Tribunal decision: Business profits estimation upheld, machinery sale loss disallowed, depreciation adjusted, interest claim dismissed.

The Tribunal upheld the estimation of business profits at 5% of gross business receipts under Section 145(3), finding it reasonable. The double addition on account of loss on sale of machinery was deemed unsustainable and directed to be deleted. Depreciation was allowed as per the Income Tax Act and Rules, reduced by the depreciation claimed in the books. The claim for interest expenses was dismissed as it was already factored into the net profit estimation. The appeal was partly allowed with specific grounds addressed accordingly.

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Issues Involved:
1. Estimation of profit @ 5% of gross business receipts.
2. Addition of Rs. 49,46,196/- on account of loss on sale of machinery.
3. Claim of depreciation.
4. Claim for interest expenses.

Detailed Analysis:

1. Estimation of Profit @ 5% of Gross Business Receipts:
The Assessee contended that books of account, bills, vouchers, etc. were produced during the first assessment, which were accepted by the AO. However, the AO rejected the book results in the second round of assessment due to the Assessee's failure to produce the required documents. The Tribunal noted that the order under Section 263 of the I.T. Act had attained finality, necessitating the production of books again. The Tribunal upheld the AO's decision to invoke Section 145(3) and confirmed the estimation of business profits @ 5% of gross business receipts, finding no material to suggest it was excessive or unreasonable.

2. Addition of Rs. 49,46,196/- on Account of Loss on Sale of Machinery:
The Assessee argued that this addition resulted in a double disallowance since the entire loss was already disallowed and net profit was assessed. The Tribunal agreed, noting that the amount was part of the business loss claimed and disallowed, making the repeated addition unsustainable. Consequently, the Tribunal directed the AO to delete the double addition.

3. Claim of Depreciation:
Both sides agreed that the Assessee was eligible for depreciation under the Income Tax Act and Rules. The Tribunal noted that since net profit (not gross profit) was estimated, the depreciation claimed in the books was already considered. Therefore, the Tribunal directed the AO to allow depreciation as per the Income Tax Act and Rules, reduced by the depreciation claimed in the books.

4. Claim for Interest Expenses:
The Assessee cited the case of CIT vs. Jain Construction Co. & Ors. to support the claim for interest expenses. However, the Tribunal found this case inapplicable as it pertained to remuneration to partners, not business borrowings. The Tribunal agreed with the Departmental Representative that interest expenses were deemed allowed in the net profit estimation and dismissed this ground of appeal.

Conclusion:
- Ground 1: Dismissed.
- Ground 2: Allowed.
- Ground 3: Partly allowed.
- Ground 4: Dismissed (not pressed).

The appeal was partly allowed, and the order was pronounced in open court on 17/12/19.

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