Hind Agro Industries, Nabha V. Addl. CIT, Sangrur

ITA 464/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95478 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAHI
• Assessee Lawyers: MANJIT SINGH
• Keywords: Rejection of books of accounts
• Section: 143(3); 194C; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 418/CHD/2015 (ASSESSMENT YEAR: 2010-11) THE COMMISSIONER OF INCOME VS. M/S HIND AGRO INDUSTRIES, TAX, PATIALA. ALOHRAN GATE, NABHA PAN: AACFH0708A (APPELLANT) (RESPONDENT) ITA NO. 464/CHD/2015 (ASSESSMENT YEAR: 2010-11) M/S HIND AGRO INDUSTRIES, VS. THE ADD L. COMMISSIONER OF ALOHRAN GATE, NABHA INCOME TAX, SANGRU R RANGE, SANGRUR. PAN: AACFH0708A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR . RESPONDENT BY : SH. N.K. SAHI, ADV. DATE OF HEARING : 06.08.2015 DATE OF PRONOUNCEMENT:12.08.2015 O R D E R PER BHAVNESH SAINI,J.M. : THESE CROSS APPEALS ARE FILED BY THE ASSESSEE AND T HE DEPARTMENT AGAINST THE ORDER OF THE CIT(A)-PATIALA, DT.26.02.2 015 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A MANUFACTURER OF HARVESTER COMBINES. DURING THE ASSESSMENT PROCEE DING ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS SUCH AS CASH BOOK, LEDGER, DAY BOOK, PURCHASE AND SALE BILLS AND EXPENDITURE BILLS AS AS KED FOR BY THE ASSESSING OFFICER VIDE VARIOUS LETTERS. NO QUANTITATIVE DETAI LS OF OPENING STOCK OR CLOSING STOCK WAS SUBMITTED, NEITHER THE PRODUCTION REGISTER NOR STOCK REGISTER FOR RAW MATERIAL AND FINISHED/SEMI FINISHE D GOODS WERE PRODUCED. 2 NO RECORD OF MONTHLY SCRAP WAS SHOWN. FURTHER IN TH IS YEAR THERE WAS A DECLINE IN GROSS PROFIT TO 10.59% FROM 11.28% AND 1 1.09% IN ASSESSMENT YEAR 2008-09 AND 2009-10 RESPECTIVELY. FURTHER THER E WERE CERTAIN DIFFERENCES IN THE CLOSING BALANCES OF CERTAIN PART IES. THE ASSESSEE HAS ALSO DEBITED BROKERAGE OF RS.24,50,000/- IN THE PRO FIT & LOSS ACCOUNT. NO AGREEMENT IN RESPECT OF BROKERAGE PAID HAS BEEN PRO DUCED AND THE MAJOR BROKERAGE HAS BEEN PAID TO CLOSE RELATIVES/FA MILY MEMBERS SPECIFIED UNDER SECTION 40A(2)(B) OF THE I.T.ACT. N O DETAILS REGARDING THE SERVICES RENDERED BY THE BROKERS COULD BE SUBMITTED . THE ASSESSING OFFICER ON THIS BASIS AND RELYING ON VARIOUS CASE L AWS REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE INCOME TAX ACT , 1961 AND ESTIMATED GROSS PROFIT @12.5% OF THE TURNOVER. 3. FURTHER, THE ASSESSEE HAD MADE PAYMENT OF RS.51, 945/- UNDER THE HEAD ADVERTISEMENT AND PUBLICITY EXPENSES WHICH EXC EEDED RS.20,000/- PAID IN A DAY AND RS.50,000/- PAID IN A YEAR. THERE FORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAME WERE LIABLE T O TAX DEDUCTION AT SOURCE UNDER SECTION 194C OF THE ACT. IN VIEW OF TH IS INVOKING THE PROVISIONS OF SECTION 40(A)(IA) THE ASSESSING OFFIC ER MADE DISALLOWANCE OF RS.51,945/-. 