TaxTMI 
TaxTMI 
2012 (8) TMI 229
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....- by ld. CIT(A) from contract business is without appreciating the provisions of law and facts of the case. Estimation of Income is not fair, honest and is arbitrary, estimation of income is without considering the relevant material on record. 4. That learned Assessing Officer has failed to prove his case and merely on surmises and conjectures framed the assessment at an abnormal figure of income. Ld. CIT(A) has failed to appreciate the facts, while sustaining the addition of income on estimate at Rs.10179982/- against huge loss declared from contract business. 5. That Ld. CIT(A) has failed to apply the provisions of law and decision of Hon'ble Supreme Court and other High Courts brought to his knowledge, on the facts of the case. 6. That addition confirmed by the ld. CIT(A) may please be deleted alternatively reduce substantially. 7. That appellant craves the right to alter, add, amend delete any of the grounds of appeal. 4. The Revenue in ITA No.231(Asr)/2010 has raised following grounds of appeal: "1. That, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing relief on account of reworking of net profit by applying rate of 2% inste....
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....ement, the contractor was to deposit 10% of the contract amount with the Market Committee as security. It was further required to deposit 10% of the balance contract money every month during the contract period. Any shortfall in actual collection of the market fee and RDF during the year was to be made good by the assessee contractor to the Market Committee. For delay in payment of Market Fee and RDF, the assessee was liable to pay interest @ 1% per month. The assessee was given the contract for collecting market fee and RDF through an open bidding process. Besides this activity, the assessee also became a commission agent for sale of agricultural produce, namely potatoes and peas, in the same market during the year. In the return of income, the assessee has shown commission receipts through sale of agricultural produce at Rs.86,32,696/-. However, it had also declared a loss of Rs.90,17,907/- from the Market Committee contract. A loss of Rs.6,57,760/- was claimed in the return of income. 6.1. As per the AO, the assessee did not maintain any record of the collection of market fee and RDF or of the expenses incurred for such collection. It was contended before the AO that all the re....
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....ission Agent in vegetable/fruit market at Hoshiarpur. Its principal activity was as a contract to the Market Committee, Hoshiarpur for collection of Market fee and Rural Development Fund (RDF). As per agreement with the Market Committee, the assessee was bound to pay a total contract amount of Rs.4,91,10,000/- to the Market Committee, Hoshiarpur. It was devised that any excess collection was to be appropriated by the assessee contractor whereas any shortfall/loss had to be borne by the assessee itself. The assessee incurred a loss in the activity of collection of Market fee and RDF. The assessee had earned income from business by acting as Commission Agent independently in vegetable/fruit market. It was observed by the AO that the assessee had not maintained proper books of account and record with regard to collection of Market Fee and RDF as also the expenses incurred for collection of Market Fee. It was also observed that the assessee had engaged 34 employees to carry out the work of the contract. The identity cards were issued by the Market Committee for 34 employees of the assesse had not declared the payment of any salary to the said 34 employees. Accordingly, the AO concluded....
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.... of the AO to support the factum of employment of 34 alleged employees by the assessee. There was no work done by them. There was no question of any payment of any salary to them for any alleged work in the contract business. No collection of market fee or RDF has been brought on record by the AO or by the ld. CIT(A) which remained undisclosed in the weekly statement submitted before the Market Committee and verified by the AO. 8.2. As regards the commission income, books of account had been audited are not in dispute. It was argued by the Ld. counsel that the assessee was not required to maintain books of account in respect of collection of Market fee and RDF and since the payments are collected in the name of Market Committee, they are deposited with the Market Committee only. All the details for the collections which were tallied weekly were available with the AO and the Ld. CIT(A) are not in dispute. Therefore, the collections made from commission agents till the amount of the contract entered is not the income of the assessee and, therefore, the assessee is not required to maintain books of account with regard to income of other persons. Therefore, the books of account to tha....
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.... same had been estimated at 5% of the contract amount and this approach of the AO is not justified. The Ld. CIT(A) is also not justified in sustaining the addition, which should have been deleted in full by him. 8.7. As regards interest of Rs.12,83,967/-, Mr. Sampath, the ld. counsel for the assessee argued that the Ld. CIT(A) was justified in allowing the interest and further added that the assessee himself had added back the said amount in the computation of income for the reason that TDS was not deducted under section 40(a)(ia) of the Act. However, in the appeal before the Ld. CIT(A), deduction was claimed relying on CBDT notification that the provision was not applicable to payment made to a statutory body., which the Market Committee is. The ld. CIT(A) accepted assessee's contention and after obtaining AO's comments, has deleted the addition. 9. Mr. Amrik Chand, the Ld. DR, on the other hand, relied upon the order of the Assessing Officer and argued that the assessee was required to maintain the books of account, since the contract money paid to the Market Committee is an expenditure and the collections made from commission agent is the income. Therefore, any loss or profit ....
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....ws. We are of the view that whether it is a loss or a profit whether cheques are collected in assessee's name or in the Market Committee's name and moreso when lesser amount is collected by the assesse it will be termed as a loss and excess collected will be termed as profit on the same principle when expenditure is more the same is will be termed as loss and if gross receipts or turnover or other receipts are more it will be termed as a profit. But the profit or loss can be deduced if books of accounts are maintained by the assessee. The computation of correct income from books of account is a concept which is quite different from the estimation of income though the result may be the same. If books of account are not maintained, then correct income can not be computed and application of section 145(3) comes into play. After invoking section 145(3) of the Act, the concept of estimation of income comes into play, which exactly is the present case before us. The confirmation from the Market Committee, submissions of the weekly report etc. which are not available with the assessee and are not the accounts of the assessee, therefore, it will be presumed that the assessee has not mainta....
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.... been rebutted with the assessee. The assessee from the very beginning had been denying employment of such persons and had been denying payment to said 34 alleged employees. No material has been brought on record with regard to payment of salary to any of the said 34 employees by the assessee. Therefore, the AO was having sufficient material to assess the same income as returned by the assessee i.e. the loss from the contract business with the Market Committee. Therefore, in the facts and circumstances of the case, even if the books of account are rejected by invoking the provisions of section 145(3) of the act, in the facts and circumstances of the particular case, as in the present case, are as mentioned hereinabove, no addition is called for. Therefore, the AO is not justified in making any addition to the income of the assessee, even if the books of account are rejected u/s 145(3) of the Act, on the basis of the material on record, which was available before the AO as well as before the ld. CIT(A). The Ld. CIT(A) is not justified in sustaining the addition on this account. 11. We find no infirmity in the order of the ld. CIT(A) with regard to the claim of interest of RS.12,83,....