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TMI Blog2016 (9) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to ₹ 22,41,600/- and ₹ 21,60,000/- are also to be allowed. AO finally decided to apply net profit of 5.05% which has been agreed upon by the assessee. It is therefore seen that issue of allowance of payments of machinery hire charges has been duly taken into consideration by the AO while estimating the n.p. rate of 5.05%. As noted that the decision of Hon’ble Kolkatta High Court in the case of Arjun Bhowmick (2014 (8) TMI 1075 - CALCUTTA HIGH COURT) wherein it has held that “once the n.p. rate is estimated, the AO cannot based this disallowance on the same books of accounts for the purpose of disallowance by invoking provisions of section 40(a)(ia) of the Act or general disallowance u/s 37 of the Act. The estimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order, there cannot be any basis for initiation of proceedings on the ground of mistake apparent from record, thus passing of order u/s 154 may please be declared as illegal and unjustified in the facts circumstances of the case. (2) The assessment order for above year was got completed o n agreed basis and appellant has accepted net profit @ 5.05% instead of declared net profit of 3.92% and no appeal against said assessment order was preferred to honour agreed assessment order. That net profit rate was enhanced by rejecting books of accounts u/s 145(3)/ Thus disallowance u/s 40(a)(ia) of IT Act on account of outstanding hire charges of machinery is absolutely illegal and unjustified and may please be declared as illegal. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is that assessment u/s 143(3) has been made and while completing the assessment a particular NP rate has been applied therefore subsequent to such assessment such amount of ₹ 24,01,000/- cannot be added by way of proceedings u/s 154 of IT Act. In this connection it may be noted the provisions of section 40(a) are of overriding nature providing that notwithstanding anything to the contrary in sec. 30 to 38, the amounts specified in section 40(a) shall not be deducted in computing the income chargeable under the head profit and gains of business and profession. In other words the provisions u/s 40(a)(ia) are to be applicable if the circumstances specified under this provision are found to be existing. In this background it may be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and not for reinitiate of any proceedings which is already consciously concluded. The extent of rectification is having very limited scope and does not entitle to disturb entire body of the order and for creation of separate issue which is discussed at length in order. Re-thoughts and revision of any order is not permissible u/s 154 of the IT Act. Therefore order of both the lower authorities to this extent by invoking of section 154 may please be declared illegal. That Ld. AO based on para of AG has made disallowance u/s 40(a)(ia) on account of non-deduction of TDS on outstanding amount of expenses of ₹ 24,01,000/-. The assessment order has been passed on agreed basis whereby NP as declared in return of income as enhanced from 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015. 2.3 The ld DR is heard who has relied upon the order of ld CIT(A). 2.4 We have heard the rival contentions and perused the material available on record. In the instant case, the books of accounts were rejected u/s 145(3) of the Act and thereafter the AO has estimated net profit @ 5.05% on contract receipt after deduction of depreciation, interest and remuneration paid to partners as against net profit of 2.39% declared by the assessee. From the perusal of the assessment order, it is noted that there have been discussions between the AO and the assessee in terms of estimating the net profit rate once the books of account have been rejected. As part of that discussion, it is noted that in response to AO s show-cause as to why 8.5% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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