2013 (3) TMI 678 - AT - Income Tax

Summary

Issues involved: Appeal against order of Commissioner of Income Tax (Appeals) u/s 143(3) of the Income Tax Act, 1961 for assessment year 2008-09.

Grounds of Appeal:
1. Orders passed by lower authorities deemed illegal, arbitrary, and bad in law.
2. Rejection of books of account and application of net profit rate of 12% on net contract receipts.
3. Non-allowance of deduction of interest and salary paid to partners u/s 40(b) of the Act.

Details of Judgment:
1. The assessee, a road contractor, declared total income of Rs. 61,23,300 for the year. During scrutiny, incomplete information led to rejection of books of account u/s 145(3) due to lack of stock register and original vouchers. Net income was estimated at Rs. 92,14,731 applying a flat rate of 12%.
2. The appeal challenged the rejection of books and application of 12% net profit rate. The Tribunal found the rejection justified due to incomplete records. However, considering the assessee's declared net profit rate of 8.94%, a 9% rate was applied instead of 12%. Deductions for interest and partner salaries were allowed u/s 40(b).
3. The Tribunal referred to a similar case where a 12% rate was not deemed appropriate, leading to the decision to adjust the net profit rate to 9% for the assessee. The appeal was partly allowed, with deductions allowed for interest and partner salaries.

Conclusion:
The appeal was partly allowed, with the net profit rate adjusted to 9% and deductions for interest and partner salaries permitted.