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TMI Blog2014 (10) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... orks as contractor and filed the return of income on 13/04/2009 declaring total income of Rs. 29,23,781/- which was processed u/s 143(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act' in short). Later on case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer asked the assessee to produce books of accounts, bills and vouchers. The Assessing Officer observed that the assessee failed to produce the books of accounts, bills and vouchers for verification, therefore, he was left with no option, but to estimate the net profit. The Assessing Officer rejected the books of accounts by invoking the provisions of section 145(3) of the Act and applied the net profit rate of 12% on the contractual receipts shown by the assessee and made the impugned addition. 4. Being aggrieved, the assessee carried the matter to the ld. CIT(A) and submitted that the Assessing Officer had not considered the net profit percentage of earlier years in the assessee's case as considered by various authorities, in this year. It was further stated that there was no change in the nature of business activities for the last several years as the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering the submissions of the assessee, directed the Assessing Officer to apply net profit rate of 5.5% subject to deduction of in and salary paid to the partners. The relevant observations has been given in para 4.4 of the impugned order which are reproduced verbatim as under:- 4.4 I have considered the submissions of the appellant and remand report of the A.0, alongwith the assessment order. It is seen that the assessee has been given reasonable and meaningful opportunity and his letter dated 20.1.2010 regarding earlier results of assessee's case has been considered by the A.0. in the remand report. In this letter, the assessee's main contention was regarding not considering the net profit declared / applied in earlier years. As regards the adoption of net profit rate of l2%by the A.0. before depreciation, interest and salary paid to the partners, it may be mentioned that once the books are rejected under section 145(3), there must be certain basis for adopting the net profit rate. In the appellant's case, earlier orders have been examined which are relevant for deciding the issue. In assessment year 2007-08 and 2006-07, assessment order has been passed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to partners is applied in the appellant's case based on the earlier results. Accordingly, the A.O. is directed to compute the net profit subject to deduction of interest and salary paid to partners. The issue is decided accordingly and balance addition if any is deleted. Now the department is in appeal. 6. Learned D.R. strongly supported the order of the Assessing Officer and submitted that the assessee did not cooperate in spite of various opportunities given and did not produce books of accounts along with bills and vouchers, therefore, the Assessing Officer had no option except to estimate the income and the Ld. CIT(A) was not justified in allowing relief to the assessee. 7. In his rival submissions, learned counsel for the assessee strongly supported the impugned order passed by the Ld. CIT(A) and reiterated the submissions made before the Ld. CIT(A). 8. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is noticed that the assessee did not produce the bills and vouchers for verification before the Assessing Officer. Therefore, there was no other option except to estimate the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot require any modification or alternation on our part because the net profit rate declared by the assessee was better than the net profit rate declared in the earlier years and the Assessing Officer had not given any basis while estimating the net profit rate at 6% on the gross receipts shown by the assessee. We therefore, do not see any merit in this ground of the departmental appeal. 13. The next issue vide Ground No. 2 relates to the deletion of disallowance of Rs. 5,22,629/- made by the Assessing Officer on account of salary and interest paid to the partners. 14. Facts relating to this issue, in brief, are that the Assessing Officer disallowed the interest and remuneration of Rs. 5,22,629/- credited to the partners capital account while invoking the provisions of section 185 of the Act. Being aggrieved, the assessee carried the matter to the ld. CIT(A) and submitted as under:- "3.1 It is respectfully submitted that the provisions of section 185 can be invoked only when the assessee failed to comply with the provisions of the section 184(5). The ld Assessing Officer has totally failed to establish in his assessment order, how the appellant was failed to comply with the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and remuneration. It is settled position of the law that income cannot be taxed twice." 15. The learned CIT(A), after considering the submissions of the assessee, held that the provisions of section 185 of the Act were not applicable in the case of the assessee. Accordingly, disallowance made by the Assessing Officer was deleted. Now the department is in appeal. 16. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it appears that there was no change in the partnership deed. The provisions contained in section 184 of the Act requires that a certified copy of the partnership deed is to be furnished along with return if there is change in the partnership deed or it was the first return of income of the partnership firm. In the present case, it was not the first year of the partnership firm and there was no change in the partnership. The Assessing Officer also had not established how and in what manner, the assessee failed to comply with the provisions of section 184 of the Act. Therefore, the Assessing Officer was not justified in making the impugned disallowance and the Ld. CIT(A) rightly delete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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