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2021 (6) TMI 842 - AT - Income TaxEstimation of income - interest and salary paid to partners - CIT(A) directing the AO to estimate the profit at 3% in the place of 4% estimated by the AO - HELD THAT:- Section 184(5) provides that where in respect of any assessment year, there is on the part of a firm any such failure as mentioned in section 144 of the Act, deduction by way of any payment of interest, salary, bonus, commission or remuneration etc. to any partner of such firm shall not be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Section 144 of the Act provides that if any person fails to make the return required under sub-section (1) of Section 139 and has not made a return or a revised return under sub-section(4) or sub-section (5) of that section, or fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section and having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the AO after taking into account all relevant material shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. In the instant appeal it was not a case of the AO where the assessee had not filed its return of income. It was also not a case where the assessee failed to comply with the notice u/s. 142(1) and also it was not a case where the assessee failed to comply with all the terms of a notice issued under section 143(2) of the Act by the AO. The AO made the assessment by estimating the income of the assessee by rejecting the books of account by invoking the provisions of section 145(3) of the Act as he was not satisfied about the correctness of the book results of the assessee. As relying on M/S JAI HANUMAN ENTERPRISES (FIRM) VERSUS ITO, ANGUL WARD, ANGUL, ODISHA [2019 (3) TMI 1606 - ITAT CUTTACK] direct the AO to allow the salary paid to partners and allow this ground of appeal
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