TaxTMI 
TaxTMI 
2013 (10) TMI 424
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....ofit rate of 8% of the total receipts instead of 10% applied by the A.O. when the complete books of account & vouchers were not produced and rejected u/s 145(3) of the Income Tax Act, 1961. 2. On the facts and circumstances whether the Ld. CIT(A) was right in directing the A.O. to adopt net profit rate of 8% of the total receipts which is in line with the provisions of section 44AD is not applicable to the case of the assessee as gross contract receipts exceeds Rs.40 lakhs. 3. On the facts and circumstances whether the Ld. CIT(A) was right in deleting the addition of Rs.3,00,000/- made on account of cash credit u/s 68 when the assessee has failed to provide any documentary evidence to substantiate its claim. 4. On the facts and circumstances whether the Ld. CIT(A) was right in not appreciating the fact there is no entry of Rs.3,00,000/- in the bank account of the assessee on 01.05.2008. 5. On the facts and circumstances whether the Ld. CIT(A) was right in deleting the addition of Rs.5,00,000/- made on account of cash credit u/s 68 when the assessee has failed to provide any documentary evidence to substantiate its claim. 6. On the facts and circumstances whether the ....
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....as procured from local suppliers who insists that cash payment be made as they have no the bank accounts. As regards other queries of the A.O. the assessee submitted that he has produced all the vouchers which are supported by documentary evidence and assessee has maintained proper books of account. 5. The AO finally observed that the assessee is maintaining mercantile system of accounting and therefore prior period expenses cannot be allowed. He further observed that till date the assessee has not produced complete vouchers/bills etc. as observed earlier, which was show caused to the assessee as well and therefore, no true profit can be derived without production of complete bills/vouchers and by debiting prior expenses during the year. Accordingly, the A.O. invoked the provisions of section 145(3) of the Act and applied N.P. rate of 10% in view of the decision of ITAT, Amritsar Bench, in the case of Assessing Officer vs. Pooja Construction Co. in ITA No.750(Asr)/1992 [69 ITD 147]. The assessee did not submit any explanation to this and the A.O. Accordingly disallowed 100% of the payment made in violation of provisions of section 40A(3) of the Act amounting to Rs.4,77,187/-. Th....
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....e issue with regard to rejection of books of account is not under dispute. As regards the application of Net Profit rate, the AO has pointed out many irregularities in the maintenance of books of account and has further given a show cause by pointing out irregularities in the maintenance of books of account and for invoking the provisions of section 145(3) of the Act and application of Net Profit rate of 10% in view of the decision of the ITAT, Amritsar Bench in the case of Assessing Officer vs. Pooja Construction Co. (supra), which has been confirmed by the Hon'ble Punjab & Haryana High Court in ITR No.166 of 1999 dated 10.09.2010 on the application of Net Profit rate of 10%. The assessee has not submitted any explanation and has not pointed out whether the said case is applicable in the facts and circumstances of the present case. Moreover, the ld. CIT(A) has not brought on record any comparable case and the fact of sub-contract has not been rebutted with the A.O. and therefore, the ld. CIT(A) is not justified to decide the issue at the back of the A.O. without affording opportunity of being heard to the A.O. Also, the ld. CIT(A) has not brought on record why the decision of Hon'....
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....s and hence reject the same and confirm the action of the A.O. to this extent." 12. We concur with the views of the ld. CIT(A) with regard to the findings in para 4.4 of his order. Moreover, section 40 starts with non- obstante clause as "notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and Gains of Business or Profession". In other words, section 40 has the effect 'notwithstanding anything contained in sections 30 to 38 of the Act. Therefore, this proposition has been affirmed by the Hon'ble Allahabad High Court in the case of CIT vs. Pradeshiya Industrial And Investment Corpn. of U.P. Ltd. (2010) 325 ITR 583 (All). The Hon'ble Allahabad High Court has followed the decision in the case of Shree Sajjan Mills Ltd. vs. CIT (1985) 156 ITR 585(SC), wherein it has been held that where in the case of gratuity with respect to section 40A where the identical 'words' are contained as in section 40, the Hon'ble Supreme Court, in 156 ITR 583, has held as under: "that for gratuity to be deductible under the Income-tax Act, 1961, it must fulfil the conditions laid down in s....