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2022 (3) TMI 726 - HC - Income TaxAddition on account introduction of un-explained partner’s opening capital in the assessee’s books of accounts - As per Tribunal separate addition can be made once the net profit rate is applied on contract receipts of the appellant for estimating its income from contract work when the provisions of section 68 is directly hit in the instant case - HELD THAT:- This Court answers the question No.(i) in the negative, i.e. in favour of the Appellant assessee against the Department by holding that the ITAT erred in holding that a separate addition on account of introduction of unexplained partner’s opening capital in the assessee’s books of accounts could be made particularly since the net profit was uniformly applied at 8% as an estimation. Adjust the TDS or refund back the same even though the said amount was deposited during the assessment year 2005-06 - HELD THAT:- CIT (A) directed the AO “to withdraw the credit given for TDS”. The ITAT while agreeing with the finding of the CIT (A) ought to have been to permit the Assessee to adjust the amount so paid or ordered it to be refunded to the Assessee. There is no explanation why this was not done. Learned counsel for the Department also could not support the above failure of the CIT(A) as well as the ITAT to issue such a direction. Question (ii) is also answered in the negative i.e. in favour of the Appellant assessee and against the Department by holding that the ITAT and the CIT(A) were not tried in failing to give a direction to adjust the TDS amount or refunded although the said amount to be deposited in AY 2005-06 Disallow the partner’s salary although the same is permissible u/s.44AD - HELD THAT:- The proviso to Section 44AD (2), as it read at the relevant time, did permit the salary and interest paid to the partners of a firm to be deducted from income of the firm subject to the condition specified under Section 40(d) of the Act being fulfilled. This appears to have been lost sight of by the ITAT. Accordingly, question (iii) is also answered in the negative i.e., in favour of the Appellant assessee and against the Department by holding that the ITAT erred in law in not allowing deduction the salaries paid to the partners from the income of the firm.
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