The Income Tax Appellate Tribunal examined the determination of...

The Income Tax Appellate Tribunal examined the determination of net profits from contract business, rejection of books of accounts, and addition u/s 40(a)(ia) for non-deduction of TDS. The Tribunal held that when books of accounts are rejected, it is rejected as a whole, and there cannot be part rejection or part acceptance. The Assessing Officer was justified in estimating business profits at a flat percentage of gross contract receipts in the absence of regular books. In such cases, the profit percentage declared by the assessee in earlier years is the best guide. Considering the assessee's earlier years' profit percentages, the Tribunal estimated the contract business profits at 6% on the reduced contract figure after deducting demurrage for non-completion of work. Regarding the addition u/s 40(a)(ia), the Tribunal held that when books are rejected, the revenue cannot make additions or disallowances based on the same rejected books. Hence, the addition u/s 40(a)(ia) was deleted in favor of the assessee.