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2014 (6) TMI 174 - AT - Income TaxRejection of books of accounts – Held that:- The assessee produced the books of account and vouchers - the AO found that the voucher does not tally with the cashbook - When the voucher does not tally with cashbook, the assessee has not maintained the books of account properly - the book result will not reflect the correct profit of the assessee – thus, the AO rightly rejected the books of account – there was no infirmity in the order of the lower authority in rejecting the books of account and estimating the profit. Estimation of profit – Held that:- There was no justification in the distinction made by the revenue to show that the Tribunal estimated the profit at 8% - Relying upon State Of Kerala Versus C. Velukutty [1965 (12) TMI 32 - SUPREME Court] - section 44AD would be applicable in respect of a case where the gross contract receipt does not exceed Rs. 40 lakhs - Wherever the gross contract receipts exceed Rs. 40 lakhs the provisions of section 44AD are not applicable - the profit can be estimated either at lower than 8% or above 8% depending upon the factual situation - for the purpose of estimating the profit various factors such as the profit ratio of the assessee in the earlier year, profit ratio of the similarly placed traders in the same locality, demand for the product, availability of labourers, raw materials, etc., and the time gap available for executing the contract work, etc., have to be taken into consideration - reference to earlier order of the Tribunal alone for the purpose of estimating the profit at 12.5% may not be justified at all. Claim of seigniorage charges – Held that:- The material supplied by the Government/contractor will not have any element of profit – it shall be reduced from the contract receipts - the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit – the AO is directed that while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. Claim of depreciation – Held that:- Following Indwell Constructions Versus Commissioner Of Income-Tax [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - an addition was made towards interest and remuneration paid to the partner when the profit was estimated and no separate addition shall be made - Depreciation is allowable u/s. 32 of the Act - as provided in section 44AD no further/separate deduction shall be allowed – thus, the claim of depreciation on the estimated income is not justified. Payment of interest and salary to the partner – Held that:- The assessment year was 1981-82 - Section 44AD was introduced in the statute book with effect from 1.4.1994 – there was no occasion to consider the provisions of section 44AD as it is applicable for the assessment year under consideration and as it would be applicable with effect from 1.4.201 – thus, the entire issue is remitted back to the file of the AO for fresh consideration – Decided in favour of Revenue. Deletion of outstanding as pointed out by the AO – Held that:- Out of the total expenditure towards diesel purchase, Rs. 4.32 crores is properly vouched – the plea of the revenue does not make any sense - the addition can be sustained at Rs. 6 lakhs - the addition at Rs. 6 lakhs which is not properly vouched. Restriction of disallowance of salaries and wages – Held that:- CIT(A) was rightly of the view that the assessee has undertaken the work in forest area and nearly 200 feet below the ground for removing the over burden - the assessee has to engage labourers and the expenditure is mostly towards wages only - payments were made by self-made vouchers only to the labourers and in this line of business it is not possible to have foolproof third party evidence - the CIT(A) sustained only Rs. 5 lakhs out of the total addition made by the AO under the head salaries and wages - the order of the CIT(A) is very reasonable and justified – Decided partly in favour of Revenue.
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