TMI Blog2014 (2) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... lls of the assets purchased by him and has not brought on record whether assets have been put to use for the purpose of business during the year – the AO who has rightly applied net profit rate of 7% on the gross receipts by the assessee - no separate allowance or depreciation is made and the application of net profit rate is inclusive of depreciation and interest and salary to the partners - Once the said estimation has been held to be correctly made and assessment having been made u/s 144 of the Act and with clear provisions of section 184(5), the ld. CIT(A) is not justified in allowing interest and salary to the partners. Allowability of Depreciation u/s 32 of the Act – Held that:- The assessee has not brought on record that the assets purchased by him have been put to use during the year – the CIT(A) is not justified in allowing depreciation – the order of the CIT(A) set aside and order of the AO is restored – Decided in favour of Revenue. - I.T.A. No.281(Asr)/2012 - - - Dated:- 14-2-2014 - Sh. H. S. Sidhu And Sh. B. P. Jain,JJ. For the Appellant : Sh. Mahavir Singh, DR For the Respondent : Sh. Sudhir Sehgal, ORDER Per Bench ; This appeal of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this account reveals that the assessee has made all the payments to this person in cash and the each entry is either Rs.20,000/- or less. As on 31.3.2006 as sum of Rs.4,12,090/- was payable to Sh. Madan Mohan Jain but no confirmation has been filed. b Assessee made purchases of Rs.1,86,299/- from Baldev Singh and made payments of Rs.2,00,000/- to him during the year. This accounts appears at ledger folio No.334. Perusal of this account reveals that the assessee has made all the payments to this person in cash and the each entry is of Rs.20,000-. c. Assessee made purchases of Rs.4,91,980/- from M/s. Bhagwati Crasher Stone and made payments of Rs.3,74,337/- to him during the year. This accounts appears at ledger folio No.285. Perusal of this account reveals that the assessee has made all the payments to this person in cash and the each entry is either Rs.20,000/- or less. As on 31.3.2006 as sum of Rs.1,17,643/- was payable to M/s. Bhagwati Crasher Stone but no confirmation has been filed. d. Assessee made purchases of Rs.40,053/- from Ishamil Stone Traders and made payments of Rs.40,053/- to him during the year. This accounts appears at ledger folio No.280. Perusal of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee failed to comply with the same. The AO did not have any alternative but to reject the books of account and made assessment u/s 144 of the Act by making estimation of income. The Net Profit shown by the assessee is 2.8% at Rs.24,90,713/- on the gross receipts of Rs.8,83,54,495/- which was 3.79% for the assessment year 2003-04, 5.41% for the assessment year 2004-05 and 0.78% for the assessment year 2005-06. The assessment for the A.Ys. 2003- 04 and 2005-06 have been stated to be under section 143(1) and no scrutiny assessment has been made whereas assessment for the A.Y. 2004-05 and 2005-06 have been made u/s 143(3) of the Act. The AO keeping into consideration that the assessee failed to file supporting evidence, copy of tender, comparative chart showing rate and quantity of material and the rate at which goods were actually purchased, supported by purchase vouchers, which was not filed by the assessee. These informations were required by the AO since the AO was informed that there was increase in the cost of building material and accordingly there was fall in profit. Nothing was brought on record by the assessee to substantiate his claim and accordingly keeping int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he vouchers have not been produced by the assessee, as mentioned by the A.O. in his order. The assessee was given a reasonabale time to produce vouchers in support of the entries in the books of account which were, in fact, not produced and therefore, the ld. CIT(A) has rightly confirmed the application of net profit rate. 5.1. As regards the estimation of income in the absence of most of the evidences which were required in support of the entries in the books of account were not produced.. There is great possibility of leakage and therefore, the past history cannot be the guide for application of net profit rate. Therefore, the facts and circumstances of the impugned year have to be taken into consideration for estimation of income. Accordingly, the AO has rightly passed the order and prayed to reverse to the order of the ld. CIT(A). 5.2. The Ld. DR argued with regard to the allowance of depreciation by the Ld.CIT(A). The assessee has not produced copies of the bills of the assets purchased by him and has not brought on record whether assets have been put to use for the purpose of business during the year. Therefore, the ld. CIT(A) was not justified in allowing depreciation. 5.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n net profit, no cogent explanation or supporting evidence has been brought on record before any of the authorities below or even before us and even in the remand proceedings before the AO and the ld. CIT(A). Accordingly, the ld. CIT(A) has rightly has rightly confirmed the provisions of section 145(3) of the Act though that have not been challenged by the assessee either in the cross appeal or in the cross objection before us. As is evident hereinabove, the AO could not verify or examine the expenses claimed at Rs.6,21,30,678/- out of gross contract receipts at Rs.8,83,54,495/-. No cogent explanation has been given before any of the authorities below in this regard. The argument given by the ld. counsel for the assessee, Mr. Sudhir Sehgal, before us cannot help the assessee and such argument cannot be a substitute of the documentation or evidence of the claim of expenses. Nothing has been argued or brought on record that the assessee has actually incurred expenses of Rs.6,21,30,678/-. In the facts and circumstances, there is every possibility of great leakage of revenue. In such facts and circumstances, past results cannot be a guide . In the Income tax proceedings, every year is ..... 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