9911796707
TMI Blog2022 (8) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... from receipts on plying of hiring of lorry transport. The assessee filed his return of income on 28.03.2015 admitting total income of Rs.5,63,100/- for assessment year 2013-14. This return of income was e-processed u/s.143(1) of the Act and subsequently assessment was completed u/s.143(3) of the Act originally accepting the net profit estimated from lorry transport business by the assessee at 7.2% as against declare by the assessee at 7.0%. The AO in the original assessment also allowed depreciation including carry forward depreciation. The AO also added some discrepancies 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given full effect is being calculated for the purpose of calculation of the tax liability." Aggrieved, assessee preferred appeal before the CIT(A). 4. The CIT(A) confirmed the application of profit rate of 8% on the gross receipts and also confirmed the action of the AO in not considering the claim of depreciation of current year and the claim of set off of unabsorbed depreciation brought forward in earlier years by observing in para 8.3 to 9.1 as under:- "8.3 As it can be seen clearly from the provisions of Section 44AD(2), the assessee's argument that 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 adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in original assessment order, based on average profit rate of 10.53% admitted for many assessment years. The assessee has filed a comparative chart of net profit and net profit rate before depreciation and net profit rate after depreciation, which reads as under:- Asst Year Sales Net Profit NP before Depn (%) Depn NP after Depn 2011-12 9,33,29,597 49,60,691 11.25 (1,17,13,548) (-)(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 accounts are not produced by the assessee or not maintained, the AO has rightly applied profit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction 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 order of CIT(A) that CIT(A) simply applied the provisions of section 44AD(2) of the Act, as noted in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks 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 section 44AD of the Act by observing in para 11 & 12 as under:- 11. It will also be relevant to consider section 44AD, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing 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 provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 part of depreciation of subsequent year by legal fiction and so on but when it becomes part of current year depreciation, it is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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