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31-10-2019, Laxminath Infrastructure, Section 40A(3), 40(a)(ia), Tribunal Jaipur

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6 months 3 weeks ago #11334 by amit
Section - 40A(3), 40(a)(ia), 145(3), 154, 194C(6)
Order Date - 31-10-2019
Favouring - Assessee
Court - Tribunal Jaipur
Appellant - DCIT
Respondent - Laxminath Infrastructure Pvt. Ltd.
Citation - 1119Taxpundit70
Appeal No. - ITA No. 801, 802 & 1249/JP/2018
Asstt. Year - 2013-14, 2014-15 & 2015-16



These are the appeals filed by the revenue against the separate orders of ld.CIT(A)-3, Jaipur dated 01/03/2018 and 23/03/2018 for the A.Y. 2013-14 and 2014-15 in the matter of order passed U/s 143(3) of the Income Tax Act, 1961 (in short, the Act).

2. In ITA No. 801/JP/2018 for the A.Y. 2013-14, the Revenue has taken following grounds of appeal:

“(i) On t he f ac ts and in t he circumstances of the case, the CIT(A) has erred in giving its decision on estimation basis without considering the facts in totality. Without considering fact of the case it just given decision on the basis of past history in AY 2010-11 and in AY 2012-13 as well. The decision is not acceptable as mere estimation on the past history of the assessee does not give any true picture of profit for the year under consideration.

(ii) Whether on the facts and in the circumstances of the case the CIT(A) is justified in law in deleting approximately the full trading addition of Rs.2,49,12,081/- and confirming the addition of Rs.2,49,559/- only which was made after rejection of books of accounts u/s 145(3) of the IT Act, 1961 ?

(iii) Whether on the facts and in the circumstances of the case the CIT(A) is justified in law deleting the entire addition made u/s 40A(3 )& 40 a)(ia) of the Act, wherein it was established fact that the assessee had violated the provision of section 40A(3) & 40(a) (ia) of the Act. ?

(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."

3. Rival contentions have been heard and record perused. The facts in brief are that the assessee company is a civil construction contractor for last five years. Its books of account are regularly audited U/s 44AB of the Act. During the course of scrutiny assessment, the A.O. after pointing out defects in the books of account, invoked the provisions of Section 145(3) of the Act and rejected the book results and estimated net profit @ 8.5% of the total receipts by observing that in the preceding A.Y. 2012-13, books of account was rejected by the A.O. and action of the A.O. was confirmed by the ld. CIT(A).

4. By the impugned order, the addition so made by the A.O. was substantially deleted by the ld. CIT(A) after observing as under:

“I have perused the record I find that the Assessing officer apply 8.5% Net profit rate without giving any reason and that is without any basis and unreasonable. There is force in the submission that past history is the best method for estimation of the profit rate held by the Hon'ble Rajasthan High Court in various cases. The trading record of three year as under:- The Hon'ble ITAT Jodhpur Bench held in appellant own case vide decisions the ITA No. 532/Jodhpur/2015 dated 31/03/2017 held we are inclined to follow the finding of the ITAT Jodhpur bench in assesses own case for A.Y. 2011-12 and we hold that fo A.Y. 2012-13 there is no substantial change of facts and therefore NP rate as applied by the ITAT in assessee case for 2011-12 seems to be reasonable and the same has to be applied for A.Y. 2012-13. We accordingly set aside the order of the Ld. CIT(A) and direct the Assessing officer to compute the NP rate @ 1% thereby maintaining status quo from A.Y. 2011-12 onwards.

Therefore, following the above observation and cited decision I estimation the Net profit @, 1% on total turnover of Rs.37,94,49,445/-subject to the allowability of the depreciation of Rs.35,46,628/-. Thus, the Net profit comes to Rs.37,94,494/-.”

5. The A.O. has also treated the interest income on FDR as income from other sources. By the impugned order, the ld. CIT(A) by following the order of the Tribunal in assessee’s own case held that interest income is also business income. The precise observation of the ld. CIT(A) was as under:

“The Assessing officer treated the FDR Interest of Rs.27,37,478/- as income from other sources. The A/R of the appellant submission had that the assessee had to make FDR for taking the contract work from the department. The assessee has to deposits the FDR a security in the departments for obtaining contract work, which are pu ely for business purposes. The Interest received from the FDR relate to the profit of business income and not income from other sources.

The A/R of the appellant relied upon the following case laws the HONBILE I.T.A.T. JODHPUR BENCH has also admitted in the assessment year 2010-11. 2011-12 and 2012 13, is also held that the A.O. has ignored the contention of the assessee that FDR were purchased for taking contract work and therefore the interest occurring on these F.D.R. would become as business income. The assessee wed copies of FDR which were pledged with various government departments. The A.O or the Id. CIT Appeals has not disputed the above mention facts. In our consideration opinion his interest income would partake the character of business income only in such like cases we have taken numerous decisions in the same lines. Accordingly offer consideration this interest income as - part of business income as has been claimed by the assessee so the FDR Interest is business income and no separate addition is called for.

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