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2019 (1) TMI 1406 - AT - Income TaxRejection of books of accounts - addition u/s 40(a)(ia) and 40A(3) - Estimation of N.P. rate - Held that:- Once books of account are rejected u/s 145(3) of the Act and income is derived at certain %age of gross receipt then there is no further scope for any further disallowance including u/s 40(a)(ia) and 40A(3) of the Act as made in the instant case. Hence, we do not have any hesitation to delete the additions. Being a subcontractor, the assessee firm was supposed to work on terms and conditions where maximum part of the receipts was taken by the main contractor as the conditions of contract work vary from contract to contract as also the profitability changes depending upon such conditions. Moreover, depreciation and interest charges debited in the accounts never been considered by the Assessing Officer. It is undisputed fact that the working in the state of J&K is not congenial and all the time depends upon the natural calamities as well as terrorist activities, hence in the aforesaid circumstances, in our considered opinion the estimation of net profit rate @6% on the gross receipt would be quite reasonable and would meet the ends of the justice. Induction of capital from partners - rectification of mistake - Held that:-CIT(A) while deleting the addition of ₹ 3,00,000/- and ₹ 5,00,000/- relied upon the enquiry independently held by the A.O. in which Sh. P.K. Zalpuri has confirmed the transactions and further ld. CIT(A) has observed that the partners have inducted this amount in the books of account of the appellant firm but there was a mistake on the part of the Accountant of the appellant firm who has shown these amounts as loan to the appellant firm from Sh. P.K. Zalpuri instead of showing them as induction of capital from partners. It was further observed by the ld. CIT(A) that it was stated by the appellant that mistake was subsequently rectified in the F.Y.2009-10. Finally, finding the explanation as reasonable and convincing and since the identity, creditworthiness and genuineness of transactions from Sh. P.K. Zalpur has been established, the ld. CIT(A) deleted the said addition correctly - Decided against assessee.
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