Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 2017 - ITAT VISAKHAPATNAMRejection of books of account - Estimation of profit & assessment of income surrendered by the assessee separately - unauthorized payment - Held that:- In the instant case, we are of the view that the trade practice prevailing in this trade and also the manner of maintenance of vouchers regarding payments made towards various expenses would constitute sufficient material to disturb the earlier year’s assessments also, which were not pending on the date of initiation of search. Accordingly, we do not find merit in the contentions of the assessee and accordingly, reject the same. In view of the admission of the partner of the firm that he has been following same practice in the earlier years also, one has to presume that the defects noticed in the maintenance of books in AY 2008-09 to 2010-11 were also prevailing in the earlier years also. Accordingly, we are of the view that there is no infirmity in the order of Ld CIT(A) in confirming rejection of books of account for all the years under consideration. The net profit rate of 5% and 7% estimated by the Ld CIT(A) for the years under consideration also appears to be high, when we consider the rate of net profit declared by the assessee. At the time of hearing, the Ld Counsel submitted that the deficiencies, if any, is automatically made good by the assessee by offering additional income in AY 2008-09 to 2010-11. Accordingly he submitted that the net profit rate declared by the assessee should have been accepted for the earlier years. However, the said contentions cannot be accepted, since we have upheld the rejection of book results and hence the net profit is required to be estimated. However, in view of the foregoing discussions, we are of the view that the rate of net profit should be determined by considering the net profit rate declared by the assessee for the earlier years, which shall be modified to take care of or to cover up the deficiencies. From the chart furnished by the assessee, we notice that the rate of net profit declared by the assessee before partners’ remuneration and interest work out to 1.46%, 3%, 3.46% and 6.83% respectively for AY 2004-05, 2005-06, 2006-07 and 2007-08. Accordingly, in our view, the rate of net profit may be adopted @ 2.5%, 3.5%, 4% and 7% respectively for AY 2004-05, 2005-06, 2006-07 and 2007-08. Rejection of claim for deduction of depreciation - Held that:- The capital expenditure incurred is not allowed as deduction, but the deterioration in their value is allowed as deduction with the name “depreciation”. Hence, it is called non-cash expenditure and also called statutory deduction. While estimating the income, the trading results only are estimated on the basis of sales/gross receipts, meaning thereby, what is estimated is only the net profit before allowing any non-cash expenditure/statutory deductions. Further, the quantum of depreciation would also depend upon the value of assets. Even if the level of operations and other things are equal between the two, the depreciation amount will be different due to the difference in the value of assets. Hence the total income shall also result in different figures between the two business men. The above said illustration would support the contentions of the assessee that the depreciation should be allowed separately. Accordingly, we direct the AO to allow the depreciation admissible to the assessee against the income estimated by us in the preceding paragraphs. Next contention of the assessee that it was using its vehicles for transport purposes and hence the vehicles are entitled for higher rate of depreciation. Since the contentions urged by the assessee require factual verification, we set aside this issue to the file of the AO, who shall examine the claim of the assessee afresh and shall take appropriate decision in accordance with the law. Deduction for remuneration and interest payable to the partners - Held that:- As from the Statement of facts filed by the assessee before the Ld CIT(A), we notice that the assessing officer has assessed the remuneration and interest in the hands of the partners, even though it was not allowed as deduction in the hands of the assessee firm. Under these set of facts, we do not find any infirmity in the decision of Ld CIT(A) in directing the AO to allow the deduction for remuneration and interest payable to the partners.
|