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Issues:
1. Computation of income based on profit rate and deduction of interest paid to 3rd parties. 2. Deletion of addition made under section 40A(3) for cash payments exceeding prescribed limit. Issue 1: Computation of income based on profit rate and deduction of interest paid to 3rd parties: The appeal involved a dispute regarding the computation of income by applying a profit rate of 5% instead of 8% as done by the Assessing Officer (AO). The appellant, a civil contractor, had declared a net profit slightly over 1% on contract receipts after claiming depreciation. The appellant contended that a profit rate of 5% should be applied, subject to deduction of interest and depreciation, based on previous Tribunal decisions. The Commissioner of Income Tax (Appeals) (CIT(A)) directed the AO to compute the income at 5% rate, allowing deduction of interest to 3rd parties. The Tribunal upheld the CIT(A)'s order, citing consistency with previous Tribunal decisions and judgments of the Rajasthan High Court. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. Issue 2: Deletion of addition made under section 40A(3) for cash payments exceeding prescribed limit: The second issue revolved around the deletion of an addition made under section 40A(3) for cash payments exceeding the prescribed limit. The AO had made the addition based on the violation of provisions of section 40A(3) by the appellant. However, the CIT(A) deleted the addition, considering that the income was computed by rejecting book results and applying a net profit rate, which disallowed deductions for various expenses. The CIT(A) relied on judgments of the Andhra Pradesh High Court and Allahabad High Court to support the deletion. The Tribunal upheld the CIT(A)'s decision, stating that no addition under section 40A(3) could be made due to the computation method used. Consequently, the Tribunal dismissed the Revenue's appeal on this ground as well. In conclusion, the Tribunal dismissed the appeal, upholding the CIT(A)'s orders on both issues related to the computation of income based on profit rate and deduction of interest paid to 3rd parties, and the deletion of addition under section 40A(3) for cash payments exceeding the prescribed limit.
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