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Income Tax Appellate Tribunal, “SMC” “C” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM]
For the Appellant: Shri Alokesh Kundu, Advocate For the Respondent: Shri Rajendra Prasad, JCIT, Sr. DR ORDER
This appeal by assessee is arising out of order of CIT(A)-XXXVI, Kolkata vide Appeal No. 303/CIT(A)-XXXVI/Kol/Wd-1(3),HG/08-09dated 31.07.2014. Assessment was framed by ITO, Wd-1(3), Hooghly u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2006-07 vide his order dated 30.12.2008.
These two inter-connected issues claimed by the assessee are in respect to disallowance of partners’ remuneration and interest to the tune of Rs.1,21,048/- and addition of liability to the tune of Rs.2.90 lacs despite the fact that the AO resorted to the provisions of section 145(3) of the Act and thereby assessed the income by applying G.P. rate.
I have heard rival submissions and gone through facts and circumstances of the case. I find that the assessee is engaged in the business of civil construction and filed return of income in pursuance to provisions of section 44AD of the Act. Admittedly, the assessee’s turnover falls within the prescribed limit of Rs.40 lacs as is evident from the re-casted P&L Account and Balance Sheet as reproduced in the assessment order as well as in the order of CIT(A). The AO resorted to the provisions of section 145(3) of the Act and rejected the books of account and determined net profit at Rs.2,76,060/- instead of declared profit by the assessee at Rs.1,33,160/-. Ld. Counsel before us stated that the assessee is entitled to claim of deduction of partners’ remuneration and interest on capital to the extent of Rs.1,21,048/- and also no addition on account of other trading
2 Shiv Sakti Construction AY 2006-07 items should have been made like liability added by the AO to the tune of Rs.2.90 lacs. I find from the above that assessee is entitled for allowance of partners’ remuneration, interest on capital to the tune of Rs.1,21,048/- and direct the AO accordingly. As regards to the addition of liability of Rs.2.90 lacs added by the AO, the same is arising out of the business transaction of the assessee being a balance sheet item, once the AO has rejected the books of account by resorting to the provisions of section 145(3) of the Act and estimated the gross profit rate, no further addition on account of trading aspect can be made by the AO. Accordingly, we delete the same. Appeal of assessee is allowed.
In the result, the appeal of assessee is allowed.
Order is pronounced in the open court on 11.12.2015. Sd/- (Mahavir Singh) Judicial Member
Dated : 11th December, 2015 Jd.(Sr.P.S.) Copy of the order forwarded to: 1. APPELLANT – Shiv Sakti Construction, 17A, Bhaduri Lane, P.O. Chatra, P.S. Serampore, Dist. Hooghly, Pin-712204 Respondent – ITO, Wd-1(3), Hooghly. 2 3. The CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata