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2016 (9) TMI 1404 - AT - Income TaxRejection of books of accounts - N.P. estimation - disallowance by invoking provisions of section 40(a)(ia) - rectification of mistake - Held that:- From the perusal of the assessment order, it is noted that there have been discussions between the AO and the assessee in terms of estimating the net profit rate once the books of account have been rejected. As part of that discussion, it is noted that in response to AO’s show-cause as to why 8.5% net profit rate should not be allowed, AR has submitted that if the net profit at the rate of 8.5% is applied, then the deduction on account of payment of hiring charges for machinery taken on rent amounting to ₹ 22,41,600/- and ₹ 21,60,000/- are also to be allowed. AO finally decided to apply net profit of 5.05% which has been agreed upon by the assessee. It is therefore seen that issue of allowance of payments of machinery hire charges has been duly taken into consideration by the AO while estimating the n.p. rate of 5.05%. As noted that the decision of Hon’ble Kolkatta High Court in the case of Arjun Bhowmick (2014 (8) TMI 1075 - CALCUTTA HIGH COURT) wherein it has held that “once the n.p. rate is estimated, the AO cannot based this disallowance on the same books of accounts for the purpose of disallowance by invoking provisions of section 40(a)(ia) of the Act or general disallowance u/s 37 of the Act. The estimation made by the AO of net profit will take care of every addition related to business income or business receipts and no further disallowance can be made.” In light of above, we see no reason for AO to invoke provisions of section 154 of the Act. - Decided in favour of assessee
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