TMI Blog2019 (12) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, stand undisturbed at the amount reflected in the books, i.e., ₹ 365.44 lacs. Allowance of interest and remuneration to the partners upon estimating the net profit of the contract business at 5% of the turnover - It is fully competent for the AO to estimate the assessee s business income either before or after allowing the said expenditure, in which latter case the estimate would be arrived at by factoring the amount of the said expenditure and, thus, lower than the former to the said extent. The motivation for a separate allowance thereof and, therefore, the estimation of profit prior thereto, could possibly be on account of the legal position that the said expenditure, to the extent allowed in the firms assessment, is assessable in the hands of the individual partners. Where, therefore, not separately deducted, no amount would stand to be assessed in their hands even as, being otherwise eligible for deduction, would stand to be reckoned while estimating the firms income u/s. 28. The AO had, in the instant case, estimated the net profit at 5% (of the turnover), and allowed the said deductions thereafter. The original assessment order clearly reflects th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,620/-, i.e., as original assessed. We are conscious that the allowance of deduction for remuneration to partners, allowed at ₹ 1,30,000, is to be w.r.t. book profit (Explanation 4 to s. 40(b)(v)), so that the enhancement in income upon estimation would have no bearing on the quantum of the said deduction. The same, however, has been considered w.r.t. the assessee s book profit, and found allowable at the claimed amount of ₹ 1,30,000. We decide accordingly. Assessee s appeal is partly allowed. - ITA No.126/JAB/2018 - - - Dated:- 24-12-2019 - Shri Bhavnesh Saini, Judicial Member And Shri Sanjay Arora, Accountant Member Appellant by Shri Hemant S. Modh, Advocate Respondent by ShriI.B. Khandel, Sr. DR ORDER Sanjay Arora, AM This is an Appeal by the Assessee, directed against the Order by the ld. Commissioner of Income Tax (Appeals)-1, Bhopal ( CIT(A) for short)dated 21.03.2018, partly allowing the assessee s appeal contesting its assessment under section 143 read with s. 263 of the Income Tax Act, 1961 ( the Act hereinafter) dated 15/7/2015 for Assessment Year (A.Y.) 2010-11. 2. The brief facts of the case are that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that the ld. CIT had given a specific direction to the AO, who therefore could not have travelled outside the mandate of the section 263 order, which had become final on account of it having not been appealed against by the assessee before the Tribunal. The AO, however, had gone wrong in increasing the net profit rate to 8%, qua which there was no direction. In any case, the same was sans any basis or material on record. He, accordingly, directed the AO to restrict the addition to ₹ 5,69,330, i.e., as stated by the ld. CIT. Aggrieved, the assessee is in further appeal. 3.1 The ld. counsel for the assessee, ShriHemantModh, would submit that the assessee s income could not have been enhanced in assessment without being show caused in its respect by the AO. The interest and remuneration to the partners is only a distribution of profit, so that the same ought to have been allowed after estimating the contract business income, toward which he would advert to the assessee s past history (PB page 7), as under, which had not been considered:(Amount in Rs. lacs) A.Y. GR NP NP(%) 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ₹ 2.50 lacs. We find no basis therefor. As clarified by the assesseewith reference to the record of it s bill-wise details in the books of the payer, the same is a reimbursement by the customer-payer; the words S.A. denoting Security Advance , which is both accepted and repaid, recording it under columns S.A. paid and S.A. recovery , i.e., on being paid and released respectively, in the bill-wise statement (PB pg. 14). Two amounts of ₹ 1.25 lac each are reflected as S.A. recovery in the said statement, and tax deducted at source only on the balance amount/s. Further, the bill amount/s having been since paid, duly recorded in the assessee s accounts, not accounting a part thereof by the assessee, as inferred by the Revenue, would lead to a difference in its accounts (with that of the payer) to that extent, i.e., ₹ 2.50 lacs, while none has been noticed or found. The said amount is thus not a trading receipt, but the receipt back of the security advance, paid earlier. The turnover would, accordingly, stand undisturbed at the amount reflected in the books, i.e., ₹ 365.44 lacs. 4.3 The second issue is with regard to the allowance of interest and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower estimate per se, but due to his having allowed, after estimation, deduction on account of interest and remuneration to the partners. Why, he himself directs for applying a net profit rate of 5% on the escaped turnover (of ₹ 2.50 lacs), so that he found the same as reasonable. The AO, accordingly, had no jurisdiction to revisit his said estimate in the set aside proceedings. This also answers the assessee s additional ground, challenging the revision in estimate, in its favour, even as the ld. CIT(A) has also held like-wise, so that there is no warrant for the said Ground; the Revenue being not in appeal. We, therefore, find no basis for either a review of the said estimate, revised to 8%,or for regardingit as having been made after the allowance of interest and salary to the partners, so as to preclude their allowance, as argued by the Revenue. No adjustment in respect thereof is accordingly called for. 4.4 The third and last adjustment is towards the income of ₹ 1,77,273/-, not separately assessed. These incomes are independent of the assessee s contract business. We are unable to see as to how these incomes, the source whereof is a Jeep (vehicle) and sur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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