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TMI Blog2016 (8) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... son in making an addition to the turnover of the appellant - Decided against revenue Separate liablility for tax on interest income and other income apart from the trading addition sustained - Held that:- We find force in the contention of the ld. Counsel for the assessee that when the interest paid and earned in the course of business in that event deduction on payment of interest is required to be allowed. Accordingly, we delete the addition made by the ld. CIT (A) on this account. In respect of the other income the ld. Counsel for the assessee has demonstrated that it is part of the contract business and therefore, once the net profit is applied for assessing the income, such receipts cannot be separately added to the income. While accepting the contention of the ld. Counsel, we direct the AO to delete the addition. This ground of the assessee is allowed. - ITA No. 331/JP/2014, C.O. No. 17/JP/2014 - - - Dated:- 20-7-2016 - SHRI KUL BHARAT, JM SHRI VIKRAM SINGH YADAV, AM For The Revenue : Shri R.A. Verma (Addl.CIT) For The Assessee : Shri P.C. Parwal (CA) ORDER PER SHRI KUL BHARAT, JM. The revenue and the assessee has challenged the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10% respectively has been confirmed by the Hon ble Jurisdictional High Court. 3.2. On the contrary, the ld. Counsel for the assessee opposed the submissions and submitted that all the details were supplied to the AO and the assessee has been consistently following the same method which has been accepted by the revenue. The ld. Counsel submitted that the AO has wrongly observed that assessee has shown net profit @ 3.79% on net receipts. Since service tax is allowed to be claimed as expenditure, therefore, net profit percentage ought to be calculated on gross contract receipts and not on net contract receipts. Ld. Counsel submitted that assessee has actually earned profit of ₹ 49.77 lacs only from construction business. Thus, if actual construction profit is considered, then net profit rate is only 3.09% as against 3.79% shown by the assessee. Accordingly, after considering the above discrepancies, AO applied the net profit rate of 8% on contract receipts resulting into trading addition of ₹ 96,27,290/-. The ld. Counsel reiterated the submissions as made in the written brief. It is submitted that the labour charges to workers supplied by the sub-contractors is ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellant is not maintaining project wise details since it is very expensive and by looking at the size of the business it is not feasible. It is also stated that the appellant is complying with the requirements of accounting standard AS-7 and the books of accounts are duly audited under the Companies Act, 1956. 4.19. I have considered the material available on record and find that although complete details of labour charges paid, sub-contractor payments and sundry creditors have been filed but certain confirmations could not be produced by the appellant. Having gone through the detailed submissions filed by the appellant along with a copy of the judicial decisions cited therein, I hold that the appellant has not been able to place on record enough material to justify the book results declared for the period under consideration. Thus, I hold that AO was justified in invoking the provisions of section 145(3) of the IT Act. 4.20. Having considered the material available on record, now the issue arises is what should be the rate of profit which needs to be applied in the facts and circumstances of the present case. A number of judicial decisions have been quoted by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 and 09-10. The ld. CIT (A) has considered the past history of the assessee as well as considering the material placed before him adopted the rate of 5% which appears to be reasonable looking to the facts and circumstances of the case. Therefore, this ground of the revenue is rejected. 4. Ground no. 2 is against deleting the receipts/sales of ₹ 2,15,15,138/- made by the AO on account of less receipts shown by the assessee from various projects in the books. 4.1. The ld. D/R supported the order of the AO and submitted that the ld. CIT (A) was not justified in deleting the receipts. He submitted that the ld. CIT (A) has excluded these receipts. 4.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the written brief. The ld. Counsel submitted that the assessee has duly reconciled the variation in receipts. Therefore, the ld. CIT (A) was justified in deleting the receipts. 