Commissioner Of Income Tax v. Shri Som Dutt Gargi

ITA No. 65 of 2002 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax Versus Shri Som Dutt Gargi ITA No. 65 of 2002 Date of Decision: 12.8.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Savita Saxena, Advocate for the appellant. None for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 12.9.2001 passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (hereinafter referred to as “theTribunal”) in ITA No. 103 (ASR)/1993 for the assessment year 1991-92proposing to raise the following substantial question of law:- “Whether, on the facts and in the circumstances ofthe case, the Appellate Tribunal is right in law indismissing the appeal of the revenue and allowinginterest when net profit rate was applied?” The facts necessary for adjudication of the present appeal may be noticed. The assessee is an individual and his source ofincome was from contract with MES authorities. He filed his return on28.10.1991 declaring an income of Rs.5,99,820/- and thereafter filedrevised return on 28.11.1991 declaring an income of Rs.4,53,860/-.During the course of assessment proceedings, the Assessing Officerfound that the assessee had not maintained day to day records of work-in-progress viz stock register of the material purchased and used.Signatures on the muster rolls were not verifiable and the paymentsmade were not subject to verification. The assessee did not furnishmonth-wise details of payments received and volume of materialsupplied by the Government departments and month-wise expenditureunder different heads. The Assessing Officer invoked proviso toSection 145 (1) of the Act and applied net profit rate of 10% on thereceipts and disallowed the interest and depreciation. The assesseetook the matter in appeal and the CIT (A) while allowing the appeal heldthat the assessee was entitled to deduction on account of interest anddepreciation. Feeling aggrieved, the revenue filed an appeal before theTribunal who upheld the view of the CIT (A) and dismissed the appeal.Hence, the present appeal by the revenue. 3.We have heard learned counsel for the revenue. Noneappears on behalf of the assessee. 4.The solitary issue raised by the revenue in this appeal is –whether an assessee is entitled to deduction on account of interest paidon loans when net profit rate has been applied by the Assessing Officerfor determining the taxable income of the assessee. 5.The matter is no longer res integra. The similar issue came ITA No. 65 of 2002 up for consideration before this Court in Girdhari Lal v. Commissionerof Income-tax, Jalandhar and another, [2002] 256 ITR 318 and noseparate deduction was held admissible to the assessee on account ofpayment of interest where net profit rate was applied by the AssessingOfficer. That being so, the Tribunal was in error in allowing the claim ofinterest to the assessee-respondent. 6.Accordingly, the appeal is allowed and the question isanswered in favour of the revenue and against the assessee. (AJAY KUMAR MITTAL) JUDGE August 12, 2010gbs (ADARSH KUMAR GOEL)JUDGE