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2015 (7) TMI 112 - AT - Income TaxEstimation of net income at the rate of 16% - Held that:- The estimate of net income from the contract work at the rate of 16% of the turnover was without any basis. We find that as per the provisions of section 44AD of the Income Tax Act, net profit from contract work declared by the assessee at the rate of 8% of the turnover would be accepted if the turnover of the assessee is less than the limit specified in that section. Though the said section is not applicable in the instant case, as the turnover of the assessee is more than the turnover specified in that section, however, taking a cue from the provision of this section and taking into consideration normal trend that the percentage of net profit is generally less when the turnover is higher, in our considered view, it shall meet ends of justice, if the net profit is estimated at 8% of its turnover. - Decided partly in favour of assessee. CIT(A) ought to have sustained the disallowance of ₹ 1,25,00,000/- made by the AO on the ground that the expenditure was not genuine, and ₹ 60,00,000/- on account of section 40(a)(ia) of the Act - Held that:- When the CIT(A) has estimated the net profit, question of allowing or disallowing of any specific expenditure does not arise. The DR could explain as to why after estimation of net profit, still the disallowance of certain expenses of ₹ 1,25,00,000/- and ₹ 60,00,000/- was warranted, and how it can be held that such expense was allowed by the CIT(A). As we have already estimated the net income of the assessee of the contract work executed by the assessee, question of any further disallowance does not arise. - Decided against revenue. Addition made on the alleged ground of retraction of income admitted during the search - Held that:- merely on the basis of admission of the assessee, the additions cannot be made unless and until some corroborative evidence was found in support of such admission. Therefore, in our considered view, in the absence of any corroborative material to support the admission made during the course of search under section 132(4) of the Act addition cannot be sustained, especially when such admission was later on retracted by the assessee by filing the return of income as well as by filing a separate retraction letter also. We, therefore, delete the addition of ₹ 1,78,00,000/- and allow this ground of the appeal of the assessee. See Kailashben Manharlal Chokshi Vs. CIT [2008 (9) TMI 525 - GUJARAT HIGH COURT] - Decided in favour of assessee. Disallowance u/s.40(a)(ia) - Held that:- CIT(A) on estimate basis by assuming net income at the rate of 16% of the turnover. Thus, it is observed that the business income of the assessee was not computed as per the normal computation provision contained in sections 28 to 43AC of the Income Tax Act, but the net income was estimated after rejecting the book results. Once this alternative method of estimating the net income was utilized, question of making allowance or disallowance as per provision of sections 28 to 43AC does not arise. In the instant case, we have upheld the computation of business income on the basis of estimation in ground no.3 of the appeal of the assessee, though, at the rate of 8% of the turnover in replace of 16%, and therefore, the question of further disallowance by invoking the provisions of section 40(a)(ia) of the Act does not arise. See CIT Vs. Banwari Lal Banshidhar(1997 (5) TMI 37 - ALLAHABAD High Court ) - Decided in favour of assessee.
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