4. THE ASSESSEE WENT INTO APPEAL BEFORE THE CIT(A) AND MADE DETAILED SUBMISSIONS AGAINST THE ACTION OF THE ASSE SSING OFFICER REJECTING THE BOOKS OF ACCOUNT. THE ASSESSEE PLEADED SINCE DE TAILS WERE FURNISHED BEFORE AO AND IT IS NOT FEASIBLE TO MAINTAIN STOCK REGISTER THEREFORE BOOKS SHOULD NOT BE REJECTED. HOWEVER, THERE IS NO NEED T O ELABORATE THE SAME AS THE AR PREFERRED NOT TO PRESS THE GROUND RELATED TO REJECTION OF BOOKS. FURTHER ASSESSEE CITED VARIOUS COMPARABLE CASES TO JUSTIFY THE FALL IN N.P. RATES. 3 5. THE DETAILED SUBMISSION SO MADE BY THE ASSESSEE WERE SENT TO THE ASSESSING OFFICER FOR COUNTER COMMENTS BY THE CIT(A ), WHO IN REPLY VIDE LETTER NO.11 DATED 25.01.2014 AGAIN RELIED ON THE A SSESSMENT ORDER & SUBMITTED THAT ASSESSEE HAS NOT PRODUCED COMPLETE B OOKS OF ACCOUNTS, CASH BOOK DAY BOOK LEDGER PURCHASE AND SALE BILLS B ESIDES OTHER POINTS MENTIONED IN ASSESSMENT ORDER. 6. AS REGARDS THE ADDITION RS.51,945, IT WAS SUBMIT TED BEFORE THE CIT(A) THAT THE ASSESSEE HAS PURCHASES VARIOUS ITEMS VIDE BILL NO.61 FOR RS.21,945/- AND FURTHER PURCHASES VIDE BILL NO.62 AND THESE AMO UNTS PAID TO M/S. P. K. TRADERS ARE NOT SUBJECT TO DEDUCTION UNDER SECTION 194C, THEREFORE, IS WAS CONTENDED THAT THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED IN SUCH CIRCUMSTANCES. 7. THE CIT(A) CONSIDERED THE DETAILED SUBMISSIONS M ADE BY THE ASSESSEE AND LOOKING INTO THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE OPINED THAT BOOKS OF A/C ARE RIGHTLY REJEC TED U/S 145(3) OF THE INCOME TAX ACT AND IN THIS CASE SINCE THE APPELLANT ITSELF HAS SHOWN GROSS PROFIT RATE OF 11.28% IN THE ASSESSMENT YEAR 2008-0 9, THE GROSS PROFIT RATE OF 11.5% MAY BE TAKEN FOR THIS YEAR COMPARED TO THE GR OSS PROFIT RATE OF 10.59% SHOWN BY THE ASSESSEE AS AGAINST 12.5% APPLI ED BY THE AO. IN THIS WAY, THE CIT(A) PARTLY ALLOWED THIS GROUND OF THE A SSESSEE. 8. AS REGARDS THE ADDITION OF RS.51,945/-, THE CIT( A) HELD THAT THE AMOUNTS PERTAIN TO ADVERTISEMENT EXPENSES AND THERE FORE PROVISIONS OF SECTION 194C ARE ATTRACTED. THEREFORE THE PROVISION OF SECTION 40(A)(IA) ARE APPLICABLE IN SUCH CIRCUMSTANCES. IN VIEW OF TH E SAME, THIS GROUND OF APPEAL WAS DISMISSED BY THE CIT(A). 4 9. NOW, BOTH THE ASSESSEE AS WELL AS THE DEPARTME NT HAVE COME IN APPEAL BEFORE US. THE DEPARTMENT HAS RAISED FOLLOWI NG GROUNDS: 1. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN REJECTING THE GP RATE OF 12.5% APPLIED BY THE AO TO 11.5% EVEN WHILE UPHOLDING THE REJECTION OF THE BOOK RESULTS U/S 145 (3). 2. IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN RELYING UPON THE TRADING RESULTS OF EARLIE R YEAR TO ESTIMATE THE NET PROFIT, IGNORING THE FACT THAT EACH YEAR HAS TO BE ASSESSED ON ITS MERITS WHICH HAS BEEN DONE BY THE AO AND, THEREFORE, THE P REVIOUS ASSESSMENT RESULTS CANNOT BE RELIED UPON TO ESTIMATE THE PROFI T IN THE CURRENT ASSESSMENT YEAR. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO APPLY THE G.P RATE OF 11.5% INSTEAD OF 12.50% WITHOUT APPRECIATING THE FACT THAT OTHER ASSESSEE D EALING IN THE SAME BUSINESS HAD SHOWN HIGHER G.P RATE THAN THE ASSESSE E. 4. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND FINALLY DISPOSED. WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS. 1. THE ASSESSEE IS PARTNERSHIP FIRM RUNNING THE B USINESS OF MANUFACTURING OF HARVESTER COMBINES AND ITS PARTS. THE BOOKS OF A CCOUNTS OF THE ASSESSEE HAS BEEN WRONGLY REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961 AND THE ASSESSMENT FRA MED IN THE MANNER PROVIDED IN SECTION 144 DESERVES TO BE DELETED. 2. THE ASSESSEE HAS DECLARED G.P @ 10.59% ON THE SA LES OF RS.1421.72 LACS. THE LD. ADD. COMMISSIONER OF INCOME TAX, SANGRUR RA NGE, SANGRUR ASSUMED THE G.P. @ 12.505 WITHOUT ANY RELEVANT FACT S AND IGNORED THE BUSINESS RESULTS DECLARED BY THE ASSESSEE WHILE FRA MING THE ASSESSEMENT ORDER. THE LD. CIT(A), PATIALA HAS WRONGLY ASSUMED THE G. P @ 11.50% STATING THAT G.P FOR THE A.Y 2008-09 WAS @ 11.28% I GNORING THAT THE SALES WERE RS.360.46 LACS ONLY. THE APPEAL OF THE ASSESSE E WAS PARTLY ALLOWED. THE ASSESSEE ALSO SUBMITTED BEFORE THE LD. CIT (A), PATIALA THAT THE G.P @ 11.09% WAS DECLARED BY THE ASSESSEE FOR THE A.Y.200 9-10 ON THE SALES OF RS.1195.78 LACS. THE CASE OF THE ASSESEE WAS SELETE D FOR SCRUITINY. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 05.12.2011 A ND THE G.P RATE OF 11.09% WAS ACCEPTED (COPY OF THE ASSESSMENT ORDER F OR THE A.Y.2009-10 WAS ALSO PROVIDED). THE SUBMISSION OF THE ASSESSEE HAS BEEN WRONGLY IGNORED BY THE LD. CIT(A), PATIALA WHILE ASSUMING T HE G.P. @ 11.50% 5 INSTEAD OF G.P DECLARED BY THE ASSESSEE @ 10.59% HE NCE THE ADDITIONS ON ACCOUNT OF HIGHER G.P. @ 0.91% AMOUNTING TO RS.1293 7665/- 3. RS,. 51945/- WAS PAID TO M/S P.K. TRADERS FOR PU RCHASE OF MATERIALS OF ADVERTISEMENT & PUBLICITY EXPENSES. THERE ITEMS WER E PURCHASED VIDE BILL NO. 61 OF RS.21945/- AND BILL NO. 62 OF RS.30000/- . THE MATERIAL PURCHASED FOR ADVERTISEMENT & PUBLICITY EXPENSES ARE NOT SUBJ ECT TO DEDUCTION OF TDS U/S 194C HENCE NO TDS WAS DEDUCTED. THESE EXPEN SES WERE WRONGLY ADDED BACK IN THE INCOME FOR THE A.Y.2010-11 U/S 40 (A0 (IA0 OF THE I.T. ACT, 1961. THE SUBMISSION OF THE ASSESSEE HAS BEEN WRONGLY IGNORED BY THE CIT(A), PATIALA. THE ADDITONS OF RS. 51945/- DESERV ES TO THE DELETED. 10. