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TMI Blog2017 (9) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... suppliers against the purchases made by it. He submitted that the AO wrongly treated the same as income other sources ignoring that when such discount is received from the suppliers, it needs to be reduced from the cost of the raw material consumed in contract work. We find merit in the contention of the assessee as the discount is nothing but reduction in the value of the material so supplied. Therefore, same was required to be reduced from the cost of raw material consumed in contract work. Therefore, we do not see any infirmity in the order of ld. CIT (A), the same is affirmed. This ground of the revenue is rejected. - ITA Nos. 551 & 552/JP/2016 And C.O. Nos. 22 & 23/JP/2016 - - - Dated:- 24-7-2017 - SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM For The Revenue : Shri R . A . Verma ( Addl . CIT ) For The Assessee : Shri P . C . Parwal ( CA ) ORDER PER SHRI KUL BHARAT, JM . These sets of 2 appeals and 2 cross objections are filed by the revenue and assessee respectively against two separate orders of ld. CIT (Appeals)-3, Jaipur dated 18.03.2016 pertaining to A.Ys. 2011-12 and 2012-13. Since identical grounds are raised in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various unverifiable payments. Against this, the revenue has preferred the present appeal and the assessee filed the cross objection. 3. The first ground of the revenue s appeal is estimating the NP rate at 11.5% as against 13% adopted by the AO. The ld. D/R submitted that the ld. CIT (A) has confirmed the action of rejection of books of account. However, he reduced the estimation of Net Profit. He submitted that the ld. CIT (A) has followed the decision in assessee s case pertaining to A.Y. 2007-08. He submitted that the facts of each year are different. 3.1 On the other hand, the ld. Counsel for the assessee reiterated the submissions as made in the written brief. He submitted that the ld. CIT (A) considering the past history of the assessee s case and following the decision of his predecessor and also the order of the ITAT for the A.Y. 2007-08 has sustained the NP at 11.5%. The submissions of the ld. Counsel are as under :- 1 . It is submitted that net profit rate before depreciation, interest and remuneration to partners and interest to third parties as well as that after depreciation, interest and remuneration to partners and interest to third parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.96% 10.06% Net Profit rate before dep., interest and remuneration to partner finally upheld by ITAT/CIT(A) 11.75% [CIT(A)] Present Appeal (ITAT) 11.5% [CIT(A)] Present Appeal (ITAT) 11.5% [CIT(A)] 11.5% [CIT(A)] 11.5% [ITAT] 11.5% [ITAT] Note : In all the years net profit rate is applied on the total receipt including interest receipt except in A.Y. 2009-10 where it is applied on contract receipt. In none of these years interest receipt was assessed as income from other sources but treated as part of the business profit for the purpose of computing the net profit rate. From the above table it can be noted that the net profit declared by the assessee is comparable with that of the earlier years. The Hon ble ITAT/CIT(A) has accepted the net profit rate of 11.5% on gross receipt (contract receipt and interest and other receipt). The rate declared in the AY 12-13 is 11.52% which is comparable with the net profit rate accepted by the ITAT. Hence addition made by the AO by applying net profit rate of 13% and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by other similarly situated cases . While comparing with the past history, if the results are fair and reasonable, then invariably no addition is to be made . In the relevant year, though the contract receipts of the assessee have sharply increased from 10 . 60 crores to Rs . 12 . 32 crores in the preceding year, the N . P . rate has increased from 5 . 02 % to 5 . 38 %. Though the argument of the Revenue that where the assessee manipulates the accounts by keeping the profit margins commensurate with the past years or slightly more than by itself cannot be a basis for acceptance of results is justified, it is for the AO to bring on record some concrete material / evidence to make a proper addition . In the instant case, the AO has failed to bring on record any comparable case so as to justify the addition made by him . Tribunal has sustained only an adhoc addition to the extent of 5 lacs . Findings of the Tribunal is a pure finding of fact based on appreciation of evidence . Therefore, no substantial question of law arises . CIT vs . Inani Marbles Pvt . Ltd . 316 ITR 125 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Keeping in mind the past history of the case and defects noted by AO, we are of the view that if a n . p . rate of 11 . 5 % is applied then it will meet the ends of justice . Accordingly, the AO is directed to recompute the profit by applying n . p . rate of 11 . 5 % against n . p . rate of 10 . 07 % shown by assessee . For the sake of clarification, the ld . Counsel of the assessee has stated that instead of disallowing expenses head - wise, a reasonable n . p . rate should be applied . This contention of the assessee is reasonable . Accordingly we direct the AO to apply n . p . rate of 11 . 5 % mentioned above . This ground of the assessee is allowed in part . Therefore, following the decision of Coordinate Bench in the assessee s own case for the A.Y. 2007-08, we find no infirmity in the order of ld. CIT (A) which is hereby affirmed. The ground of the revenue is rejected. 4. Ground No. 2 relates to deletion of interest income treating the same as business profit. The ld. D/R has supported the order of the AO. He placed reliance on the decision of Hon ble Rajasthan High Court rendered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the FDR was for obtaining letter of credit to purchase machinery but so far as interest earned thereon is concerned, that is nothing but income through other sources, as such, the Commissioner of Income Tax rightly treated the same as income taxable . So far as the second question is concerned as to whether the Commissioner of Income Tax was justified in invoking powers under section 263 of the Act of 1961 by holding that the enquiry conducted by the Assessing Officer before the assessment order was neither proper nor adequate, we would like to state that the order passed by the Assessing Officer nowhere reflects about any enquiry said to be made . It simply refers the explanation given by the assessee and nothing beyond that . Therefore, respectfully following judgment of the Hon ble Rajasthan High Court, supra, we set aside the order of ld. CIT (A) on this issue and restore the finding of the AO. Ground of the revenue is allowed. 5. Ground No. 3 is against the direction of the ld. CIT (A) reducing the discount from the cost of material instead of treating the same as part of the income. The ld. D/R supported the order of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NSC as business income and part of total receipts without appreciating the facts that the interest income on FDR NSC is income from other sources. iii) On the facts and in the circumstances of the case, the CIT (A) has erred in directing the discount income from supplier to be reduced from cost of the material because the assessee itself has shown it as other income in the Profit and Loss account, ignoring the findings of fact given in the assessment order that discount income has been treated the other income by the AO. iv) The appellant craves leave to add, alter, amend, withdraw or insert any ground or grounds of appeal before or at the time of hearing of the appeal. 9.1. We have heard the rival contentions and perused the material on record. The grounds raised in the revenue s appeal are exactly identical to earlier assessment year 2011-12 except change in figure and we have decided the same by partly allowing the appeal of the revenue. We find no new facts in the arguments advanced by both the representatives of the parties. Therefore, following our order for the assessment year 2011-12 on the identical grounds, the appeal of the revenue is partly allowed. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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