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2020 (3) TMI 211 - AT - Income TaxLegality of the order passed U/s 144 - best judgment assessment - HELD THAT:- In the instant case, we find that during the course of assessment proceedings, the Assessing officer has issued notice u/s 143(2), 142(1) and through such notice, has sought to examine the books of accounts of the assessee. The assessee in turn submitted copy of cash book and ledgers however, bills, vouchers, muster rolls, wages register, purchase bills, etc were not produced for verification inspite of various opportunities granted by the Assessing officer. We therefore find that the Assessing officer having given sufficient opportunity to furnish the aforesaid details and the assessee failing to even attend to the proceedings and replying to the show- cause so issued by the Assessing officer, the provisions of section 144 have been rightly invoked by the Assessing officer. How the powers of best judgment should be exercised by the Assessing officer and what principles should be followed by the Assessing officer while making the best judgment? - As relying on BRIJ BHUSHAN LAL PARDUMAN KUMAR, ETC. [1978 (10) TMI 2 - SUPREME COURT] what is therefore, required is to make an honest and fair estimate of income and such estimate of income should have a reasonable nexus to the available material and the circumstances of the case. In the instant case, we find that the Assessing officer has disallowed 15% of material, wages, office and petrol expenses amounting to ₹ 11,84,522 for the reason that the assessee has failed to substantiate these expenses, however, on what basis/rationale, he has arrived at the figure of 15% has not been specified. There is no finding that there are any specific expenses which have either not been incurred for the purposes of business or are bogus in nature, therefore, in absence of any specific finding by the Assessing officer, the disallowance so made is directed to be deleted. Further, interest and remuneration to partners have been disallowed due to specific provisions of section 184(5) which provides that where there is a failure on part of the firm as is mentioned in section 144 of the Act, no deduction by way of interest and remuneration shall be allowed. Given the specific bar in the statute against allowance of such interest and remuneration where the assessment has been completed u/s 144, we donot see any infirmity in the action of the Assessing officer where he has strictly followed the provisions of section 184(5) of the Act. Addition made on account of negative cash balance - we find that inspite of sufficient opportunities provided by the ld CIT(A) during the appellate proceedings and having called the remand report, the assessee has failed to produce the necessary documentation in support of its claim and the addition has thus rightly been made by the Assessing officer. Lastly, regarding non-allowance of full depreciation on all the fixed assets, we find that in the balance sheet as on 31.03.2009, the assessee has shown a shop with a book value of ₹ 22,87,000 besides Tools and plant with book value of ₹ 63,750. In the profit/loss account, depreciation on only tools and plant has been debited and similar is the position in the computation of income and the auditor’s report where depreciation claim is limited to tools and plants. At the same time, given that value of shop has been reflected as part of block of assets in the financial statements and is a matter of record which can be verified in terms of ownership and where such shop premises are utilized for the purposes of business, the assessee shall be eligible for depreciation even though not claimed earlier and the matter is remanded to the file of the Assessing officer for limited purposes of verifying the depreciation on shop forming part of assessee’s block of assets and where the same is found to be in order, allow the claim as per law.
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