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE APPE ARING BEFORE US PREFERRED NOT TO PRESS GROUND NO.1 RELATED TO THE R EJECTION OF BOOKS OF ACCOUNTS. THE GROUND NO. 1 IS THEREFORE, DISMISSED AS NOT PRESSED. 11. FURTHER ON THE ISSUE OF ESTIMATION OF GROSS PRO FIT RATE, IT WAS SUBMITTED THAT THE ASSESSEE HAS DECLARED FOLLOWING TRADING RESULTS IN THE EARLIER YEARS. A.Y TURNOVER GROSS PROFIT GP RATE 2008-09 3,60,46,991/- 40,66,099/- 11.28% 2009-10 11,95,78,609/- 1,32,60,730/- 11.09% 2010-11 14,21,72,875/- 1,50,62,002/- 10.59% IT WAS ALSO SUBMITTED THAT FOR THE IMMEDIATE PRECED ING ASSESSMENT YEAR I.E., ASSESSMENT YEAR 2009-10 THE ASSESSMENT WAS CO MPLETED UNDER SECTION 143(3) AND AN ADDITION OF RS,30,000/- ONLY WAS MADE IN THE TRADING RESULTS DECLARED BY THE ASSESSEE. AFTER TAKING INTO ACCOUNT THIS ADDITION OF RS.30,000/-, GROSS PROFIT RATE OF 11.11% WAS ACCEPT ED BY THE ASSESSING OFFICER. THE COPY OF THE ASSESSMENT ORDER FOR THE A SSESSMENT YEAR 2009-10 WAS ALSO FILED BEFORE THE CIT(A). IT WAS FURTHER SU BMITTED THAT THE A.O. HAS WRONGLY BASED HIS ESTIMATION ON THE BASIS OF GROSS PROFIT RATE DECLARED IN THE ASSESSMENT YEAR 2008-09. SINCE, THERE WAS AN IN CREASE OF RS.10.61 CRORES IN THE TURNOVER OF THE YEAR UNDER CONSIDERAT ION AS COMPARED TO ASSESSMENT YEAR 2008-09. IT WAS ALSO EXPLAINED THAT INCREASE IN TURNOVER 6 HAS BEEN ACHIEVED BY REDUCING THE SALE RATE OF GOOD S SOLD AND MARGIN OF PROFITS THEREON. SMALL DECREASE OF 0.69% AS COMPARE D TO THE ASSESSMENT YEAR 2008-09 STANDS WELL EXPLAINED BY STEEP INCREAS E OF 10.61 CRORES IN SALES DURING THE YEAR UNDER CONSIDERATION. IT WAS A LSO SUBMITTED THAT SINCE DEPARTMENT HAS ACCEPTED THE GROSS PROFIT RATE OF 11 .11% IN THE IMMEDIATE PRECEDING ASSESSMENT. THERE IS NO REASON FOR MAKING SUCH ESTIMATION DURING THE RELEVANT ASSESSMENT YEARS. 12. REGARDING THE ESTIMATION OF GROSS PROFIT RATE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROSS PROFIT RATE FOR ASSES SMENT YEAR 2008-09 BEING 11.28% AND THAT OF ASSESSMENT YEAR 2009-10 BE ING 11.09% THE RATE OF 10.59% IN ASSESSMENT YEAR 2010-11 IS NOT A BIG F ALL. FURTHER IT WAS SUBMITTED THAT THE FALL IN GROSS PROFIT HAS BEEN EX PLAINED TO THE ASSESSING OFFICER AS WELL AS CIT(A). THIS WAS DUE TO STEEP IN CREASE IN TURN OVER OF THE ASSESSEE. IN VIEW OF THE SAID SUBMISSIONS IT WAS PR AYED THAT GROSS PROFIT RATE 10.5% SHOWN BY THE ASSESSEE MAY BE UPHELD. 13. LD. DR RELIED ON THE ORDER OF THE ASSESSING OFF ICER AND PRAYED TO UPHOLD THE GROSS PROFIT RATE OF 12.5% AS HELD BY A. O. AS AGAINST 11.5% HELD BY CIT(A). