2011 (8) TMI 1320 - AT - Income Tax

Summary

Issues Involved:
1. Reasonable opportunity of being heard.
2. Invoking of Section 145 for non-maintenance of stock book.
3. Verification of written submission for low profit.
4. Addition of interest on performance guarantee as income other than business income.

Summary:

1. Reasonable Opportunity of Being Heard:
The assessee contended that the Ld. C.I.T. (Appeal) Jalpaiguri erred by not granting a reasonable opportunity of being heard, as the notices mentioned in the order were not served to the appellant. The Tribunal did not specifically address this issue in the judgment.

2. Invoking of Section 145 for Non-Maintenance of Stock Book:
The assessee argued that the Ld. C.I.T. (Appeal) Jalpaiguri erred by upholding the invoking of Section 145 by the A.O. for non-maintenance of a stock book. The A.O. observed that the assessee did not maintain any stock register and labor muster roll, leading to the rejection of the trading results u/s 145 of the Act. The Tribunal upheld the rejection of the books of account, stating that the A.O. had valid reasons for dissatisfaction over the correctness of the accounts due to the lack of unified stock register, unverifiable labor payments, and self-made vouchers for expenses.

3. Verification of Written Submission for Low Profit:
The assessee claimed that the low profit was due to emotional issues related to executing work in their native village affected by river erosion. The A.O. estimated the net profit at 4% of the gross contractual receipts, while the assessee declared a net profit of 1.73%. The Tribunal, considering the facts and circumstances, directed the A.O. to recompute the total income by taking the net profit rate at 2% on the gross contractual receipts.

4. Addition of Interest on Performance Guarantee as Income Other than Business Income:
The assessee contested the addition of Rs. 61,622/- as income from other sources, arguing it should be treated as business income. The Tribunal, following the decisions of the Hon'ble Supreme Court and Delhi High Court, held that the interest income on performance guarantee should be treated as business income. Consequently, no separate addition of Rs. 61,622/- was required since the net profit was already recomputed at 2%.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal directing the A.O. to adopt a net profit rate of 2% on gross contractual receipts and treating the interest income on performance guarantee as business income.