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2020 (11) TMI 745 - AT - Income TaxRejection of accounts - estimation of income - failure on the part of the assessee to provide site wise expenses, labour, proof of address & identity of labourers, the genuineness of the labour expenses was not established - reduction of Net Profit rate @ 6.5% on the total receipt by CIT-A instead of 12% applied by the A.O.- HELD THAT:- In the present case it is not in dispute that the A.O. rejected the books of account by pointing out various discrepancies in the books of account mentioned by the assessee. It is well settled that in case the books of accounts are rejected the only way to work out the income is the application of gross / net profit rate on the turnover or receipts of the assessee. Net profit rate to be applied should be reasonable and the past history of assessee’s own case is to be considered. Assessee had shown net profit rate of 6.36% for the year under consideration and in the earlier assessment year i.e; assessment year 2012-13 and 2013-14 it was at 5.87% and 6.01% respectively. Since the net profit rate was progressive and was higher in the year under consideration. Ld. CIT(A) was fair enough and fully justified in estimating the net profit rate of 6.5%. We do not see any valid ground to interfere with the findings given by the Ld. CIT(A) on this issue. Application of net profit rate of 12% by the A.O. based on the judgment of Shri Prabhat Kumar Contractor [2008 (11) TMI 723 - PUNJAB AND HARYANA HIGH COURT]is concerned the Ld. CIT(A) clearly mentioned that in the case of CIT Vs. Shri Praveen Mittal [2011 (10) TMI 458 - PUNJAB AND HARYANA HIGH COURT] after considering the earlier judgment in the case of Shri Prabhat Kumar Contractor(supra) upheld the application of net profit rate of 4%. We therefore do not see any merit in the submissions of the Ld. CIT DR that the net profit rate of 12% applied by the A.O. was based upon the judgment of the Hon'ble Jurisdictional High Court in the case of Shri Prabhat Kumar Contractor(supra) and the same to be upheld, particularly when the Hon'ble Jurisdictional High Court had considered the said judgment in its later decision in the case of CIT Vs. Praveen Kumar Mittal(supra) which has been considered by the Ld. CIT(A) while directing the A.O. to apply the net profit rate of 6.5% in the assessee’s case. Depreciation after applying the net profit rate - HELD THAT:- The present case it is not in dispute that the income of the assessee was worked out by applying the net profit rate and rejecting the books of accounts. we deem it appropriate to restore this issue to the file of the A.O. to verify as to whether the claim of the assessee for depreciation was allowed by him or not, as was claimed by the Ld. CIT DR during the course of hearing. Accordingly this issue is restored to the file of the A.O. for the limited purpose i.e; to verify as to whether the depreciation was already allowed to the assessee or not and if not allowed then by considering the ratio laid down by the Hon'ble Jurisdictional High Court, the claim of the assessee for depreciation is to be allowed from the income determined by applying the net profit rate of 6.5%. Addition u/s 69C - HELD THAT:- As already pointed out that the books of accounts maintained by the assessee were rejected by the AO and the said rejection was upheld by the Ld. CIT(A). The income of the assessee was determined by applying the net profit rate, therefore in view of the ratio laid down in the aforesaid referred to cases by the Hon’ble Allahabad High Court and Hon’ble Andhra Pradesh High Court, no separate addition on account of expenditure was called for when the income was determined by applying the net profit rate. Accordingly we do not see any infirmity in the impugned order passed by the Ld. CIT(A) on this issue.
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