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TMI Blog2022 (8) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... ve wrongly taken cognizance of section 44AD of the Act for applying the profit rate. Hence, this proposition will decide in favour of assessee. Net profit computation - As gone through the profit rate adopted by the AO in assessee s own case in earlier years and future years and noted from the above chart that profit rate varies from 1.05% to 13.02% i.e., profit before depreciation and in this year, the AO in the original assessment has accepted the profit rate at 7.2% and made assessment which was subject matter of revision before PCIT and the AO applied profit rate at 8% in consequence to the order giving effect to revision order passed by PCIT u/s.263 of the Act. In our view, the profit rate accepted by assessee as applied by the AO originally at 7.2% seems to be genuine and reasonable and we upheld the same. The AO is directed to recompute the net profit by applying profit rate at 7.2% of the gross receipts. After application of profit rate, even though the assessee has not maintained books of accounts, depreciation is to be allowed to the assessee - Once the assessee s books of accounts are not available or rejected by the AO, the AO has to estimate the profit rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the business receipts at Rs.2,70,936/- and thereby assessed the income at Rs.8,34,040/-. Subsequently, the PCIT, Salem revised the assessment u/s.263 of the Act vide C.No.9544(25)/2017-18/PCIT/SLM dated 21.03.2018 by noting that the assessee has not maintained any books of accounts and net profit should have been added at net of 8% of the gross receipts and even the current depreciation and brought forward depreciation from assessment year 2011-12 and 2012-13 should not have been allowed as the same has not been claimed in the original return of income in view of the decision of Hon ble Supreme Court in the case of Goetze India Ltd., 284 ITR 323(SC). With these observations, the PCIT directed the AO to reframe the assessment by observing in para 5 as under:- 5. It is seen that the issues discussed above were not considered by the Assessing Officer during the course of assessment proceedings. Therefore, the assessment order passed on 19.01.2016 is set aside u/s 263 of the IT Act, 1961 and the Assessing Officer is directed to complete the assessment afresh in accordance with law and after giving the assessee reasonable opportunity of being heard. 3.1 Consequent to this, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation should be allowed cannot be considered. Hence, this ground of appeal is dismissed. The assessee has relied o the Hon ble Madras High Court decision in the case of K. Kannan vs. ACIT (220Taxman 250) [2014] in support of his argument that 44 AD should have not been invoked. The Assessing Officer also contended that the assessee relied on various case laws of other Tribunals and High Courts which were also considered by him before making the Assessment Order. The Assessing Officer contended that as the only issue in the assessee's case is of non-maintenance of books of account, the net profit should have been adopted at 8% of the gross receipts. The Assessing Officer also pointed out to the assessee's reliance in the case of Goetze India Ltd (284 ITR 323 (SC) wherein it is. held that filing of revised return is mandatory for making any fresh claims. The Assessing Officer also stated all deductions/expenditures are deemed to have been allowed when income is computed on estimate basis and no further deductions shall be allowed. Having considered all the details before me, I do not find any valid reason to interfere with the order of the Assessing Officer in adopting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (-)(1.05) 2012-13 8,16,36,491 (28,13,120) 1.05 (44,06,457) (-) 2.97 2013-14 13,54,68,125 4,25,000 3.57 (44,08,927) 0.31 2014-15 * 8,25,000 * * * 2015-16 14,41,71,379 14,56,265 10.14 (1,31,59,009) 1.05 2016-17 1,27,94,190 7,42,172 13.02 (9,24,002) 5.80 * Data not available The assessee also made claim of current depreciation and set off of unabsorbed loss brought forward from earlier years. 6. Before us, the ld.counsel for the assessee Shri G. Baskar made four propositions and argued the matter on four propositions. On the other hand, the ld. Senior DR Shri P. Sajit Kumar heavily relied on the assessment order and the order of CIT(A) and stated that once books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount under the head profit and gain of the business or profession . Sub Section (2) states that any deduction allowable under the provisions of Sections 30 to 38, shall, for the purpose of Sub Section (1), be deemed to have been already given full effect to and no further deduction would be allowed under those Sections. In other words, considering the percentage of liability fixed as income on the eligible assessees who are defined under clause (a) Explanation and eligible business defined under Clause (b) Explanation, so long as the gross turnover does not exceed Rs.40 lakhs, the income would be assessed at the specified percentage of the gross turnover. There is no denial of the fact, as is evident from the order of assessment that the assessee's gross contract receipt was Rs.4,02,10,611/- for the assessment year 2006-2007 and Rs.5,34,96,995/- for the assessment year 2007-2008, which means, Section 44 AD of the Act has no relevance. 7.1 When the above proposition was confronted to ld. Senior DR, he could not controvert the above fact situation but only stated that the AO has not applied the provisions of section 44AD of the Act but when his contentions are drawn to the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition of the assessee that after application of profit rate, even though the assessee has not maintained books of accounts, depreciation is to be allowed to the assessee. For this, the ld.counsel for the assessee relied on the following case laws:- (i) High Court of Allahabad in Saraya Engg. Works (P.) Ltd., vs CIT, [1987] 31 Taxman 165 (ii) High Court of Allahabad in CIT vs. Bishambhar Dayal Co., [1994] 74 Taxman 123 (iii) High Court of Rajasthan in CIT vs. Jain Construction Co., [2000] 110 Taxman 156 (iv) High Court of Punjab Haryana in CIT vs. Chopra Bros (P) Ltd., [2001] 119 Taxman 866 (v) High Court of Rajasthan in CIT vs. Bhawan va Path Nirman (Bohra) Co., [2003] 130 Taxman 361 The ld.counsel also relied on the decision of Hon ble High Court of Madras in the case of K.Kannan, supra wherein Hon ble High Court has considered applicability of profit rate at 5% of the gross contract receipts. Even the Hon ble High Court of Rajasthan in the case of Jain Construction Co., supra, has considered an identical issue by considering the Circular issued by CBDT dated 31.08.1965 and allowed the claim of depreciation by considering even the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contained in sections 30 to 43. Under section 32, the assessee is entitled to claim depreciation. Under section 144, the Assessing Officer is bound to take into consideration the entire material on the record. Thus, in a case where the assessee makes a specific claim for depreciation and gives the information as required under section 32, the Assessing Officer is bound to take the claim of the assessee into consideration. This consideration of the material should be apparent from the order. There is no room for any assumption. 16. In this context, it deserves notice that with effect from 1-4-1994, the Parliament has made a special provision for computing profits and gains of business of civil construction, etc., by introducing section 44AD. It was, inter alia, provided that in case of an assessee engaged in the business of civil construction or supply of labour for that purpose, 'a sum equal to 8 per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business. . . . shall be deemed to be the profits and gains...chargeable to tax...' In sub-section (2), it has been stipulated that 'any deduction allowable under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om assessment year 2002-03 is mandatory even though the assessee has claimed or not claimed in the return of income. As regards to the claim of depreciation i.e., carry forward depreciation, the ld.counsel for the assessee drew our attention to the provisions of section 32(2) of the Act and the relevant reads as under:- 32 (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years. In view of the above, the ld.counsel stated that unabsorbed depreciation of any year becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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