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2015 (8) TMI 887 - AT - Income TaxRejection of books of accounts - estimation of N.P. - CIT(A) while allowing deduction of depreciation, interest and salary to partners against his estimated net profit rate of 5% without looking to the provisions of section 184(5) as against 10% by A0 - Held that:- In the instant case, undisputedly the net profit rate was estimated at 4.49% in assessment year 2007-08 and 3.92% in assessment year 2008-09. Keeping the past net profit rate adopted, we find no infirmity in the order of the ld. CIT(A) in which he has estimated the net profit rate at 5% of the gross receipts. Accordingly we uphold the estimation of the net profit rate. - Decided against revenue. Further deduction of depreciation, interest and salary to partners - Held that:- Wherever the assessment is framed under section 144 of the Act on account of non-production of the requisite documents or the books of account by the assessee, no further deduction of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner shall be allowed. But under sub-section (5) of section 184 of the Act, nothing has been stated with regard to the allowance of depreciation against net profit rate. In the instant case, we are of the view that in the light of the provisions of section 184(5) of the Act, further deduction of interest and salary to partners cannot be allowed. 10. So far as allowance of depreciation is concerned, nothing has been stated in sub-section (5) of section 184 of the Act. Therefore, depreciation can further be allowed from the net profit rate estimated by the ld. CIT(A). Accordingly we modify the order of the ld. CIT(A) and direct the Assessing Officer to estimate the net profit rate at 5% and thereafter allow further deduction of depreciation of ₹ 87,294/- - Decided partly in favour of revenue. Provisions of section 40A(3) with respect to certain payment exceeding ₹ 20,000/- invoked - Held that:- Once the books of account are rejected, the same cannot be looked into for making further additions under different heads. While estimating the net profit, the Assessing Officer is required to take into cognizance all the relevant facts available before him. We have also carefully perused the aforesaid judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Banwarilal Banshidhar,[1997 (5) TMI 37 - ALLAHABAD High Court] in which it has been categorically held that once the books of account are rejected, separate addition by invoking the provisions of section 40A(3) of the Act cannot be made. We, therefore, find no infirmity in the order of the ld. CIT(A) who has rightly deleted the addition made by the Assessing Officer after invoking the provisions of section 40A(3) of the Act. Accordingly, the order of the ld. CIT(A) is confirmed. - Decided against revenue.
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