TaxTMI 
TaxTMI 
2016 (8) TMI 1216
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....se the action of A.O. for issuing of notice u/s 148 is justified. 4. That the Ld. CIT-(A)-3 Ludhiana has wrongly worked out the addition of Rs. 4345,658/- based to low Gross Profit rate. 5. That the Ld. CIT-(A)-3 Ludhiana is not justified in stating that as admitted by the assessee itself that books of accounts prepared by it are not correct. 6. That the order of the Ld. CIT-(A)-3 Ludhiana is against law & facts of the case." 3. The above grounds of appeal are consisting of two sets of arguments; one, from ground no 1 to 3 are against reopening of assessment and second, ground no 4 and 5 are against the addition of Rs. 4345658/- made based on low gross profit rate. 4. The brief fact of the case is that the assessee is a company engaged in the business of civil construction as contractor. On 23.09.2010, a survey u/s 133A was carried out and assessee surrendered an amount of Rs. 1.10 crore as business income. Consequently, it filed its return of income showing income of Rs. 12829250/- including the surrendered amount of Rs. 1.10 crores. The assessee has disclosed the sum included under the head of "Miscellaneous Income" shown at annexure 6 of other income in the balance s....
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.... 2010-11 return was filed for Rs. 4047040/- and therefore surrendered amount should have been included and the assessee should have filed his return for Assessment year 2011-12 of Rs. 15074040/- instead of that the return of income filed of Rs. 12829250/-. Therefore, the assessee has not shown his income properly and made adjustment and shown lesser income than disclosed income. During the course of assessment proceedings the ld AO was of the opinion that net profit shown by the assessee is lower in the current year compared to the earlier years and therefore he rejected the books of account and estimated the net profit @ 3.34% on turnover of Rs. 100361625/- for the current year determining the net profit of Rs. 335278/-. One another addition of Rs. 7004386/- was made on changing the head of the income for rebate and discount income from the „business income‟ to the „income from other sources‟. The ld AO further took income of Rs. 11646255/- being miscellaneous income including the income surrendered during the course of survey of Rs. 1.10 as deemed income u/s 69C of the Income Tax Act. Consequently, the total income computed of Rs. 22002720/-. Aggrieved by ....
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.... of the assessee, wherein it at page 62 Annexure IV titled as administrative expenses of sales tax payment of Rs. 2853216/- shown to have been debited in the profit and loss account. Therefore, he submitted that this is an exceptional item and if that is excluded and if the income disclosed during the course of survey is also excluded the net profit ratio for the year shall be 3.9% and therefore there is no understatement of the income. He further submitted that the disclosure during the course of survey was on account of business income of the assessee and therefore it cannot be taken as undisclosed income. He further submitted that decision in the case of Kim Pharma does not apply to the facts of the case, he submitted that in that case a sum of Rs. 5 lakhs found in cash, source of which could not be explained by the assessee and on that circumstances it was held that such income is not a business income of the assessee but would be taxable u/s 68 and 69 etc. In the present case, the declaration was not because of any cash or other documents etc seized Therefore disclosure shall be charged to tax as business income. Therefore, he submitted that the reopening on the above reason ....
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....ed income for AY 2010-11 plus disclosure amount with returned income for AY 2011-12 for working out the escapement of income. f. It is apparent on reading the reasons that ld AO is not sure in which year the income of survey disclosure should have been included as he is inferring inclusion of disclosure income in returned income of AY 2010-11. g. Furthermore, the decision relied upon by the ld AO of Hon‟ble Punjab and Haryana High Court I case of Kim Pharma Vs. Cit 216 Taxmann.com 153 are not applicable to the facts of the present case because in this case there is no claim of any sort of from the assessee against the income disclosed during the course of survey. Out of total income of Rs. 12829250/- surrendered income included is of Rs. 1.10 crores and even after that there is no positive income of Rs. 1125135/-. 10. The above observation in reason recorded by the ld AO does not even sustain the test of prima facie opinion formed by him. In view of this the reopening of assessment does not withstand the judicial scrutiny. In view of this the reasons recorded by the ld AO are not supported by the facts of the case. The ld CIT(A) has confirmed the action u/s 148 of the Ac....