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2022 (8) TMI 444 - AT - Income TaxRejection of book result u/s 145(3) - estimation of income - HELD THAT:- As in the hands of the assessee being the partnership firm the interest/remuneration to the partners are the eligible expenses. Same is the case with the depreciation claimed by the assessee. It is also an admitted fact that the remuneration/interest to the partners though eligible for deduction from the income of the partnership firm but the same is taxable in the hands of the partners in their individual capacity. But, we have to see profit of the assessee which is the partnership firm before us. It is the onus upon the assessee to justify based on the documentary evidence that the profit declared by it, is correct and supported by the books of accounts and the corroborative evidences. But the assessee has not filed the books of accounts along with the supporting corroborative materials to justify that the profit declared in the income tax return is correct within the provisions of law. Thus, we hold that the assessee failed to discharge his primary onus cast upon it under the provisions of law. In the absence of necessary books of accounts and supporting materials, the income of the assessee cannot be deduced. Thus, the only option available to the AO is to determine the profit of the assessee in the scientific manner. For this purpose, we note that the AO has taken other assessee engaged in similar business for comparable and reached to the conclusion that the net profit of the assessee should have been declared at least 1.5% of the turnover. The industrial comparable rate selected by the AO while determining the profit has not been disputed by the assessee. Deduction of depreciation from the estimated income - Estimate the income of an assessee by applying a net profit or gross profit to the gross receipts/turnover of the assessee - As provided by presumptive taxes, under sections 44AD, 44AE and 44AF, all deductions under sections 30 to 38 shall be deemed to have been allowed, and no further deduction under those sections would be allowable. No such provision has been mentioned in any other case of presumptive income or estimation by the Assessing Officer and, hence, depreciation should be allowable being statutory allowance where Assessing Officer has rejected the books of account and estimated the income of the assessee. However, the profit declared by the assessee in the return of income cannot be further reduced on account of partner's remuneration, interest on partner's capital and the depreciation. Thus we uphold the rejection of the books of accounts made by the authorities below as well as the rate of profit estimated by the authorities below but subject to the direction that against the estimated profit the amount of depreciation, partners remuneration and interest to the partners on their capital should be allowed as deduction while calculating the taxable income in the hands of the assessee. Thus the ground of appeal of the assessee is partly allowed.
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