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2012 (2) TMI 536 - AT - Income TaxDetermination of unaccounted investments - Held that:- Deletion of addition on the reason that there is no seized material to estimate the turnover and thereby estimate the income. Similarly, for determination of expenditure which was claimed in the regular returns cannot be disallowed in the block assessment consequent to the search action as the disallowance is only could be subject matter in regular assessment not in the block assessment. Estimation of the income at 15% of the undisclosed turnover and disallowing net cash expenditure at 7% - Held that:- Assessing Officer has not only enhanced the gross profit rate but also increased the estimate and increased the quantum of turnover. The assessee has not disputed the quantum of suppressed turnover. However, the assessee challenged the rate of net profit and filed a chart as above. As regards the net profit, we find that in earlier years records and past history could be the basis to determine the rate of profit provided if the book results are actually accepted by the Department in earlier years. In the present case all the assessments from 2002-03 to 2008-09 are subject matter of dispute before us and we cannot take the result of these assessment years as base to determine the net profit. In our opinion, considering the nature of industry and prevailing market conditions, it is reasonable to estimate net profit at 8% of the suppressed turnover. Accordingly, we direct the Assessing Officer to estimate the income of the assessee at 8% of the suppressed turnover in addition to the income from regular business. The ground raised by the assessee for these three assessment years i.e., 2006-07, 2007-08 and 2008-09 is partly allowed. Disallowance on chance of inflation of expenditure under the head production expenditure, employee benefits and administrative expenditure - Held that:- The assessee is a subcontractor. Assessee is engaging labour at site at far flung places. In such circumstances, it is difficult to have documents for such expenditure, to the satisfaction of the assessing officer. It is also difficult to verify the identity of the labour, after lapse of many years. The accounts of the assessee have been audited and auditor's certificate under section 44AB has also been furnished. The assessing officer has not analysed the expenses compared to the turnover for the earlier years. A search has been made in the premises of the assessee and no incriminating evidence in this regard has been found. Only an ad hoc disallowance of expenditure claimed by the assessee has been made. However, from the observations of the lower authorities it can be inferred that full details of expenditure have not been properly documented. Hence, the possibility of some inflation of such expenses cannot be ruled out. Considering totality of facts and circumstances of the case, we are of the opinion that disallowance of 5% of labour and site expenses are reasonable
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