2010 (9) TMI 723

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....n 145(3). A net profit rate of 12 per cent on contract receipts subject to allowance of depreciation and interest to banks and others was adopted. After examining the assessment record, the learned CIT found that assessee has not considered certain legal disallowances which were not allowable and, therefore, the order of the Assessing Officer was found to be erroneous insofar as prejudicial to the interest of revenue. Accordingly, a show-cause notice dated 19-2-2010 was issued to the assessee. Various points which were not considered by the Assessing Officer were mentioned in the show-cause notice by the learned CIT. These defects have been noted by learned CIT in his order at pp. 1 and 2 which are five in number. The main objection of lear....

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.... is considered that the net profit should be estimated it should be estimated subject to allowances of depreciation and depreciation allowance should be deducted therefrom. This decision was taken into consideration by learned CIT in favour of the Department for the reason that where depreciation and interest is allowable other disallowances can also be disallowed. Therefore, other legal disallowance i.e., under section 40A(3) can also be disallowed. Accordingly, the order of Assessing Officer was set aside and the Assessing Officer was directed to complete the assessment afresh after affording reasonable opportunity of being heard to the assessee. Now the assessee is in appeal here before the Tribunal. 3. The learned counsel of the asse....

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....bmissions and perusing the material on record, we find that assessee deserves to succeed in its appeal. We noted that the Assessing Officer has made enquiry in respect to cash payment made hit by provisions of section 40A(3) and assessee had filed reply that the provisions are not applicable on the facts of the present case. It is further seen that after knowing various defects in the maintenance of books of account, the books of account were rejected by invoking provisions of section 145(3) by the Assessing Officer and profit rate of 12 per cent was applied subject to deduction on account of depreciation and interest. Once GP rate or net profit rate is applied, then no further disallowance can be made under section 40A(3) or any other prov....