9911796707
TMI Blog2022 (1) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover and allowed deduction of depreciation and interest. From the foregoing discussions, it can be noticed that the A.O. has applied his mind on the impugned issue and has taken a conscious decision to allow deduction of depreciation and interest after estimating gross income @ 10% of the gross receipts. We find merit in the contentions of the assessee that the AO has taken a plausible view in this matter and hence it cannot be considered to be prejudicial to the interest of the revenue. In the instant case, there are two views possible with regard to estimation of income from civil contract works and the assessing officer has taken a plausible view. Accordingly, we are of the view that the revision order passed by Ld. PCIT on this issue cannot be sustained. Accordingly, we set aside his order in directing the A.O. to do de-novo assessment. Dropping of penalty u/s 271A of the Act was on wrong appreciation of the judgement of the High Court - A.R. contended that the Ld. PCIT should have passed separate order on this issue. However, the Ld. A.R. did not cite any authority in support of his contentions. In any case we notice that the Ld. PCIT has given opportunity to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deducted therefrom depreciation and interest expenditure claimed by the assessee. The same has resulted in an addition of ₹ 22,72,313/- to the total income declared by the assessee. 5. Since the assessee did not maintain books of accounts as required under provisions of section 44AA of the Act, the A.O. also initiated penalty proceedings u/s 271A of the Act. 6. The Ld. PCIT examined the assessment record and took the view that the action of the A.O. in granting depreciation and interest expenditure as deduction is not in accordance with provisions of section 44AD(2) of the Act. The Ld. Principal CIT also noticed that the A.O. has dropped the penalty proceedings initiated u/s 271A of the Act accepting the decision cited by the assessee, viz., decision of Hon ble jurisdictional High Court rendered in the case of CIT Vs. Babu Reddy (2010) 38 DTR 147 (KAR). The Ld PCIT took the view that the decision rendered in the case of Babu Reddy (supra) was not applicable to the facts of the present case, since in the case of Baby Reddy (supra), the said assessee was maintaining books of account. Accordingly, the Ld PCIT took the view that the assessment order passed by the AO is er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision rendered by Hon ble High Court of Karnataka in the case of CIT Vs. P. Sudhakar (2015) 61 Taxmann.com 17, wherein the Hon ble High Court has quashed revision proceedings initiated in respect of assessment order, where the AO had estimated income from sub-contract works. Accordingly, the Ld. A.R. submitted that the impugned revision order is liable to be cancelled. 8. The Ld. A.R. further submitted that the provisions of section 44AD of the Act are not applicable to the assessee, as the turnover of the assessee has exceeded the limit prescribed in that section. Accordingly, he submitted that the Ld. PCIT was not justified in placing reliance to the provisions of section 44AD(2) of the Act in order to form the view that the depreciation and interest expenditure is not allowable as deduction. 9. The Ld. A.R. further submitted that the Ld. PCIT has also expressed the view that the dropping of penalty u/s 271A of the Act was clearly on a wrong appreciation of the judgement of the Hon ble High Court of Karnataka. The Ld. A.R. submitted that the Ld. PCIT should have passed separate revision order in respect of penalty proceedings initiated u/s 271A of the Act. Accordingly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not maintained, section 44AD percentage of 8 can be guideline for estimation of income from civil works though the section 44AD is not applicable. The assessee also submitted that, in the following cases, the Ld. CIT(A) has allowed claim of depreciation and bank interest where income from contract was estimated before claim of depreciation and bank interest:- Sl.No. Name of the assessee Assessment year ITA No. 1. G.L. Lakshmegowda 2006-07 61/CIT(Appeals)/Mys./2013-14 2. M.S. Revanna 2012-13 98/CIT(Appeals)/Mys./2015-16 3. P. Ravishankar 2014-15 132/CIT(Appeals)/Mys./2016-17 The assessee also placed reliance on the Board Circular No.29D(XIX-14) dated 31.8.1965 and submitted that the CBDT has clarified that in cases gross income is estimated before claim of depreciation and bank interest, the same method should be followed if necessary particulars have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. In those circumstances, in the absence of any other material which was before the Commissioner he was not justified in recording a finding that the assessing authority has not applied its mind, not verified the expenses, not verified the receipts and looked into the book and, therefore, a case for interference under Section 263 is made out cannot be accepted. The Tribunal by a considered order rightly set aside the order passed by the Commissioner relying on several judgments on the question after appreciating the entire evidence on record. Under these circumstances, we do not find any justification to interfere with the said order. No merits. The substantial questions of law are answered in favour of the assessee and against the revenue. 14. The scope of revision proceedings initiated under section 263 of the Act was considered by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
