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2006 (8) TMI 607 - ALLAHABAD HIGH COURTDetermination of rate of profit - work of civil construction in Public Works Department - rejected books of account - exceeds turnover - whether the assessee was entitled to the benefit of section 40(b)( iv) and (v) - salary and interest paid to the partners - HELD THAT:- In no case, simply because the turnover is more than ₹ 40 lakhs or the assessee is performing civil construction work for Public Works Department, neither the rate of profit could be determined nor it could be taken to be less nor it could be reduced nor could be arrived at on presumptions. Since the Assessing Officer as well as the CIT(A) as also the ITAT has not recorded any finding based on any material, and the findings recorded are merely on surmises and conjectures or, so to say, on purely guess work and imagination of the authorities, as it has not been brought to our notice that any such rate of profit can be assessed under the rules or any law in this manner, the findings of rate of profit, therefore, cannot be sustained and are liable to be set aside, and the matter deserves to be remanded to the assessing authority for re-determination thereof. It was the specific case that these partners were working partners and they were entitled to salary and interest, as per terms of the deed in accordance with section 40(b) of the Act. In the absence of any material having brought by the revenue in rebuttal and more so when no such plea was ever taken or raised in the appeal, as also no substantial question of law has been framed in this regard, the aforesaid plea is bound to fail. Even before the Tribunal, it appears that no such question was raised. We have been informed by the learned counsel for the parties that for the last two assessment years, the Assessing Officer himself has granted deductions treating the firm to be entitled for the same. Thus, we allow the appeals in part and remit the matter to the Assessing Officer for only recording findings on question (1) referred to above, namely, to determine the rate of profit on the basis of the evidence/material on record, after affording opportunity of hearing and also giving opportunity to the parties to lead such evidence, as may be necessary, in the light of the observations. The findings regarding availability of deductions u/s 40(b)( iv) and (v) stand concluded and this question shall not be opened by the Assessing Officer. All the appeals are disposed of accordingly.
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