TaxTMI 
TaxTMI 
2017 (12) TMI 1258
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....me of Rs. 1,52,85,740/-. The Assessing Officer found that assessee had received total contract receipts of Rs. 26,66,70,613/-. Out of which, an amount of Rs. 5,42,90,048/- was given for sub-contract works to others and received sub-contract commission @1%, amounting to Rs. 5,42,901/-. Further, a sum of Rs. 12,68,58,376/- was received on sub-contract work awarded to the assessee by M/s. Mahalakshmi Construction Corporation Ltd., Pune. Thus, the main contract works executed by the assessee was Rs. 8,55,22,189/-. The Assessing Officer in the assessment proceedings found that the expenditure debited to the profit & loss account in respect of various heads is incapable of verification. It was also observed by the Assessing Officer that whether expenditure attracts section 40A(3) or not, is also not clear, since expenditure in respect of purchases and other expenditure is not incapable of verification. Thus, the Assessing Officer rejected the books of account and resorted to estimation of income @8% on the main contract receipts and @ 6% on the sub-contract receipts, apart from sub-contract commission of Rs. 5,42,901/-, which was received by the assessee separately. The Assessing Officer....
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.... decisionn of Indwell Construction (supra) was delivered prior to the introduction of section 44AD of the Act. Hence, the Tribunal held that after the introduction of section 44AD of the Act, even in case of estimation of income further deduction towards remuneration and interest payment to partners is allowable. Same view was again reiterated by the ITA T Hyderabad Bench in the case of Venkateswara Swamy Lorry Services (ITA No.903 & 353/Hyd/2009) dated 25.11.2009. When the department preferred appeal against this order of the Tribunal, Hon'ble Jurisdictional High Court upheld the view of the ITAT Hyderabad in judgement dt. 25.6.2013 in ITTA No.82 of 2013 by holding that in view of CBDT circular dated 31.8.1965, relied upon by the Tribunal, interest has to be allowed separately even in case of estimation of profit. Since the view taken by the AO is in consonance with the decision of the coordinate benches of the Tribunal and that view is one of the possible views, the assessment order passed under section 143(3) cannot be held to be either erroneous or prejudicial to the interests of the revenue on this issue. In the aforesaid view of the matter, we direct the AO not to disallo....
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....s men. The above said illustration would support the contentions of the assessee that the depreciation should be allowed separately. Accordingly, we direct the AO to allow the depreciation admissible to the assessee against the income estimated by us in the preceding paragraphs." 11. Considering the facts and circumstances of the case and also applying the ratios of the decision relied upon by the AR., we are of the opinion that depreciation is a allowable deduction, even after estimation of net profit on gross receipts. Accordingly, we direct the A.0. to allow the admissible depreciation against the income estimated from the contract receipts." 6.4. I, therefore, direct A.O. to allow (1) eligible depreciation and (2) allowable partners' remuneration as per provisions of the Act subject to the condition that resultant income should not be less than admitted income of appellant." 4. Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before this tribunal challenging the direction of the ld.CIT(A) that he should not have allowed the depreciation and remuneration paid to the partners, and the assessee is in cross objection supporting the order o....
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...., metal, road metal, sand, steel and stone, construction expenses, consumable stores, earth work payments, repairs & maintenance, salaries, labour charges, transport charges etc. are not verifiable hence, made self paid vouchers. Many petty payments were made in cash and it is also not ascertainable whether the payments attract the disallowance under section 40A(3) of the Act or not. Therefore, the Assessing Officer rejected the books of account and estimated the income. During the hearing in appeal, ld.Authorised Representative for the assessee did not make out any case to controvert the findings given by the Assessing Officer with regard to nature of expenses and its capability of verification. When the assessee cannot establish the genuineness of the expenses, we do not find any error in the action of the Assessing Officer for computing the income on estimate basis. Therefore, we uphold the order of the ld. CIT(A) with regard to estimation of income @ 8% on main contract receipts and @ 6% on sub-contract receipts, apart from sub-contract commission. 9. The next issue in revenue's appeal is with regard to direction of the ld. CIT(A) to allow depreciation and remuneration pa....