2015 (8) TMI 648 - AT - Income Tax

Rejection of book result - estimation of profit at 8% of the gross contract receipts - Held that - As the assessee has not produced any evidence before the Assessing Officer, therefore Assessing Officer is justified in estimating the profit at 8% and our interference is not required. - Decided against assessee. Disallowance of interest on house property claim u/s. 80C - Held that - Looking to the facts and circumstances of the case, we find that the assessee has paid interest of ₹ 82,064/-, for which he submitted a bank statement before us. The assessee was claimed interest since so many years. We find that the assessee has paid interest paid to the bank for housing loan and it is supported by bank statement, therefore we allow the same. - Decided in favour of assessee.

Summary

Issues:
1. Estimation of profit at 8% of gross receipts by AO.
2. Disallowance of depreciation on estimated profit.
3. Disallowance of deduction u/s. 24(b) of the Income Tax Act.

Analysis:
1. The appeal was against the order of the ld. CIT (A) confirming the AO's estimation of profit at 8% of gross receipts, despite audited accounts under section 44AB. The assessee argued that the profit estimation was on the higher side. However, as the assessee failed to produce necessary documents, the AO rejected the books and estimated profit at 8%. The Tribunal upheld this decision citing Section 44AD of the Income Tax Act, which allows for such estimation if books are not maintained, especially when gross receipts exceed Rs. 1 crore. The Tribunal found the rate reasonable and in line with precedents, dismissing the appeal.

2. The second issue pertained to the disallowance of depreciation on the estimated profit. The AR cited judgments supporting depreciation allowance on estimated income, emphasizing the need for deductions as per relevant sections of the Act. The DR supported the revenue authorities' decisions. The Tribunal noted that the assessee did not provide evidence to support the claim, leading to the disallowance. Referring to Section 144 of the Act, the Tribunal upheld the disallowance of depreciation due to lack of compliance and failure to produce necessary documentation.

3. The final issue involved the disallowance of interest on house property claim under section 80C. The assessee failed to provide evidence to support the claim, resulting in disallowance by the AO and confirmation by the CIT (A). However, during the appeal, the assessee submitted a bank statement showing interest payments, which the Tribunal accepted as valid. The Tribunal allowed the claim for interest paid on the house property, supported by the bank statement.

In conclusion, the Tribunal partly allowed the appeal, permitting the interest claim on the house property but upholding the estimation of profit at 8% and disallowance of depreciation due to non-compliance and lack of evidence.