2009 (10) TMI 593 - AT - Income Tax

Rejection of books of accounts and estimation of income - Disallowance - the assessee is carrying on three kinds of contracts, as in earlier years, i.e.. (i) own contracts, (ii) contracts taken from the sub-contractors, (iii) contracts given to other parties on sub-contracts - In the present case, the AO rejected the books of account on the reason that, the assessee has not maintained proper books of account and also failed to produced vouchers for verification and the expenditure claimed by the assessee are not substantiated - The AO after rejecting the books of account made a reasonable estimate of the income at a reasonable percentage of gross receipts at 10 per cent - The assessee had a higher rate of profit on the contracts executed by the assessee itself - Thus, accordingly the AO is directed to estimate the income on the contracts executed by the assessees own at 9 per cent - Accordingly, this ground of the assessee appeal is partly allowed

Once the AO has observed that books of account are not reliable, how the same books can be relied for other purpose for invoking other provisions of the Act - The AO rejected the claim on the ground that according to s. 194C stipulates that the person making payment to a contractor or at the time of credit to the account has to deduct tax at source - If amount is actually paid and tax is not deducted under the above section, s. 40(a)(ia) is not applicable - in the case of Indwell Construction vs. CIT(1999) 151 CTR (AP) 207 : (1998 -TMI - 17056 - ANDHRA PRADESH High Court) it has been clearly held that where the books of account have been rejected, the Revenue cannot rely on the same books of account for addition of an exact amount of expenditure in the P&L a/c – Decided in the favour of the assessee