TMI Blog2015 (8) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... 184 of the Act, nothing has been stated with regard to the allowance of depreciation against net profit rate. In the instant case, we are of the view that in the light of the provisions of section 184(5) of the Act, further deduction of interest and salary to partners cannot be allowed. 10. So far as allowance of depreciation is concerned, nothing has been stated in sub-section (5) of section 184 of the Act. Therefore, depreciation can further be allowed from the net profit rate estimated by the ld. CIT(A). Accordingly we modify the order of the ld. CIT(A) and direct the Assessing Officer to estimate the net profit rate at 5% and thereafter allow further deduction of depreciation of ₹ 87,294/- - Decided partly in favour of revenue. Provisions of section 40A(3) with respect to certain payment exceeding ₹ 20,000/- invoked - Held that:- Once the books of account are rejected, the same cannot be looked into for making further additions under different heads. While estimating the net profit, the Assessing Officer is required to take into cognizance all the relevant facts available before him. We have also carefully perused the aforesaid judgment of the Hon'ble jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the provisions of section 184(5) of the Act which categorically says that no deduction by way of any payment of interest and salary made to partners shall be allowed, if the firm fails to comply with the terms of notice issued u/s 142(1) of the IT Act, 1961. 5. The Ld. CIT(A) has erred in law on facts of the case in allowing the deduction of depreciation from estimated income without considering the fact that all deduction deemed to have been taken into consideration while estimating the income. In doing so, the CIT(A) has failed in not considering the following case laws: Surinder Pal Nayyar Vs CIT(P H) 177 Taxman 207 Indwell Constructions Vs CIT (AP) 232ITR 776 CIT Vs Pooja Construction Co.(ITAT, Amritsar) 69 ITD 147 6. The Ld. CIT(A) has erred in law on facts of the case in deleting the addition of ₹ 35,91,500/-out of total payment of ₹ 61,80,304/- by holding that these cash payments were made through an agent which is covered under exceptions vide clause (k) of rule 6DD read with section 40A(3) of the Act without appreciating the fact that neither any commission was debited in P L account with regard to payment to agent for services rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, interest and salary to partners relaying upon the provisions of section 184(5) of the Act. 4. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) with the submission that the estimation of net profit rate by the Assessing Officer is quite excessive and the same may be reduced. The assessee has furnished details of net profit declared by the assessee in the immediately preceding years. The ld. CIT(A) has taken note of all these facts and estimated the net profit rate at 5% of the gross receipts. The ld. CIT(A) has also allowed deduction of depreciation, interest and salary to partners against the estimated net profit rate of 5%. 5. Aggrieved, the Revenue has preferred an appeal before the Tribunal with the submission that the assessee has not furnished the books of account and other relevant evidence before the Assessing Officer during the course of assessment proceedings despite various opportunities afforded to the assessee. Therefore, the Assessing Officer has rightly estimated the net profit rate at 10% of the gross receipts. The ld. D. R. has further contended that the ld. CIT(A) while allowing deduction of depreciation, interest and salary to partners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account by the ld. CIT(A) while estimating the net profit rate for the impugned assessment year. There was no dispute with regard to the gross receipts of ₹ 6,29,62,433/-. The ld. CIT(A) has also upheld the rejection of the books of account under section 145(3) of the Act against which assessee is not in appeal. Therefore, once the books of account are rejected, the remedy available with the assessing authorities is to estimate the net profit rate of the assessee keeping in view the past record of the assessee. In the instant case, undisputedly the net profit rate was estimated at 4.49% in assessment year 2007-08 and 3.92% in assessment year 2008-09. Keeping the past net profit rate adopted, we find no infirmity in the order of the ld. CIT(A) in which he has estimated the net profit rate at 5% of the gross receipts. Accordingly we uphold the estimation of the net profit rate. 9. Now the only dispute is with regard to further deduction of depreciation, interest and salary to partners. It was argued by the ld. counsel for the assessee that the provisions of section 184(5) of the Act cannot be invoked, but on perusal of the provisions of section 184(5) of the Act we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Rules, as no deduction was allowed to and claimed by the assessee in respect of the purchases. The ld. counsel for the assessee has further contended that in the light of the aforesaid judgment of the Hon'ble jurisdictional High Court, no further disallowance can be made under section 40A(3) of the Act having relied upon the books of account which were already rejected by the Assessing Officer under section 145(3) of the Act. 14. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we are of the view that once the books of account are rejected, the same cannot be looked into for making further additions under different heads. While estimating the net profit, the Assessing Officer is required to take into cognizance all the relevant facts available before him. We have also carefully perused the aforesaid judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Banwarilal Banshidhar, in which it has been categorically held that once the books of account are rejected, separate addition by invoking the provisions of section 40A(3) of the Act cannot be made. We, therefore, find no infirmity in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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