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TMI Blog2021 (6) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... te the income of the assessee at a percentage of the turnover. Therefore, as rightly held by the CIT (A), the Assessing Officer has restricted himself to the points of limited scrutiny and has not converted limited scrutiny into complete scrutiny as alleged by the assessee and therefore, there was no need for him to obtain the approval of the Pr. CIT before completing the assessment. Therefore, the case law relied upon by the learned Counsel for the assessee are not applicable to the case before us. Therefore, Ground of appeal Nos.1, 2 and 3 are rejected. Correct head of income - Interest income from the fixed deposits made with the Bank - DR supported the orders of the CIT (A) but held that there is no direct nexus between the interest from deposits and the actual business of the assessee i.e., undertaking construction contracts and hence cannot be conside3red as business income of the assessee - HELD THAT:- CIT (A) has held that the interest income from fixed deposits is incidental to the main business activities, but however, he further held that the same cannot be termed as trading receipts or income derived from the business of the assessee as placing reliance upon the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, the financials of the assessee were called for u/s. 142(1) of the Act. In response to the notice, the assessee submitted his P L Account and Balance Sheet of the relevant financial year. The Assessing Officer observed that the net income was declared by the assessee at ₹ 42,73,140 which includes the income (i) by refund of VAT amounting to ₹ 11,04,805,(ii) income by interest on FDR to ₹ 19,16,927; and (iii) income by interest on deposit amounting to ₹ 3,383. After reducing the aforementioned indirect incomes, the net profit from construction activity worked out to ₹ 12,38,025. Considering the turnover of ₹ 8,03,01,580, net profit of ₹ 12,38,025 was worked out to 1.54% of the turnover which was too low. The Assessing Officer, therefore called for books of accounts and found that most of the vouchers pertaining to labour charges and other expenses were self-made. Therefore, he held that there is no other option but to reject the assessee s books of account and to estimate the profit @ 8% of the turnover. 3. Aggrieved by the said decision, the assessee filed an appeal before the CIT(A) by stating that the assessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Books of Accounts and there was never been an occasion for rejection of Books of Accounts and estimation of income, and hence he failed to note that the assessment order is in violation of the principles of natural justice. 6. For the reasons set out in Grounds 1 to 5 above, the appellant respectfully prays that the Honourable Income Tax Tribunal may be pleased to hold that the assessment order passed is invalid in law, and is to be quashed. 7. Any other ground or grounds that may be urged at the time of hearing. 5. The learned Counsel for the assessee submitted that this is a case of limited scrutiny, whereas the Assessing Officer has exceeded his jurisdiction by conducting complete scrutiny without obtaining approval of the Pr. CIT for conversion of the assessment into complete scrutiny assessment. He submitted that for this reason alone, the assessment has to be set aside and this appeal is to be allowed. In support of this contention, the learned Counsel for the assessee has placed reliance upon the following decisions: i) Copy of Judgement of the Hon'ble Income Tax Appellant Tribunal, Hyderabad - B Bench in ITA No. 429/HYD/20 18 in the case of G. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to 6% of the turnover. 7. Having regard to the rival contentions and the material placed on record, we find that the points for selection of the return of income of the assessee for limited scrutiny are: (i) whether the sales turnover/receipts have been correctly offered or tax? And (ii) whether the contract receipts/fees have been correctly offered for tax?. 8. For this purpose, the first point to be examined is whether the sales turnover declared by the assessee was correct or not. The Assessing Officer has verified and found from the I.T data that the assessee has received contract receipts of ₹ 8,03,01,580/-. He, therefore, accept6ed it as correct. As regards the second point, the Assessing Officer had examined whether the correct contract receipts have been offered to tax. In this regard when the Assessing Officer verified the P L A/c and Balance Sheet of the assessee he observed that the assessee has declared the net profit at ₹ 42,73,140/- and that it included indirect income also such as interest income on FDR and interest on deposits and also refund of VAT. Since they did not form part of business receipts, he reduced them from the net profit dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. In the case of Allied Construction (Supra), the Special Bench observed that where FD s made in the Bank were utilized to give bank guarantees or as a performance security, the interest income therefrom cannot be said to have any nexus with the business of the assessee. The learned Counsel for the assessee has not been able to rebut these findings of the CIT (A) with any evidence or decision to the contrary and therefore, the assessee s ground of appeal No.4 is also rejected. 12. As regards the estimation of net profit at 6% of the gross receipts by the CIT (A), the learned Counsel for the assessee has relied upon the percentage of net income to gross receipts in the earlier years to plead that the net profit for the relevant A.Y is 2.92% of the gross total turnover and it should be accepted. 13. The learned DR, however, supported the orders of the CIT (A). 14. Having gone through the material on record and also that the average net profit disclosed by the assessee and determined by the Assessing Officer in the earlier A.Y is in the range of 2.5% to 5.8%, we deem it fit and proper to restrict the net profit to 5% of the gross total turnover during the relevant A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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