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED THAT THE BOOKS OF ACCOUNTS WERE NEVER PRODUCED BEFORE THE ASSESSING OFFICER. CERTAIN OTHER ALARMIN G FACTS WERE ALSO FOUND BY THE ASSESSING OFFICER, THE OBVIOUS CONCLUSION MA DE BY HIM WAS TO REJECT THE BOOKS OF ACCOUNT. THE ASSESSEE PREFERRED NOT TO PRESS THE GROUND RELATED TO REJECTION OF BOOKS OF ACCOUNTS BE FORE US. IN SUCH A SCENARIO THE ESTIMATION OF GROSS PROFIT RATE IS A M UST. THE ASSESSEE CANNOT PLEAD TO ACCEPT THE GROSS PROFIT RATE AS DECLARED B Y HIM, WHEN BOOKS OF A/C AND DETAILS WERE NOT PRODUCED BEFORE AUTHORITIE S BELOW. THE CIT(A), 7 IN THIS CASE HAS GIVEN A VERY DETAILED REASONED FIN DING AS TO THE FACT THAT, WHY A GROSS PROFIT RATE OF 11.5% MAY BE APPLIED. HE STATED IN HIS ORDER AT PARA 4.3, AS FOLLOWS: 4.3 I HAVE CONSIDERED THE SUBMISSION MADE. IT IS NOTED THAT THE ASSESSEE FAILED TO PRODUCE COMPLETE BOOKS OF ACCOUN TS BEFORE THE ASESSING OFFICER AND THEREFORE APPELLANT DEFINITELY DEFAULTED IN THIS RESPECT. A HUGE AMOUNT HAS BEEN PAID BY THE APPELLA NT TO PERSONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT REGARDIN G PAYMENT OF BROKERAGE. NO DOUBT THE PERSONS MIGHT HAVE ACCEPTED RECEIPT OF THE AMOUNT BUT THE NATURE AND EXTENT OF THE SERVICE PRO VIDED BY SUCH PERSONS IS NOT CLEARLY ESTABLISHED AS MENTIONED BY THE ASSESSING OFFICER. IN ABSENCE OF COMPLETE BOOKS OF ACCOUNTS COUPLED WITH THE FACT THAT HEAVY EXPENSES PERTAIN TO PAYMENT MADE TO SPECIFIED PERSONS I AM OF THE OPINION THAT BOOKS OF ACCOUNTS HAVE BEEN CORREC TLY REJECTED BY THE ASSESSING OFFICER. AS REGARDS ESTIMATION OF PROFIT THE APPELLANT HIMSELF HAS SHOWN 11.28% GROSS PROFIT IN THE ASSESSMENT YEAR 20 08-09. AS REGARDS COMPARABLE CASES CITED BY THE ASSESSING OFFICER THE APPELLANT HAS GIVEN SUBMISSION IN THIS REGARD DURING THE COURSE OF ASSE SSMENT PROCEEDINGS AS REPRODUCED BY THE ASSESSING OFFICER IN THE ASSTT. O RDER. DURING THE COURSE OF ASSESSMENT PROCEEDING AS WELL AS DURING APPELLAT E PROCEEDING, APPELLANT FURTHER REFERRED TO SOME OTHER CASES WHER E GROSS PROFIT RATE IS LITTLE LOWER. THE APPELLANT HAS ALSO SUBMITTED ADDI TIONAL EVIDENCE UNDER RULE 46A PRODUCING FEW PHOTOCOPIES OF BILLS CONTEND ING THAT M/S PREET AGRO INDUSTRIES ARE PURCHASING ENGINES AT LOWER COS T DIRECTLY FROM THE MANUFACTURER. HOWEVER, SUBMITTING ONLY A FEW COPIES OF SUCH BILLS DO NOT JUSTIFY THE FALL IN MARGIN AS THE APPELLANT ITSELF IN EARLIER YEARS HAS SHOWN HIGHER MARGIN AND THE APPELLANT FAILED TO SHOW THAT THE FACTS WERE DIFFERENT IN THAT YEAR. THEREFORE, THE ADDITIONAL E VIDENCE SUBMITTED HAS NO RELEVANCE AND IS NOT ACCEPTABLE. LOOKING INTO ENTIR ETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT IN THIS CASE SINCE THE APPELLANT HAS HIMSELF SHOWN GROSS PROFIT OF 11.28% IN THE ASSESSMENT YEAR 2008-09. THE GROSS PROFIT RATE OF 11.5% MAY BE TAKE N FOR THIS YEAR COMPARED TO 10.59% SHOWN. THUS THERE IS AN INCREASE OF 0.91% IN G.P. