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2005 (8) TMI 312 - AT - Income TaxEstimate Of Income - scrutiny assessment - Non-maintenance/irregular maintenance of vouchers in support of expenses - HELD THAT:- In the instant case, the AO has allowed deduction of direct expenses at 75 per cent of the gross receipts without any cogent material. His ad hoc estimate of expenses divorced from the relevant facts cannot be upheld. We have also gone through the detail of income furnished by the assessee, which shows net profit at 8.05 per cent. In this calculation, the assessee had determined net profit at Rs. 3,40,350 before depreciation, interest and remuneration to partners. If the amount of depreciation of Rs. 49,234 is reduced, this net profit comes at Rs. 2,91,116. Its ratio of gross receipts comes at 6.88 per cent. It is the same manner in which the assessee had shown working of net profits in the earlier three years as well. It is no doubt true that the assessee had gross receipts of Rs. 42,27,946 in this year and the case did not strictly fall within the parameters laid down under s. 44AD. However, in order to determine the correct rate of profit, we are regularly. seeking guidance from this section and applying 8 per cent net profit rate. This net profit rate is further subject to interest and remuneration to partners as provided in proviso to s. 44AD(2). In our consideration opinion, it would be fair and reasonable if the total income of the assessee is computed in this manner. By translating it into the actual calculation, the amount of net profit after depreciation but before remuneration and interest to partners comes at Rs. 3,38,236. The amount of salary and interest to partners has been shown at Rs. 2,52,249. If this amount is deducted, the taxable income comes at Rs. 85,987. We hold this amount to be taxable income liable for taxation. In the result, the appeal is partly allowed.
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