Punjab-Haryana High Court
M/S Vijay Kumar Garg Contractors vs Commissioner Of Income Tax on 8 August, 2024
Author: Sanjeev Prakash Sharma
Bench: Sanjeev Prakash Sharma
Neutral Citation No:=2024:PHHC:102107-DB
206
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
ITA
ITA-110-2003(O&M)
Date of Decision:
Decision:08.08.2024
M/S VIJAY KUMAR GARG CONTRACTORS ........Appellant
V/s.
COMMISSIONER OF INCOME TAX AND ANR ........Respondents
CORAM: HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
SHARMA.
HON'BLE MR.
M JUSTICE SANJAY VASHISTH
VASHISTH.
Present Mr. Akshay Bhan, Sr. Advocate with
Mr. Yugank Goel, Advocate for the appellant.
Mr. Vaibhav Gupta, Standing Counsel
for Income Tax Department.
***
SANJEEV PRAKASH SHARMA,
SHARMA J. (Oral)
1. Learned Senior Counsel for the appellant has vehemently argued
that the order of CIT(A) was
w not required to be interpreted at all by the
Income Tax Appellate Tribunal (for short, 'the ITAT') and the additions
made was based on the gross profit rate by the ITAT is erroneous. He
submits that there was no occasion to observe that the gross profit rrate
ate of the
earlier assessment year was required to be followed.
2. Learned counsel appearing on behalf of respondent/revenue
however points out that the ITAT has examined the question of fact and there
is no substantial question of law required to be examine
examined by this Court.
3. We have considered the submissions
submissions. The ITAT has made
following observations, which are as under:
"8.3 Besides, we have also observed that the assessed
claimed to have shown GP @ 11.42% the assessment year
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Neutral Citation No:=2024:PHHC:102107-DB
ITA-110-2003(O&M)
2003(O&M)
under reference. While working out the GP, the assessee
has included other income of Rs. 26, 27, 243. PAge 17 of
the paper book, which is a copy of audited account, shows
profit on sale of investments, i.e. sale of shares at Rs.
23,49,426. This is included in the income of Rs. 26, 27,
43. Such profit had nothing to do with the contract
receipts as the same was on sale of shares on which
assessee had shown long terms capital gain of
Rs.11,31,066. Thus the amount of Rs. 23,49,426 Was
required to be reduced from the income for working out
the GP rate. If we deduct an amount of Rs.23,49,426 from
the total credits on income side of Rs.2,86,65,379, the net
amount remains at Rs.2,63,15,953. Likewsie, amount of
Rs.23,49,426 being profit on sale of shares was required
to be reduced from the GP of Rs. 32,73,557. If we do so,
the GP works out to Rs. 9,24, 131 (3273557 23,49,426).
The same works out to 3.51% as against GP rate of
10.87% and 9.63% of the assessment years 90
90-91 and 91--
92 respectively. Therefore, the contention of the assessee
that GP shown
hown by the assessее for the assessment year
under reference is better than the GP of the earlier
assessment years is absolutely wrong and this is nothing
but an attempt to mislead the Bench.
9. The next issue that requires to be decided by this
Bench is, whether estimation of income by the A0 by
applying net profit rate of 7% inclusive of depreciation
was correct? From the facts detailed above, it is obvious
that in the past the assessee had sho
shown
wn GP rate of 10.87%
and 9.63% for the assessment years 90
90-91 and 91-92
respectively. As against this, the GP rate shown the
assessee works out to 3.5%, which is lower by almost 6%.
The AO has applied only net profit rate of 7%, which
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ITA-110-2003(O&M)
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appears to be fair and
d reasonable. However, while doing
so, the AO has not allowed deduction on account of
depreciation. This is contrary to the judgment of
jurisdictional High Court of Punjab & Haryana High
Court in the case of CIT Vs. Chopra Bros. (India) Pvt.
Ltd., 252 ITR 412, where the High Court by referring to
CBDT's Circular No.29--D(XIX)-14
14 dated 31.8.65 has
held that even if income is estimated by applying net profit
rate, the AO is duty bound to allow depreciation if the
same is claimed by the assessee in the return and furnish
full particulars thereof. Thus, while we uphold the action
of the AO in estimating the income by applying net profit
rate of 7%, we direct the AO to allow depreciation as per
the provisions of law and keeping the judgment of Hon'ble
Punjab & Haryana
ryana High Court in the case of Chopra
Bros (supra). We order accordingly. This part of the
ground is partly allowed.
10. The next ground of appeal relates to the fact that
the CIT(A) was not justified in restricting the
disallowance to Rs.50,000 from th
thee trading addition made
by the AO. The facts of the case are that the AO had
estimated the income by applying net profit rate. separate
disallowance for the expenses was made in view of the
fact that income was estimated by rejecting the book
results and by applying net profit rate. On appeal, the
CIT(A) held that the AO was not Justified in rejecting the
book results. However, the CIT(A) sustained the
disallowance of Rs.50,000 out of the various expenses
keeping in view the past history of the case. Sinc
Sincee we have
already set aside the order of CIT(A) on the issue of
rejection of book results and upheld the action of the AO,
there is no point in making further disallowance of
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ITA-110-2003(O&M)
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Rs.50,000. Therefore, we setaside the order of the CIT(A)
and direct the AO not to
o make any separate disallowance
Rs.50,000. This ground of appeal is allowed."
4. Thus, we find that the ITAT has taken into consideration the
factual aspects and also gone through the books of accounts and the audited
account,, the findings are purely factual
factual and need not be gone in the present
appeal, the question of best judgment assessment would also not apply in the
present case and the present appeal is hereby dismissed.
5. All pending application stands dismissed accordingly.
[SANJEEV
SANJEEV PRAKASH SHARMA]
JUDGE
[SANJAY
SANJAY VASHISTH
VASHISTH]
JUDGE
August 08,, 2024
rashmi
Whetherr speaking / reasoned :Yes / No
Whether Reportable :Yes/ No
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