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2014 (2) TMI 1024 - AT - Income TaxApplication of Net profit rate - Assessment framed u/s 144 of the Act - Deduction by way of any payment of interest, salary to be allowed or not u/s 185(5) of the Act – Estimation of income in the absence of evidences - Held that:- Even in the remand proceedings before the AO and the CIT(A), the claim has not been substantiated by the assessee - As regards the increase in the cost of building material and fall in net profit, no cogent explanation or supporting evidence has been brought on record before any of the authorities and even in the remand proceedings before the AO and the CIT(A) – Thus, the CIT(A) has rightly has rightly confirmed the provisions of section 145(3) of the Act though that have not been challenged by the assessee either in the cross appeal or in the cross objection – There is great possibility of leakage and therefore, the past history cannot be the guide for application of net profit rate. The facts and circumstances of the concerned year have to be taken into consideration for estimation of income - The assessee has not produced copies of the bills of the assets purchased by him and has not brought on record whether assets have been put to use for the purpose of business during the year – the AO who has rightly applied net profit rate of 7% on the gross receipts by the assessee - no separate allowance or depreciation is made and the application of net profit rate is inclusive of depreciation and interest and salary to the partners - Once the said estimation has been held to be correctly made and assessment having been made u/s 144 of the Act and with clear provisions of section 184(5), the ld. CIT(A) is not justified in allowing interest and salary to the partners. Allowability of Depreciation u/s 32 of the Act – Held that:- The assessee has not brought on record that the assets purchased by him have been put to use during the year – the CIT(A) is not justified in allowing depreciation – the order of the CIT(A) set aside and order of the AO is restored – Decided in favour of Revenue.
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