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Issues involved: Appeal against order of ld. CIT(A) for A.Y. 2008-09, rejection of books of accounts u/s 145(3) of the Act, application of N.P. rate, trading addition, interest income related to business.
Issue 1: Rejection of books of accounts u/s 145(3) of the Act and trading addition The assessee-firm derived income from Civil Contract Works and declared income for F.Y. 2007-08. The AO rejected the books of accounts u/s 145(3) of the Act due to lack of stock and material registers, applying N.P. rate of 8.5%. This resulted in a trading addition. The ld. CIT(A) restricted the addition but approved the application of section 145(3). The revenue challenged the reduction, while the assessee accepted the rejection of books. The Tribunal found the gross and net profits of two assessment years, agreeing with the ld. CIT(A) on adopting N.P. rate based on past history. The Tribunal confirmed the reduction of trading addition and did not interfere with the ld. CIT(A)'s findings. Issue 2: Interest income related to business The appeal also addressed interest income of the assessee-firm, earned from a compulsory deposit made in NSC for obtaining contracts. Both parties agreed that this interest income was directly related to the business activities. The Tribunal affirmed that the interest earned on securities for obtaining contractual work falls under 'income from business'. The deposit was crucial for securing contracts, making the interest income a necessary part of the business. The Tribunal upheld the ld. CIT(A)'s decision to delete this addition, dismissing the appeal on this ground. Conclusion The Tribunal dismissed the revenue's appeal against the order of ld. CIT(A) for A.Y. 2008-09, upholding the decisions on the rejection of books of accounts, trading addition, and interest income related to business. Ground No. (iii) was deemed general and required no further adjudication. The order was pronounced on 14th March, 2013.
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