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2014 (5) TMI 1026 - AT - Income TaxDetermination of net profit rate - Rejection of books of accounts - Held that:- Authorities below have applied excessive net profit rate of 6.5% against total receipts before allowing interest and salary to the partners. History of the assessee clearly suggests that the assessee has reasonably declared profit rate of 2.49% as against 2.66% of the preceding assessment year. The total receipts of the assessee have admittedly exceeded very high as against the receipts declared in the last year. Therefore, when the receipts have exceeded, there is bound to be fall in the net profit. The explanation of the assessee also suggests that labour/wages paid was a necessary component for the purpose of executing the contract. Profit rate applied by the authorities below at 6.5% is very excessive and unreasonable. The assessee has agreed for application of net profit rate of 4% of the gross receipts before salary and interest to the partners before the AO, which in our view is most reasonable and appropriate considering the previous history of the assessee and facts and circumstances of the case. Therefore, to meet the ends of justice, we modify the orders of the authorities below and direct the AO to apply net profit rate of 4% of the gross receipts before salary and interest to the partners for the purpose of estimating business income of the assessee - Decided partly in favour of assessee.
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