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2017 (1) TMI 1194 - AT - Income TaxRejection of books of accounts - estimated net profit of 8% on gross contract receipts net of all deductions - Held that:- Admittedly, the A.O. had rejected books of accounts for the reason that the assessee has failed to produce supporting bills and vouchers in respect of expenditures. It is also an admitted fact that the assessee himself has admitted about 8% net profit in the earlier period net of all deductions including depreciation. Therefore, considering the overall facts and circumstances of the case, we are of the view that the rate of net profit adopted by the A.O. appears to be fair and reasonable. Hence, we uphold estimation of net profit of 8% on total receipts net of all deductions including depreciation. In so far as separate deductions towards depreciation is concerned since, the A.O. has adopted reasonable rate of 8% on gross contract receipts, further deductions towards depreciation will result into determination of total income below the income returned by the assessee in his return of income. Therefore, we are of the view that the A.O. was right in estimating net profit of 8% on gross receipts net of all deductions including depreciation, and hence, the assessee is not eligible for separate deduction for depreciation. In so far as separate additions towards interest on fixed deposits under the head income from other sources, we find merits in the findings of the A.O. for the reason that there is no nexus between interest receipts and works contracts executed by the assessee. Just because fixed deposits are kept as security for obtaining works contracts, it does not alter the character of income. Interest on fixed deposits are assessable under the head income from other sources. Therefore, we are of the view that the A.O. was rightly made additions towards interest income under the head income from other sources. The CIT(A) after considering the relevant facts has rightly upheld the order of the A.O. We do not see any error or infirmity in the order of the CIT(A), hence, we inclined to uphold the CIT(A) order and reject ground raised by the assessee.
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