INCOME TAX ACT, 1961

Section 154 read with Sections 145 and 263

Rectification under section 154 - Estimation of books of accounts of assessee - IT restricated partners remunation -

Assessee was engaged as contractor and was subjected to survey action wherein one of the partner in recorded statement, made admission of a sum. During assessment proceedings, assessee's books of accounts were rejected under section 145(3) and profit was estimated @3% of total turnover which was held to be over and above declared income. CIT(A) enhanced the income which comprised of two components viz. other income and business income. Assessee sought rectification of assessee by way of rectification application under section 154. Tribunal held that when profits were estimated, further addition of income declared during survey was not called for. In the meantime, order passed by AO was subjected to revisional jurisdiction under section 263 by CIT to restrict the partners' remuneration. Assessee challenged exercise of revisional jurisdiction under section 263 wherein revisional order was cancelled on principle of merger. Held: Upon careful consideration of factual matrix, it was found that coordinate bench had already adjudicated the matter of quantum additions and the same was to be followed in spirit. As per this order, since the income were assessed on estimated basis, separate additions over and above the assessed income was uncalled for. CIT(A) correctly ascertained assessee's income which was in consonance with the directions of Tribunal. The said computation comprised-off of estimated income @ 3%, other income as per financial statements and disallowance under section 40A(3). Against the same, deduction of interest and remuneration to partner's have been allowed. The same was in consonance with the case history. Therefore, AO was directed to adopt the income and recompute assessee's tax liability.

REFERRED : M/s. B.M. Patel & Brothers v. ACIT [I.T.A. Nos. 91 & 92/Ahd/2011, dt. 18-9-2015] M/s. BM Patel & Brothers v. CIT [ITA No. 1507/Ahd/2011, dt. 28-11-2014]

FAVOUR : Partly in assessee's favour

A.Y. : 2006-07

INCOME TAX ACT, 1961

Section 154

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