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TMI Blog2015 (12) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... AO as the assessee has been assessed as AOP not as a firm. Since while disposing off the ground No. 1 to 5, as already held that the assessee be assessed in the status of the firm accordingly direct the AO to allow interest and salary to the partners subject to the compliance of the conditions as stipulated u/s 40(b) of the Act. - Decided in favour of assessee. Estimation of the profit in the case of assessee by applying the proviso to section 44AD - Held that:- It is an undisputed fact that the assessee failed to produce the bills and vouchers to prove the genuinity of the expenses although the assessee has produced the books of account. This is also the fact that in the case of sub-contractor the margin of the profit is less as the margin in respect of contractor is being shared between the main contractor and the sub-contractor. The assessee has submitted a copy of order dated 11.05.2011 of the ld. CIT(A) in which he has estimated the profit rate @ 5% of the total receipt. In the absence of any cogent material being brought on record from either of the side it is appropriate that the gross profit in respect of a sub-contractor be estimated @ 4% - Decided partly in favour of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is a sub-Contractor hence the declared profit should have been accepted especially when the learned commissioner of income tax (Appeals) held that provision of section 44AD is not applicable. 10. That in any view of the matter the learned commissioner of Income Tax (Appeals) highly unjustified and incorrect in saying that the expenditure claimed in profit and loss account are not verifiable hence application of rate 7% is unwarranted and declared profit liable to be accepted. 2. The ground Nos. 1,2,3,4,5 6 relate to only issue of making the assessment of the assessee under the status of the AOP, not as firm. 3. Brief facts of the case are that; the assessee submitted income tax return on 31st October, 2005 on an income of ₹ 1170/-. The assessee enclosed audited balance sheet alongwith the return. The AO treated the assessee as AOP as the no partnership deed was filed alongwith the return. The assessee went in appeal before the ld. CIT(A), the assessee submitted the application under Rule 46A for admission of additional evidence and also enclosed the copy of the partnership deed. The ld. CIT(A) did not accept the additional evidence and confirm th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known to the law. 7. In view of the aforesaid dictum of law by the Hon ble Supreme Court; I am of the view that the assessee may not be aware of about the intricacies of the Income Tax Act. This fact is also proved from the conduct of the advocate on which the assessee has relied and to whom he has given the Vakalatnama, if the advocate would aware of the relevant provision of the Income Tax Act, he could have filed the copy of the partnership deed even during the course of assessment. I therefore, set aside the order of the ld. CIT(A) on this issue and I am of the view that it is a fit case where the additional evidence has been submitted by the assessee has to be admitted. 8. Now coming to the question whether the assessee firm has to be assessed as AOP or firm. The relevant provision of section 184(2) lays down as under: A certified copy of the instrument of partnership referred to in sub-section (1) shall accompany the return of income of the firm of the previous year relevant to the assessment year commencing on or after the 1st day of April, 1993 in respect of which assessment as a firm is first sought. 9. From the perusal of the aforesaid provision, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, in the interest of justice and in view of the fact that the provision of section 184(2) is not mandatory and is only directory as the similar language has been used u/s 80IA(7). I set aside the order of the ld. CIT(A) on this issue and held that the assessee be assessed as firm not as AOP . Thus the ground No. 1 to 5 are allowed. 12. The ground Nos. 6, 7 8 relate to the disallowance of remuneration and interest to the partners in accordance with the partnership deed. After hearing the rival submissions, and going through the order of the tax authorities below. I noted that the remuneration and interest to the partner was disallowed by the AO as the assessee has been assessed as AOP not as a firm. Since while disposing off the ground No. 1 to 5, I have already held that the assessee be assessed in the status of the firm. I accordingly direct the AO to allow interest and salary to the partners subject to the compliance of the conditions as stipulated u/s 40(b) of the Act. Thus the ground Nos. 6, 7 8 stands allowed. 13. The ground No. 9 10 relate to the estimation of the profit in the case of assessee by applying the proviso to section 44AD. The facts relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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