9911796707
TMI Blog2021 (12) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... at there was no mistake in the said order much less the mistake apparent from record, which could be rectified under section 154 as done by the Assessing Officer vide his second order dated 26.11.2015 passed under section 154. The ld. CIT(Appeals), in our opinion, therefore, was not justified in upholding the order of the Assessing Officer passed under section 154 dated 26.11.2015 on the issue of disallowance of depreciation. Addition made on account of interest on FDR - We are of the view that there being nothing on record to establish that the investment in the FDR made by the assessee was for the purpose of its business, the interest earned on the said FDR was liable to be added separately while computing the total income of the assessee by applying the net profit rate. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on this issue vide his order dated 26.11.2015 passed under section 154 of the Act. Rate of net profit to be adopted for estimating the income of the assessee - As observed that the net profit rate of 6% adopted in the assessment originally completed under section 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record in the order of the Assessing Officer passed under section 143(3) of the Act in not allowing such depreciation. This stand of the assessee was found to be correct by the Assessing Officer and vide an order passed under section 154 on 27.04.2015, the Assessing Officer re-computed the income of the assessee by applying a net profit rate of 6.5% at ₹ 53,42,752/-. After allowing depreciation of ₹ 7,02,732/- from the profit so worked out, the total income of the assessee was determined by him at ₹ 46,40,020/-. Thereafter the Assessing Officer was of the view that there was a mistake in allowing depreciation separately from the income of the assessee computed by applying net profit rate as well as in not adding separately the interest income on FDR amounting to ₹ 41,493/- and the same being apparent from record, he issued a notice under section 154 to the assessee. In reply, it was submitted on behalf of the assessee in respect to the issue of interest on FDR that the investment in FDR having been made for business purpose, interest income earned thereon had a direct nexus with the business of the assessee and there was no separate addition required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment is being made in the manner prescribed u/s. 144, no further expenses/deemed expenses would be allowable From the above 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 contract works, then he should have appealed against the order passed u/s.143(3) of the Act. Thus, no dispute is possible about allowing the depreciation, vide the proceedings u/s.154. Such incorrect allowance of depreciation is proposed to be rectified vide the order under discussion. Thus, rectification of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of interest on FDR amounting to ₹ 41,493/- as well as disallowance made on account of depreciation amounting to ₹ 7,02,732/-. He, however, reduced the net profit of 6.5% adopted by the Assessing Officer in the first order passed under section 154 on 27.04.2015 by estimating the income of the assessee from the business of contracting to 6%. Still aggrieved by the order of ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. In support of the assessee s case for deduction on account of depreciation separately while computing its income by applying the net profit rate, ld. Counsel for the assessee has relied on the decision of the Hon ble Patna High Court in the case of Shyam Bihari reported in 345 ITR 283, wherein it was held that if the net profit was required to be estimated, it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted separately, as clarified by the CBDT Circular No. August 31, 1965, which was binding on the Assessing Officer. Keeping in view the said decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
