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2018 (8) TMI 1372 - ALLAHABAD HIGH COURTDiallowance of expenses after estimation of profit u/s 144 - bogus/unverifiable purchase - bogus/unverifiable expense - Tribunal deleted the disallowance on the ground that, once the books of account had been rejected, the AO should not have disallowed the expenses for computing the income of the assessee which were claimed by the assessee. The AO should have estimated the income of the assessee by applying the net profit rate to the gross receipt of the assessee. Held that:- the AO while finalising the assessment under Section 144 of the Act had disallowed the claims of expenditure made by the assessee which could not be verified in absence of evidence led by the assessee to support the claim. It is permissible for the AO to disallow the claims while finalising the assessement in the manner provided under Section 144 of the Act to make best judgment assessment. It is not required for the AO to apply net profit at a particular rate while finalising the assessment under Section 144 of the Act. Method for estimating the income in the previous year of the assessee on the basis of net profit at a particular rate cannot be applied for all subsequent years. The impugned order passed by the Tribunal is not in accordance with law and, therefore, we set aside the impugned order passed by the Tribunal and remit the matter back to the Tribunal to decide the appeal of the assessee on merit and not on the basis of method of net profit @ 11.5% applied for assessing the estimate of profit of the assessee for the previous year i.e. 2009-2010. Decided in favor of revenue.
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