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2018 (3) TMI 1706 - AT - Income TaxRejection of books of accounts - Net profit determination - addition on account of depreciation (u/s. 32(1)) and interest (u/s. 36(iii)) - Held that:- A difficult terrain may not necessarily imply a lower profit. Rather, economic theory would suggest the profit to match the risk involved, so that a higher risk would entail a higher rate of profit. Further, again, the assessee as the person undertaking the work would, both in theory and in practice, be entitled to a larger share of the profit, i.e., even if the same is to be considered as in the range of 7% to 8%. Considering these facts, we modify the estimation of the assessee’s net profit rate to, even as conceded to by the ld. AR, the assessee’s counsel, during hearing, 5% of the turnover. The disallowance on account of depreciation (u/s. 32(1)) and interest (u/s. 36(iii)) shall not survive in view of the estimation of the net profit rate. Addition u/s 68 qua a secured loan/s - Held that:- Though the same could be made in principal, and we do not agree with the ld. CIT(A) that the same could not be in view of the assessee’s profit rate being estimated (CIT v. Devi Prasad Vishwanath Prasad [1968 (8) TMI 5 - SUPREME COURT], we find no basis for the said addition in the facts and circumstances of the case. True, the burden of proof u/s. 68 is on the assessee, which has not furnished any material in the assessment proceedings. However, it is not clear if the AO had in any of the notices u/s. 142(1) required the assessee to support its’ claim qua the said loan with any material/ evidence. This does not appear to be the case as there is no reference thereto by him either in the assessment order or in the remand report. The addition under the circumstances could only be on the basis of some adverse material brought on record by the Assessing Officer. The addition, in fact, has not even been impugned by the Revenue.
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