TaxTMI 
TaxTMI 
2014 (7) TMI 1237
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....s contract mostly from Government Departments including PWD Dungarpur and PWD Sagwara, Udaipur, etc. For A.Y. 2009-10, the firm filed its Return of Income [ROI] on 25.9.2009 declaring total income of Rs. 61,77,950/- as against which assessment was completed at a total income of Rs. 1,09,72,080/-. The A.O. has made trading addition of Rs. 40,38,427/- and interest income claimed by the assessee as its business income of Rs. 7,55,701/- by treating it as income from other sources. In appeal, the assessee was successful in getting part relief. Now both the parties are aggrieved and have raised their respective grounds as under: 2.1 Revenue's Grounds read as under:- "On the facts and in the circumstances of the case, the ld. CIT(A) ha....
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....nt totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full." 3. We have heard the rival submissions and have carefully perused the entire material on record. It was argued by the ld. A.R. that during the course of verification of turnover, and net profit ratio, the comparative figures excluding the income from other sources is found as under: A.Y. Turnover Net profit N.P. ratio 2007-08 6,6,1,74,781 25,46,690 3.85% 2008-09 13,22,49,279 68,90,529 5.21% 2009-10 17,45,73,358 59,99,541 3.43% For the A.Y. under consideration, that is 2009-10, net profit rate disclosed is 3.43%....
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.... Turnover (i) Assessee own contracts and machine job works 138240932 118000 (ii) contracts taken from sub contracts 2114290 (iii) contracts given to other parties on sub contracts 34100136 Gross contract receipt 174573358 3.3 As per the ld. A.R., keeping in view the above three factors, net profit shown by the assessee is quite reasonable in the line of his contract business. It was argued that even after rejection of books of account, a reasonable estimation has to be done and further allowance in respect of expenses like depreciation, third party interest paid to banks and financial institutions, financial charges, bank guarantee commission, bank charges, partner's salary and interest etc as per the ca....
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....substantial increase in the turnover which is more than Rs. 4 crores and after considering the steep rise in the prices in various items as also been accepted by the A.O. to that extent. We are aware that u/s 145 of the Act, fair estimation of income has to be done when books of account are rejected. The past history of the assessee is the best guide in this regard. However, as has been held by the Hon'ble Rajasthan High Court in the case of Gotan Lime Kanij Udyog reported in 256 ITR 243 [Raj] that even after rejection of books of account, addition is not necessary in all cases. In case valid reasons for fall in the net profit ratio/gross profit ratio are adduced by the assessee, they have also to be considered. The fact that the assess....
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.... to that particular A.Y. The ld. CIT(A) has considered these factors and has given part relief to the assessee. However, in our considered opinion, keeping in view all the above factors which have either been accepted by the A.O. or have not been denied by him and which definitely contribute towards a magical figure of net profit ratio, it would be fair and reasonable to sustain a lumpsum addition of Rs. 2.5 lakhs to answer the fall in net profit. Accordingly, we partly allow the assessee's ground raised in its cross objection and cannot allow revenue's grounds of appeal. 6. The other ground raised by the assessee in its cross objection is regarding treating the interest income arising from compulsory FDRs deposits as income from other s....