4.3. We have heard rival contentions and perused the material available on record. The contentions of the assessee are that the AO observed that receipts as per Form 26AS were higher than the contract receipts shown by the assessee in its books by ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain at the time of payment. Further, on the amount of ₹ 80,30,437/-, the tax was deducted by NBBC during the year but this amount was shown in the closing work in process by the assessee on 31.03.2010 and receipt in FY 2010-11. After considering the same, there does not remain any difference in the receipt declared by the assessee and that reflected in Form 26AS. (b) M/s Shimizu Corporation:- AO observed that the receipts as per Form 26AS were shown for ₹ 15,22,668/- whereas receipts as per books were shown for ₹ 10,61,570/- resulting in less receipts of ₹ 4,61,098/- shown by the assessee. It is submitted that in the immediately previous year the assessee booked receipts at ₹ 1,44,40,888/- whereas party has passed the bills of ₹ 1,38,21,228/- only and rest of the bills were passed in the year under consideration. Thus, in AY 2009-10 there was excess booking of receipts by ₹ 6,12,660/- as compared to receipts shown in Form 26AS. Since the amount was already booked in the previous year, the same cannot be again shown in the year under consideration only because the party has deducted the TDS on this amount in the current FY. In support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (h) Kansai Nerolac Ltd:- The receipts as per Form 26AS were shown for ₹ 30,06,140/- whereas receipts in books were shown at Rs. Nil. Assessee explained that in the immediate previous year the assessee has booked receipts at ₹ 3,55,19,473/- whereas party has passed the bills of ₹ 3,25,49,165/- only. The remaining bills were passed in the year under consideration after deducting TDS. Thus, in AY 2009-10 there was excess booking of receipts by ₹ 29,70,308/-. Since the receipts were already booked in the previous year, there is no requirement to consider the same again in the current financial year. The remaining amount of ₹ 35,832/- (Rs.30,06,140 - ₹ 29,70,308) has been considered as receipt by the assessee and included in Miscellaneous Receipts of ₹ 1,50,93,895/-. (i) Ashok Leyland Ltd.:- The difference of ₹ 28,04,944/- in book receipts and Form 26AS was only due to bills of earlier years passed this year by the party. In AY 09-10, assessee recognized the receipts at ₹ 1,11,68,929/- whereas the party has passed and deducted tax on bills of ₹ 70,99,079/- causing difference of ₹ 31,69,850/-. Since the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only for the reason that certain confirmations could not be produced, he upheld the application of section 145(3). This cannot be a basis for rejection of books of accounts. The ld. CIT (A) on the basis of submissions made has given the finding of fact in para 4.9 of his order as under :- 4.9. Further, considering the explanations given for the other parties as well, it is seen that receipts amounting to ₹ 60,29,951/- has been declared in the books of accounts for which there is no corresponding entry in the 26AS. The total difference between 26AS and the receipts shown in the books works out to ₹ 1,54,85,187/- after giving credit for the receipts declared for which no corresponding entry is found in 26AS. Thus, considering all these factors, I do not find any reason to disturb the quantum of turnover which has been declared by the appellant. Moreover, if an amount has to be included in the turnover for this year, the same amount has either to be excluded from the turnover declared in the preceding year or of the turnover declared in the succeeding year. In either case, it is not going to matter much in terms of the ultimate results declared by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Therefore, the ground raised in the cross objection against rejection of books of accounts as well as adopting the net profit rate @ 5% is reasonable under the facts and circumstances of the present case. During the course of hearing, both the parties have relied upon the case laws. The revenue s contention is that in the line of civil construction, the Hon ble Jurisdictional High Court has affirmed the estimation of net profit @ 12.5%. Since the estimation of profit depends on facts of each case, in the case in hand, in our considered view, the ld. CIT (A) has rightly applied the rate of 5% as the both assessee and revenue have not placed any material suggesting that the net profit could have been earned higher or lower than estimated by the ld. CIT (A). Accordingly this ground of the assessee is rejected. 7. Ground no. 2 of the cross objection is against holding that the assessee would be separately liable for tax on interest income of ₹ 3,16,339/- and other income of ₹ 7,03,275/- apart from the trading addition sustained by him. 7.1. The ld. Counsel for the assessee reiterated the submissions as made in the written brief. It is contended by the ld. Counsel t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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