(3) clearly stated that no further expenditure would be allowable, the AO incorrectly allowed the depreciation vide the 154 proceedings. If the assessee is of the opinion that depreciation should have been separately allowed after estimating the income from con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is true. Vide the 143(3) proceedings, the estimation was made @6% of the gross receipts. However, while completing the previous 154 proceedings dated 27.04.2015, the income from business was computed @6.5% of the gross receipts. No reasons were cited by the AO, as to how and why the estimation is made @6.5% on the gross contract receipts. The same income was adopted while completing the subsequent 154 proceedings, resulting in the order under discussion. Admittedly, incorrect estimation was made while completing the previous 154 proceedings. Since the same income was adopted while completing the present 154 proceedings, impliedly the wrong estimation continued to these subsequent 154 proceedings. Thus, the plea of the assessee of restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparately, as clarified by the CBDT Circular No. August 31, 1965, which was binding on the Assessing Officer. Keeping in view the said decision of the Hon'ble jurisdictional High Court as well as the CBDT Circular dated August 31, 1965 relied therein, we find merit in the contention of the ld. Counsel for the assessee that there was a mistake in the order passed by the Assessing Officer under section 143(3) of the Act on 04.03.2015 in not allowing depreciation allowance separately when the income of the assessee from the business of contracting was computed by the Assessing Officer by applying the net profit rate. Since the said mistake was apparent from record, it was correctly rectified by the Assessing Officer in the first order dated 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 26.11.2015 passed under section 154 of the Act. 7. As regards the issue relating to the rate of net profit is concerned, which is to be adopted for estimating the income of the assessee, it is observed that the net profit rate of 6% adopted in the assessment originally completed under section 143(3) of the Act was increased by the Assessing Officer vide the first order dated 27.04.2015 passed under section 154 of the Act while allowing the depreciation allowance separately and since the said order was accepted by the Assessing Officer and no appeal against the same was filed by the assessee before the ld. CIT(Appeals), we are of the view that the net profit rate of 6.5% applied by the Assessing Officer had become final and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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