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOWED. CONSIDERING FACTS OF CASE IT IS CLEAR THAT THERE IS INCREASE IN TURNOVER OF ASSESSEE AS COMPARED TO EARLIER YEARS. THE LD. CIT( A) CONSIDERED PAST HISTORY OF ASSESSEE FOR ESTIMATING PROFIT WHEN NO B OOKS WERE PRODUCED BEFORE AO. WE RELY ON DECISION OF PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. RAJINDER PARSHAD JAIN, 374 ITR 545. 15. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF CIT(A) ON THIS ISSUE. THE GROSS PROFIT RATE 11.5% A S ESTIMATED BY THE CIT(A) SEEMS REASONABLE IN THE FACTS & CIRCUMSTANCES OF TH E CASE. 16. IN THE RESULT, GROUND NO.2 OF THE ASSESSEES AP PEAL & GROUND NO.1-5 OF THE DEPARTMENTS APPEAL ARE DISMISSED. 8 17. REGARDING THE ADDITION OF RS.51,945/-, ON GROUN D NO. 3 OF APPEAL OF THE ASSESSEE, LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE BOOKS HAVING BEEN REJECTED AND GROSS PROFIT RATE HAVING B EEN ESTIMATED A SEPARATE DISALLOWANCE OF EXPENSES MADE BY THE ASSES SING OFFICER IS NOT TENABLE. 18. THE LEARNED DR RELIED UPON THE ORDER OF THE ASS ESSING OFFICER AS WELL AS CIT(A). 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE, WE HAVE UPHELD THE EST IMATION OF GROSS PROFIT @ 11.5% WHILE ADJUDICATING THE EARLIER GROUNDS, NO OTHER DISALLOWANCE OF ANY EXPENSES SEPARATELY IS CALLED FOR. OUR VIEW GET S STRENGTHEN BY THE JUDGEMENT OF THE HONBLE HIGH COURT OF ANDHRA PRADE SH IN THE CASE OF INDWELL CONSTRUCTIONS VS. COMMISSIONER OF INCOME TA X(1998) 232 ITR 776, WHEREBY HONBLE HIGH COURT HELD AS UNDER: 4. THE PATTERN OF ASSESSMENT UNDER THE IT ACT IS G IVEN BY S.29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTE D IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SS.30 TO 43D. SEC. 40 PROVIDES FOR CER TAIN DISALLOWANCE IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENE RALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER S.29 IS TO BE MADE UNDER S. 145 O N THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE, THE ITO MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGEMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOM E THAT IS TO BE COMPUTED UNDER S. 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER S. 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMA TE. THIS WILL ALSO THAT THE EMBARGO PLACED IN S. 40 ALSO TAKEN INTO ACCOUNT. 20. IN VIEW OF THE ABOVE, INCOME HAVING BEEN ESTIMA TED. ANY OTHER DISALLOWANCE IS NOT WARRANTED. IN THE RESULT GROUND NO.3 OF THE ASSESSEES APPEAL IS DECIDED IN ITS FAVOUR. 21. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED, WHILE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/08/2015 SD/- SD/- (T.R. SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12/08/2015 PRAMOD / AG