The Appellant Also Relied On The Decision Of This Court In M.a v. Commissioner Ofincome Tax, Muzaffarpur & Anr.), Which Considered Theaforesaid Questions

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.51 of 2011 ====================================================== M/s Salauddin, a partnership firm having its office at Chhatradhari Bazar,Chapra P.O Chapra, P.S. Bhagwan Bazar, District-Saran through its partnerSalauddin son of late Md. Wazuddin resident of Chhatradhari Bazar, ChapraP.O Chapra, P.S. Bhagwan Bazar, District- Saran. ... ... Appellant/s Versus1. Commissioner of Income Tax, Muzaffarpur having its office at Bela KothiMuzaffarpur. 2. Additional Commissioner of Income Tax, Range-2, having its office at BelaKothi, Muzaffarpur. CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHYORAL JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE)Date : 14-09-2023 1. The assessee, a works contractor, was before the statutory authorities against the estimation made of profit atthe rate of 8% on the basis of an order with regard to analtogether different assessee; overlooking the estimate of profitat the rate of 6% in the case of the appellant itself in threepreceding assessment years, which was negatived by thestatutory authorities. 2. As far as consideration of depreciation, it wascontended that merely because of an estimation carried out, theclaim of depreciation cannot be overlooked. Learned counsel for the appellant also relied on the decision of this Court in M.A.No. 56 of 2011 (Trishul Constructions Vs. Commissioner ofIncome Tax, Muzaffarpur & Anr.), which considered theaforesaid questions. 3. The questions of law are identical and are as follows:- “(i) Whether the order of the Tribunal inadopting the estimate of profits at the rate of 8percent on the basis of an order in an altogetherdifferent case, overlooking the estimate of profit@ 6 percent in assessment year 2003-04 by theTribunal itself in the assessee’s case, runscounter to the rule of consistency? (ii) Whether in view of the rule ofconsistency, in the absence of any materialchange in the nature of business activity, theTribunal ought to have followed the estimate ofprofits made in the assessment year 2003-04 inthe case of the appellant itself? (iii) Whether the order of the Tribunalrefusing consideration of depreciation, runscontrary to the mandate of law?” 4. Insofar as the question nos. (i) and (ii), the answer is found in paragraph nos. 5, 6 and 7, which is extracted hereunder:- “5. The question raised as (i) and (ii) areanswered together. Any estimation is based on the best judgment of the Assessing Officer and ifit is reasonable, there is no reason for theAppellate Authorities or even this Court tosubstitute the same for yet another reasonableview. There is also no rule of consistencyapplicable in estimations, as the factorsregulating profits fluctuate from year to year andevery assessment year brings forth a differentcause of action. 6. The assessee was a railway contractorcarrying on works for very many years. It cannotbe assumed that the net profit of the assesseewould have been the same for all the years. Themere fact that in the assessment year, twice priorto the relevant assessment year, the AssessingOfficer had adopted an income of 6% would notrestrict the estimation of net profit to that, for alltime to come. 7. The Assessing Officers, rightlyreckoned the profit margin of similar businessesin the relevant assessment year to estimate thenet profit at 8%.” 5. We find absolutely no reason to interfere withthe question of estimation, as the facts on which the law is to beapplied are identical. 6. On the question of depreciation, this Court hasanswered the issue in paragraph no. 9, which is extractedhereunder:- “9. On the question of depreciation, the learnedcounsel for the assessee relied on Shyam Bihari v.Commissioner of Income-Tax and Anr.; [2012] 345 ITR 283(Patna). We extract paragraph number 10 and 11 of the saiddecision. 7. The Assessing Officers, rightlyreckoned the profit margin of similar businessesin the relevant assessment year to estimate thenet profit at 8%.” 5. We find absolutely no reason to interfere withthe question of estimation, as the facts on which the law is to beapplied are identical. 6. On the question of depreciation, this Court hasanswered the issue in paragraph no. 9, which is extractedhereunder:- “9. On the question of depreciation, the learnedcounsel for the assessee relied on Shyam Bihari v.Commissioner of Income-Tax and Anr.; [2012] 345 ITR 283(Patna). We extract paragraph number 10 and 11 of the saiddecision. 10. We have been taken throughthe provisions of circular of the Board datedAugust 31, 1965. According to that circularwhich is binding on the department and itsauthorities, where it is proposed to estimate theprofit and the prescribed particulars have beenfurnished by the assessee, the depreciationallowance should be separately worked out. Inall such cases, as per the circular, the grossprofit should be estimated and the deductionsand allowance including the depreciationallowance should be separately deducted fromthe gross profit. If the net profit is required to beestimated, it should be estimated subject to theallowance for depreciation and the depreciationallowance should be deducted therefrom. 11. Since it is the case of theappellant that the authorities should not applythe principles emanating section 44AD of theAct but should be guided by the binding circularof the Board, we find it necessary not only to setaside the order of the Tribunal but also theorders of the Assessing Officer and the learnedCommissioner of Income-tax (Appeals) as thoseorders also suffer from error of law on both thepoints. Accordingly, this appeal is allowed andthe order under appeal passed by the Tribunal, the appellate order of the leamed Commissionerof Income-tax (Appeals), Patna, and also theorder of the Assessing Officer are set aside andthe matter is remitted back to the AssessingOfficer for passing a fresh order of assessmentin accordance with law keeping in view thequestions of law as answered by this court.” 7. The question of depreciation would beconsidered independently by the Assessing Officer for which aremand shall be made. 8. The appeal stands partly allowed answeringquestions : (i) & (ii) against the assessee and in favour of therevenue while question : (iii) is answered in favour of theassessee, to the extent of the remand made. (K. Vinod Chandran, CJ) (Partha Sarthy, J) Spd/shiv AFR/NAFRCAV DATEN/AUploading Date19.09.2023.Transmission DateN/A