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TMI Blog2018 (10) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... M ITA No.6857/Del/2015 and ITA No.6724/Del/2016 are appeals by the assessee preferred against two separate orders of CIT(A) 20, New Delhi dated 16.11.2015 and 16.11.2016 pertaining to A.Y. 2011-12 and 2012-13 respectively. 2. Both these appeals have common issues, therefore, they were heard together and are disposed of by this common order for the sake of convenience. 3. The common grievance in both these appeals relate to the rejection of books of accounts and the estimation of profit. 4. Representatives of both the sides were heard at length and with the assistance of the Ld. Counsel we have perused the relevant documentary evidences brought on record in the form of paper book. 5. The appellant firm is engaged in the business of execution of civil construction contracts. During the course of the scrutiny assessment proceedings the assessee was asked to submit comparative chart GP/NP ratio for the current assessment year and for the preceding assessment year. The assessee furnished the requisite details. In the light of a low profit rate declared by the assessee, the financial results declared by the assessee and observations from the assessment completed u/s 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal 10. A perusal of the above shows that in the earlier assessment years also the profit was estimated at 5 % but the same was not accepted either by the first appellate authority or by the Tribunal. 11. It is the say of the DR that during the years under consideration the Assessing Officer has specifically pointed out the errors / defects in the books of the accounts of the assessee and therefore, the past results should not be accepted. 12. We do not find any force in this contention of the DR. The assessment order of A. Y. 2010-11 is placed at pages 230 to 240 of the paper book. We find that in A. Y. 2010-11 the Assessing Officer has rejected the books of accounts for the following reasons :- 1. Unverifiable creditors/ suppliers 2. Unverifiable wage charges 3. Defects in the books of accounts 4. Non maintenance of stock register 13. It can be seen that on identical reasons the books were rejected in A. Y. 2010-11 and the profit was estimated at 5% which was confirmed by the CIT (A). The matter travelled up to the Tribunal and the Tribunal in ITA No.3967/Del/2010, 474/Del/2015, 2561/Del/2012 and 4366/Del/2012 for A. Y. 2007-08, 2008-09, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the method of accounting regularly followed by the assessee. It must be said at the outset that the choice to account for income on an acceptable basis, is that of the assessee and not of the department. This is, however not an unlimited choice, because the ITO has always the liberty to examine the system of accounting regularly employed by the assessee, to determine whether the system of accounting is defective and whether by following such system of accounting, correct profits can be deduced from the account books maintained by the assessee. If, on such scrutiny, the ITO comes to the conclusion that with reference to the method of accounting followed by the assessee, correct profits cannot be deduced, it is open to him to apply the provisions of section 145 and make the assessment in an appropriate manner. In the present case, there is no material to indicate why the ITO considers the system of accounting regularly followed by the assessee to be defective or the system of accounting followed to be such that correct profits cannot be deduced there from. The ITO s power to substitute a system of accounting for the one followed by the assessee, flows from the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to catalogue the various types of defects in books the account books of an assessee which may render rejection of account books on the ground that the accounts are not complete or correct from which the correct profit cannot be deduced. Whether presence or absence of stock register is material or not, would depend upon the type of the business. It is true that absence of stock register or cash memos in a given situation may not per se lead to an inference that accounts are false or incomplete. However, where a stock register, cash memos, etc., coupled with other facts like vouchers in support of the expenses and purchases made are not forthcoming and the profits are low, it may give rise to a legitimate inference that all is not well with the books and the same cannot be relied upon to assess the income, profits or gains of an assessee. In such a situation the authorities would be justified to reject the account books under section 145 (2) and to make the assessment in the manner contemplated in these provisions. The material on which the rejection of accounts books was sustained in the case on hand was relevant material. Taking all these aspects and the material into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws . If the amounts are not paid at the proper time and interest is awarded or paid for such delay, such interest is only an accretion to the assessee s receipts from the contracts. It is obviously attributable and incidental to the business carried on by it. It would not be correct to say, as the Tribunal has held, that this interest is totally de hors the contract business carried on by the assessee. It is well-settled that interest can be assessed under the head Income from other sources only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to it de hors the business which is carried on by it. In our view, the interest payable to it certainly partakes of the same character as the receipts for the payment of which it was otherwise entitled under the contract and which payment has been delayed as a result of amounts granted to the assessee under the award and treated as income from other sources . 10. Subsequently, the Hon ble Apex Court in the case of CIT Vs. B. N. Agarwalal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of assessment proceeding and considering the fact that similar addition made by the A. O. in the immediately preceding A.Y. 2007-08 was upheld by the Ld. CIT(A). ii. The grounds of appeal are without prejudice to each other. iii. The appellant craves to add, amend or modify the grounds of appeal at any time. 14. The Revenue challenged vide these appeals the orders of the CIT(A) upholding the book results. Ld. CIT(A) vide his order passed for the assessment years 2008-09 2009-10, allowed the appeals filed by the assessee by upholding as under :- I have carefully considered the facts of the case, the important aspects which immerge from the present appeal are :- 1. The Method of accounting has been accepted for several years on same set of facts. Reliance is placed on 294 ITR 655 (Gauhati) MKB (Asia) P. Ltd. V. Commissioner of Income- Tax. 2. Non maintenance of stock register cannot be a ground for rejection of account in every case it depends upon the nature of business. 324 ITR 95 (Delhi) Commissioner of Income-Tax v. Jas Jack Elegance Exports 192 Taxman 167 (Delhi) Commissioner of Income Tax XII v. Poonam Rani. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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